Nissan is betting that a third-generation version of its unique hybrid technology will drive a breakthrough in the US, a critical market for new boss Ivan Espinosa as he tries to turn around the struggling Japanese carmaker.
The company produces its “e-Power” hybrid system for the Qashqai model in its UK plant in Sunderland and for various models made in Japan but has shied away from launching it in the US because of poor fuel economy on highways.
However, fuel efficiency has improved 15 per cent in the latest generation, making management confident the technology can be introduced in Nissan’s Rogue SUV in the US from next year, as part of a push to win back customers and reverse tumbling sales.
“E-Power is one of the most important technologies” to support Nissan’s revival, said Eiichi Akashi, Nissan’s chief technology officer and a key ally of Espinosa.
Hybrids, which combine conventional engines with batteries to power cars, have been experiencing a significant resurgence. Nissan’s rival Toyota has seen its enduring faith in the category rewarded through higher sales, as motorists hesitate to go fully electric because of concerns about higher prices and the availability of charging points.
In contrast, Nissan was a trailblazer in fully electric cars with its Leaf model but has fallen behind BYD and Tesla in that category while neglecting hybrids, despite initially releasing its e-Power technology almost a decade ago in 2016.
While standard hybrids switch between an engine and a battery-powered electric motor to power a vehicle’s wheels, Nissan’s e-Power engine is not connected to the wheels and powers a generator instead, which tops up the battery.
This means e-Power hybrids can offer the same experience as fully electric cars, with quieter driving and faster response times. The engine kicks in at higher speeds, but less perceptibly because it operates at a more consistent, lower RPM level optimised for generating electricity. The system takes advantage of the efficient engine to use less fuel to power the generator, keeping the battery at a high level of charge and reducing motorists’ “range anxiety”.
In earlier versions of e-Power, only a small portion of the battery capacity was utilised, due to concerns about the impact on battery life from frequent charging and discharging. This meant the engine did the majority of the work at higher speeds, lowering the fuel efficiency benefit.
Analysts said the history of the technology epitomised the good, bad and the ugly at Nissan: fun, novel and offbeat products, but confused, clunky marketing and getting caught flat-footed due to slow decision-making and infighting.
“I think Nissan has a lot of problems — [but] I don’t think technology is one of them. The problem is not being differentiated enough; it’s not reacting quickly enough to changes in markets,” said Christopher Richter, analyst at CLSA. “They failed to put it [e-Power] into the US market and they’re in the penalty box because of that.”
During this period of lost time on hybrids, Nissan’s brand has been damaged by large incentive packages offered on cars sold in the US, which have cemented a perception of its brand as low-cost. As an executive at a major Nissan supplier put it: “If you’re on welfare, then you buy a Nissan.”
While fuel economy is now expected to be similar to that of regular hybrids, Nissan believes sharing components with pure EVs may give it a slight cost advantage, according to current executives and former engineers. The main differentiator is the EV-like feel, which creates less engine vibration and reduced pedal switching as the car automatically slows itself down.
“Ninety per cent of customers won’t care. They just care if it’s cheaper,” said Francisco Carranza, a former Nissan executive who worked on its electrification technologies.
Analysts have expressed concern that the carmaker’s window for major sales of hybrids has narrowed significantly, and it may have missed the golden years. The e-Power system will compete against new and planned EV offerings with range-extender options from rivals such as BMW, Hyundai, Jeep and Volkswagen.
With Nissan highly exposed to US tariffs of 25 per cent on auto imports, it plans to shift a higher proportion of the Rogue’s e-Power production to the US, rather than Japan.
“They should have introduced e-Power into the US sooner,” said Carranza, who now works at Futuraiser, a London-based financial advisory for auto and energy groups. But he added that there were “still many years in front of us in which hybrid vehicles will have a bright market”.
In May, chief executive Espinosa unveiled plans to cut 20,000 jobs and shut seven out of 17 factories globally in an effort to reduce costs and tackle an expected ¥200bn ($1.4bn) operating loss in the three months to the end of June. But arguably the far tougher task for the 46-year-old Mexican will be reigniting revenue growth, with car sales tumbling from 5.5mn to 3.5mn globally since 2018.
Since Nissan’s merger talks with Honda fell apart earlier this year, Apple supplier Foxconn has stepped up its pursuit to secure contract manufacturing orders for EVs from Nissan.
The two sides have been in talks about joint use of the Oppama plant in Japan to form a base for Foxconn’s contract manufacturing operations, rather than Nissan closing the plant, according to two people familiar with the matter. Nissan shares slumped a further 16 per cent this week after issuing ¥200bn ($1.4bn) of convertible bonds, raising fears of dilution for existing shareholders.
Proving e-Power’s success would put weight behind Nissan’s claims that it holds a clutch of valuable technologies, in areas from assisted driving to solid-state batteries, that set it apart from the competition and provide a foundation for growth.
While the US market is shielded from Chinese competition, in the long run, Nissan will have to contend with its Asian rivals’ technological edge and cost competitiveness, led by BYD.
With conventional fuel readily available for the e-Power engine that tops up the battery, a former Nissan engineer said the technology may provide a good alternative to EVs for people with little access to charging infrastructure.
Yet China’s low-cost lithium iron phosphate (LFP) batteries had outperformed even the wildest expectations of the auto industry and put Chinese carmakers in a powerful position to expand plug-in hybrid and range extender vehicle sales, the person added.
“In the end, LFP will make sense. E-Power was developed during a time when we didn’t know how far LFP could go,” the engineer said.