Nissan Leaf EV will be phased out

Nissan is facing up to the fact that it struggled for more than a decade to sell a pioneering electric vehicle that the U.S. market was not ready for — and which, in the end, fell behind the competitors that followed it.

Long before Tesla made EVs cool, Nissan attempted to spark the segment with the first affordable, mass-market electric car, launched in the U.S. in late 2010.

But the compact Leaf has since been largely elbowed off the road by a wave of more stylish and more capable offerings.

Nissan does not plan to bring out a next-generation Leaf and instead will replace it with a new model more tuned to the needs of the modern EV buyer, sources told Automotive News. Production of the Leaf should end by mid-decade.

Nissan spokesman Brian Brockman declined to speculate on the future of the Leaf but noted "renewed" customer interest due to the vehicle's "value proposition" and the growing demand for EVs.

New chapter

But even as Nissan closes the book on its first plunge into mass-market electrification, the company is gearing up for a second act. The Japanese automaker is making a nearly $18 billion bet on electrification, delivering 15 battery-electric models globally by 2030.

The new campaign undoubtedly builds on the lessons learned from the Leaf.

"With EVs projected to be 40 percent of Nissan's U.S. sales volume by 2030, we will offer a lineup of electric vehicles in a variety of segments to meet the growing demands of American customers," Brockman said.

The first of those vehicles — the Ariya compact crossover — arrives stateside in the fall.

Nissan could replace the Leaf with a coupelike crossover, which the automaker teased last year in a sporty concept called the Chill-Out. It uses Nissan's CMF-EV platform and features a dual-motor all-wheel-drive system called e-4orce.

The Leaf arrived in the U.S. 18 months before Tesla wowed the world with its Model S electric sedan. The hatchback debuted a novel powertrain — a 24-kilowatt-hour lithium ion battery powered the first model — and introduced new technologies and manufacturing innovations.

But the Leaf struggled to match the lofty market expectations of its greatest champion, Nissan Motor Co.'s then-CEO, Carlos Ghosn. Some say that, after the launch, as EV competition quickly evolved, Nissan starved the Leaf of the updates needed to stay ahead.

AutoPacific President Ed Kim described the Leaf as "a miscalculation" by Nissan that led to the automaker "squandering" its first-mover advantage.

"Today, the Leaf name means little to EV shoppers," Kim said. "It doesn't have the brand power it would have had with more product updates, better design and a CUV body style."

Jeff Schuster, LMC Automotive's president of forecasting, said first-gen EVs of the past decade were considered "science projects" rather than practical alternatives to combustion engine models. And the Leaf is associated with those early EVs instead of reflecting where the market is headed.

"I suspect Nissan wants to separate from that," Schuster said.

Ghosn, who captained Nissan for nearly two decades, saw a halo vehicle in the then-high-tech Leaf that would elevate the brand globally.

The Leaf was also Nissan's attempt to one-up its bigger Japanese rival, Toyota, which was enjoying market success with its Prius hybrid.

According to a former Nissan U.S. executive, Ghosn sought to leapfrog the Prius by developing a full-electric mass-market vehicle.

"He wanted to prove Nissan was not Toyota's little brother," said the former executive, who asked not to be identified. "Ghosn wanted to be a trailblazer; he wanted to be a first mover."

Convinced that the age of peak oil was near, Ghosn anticipated that consumers were ready to switch en masse from gas-powered mobility to battery-powered.

To capitalize, Ghosn drew up ambitious sales targets for the Leaf and plowed billions of dollars into product development and manufacturing. Nissan initially invested $1.6 billion in Smyrna, Tenn., to build annual capacity for 150,000 Leafs and 200,000 battery modules. It was part of a Leaf production network Nissan constructed on three continents.

"I think the capacity that we built is adequate for the potential we see for the midterm for the United States," Ghosn said in 2012 . "When we decided to make our investment in electric cars, we didn't take a very short-term perspective. We took a longer-term perspective."

Even so, Nissan's planners and sales teams struggled to meet their boss's aspirations.

In the nearly dozen years the Leaf has been on the U.S. market, Nissan has sold fewer than 175,000.

"Ghosn was the emperor," the former Nissan executive said. "But nobody wanted to tell the emperor he wasn't wearing any clothes."

Under pressure

At first, the Leaf saw strong interest from tech-savvy, enthusiastic early adopters, mainly on the West Coast. It garnered "thousands and thousands" of preorders, the executive recalled.

"There was nothing like it on the market at the time," he said. "It had more torque than Maxima and a Zen-like driving experience because it was so quiet."

But once Nissan met that early demand, sales hit a wall of ambivalence from the mainstream.

"The marketplace just didn't care," the executive said.

Nissan had projected U.S. sales of 20,000 Leafs in 2012 but delivered fewer than half that for the year, as electrified competitors arrived. Leaf sales peaked in 2014 at 30,200.

Inside the company, "there was this massive amount of pressure because Ghosn had just bullied through these billions and billions of dollars of investments," the former exec recalled.

To move Leafs, Nissan leveraged state and federal EV tax credits to offer customers low-cost leases. In Atlanta, Nissan famously offered a $199-a-month lease on the car, which eventually led the Georgia Legislature to yank the state's rich $5,000 EV tax credit.

But the aggressive leasing hammered Leaf residual values, requiring Nissan to prop up new sales with incentives.

The former executive said that at its peak, the Leaf represented about 3% of Nissan sales yet accounted for more than 10% of its incentive spending.

As an EV pioneer, Nissan faced challenges in commercializing the Leaf, which further ballooned outlays. Without an ecosystem of battery suppliers to tap, Nissan had to develop and build its own batteries.

"There was a ton of trial and error, with early batteries getting thrown in dumpsters," the exec said. "We were going through a massive learning curve on battery technology."

And all the while, the Leaf's lopsided economics made the idea of new investments in the vehicle harder to justify, especially as Nissan's bread-and-butter models, such as the Altima, also required redesigns.

"You couldn't with a straight face say, 'Hey, I need another billion dollars to update the Leaf,' " the source added.

Key Leaf Moments

2010: The Nissan Leaf hatchback, the world's first mass-market electric vehicle, debuts in the U.S. as an import from Japan. It has a range of 73 miles.
2012: Lithium ion battery production for the Leaf begins at a new $1.4 billion plant in Smyrna, Tenn. The plant was built, with the help of federal loans, with a capacity for up to 200,000 batteries annually.
2013: U.S. Leaf production begins at Nissan's Smyrna vehicle assembly plant.
2015: The Leaf receives a 30-kilowatt-hour battery and a range of about 107 miles.
2017: The 2nd-generation model gets a design update, a 150-mile range, 1-pedal driving and advanced driver-assistance technology.
2019: The top-end Nissan Leaf e+ is powered by a 62-kWh battery that delivers 226 miles of range.