When Nissan North America announced 2012 pricing for its Leaf electric car (above), the automaker justified the relatively hefty increases in terms of added standard equipment. Makes sense -- if something that previously was an option, or wasn't even available, is now going to be standard, the cost of the equipment should be reflected in the car pricing. But a deeper look at the 2012 Nissan Leaf pricing raises an issue that' s not unique to Nissan. How accurately do automakers explain their car pricing decisions and how much pure revenue is hidden under the guise of "additional standard equipment?"
Automakers are entitled to profits or, in the case of unprofitable cars like the still-new Leaf - which hasn't been around nearly long enough to amortize its billion-plus development cost - to at least recover as much revenue as possible from each car sold. And car companies employ legions of market researchers to figure out what the market will bear. I don't have a quarrel with Nissan's right to price its cars however it wants, but I do question both the wisdom of such steep hikes in such a sluggish economy and the rationale that Nissan used to explain them. It seems that the company – and most car makers do this – is using that "extra equipment" explanation to keep us from wondering if at least part of the price hike is aimed at squeezing a bit more margin out of each car.
Poor Timing
The base-level SV model of the still-hard-to-get Leaf hatchback will rise 8 percent to $32,780 when the 2012 models hit the market late this year – that's a $2,420 increase. The loaded SL model, now priced at $33,720, will soar 10 percent to $37,250, a boost of $3,530. Nissan says the increases are due solely to added standard content – a cold weather package that will be in all 2012 Leaf models, regardless of whether they are sold in Minnesota or Miami Beach – plus an on-board rapid-charging system for the SL model. Nothing else about the cars will change.
But the cold weather package was a $930 option for late 2011 models, so does it really now cost Nissan $2,420? Or is that price hike hiding an additional margin for the company? And the rapid charging system, which was a $700 item when it was optional on the SL models, becomes a $1,110 item ($2,420 for the cold weather kit and $1,110 for the charger gives us the entire $3,530 price hike for the SL) as standard equipment on the 2012 SLs. Shouldn't something be a little cheaper if it is made standard across a model line rather than remaining an option whose installation then requires a bit more assembly line complexity?
The wisdom of passing on such big increases during a an economic slump and at a time when consumers are still iffy about electric cars (and need $7,500 federal tax credits to make them seem more affordable) is questionable, although I imagine Nissan's market mavens have decided that consumers will pay (we'll see). A better case can be made for making the equipment standard instead of optional. Nissan says that almost all Leafs being ordered are SL Models and that 93 percent of them are being ordered with the fast-charger option, so why not just make it standard? As for the cold weather package, well, even Miami gets chilly on occasion.
More Than Meets The Eye
It's by now a well-established fact that turning on the heater in an all-electric car like the Leaf initiates a huge drain on the batteries and consequently reduces the car's range before the batteries need to be recharged. The cold weather package includes heated seats front and rear, as well as a heated steering wheel and a battery-pack warmer (cold lithium-ion batteries don't charge well), and Nissan's market research has determined that if consumers use the Leaf's seat and steering wheel warming functions they'll cut down use of the car's heater by 50 percent, thus improving driving range on cold days. That's a bonus many would willingly pay for -- although as the lessee of a 2011 Leaf and a resident of Southern California, I've got to say that I certainly wouldn't have ponied up $2,420 for the system if it were an option when the car debuted in December.
Asked if the $410 increase in the price of the rapid charger reflected more revenue for Nissan or higher costs of manufacturing or components, Nissan Leaf chief marketing manager Brendan Jones deferred to a corporate spokesman who said the only explanation he could offer was, simply, "that's the 2012 price."
That leads to a strong suspicion that the 2012 price hikes do, indeed, include more than just the real cost of added equipment. And that's okay. As I said at the start, carmakers are entitled to charge whatever they can. But it would certainly be a lot more consumer-friendly if they -- and that's all automakers, not just Nissan -- didn’t try to fuzzy up the reasons for those increases. Telling us that the price hikes for the 2012 Leaf are all, and only, about adding additional equipment just makes it more difficult for consumers to justify the purchase of this new-technology vehicle by hiding -- even inflating -- the real cost of the technologies that make it work.
