Nissan's LEAF Creates a New "Anchor" for Electric Car Pricing, Forcing Others to Match It


Photo: Michael Graham Richard
What Do You Expect to Pay for an Electric Car?
With its unveiling of the LEAF pricing, Nissan just did us all a favor by creating a new "anchor" price for electric cars. People tend to have an "anchor" price for most products, and judge them in relation to that anchor. For example, if you expect a laptop computer to be about $1,000, the $750 model might look like a bargain, but if you were anchored on $500, it'll seem expensive. Some products have very stable anchor prices (milk, bread), others change often (most electronics). Here's how this applies to electric cars.
Photo: Michael Graham Richard
A Little EV History
Until recently, the electric car that got the most press was the Tesla Roadster. Without intending to, it taught people that $100k was the kind of price you could expect to pay for an electric car. Okay, so it was sporty, but if you asked people what a non-sporty electric car would cost, they'd probably guess something around $70k.

Then Tesla started talking about the Model S, with its target price closer to $50k, and that seemed like a bargain compared to the $100k+ Roadster. Slowly but surely, people got used to that price and it became a new anchor. This meant that an expensive electric car would now be somewhere North of $50k, and a less luxurious one like the Chevy Volt or Mitsubishi i MiEV could be expected to be around $30-40k after government incentives.

But Nissan has just picked up that anchor and ran with it pretty far in the direction of affordability!

With a basic model at $32,780 ($25,280 after a federal tax credit of $7,500, and closer to $20,000 in states like California and Georgia where an extra $5,000 is offered), Nissan is forcing all other electric car makers to try to match that benchmark price. If competing products are much more expensive, they'll be considered too pricey compared to that new anchor (despite the fact that a few months ago, they would've been considered OK compared to the previous anchor).

Repercussions on Other Electric Car Makers
The impact of this is already being felt: Mitsubishi has just cut the price of the i MiEV electric car in Japan by the equivalent of about $6,700 (before it's even sold). GM is no doubt trying to launch the Volt at a lower price than they would have otherwise, and everybody else (Ford, Toyota, etc) will have to play by these new rules.

This is good for the environment, because it's going to speed up the electrification of transportation (it's still better not to have a car at all, but if you're going to have one, an EV is much better than a gas/diesel), and higher volumes will further bring down the cost of batteries and other components because of economies of scale, creating a virtuous feedback loop. Thanks for doing your part, Nissan!

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Tags: Electric Cars | Electric Vehicles | Transportation

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