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A Nissan Leaf electric vehicle with part of its battery.
Business

Nissan bucks the tide in electric-car age

Carmaker raises eyebrows by unloading battery unit to Chinese fund

TOKYO -- Nissan Motor's planned sale of an electric-car-battery subsidiary to a Chinese investment fund stands out in a sector where many rivals are pouring more resources into building the key component of increasingly popular electric vehicles.

The bold move seems to comport with the head-over-heart approach of charismatic Chairman Carlos Ghosn even as it raises concerns over disadvantaging Nissan down the road. Whether the company's foresight proves to be 20/20 remains to be seen.

Against the grain?

Nissan will unload its 51% stake in Automotive Energy Supply Corp., based in the Kanagawa Prefecture city of Zama, to GSR Capital under a deal announced Tuesday. The price was not disclosed but is estimated at around 110 billion yen ($993 million).

Ownership of production equipment in the U.S. and the U.K. will be transferred, as will development and production operations based in Kanagawa.

NEC will sell its 49% stake to GSR via Nissan and is in talks to sell battery and electrode subsidiary NEC Energy Devices to the Chinese fund.

Ghosn, who also heads the Nissan-Renault alliance, highlighted the Nissan group's lead in electric vehicles at the company's shareholders meeting this June. He noted how the group, including capital partner Renault, had sold 460,000-plus electric vehicles so far, twice as many as American media darling Tesla.

Ghosn has declared that the group will invest 1.2 billion euros ($1.41 billion) to 2020 in the development of electric-vehicle and other technologies. Nissan is gearing up to roll out this year a revamped Leaf electric car with an AESC battery.

Batteries are as essential to electric cars as engines are to conventional autos. AESC was created back in 2007, during a time of skepticism over the popularization of electrics. So Nissan had no choice but to make the batteries in-house, according to a company official.

But the landscape has shifted radically over the past year or two. China is moving to require automakers to build and sell vehicles propelled by electricity. And the U.K. and France plan to ban the sale of gasoline- and diesel-powered autos by 2040.

Watching from the sidelines

As electric vehicles pick up speed around the world, manufacturers are stepping up investment in battery production facilities.

Tesla's Model 3, for which deliveries began in late July, uses batteries from a $5 billion factory in the U.S. state of Nevada in which Japanese partner Panasonic is an investor.

Parties including South Korea's LG Chem are spending hundreds of millions of dollars, mainly in the world's biggest electric-vehicle market, China.

Despite the bright prospects for its battery business, Nissan is stepping away from production. This way, "we can focus more on developing and producing electric vehicles" themselves, President Hiroto Saikawa said.

The sale will also likely help Nissan save money on vehicle production. The price of automotive lithium-ion batteries will drop 16% to 21,000 yen per kilowatt-hour of output in 2020, research company Fuji Keizai projects. Buying batteries will enable Nissan to compare different suppliers, making more economic sense.

The unusual move aligns with the drastic changes spearheaded by Ghosn since he joined the Japanese automaker in 1999. On his watch, Nissan re-examined its entire supplier network to lower costs. Its demands for lower prices in steel materials, for instance, eventually led to the 2002 merger of NKK and Kawasaki Steel into JFE Holdings.

This March, Nissan unloaded its stake in largest group affiliate Calsonic Kansei to a U.S. investment fund. And now, the sale of AESC has prompted NEC to leave the battery business altogether.

Some in the industry say Nissan should have stuck with in-house production of batteries, noting their importance to electric vehicles.

Toyota Motor is retaining its joint production arrangement with Panasonic, and Honda Motor and Mitsubishi Motors are working with GS Yuasa.

Nissan could be put at a disadvantage in battery procurement if all its competitors step up electric-vehicle production. Whether Ghosn-style management will help propel growth again is an open question.

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