Take It or Leaf It: Nissan is Selling Its Battery Building Business to the Chinese

Earlier this month, Nissan announced it was in the final stages of sealing a deal to sell its entire EV battery business to Chinese investment firm GSR Capital. The sale includes battery plants in Tennessee, England, and Japan, with a preamble where the Japanese automaker has to buy up minority shares of Automotive Energy Supply Corp. from NEC Corp.

From there, it can sell off the business to GSR for a cool $1 billion — which isn’t a bad deal for the Chinese company. Nissan used around $1.4 billion in government funds building its U.S. factory in 2010, and the remaining plants weren’t exactly cheap to build. So why is Nissan selling them off?

For starters, the Leaf hasn’t been the sales leader the manufacturer hoped for. Even though global deliveries surpassed the 250,000-unit milestone in December 2016, Leaf sales don’t go beyond 50,000 units annually. By electric vehicle metrics, that’s still a win. However, the Tennessee factory is capable of producing 200,000 complete EV battery packs a year — well beyond the company’s current needs.

Reports point to the next-generation Leaf coming equipped with a less competitive power source and a more competitive price tag. Industry rumors have the 2018 model possessing a range of 143 miles per charge. That’s well below the 215-mile range of the Tesla Model 3 and the 238-mile range of the Chevrolet Bolt, both of which compete in the same segment as the Leaf.

Nissan hasn’t revealed its marketing plan for the new EV, but it’s assumed the car will come with several battery options and a base price $5,000 lower than the Bolt’s. Higher trim levels may even bridge the range gap. But, even with moderate sales, Nissan still needs to acquire its batteries from somewhere. In fact, its Tennessee assembly plant exists side-by-side with its EV battery factory and is part of the deal with GSR.

It’s difficult to see how this benefits the Japanese automaker. While GSR gets to become an important battery supplier for Chinese customers, Nissan gets to purchase its own hardware after having sold off the factories.

“This will enable GSR to grow its business and look for other opportunities,” Nissan North America spokesman Brian Brockman told Automotive News. “It will give them the scale to further develop their batteries and look for other opportunities.”

While altruism is its own reward, there isn’t usually a lot of money in it. But, by handing the battery business off, Nissan has alleviated some of the financial risks associated with production and engineering. It may have bit off more than it could chew and didn’t want to hold onto a side business it wasn’t taking full advantage of.

“The battery business alone will not make money, you have to have scale, you have to have the supply chain,” said GSR chairman Sonny Wu. “It’s a bloody, cutthroat game. The auto OEMs will lock you in for five years.”

Nissan has been selling stakes in other businesses, including parts supplier Calsonic Kansei and forklift manufacturer UniCarriers, to better focus on developing superior electric powertrains and autonomous driving technology. Nissan is also looking to push into Southeast Asia with smaller, more traditional automobiles since its purchase of a controlling stake in Mitsubishi Motors.

Under GSR ownership, the battery company will continue as the exclusive supplier of the Leaf’s power source.