Published on May 11th, 2018 | by Steve Hanley0
Carlos Ghosn: Range Is No Longer A Concern. Now The Issue Is Price.
May 11th, 2018 by Steve Hanley
Carlos Ghosn may not be as sexy as Elon Musk, but he knows a thing or two about building and selling automobiles, especially electric cars. Since China is ground zero for the electric car market at the moment, it was only appropriate that Ghosn was in Hong Kong last week, where he gave an extensive interview on a wide range of topics to reporters.
His main a point was that people are no longer concerned about range. Electric cars with at least 300 kilometers of range are sufficient to address most fears about running out of battery power while driving, especially since the average person drives fewer than 50 kilometers a day.
Now that range issues have been resolved, the next thing on people’s minds when they shop for a car is price. Ghosn said once they find a car with adequate range at a price they can afford, technology like autonomous driving systems becomes less important, according to a report in Nikkei Asian Review.
“We have seen that consumers do not talk anymore about range or autonomy as long as you guarantee more than 300 kilometers. You could not have guessed this [result] through studies. You had to have 500,000 [electric] cars on the ground to understand that consumers do not put autonomy on top of their concerns any more when you cross 300 kilometers. When you look what are the electric Chinese cars that are selling, they are very, very affordable cars. The price point of the LEAF today is not adequate for the Chinese market.” (Note: This echoes comments Ghosn made approximately a year ago as well.)
Autonomy Is Coming, But Not Yet
With regard to autonomous vehicles, Ghosn said, “It’s going to take some time. There are plenty of very sensitive questions that need to be answered by the regulator before these cars go on the market. I don’t think the mass marketing of these technologies will happen before 2022-2023.”
The push for self-driving cars is coming not from customers but from ride-hailing and ride-sharing companies like Alibaba, Didi Chuxing, Uber, Amazon, and Waymo. “It’s because the driver is the biggest cost they have,” he said. A self-driving car in the US operating nearly constantly might use $250 worth of electricity in a month. Paying people to drive the same amount of miles might cost a company as much as $15,000.
“Getting rid of the driver is a [more than] 90% reduction of the cost,” Ghosn said. “The benefit for commercial users is huge.” Of course, people who actually drive for Uber or Lyft may dispute that $15,000 a month figure. Many of them find they earn barely enough to cover their expenses.
Doing Business In China
China made headlines recently by changing its national policies to allow foreign manufacturers to build factories there without a local partner. Despite that announcement, Ghosn says, “Today, we consider that these partners are very useful,” adding that the flexibility to go their own way in the future with new initiatives is intriguing.
For now, though, Renault, Nissan, and Mitsubishi will continue working with their local partners. Nissan intends to introduce a new version of its Kwid electric crossover with current partner Dongfeng Motor Group. “This will address the particular segment of the very affordable electric car,” he said.
The primary reason why car companies want to build factories in China or the US is not to be closer to the consumer, Ghosn suggests. “It is because they don’t want to take the foreign exchange risk. That’s why 95% of the cars sold in China are made in China. The logic of car makers today is localize, localize, localize.”
The US/China Trade War
Ghosn also had some thoughts about the escalating tensions between China and the US over trade. He says the US move to increase tariffs on aluminum and steel is “going to have an impact on the price of cars” and potentially reduce sales. “The effect of all these things is negative,” he said.
Nevertheless, he agrees with the some of the complaints Donald Trump has with Chinese trade policies and existing treaties, especially NAFTA. “Some of these [trade] treaties are old,” Ghosn said. “They did not follow the evolution of the economy. I think what people are trying to do is to say, ‘I want you to listen to me when I have total unbalanced trade and I want us to sit down together and find a way to reduce this imbalance.’ In a certain way, it’s going to make trade more sustainable in the future.”