Published on March 28th, 2016 | by Rocky Mountain Institute6
Bulk Buying Discounts Boost EV Sales
March 28th, 2016 by Rocky Mountain Institute
Originally published on RMI Outlet.
By Christa Owens Michelet and Edward J. Klock-McCook
Right now, residents of Fort Collins, Colorado and the entire state of Minnesota are eligible for a major discount on a Nissan LEAF electric vehicle (EV) through the end of March. These programs are constructed as a bulk-buy and—thanks to the hard work of the nonprofits Drive Electric Northern Colorado (DENC) and Drive Electric Minnesota (DEM) and the coalition of partners they have assembled—it eliminates the EV price premium, and then some. The current programs are modeled after a wildly successful program pioneered by three county governments in Colorado, Nissan North America, and local dealerships, which resulted in 248 Nissan LEAF sales; sales in the last three months of the program more than doubled sales for the same period the year before.
Up to this point, zero emission vehicle (ZEV) mandates have focused automakers’ electric vehicle efforts in California, with all other states lagging behind in EV sales. In fact, a recent report found that 40 percent of ZEV sales were in California. This new bulk discount model, however, which is driven by nonprofits and local governments, makes electric vehicles increasingly attractive and affordable for consumers and is quickly spreading across the country.
Nonprofits Spur Bulk EV-Discount Programs in Northern Colorado…
In December 2015, DENC—a partnership between the Electrification Coalition, the City of Fort Collins, the City of Loveland, and Colorado State University—launched a discount program for the Nissan LEAF and BMW i3, that was very similar to one created by Adams, Boulder, and Denver counties in late 2015. According to Annie Freyschlag of DENC, they recognized from the get-go that preferred pricing needed to be part of their strategy to drive adoption of EVs. Freyschlag adds that the success of Boulder County’s program (see our previous blog on the subject) gave the bulk EV-purchase strategy the momentum it needed for DENC to initiate a program in Northern Colorado.
DENC created a list of requirements for automakers and dealerships to participate in a bulk discount program, including salespeople who are knowledgeable about electric vehicles, a marketing plan, and sufficient inventory on the lot. DENC engaged with all of their local car-dealer partners and found that Nissan North America and Tynan’s Nissan were a match, quickly followed by the BMW Center of Loveland, CO.
With a price of only $10,623 for a LEAF S after tax credits and incentives, demand quickly exceeded expectations. In the first five days of the discount program, Tynan’s Nissan blew through its entire inventory of 2015 Nissan LEAFs. With no more 2015 LEAFs available nationwide, DENC and Tynan’s Nissan quickly created a pricing program for the more expensive, but more capable, 2016 Nissan LEAF. Freyschlag says this challenge highlights the importance of working with the dealerships to secure backup inventory at the same pricing. Nevertheless, Tynan’s Nissan sold 51 LEAFs in the 39 days between the launch of the program and the end of year, which is six times higher than the dealership’s usual EV sales.
Demand was so great that DENC launched a second bulk-purchase this month. In addition to the already incredible discount on a single 2016 LEAF S or SV, a purchase of two or more for a fleet cuts the price of a LEAF S to $8,800 per vehicle. (See RMI’s recent blog post to understand why electric fleets are likely to become increasingly important in the future.) DENC plans to keep pursuing the bulk-purchase strategy with the goal of collaborating with multiple automakers and dealerships and ensuring there are formal agreements and inventory plans in place to meet demand.
…and Even in Minnesota, a State Without ZEV Mandates
This innovative model is starting to spread across the country. Drive Electric Minnesota recently negotiated a similar bulk-discount arrangement with Kline Nissan in Maplewood, Minnesota. Brendan Jordan of Drive Electric Minnesota explains that in spearheading this program, the question was, “What does an EV-adoption strategy in a non-ZEV state look like?” For Drive Electric Minnesota, bulk discounts looked promising.
Drive Electric Minnesota issued an RFP to automakers and dealerships last month and Nissan responded. Now, during the month of March, residents of Minnesota can save up to $13,500 on a new Nissan LEAF SV. Customers looking to lease a LEAF SV can save just over $12,000, and those already leasing a LEAF SV are eligible for a two-month lease waiver. Unlike Colorado, Minnesota does not offer a state tax credit, hence the higher price. But, at roughly $21,000, a new Nissan LEAF SV at Kline Nissan is comparable to a new, conventional compact vehicle. When you take into account the savings in fuel and maintenance, the price of ownership drops below that of a comparable conventional vehicle and it “starts to look more like a no-brainer,” says Jordan.
Jordan reports that over 300 vouchers have been downloaded since the program began. While it is too early to predict what sales will look like for program, Kline Nissan has already sold three times more LEAFs than during the previous month.
The Road Ahead
The beauty of this bulk discount model is that it does not require any new tax credits, subsidies, or legislation to succeed. In fact, the incremental costs of setting up and administering such a program are very low, whether led by local governments or nonprofits. According to research conducted by the Southwest Energy Efficiency Project, the success of these programs is not due to not only the great discount, but also to the implicit third-party validation that these organizations provide. Freyschlag says that consumers are more comfortable with this kind of sale. This strategy—a win for local organizers, car dealers and consumers—is showing promise for accelerating the rate of EV sales across the nation.
In fact, RMI is working with the cities of Austin, Texas and Denver, Colorado to expand and enhance this approach for both consumers and commercial fleets. In the end, RMI believes that the largest economic and environmental benefits will be derived from shared electric (and eventually autonomous) mobility, which has the potential to drastically reduce the cost of transportation and the emissions it creates. However, individually owned electric vehicles are an important intermediate step. These bulk purchase programs have shown great potential in their early iterations. Now the question is: who will be next?
Image courtesy of Thinkstock.