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Lithium-ion batteries have a limited number of charge cycles in electric vehicles, but once a car’s battery pack goes kaput, it can be recycled or find new life in less demanding applications — storing renewable energy generated during off-peak hours, for example. At least that’s the theory.
But until resale values for electric vehicles and secondary markets for batteries are proven with a few years of real-world performance, ratings from agencies like Automotive Lease Guide (ALG) and banks’ financing offers for cars such as the 2010 LEAF electric sedan from Nissan (s NSANY), may not reflect their actual value.
That’s what happened with the Toyota Prius and the earliest in-vehicle GPS systems, Ward’s Auto noted recently. When the technologies were first introduced, their long-term values were significantly underestimated, but the ratings rose after they had time to be proven on the road.
The upcoming generation of all-electric vehicles may face an even tougher slog to raise those expectations. A good chunk of the potential residual value (the car’s projected worth at the end of the lease) for these cars will hinge on estimates of how much the battery’s value will depreciate. That figure, in turn, could be affected by how much value it holds for emerging energy storage applications after its useful life in vehicles runs out.
As Larry Dominique, vice president of product planning for Nissan North America, told Ward’s (hat tip to AllCarsElectric.com), the automaker will need “a little bit of time to convince the banks and ALGs of the world” that the LEAF has strong long-term value and good technology.
So Nissan plans to provide the financing for most or all of the LEAF sedans in its initial rollout. If Nissan is the one issuing the lease contract, then it gets to set the residual value. In general, while other factors also come into play, the higher the residual value is set (based on more optimistic estimates of long-term vehicle value and potential after-vehicle applications for the battery), the more it can drop monthly lease payments.
For Nissan, providing financing is about more than control over residual value and monthly payments, however. Dominique said, “We want to be able to control the residual value; we want to be able to control the end value, so at the end of a lease or loan we have the vehicles back and we can decide what to do with them.”
Nissan isn’t providing full details yet on lease or sales options it might offer U.S. customers, telling Ward’s that there will be “a lot of captive financing on these vehicles.” Flipping back through the history of electric cars, it’s smart to move cautiously on this. As Edmunds Green Car Advisor points out, the reputations of General Motors (s GM) and other automakers marketing trial electric vehicles in California in the 1990s suffered (Exhibit A: Who Killed the Electric Car?) “when lessees wanted to buy their vehicles and couldn’t.”