The War for Car 2.0 Renault-Nissan: Betting the...

The War for Car 2.0

Renault-Nissan: Betting the company

" A new era is beginning in the global automotive industry. At Nissan and Renault, we

are working together to lead the way to mass-market zero-emission mobility" - Carlos Ghosn, CEO Renault, CEO Nissani

“This *$1.6 billion loan to Nissan North America+ is an investment in our clean energy future. It will bring

the United States closer to reducing our dependence on foreign oil and help lower carbon pollution.”

- Steven Chu, US Secretary of Energy, January 2010ii

“We must have zero-emission vehicles. Nothing else will prevent the world from exploding.”

- Carlos Ghosn, CEO Renault, CEO Nissan, May 2008iii

MBA 211 Game Theory – Final Project – Professor John Morgan

Team Schachmatt - Angus Hildreth | David Martin | Laurie Reemeyer | Elise Singer

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On April 20, 2010 an explosion on the Deepwater Horizon offshore drilling rig, operating in the Gulf of

Mexico off the coast of Louisiana, resulted in a fire that sank the rig, killing 11 workers and causing a

massive-scale oil spilliv. On May 1, 2010, as the devastating environmental impact was becoming more

apparent, President Obama, put all new offshore oil leases on hold pending a 30-day probe into the

catastrophic Gulf of Mexico spill.v As US officials predicted the oil spill could become the worst in US

historyvi, eclipsing the 1989 Exxon Valdez disastervii, the US’ $700 billion per year dependence on foreign

oilviii and need for an alternative solution was yet again thrown to the fore of public awareness.

Energy dependency is, of course, not a uniquely US phenomenon; nor is the increasing sense of urgency

to finding alternative sources of renewable energy in a warming world. Perhaps, nowhere has this crisis

of dependence and urgency been felt more keenly than in the auto-industry, where the economic

impact of fluctuating oil prices ix x contributed to two of the Big Three US auto manufacturers, GM and

Chrysler, filing for Chapter 11 bankruptcy in 2009xi xii. Car1.0, the gas guzzling utopia of Big Oil appears

dead in the water, but the ultimate form of its successor, Car2.0, is yet to be determined. The battle-

lines are being drawn, and to the winner the spoils – the auto manufacturing market is currently worth

$1.5 trillion per year, roughly the same size as the market for gas at the pumpxiii.

Our mid-term project focused on the emerging war for Car2.0 through the lens of Better Place, an

electric vehicle (EV) infrastructure provider that is betting the future is green, as it grapples with the

decision to enter the US market. In our final project we revisit Car2.0, but this time through the lens of

a different group of players with much more “skin in the game” – the auto manufacturers. Moreover,

we focus on a company led by another inspirational leader, with a very definite greener vision of Car2.0

– Renault-Nissan (RN). Using game theory principles, we analyze RN’s current EV strategy and the likely

responses of incumbent players, and we then consider what RN might do to improve its chances of

success.

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Background to the automobile industry

Since the first practical automobile with a petrol engine was produced by Karl Benz in 1885xiv, the

automobile industry had grown into a $1.5 trillion a year behemothxv with more than 800 million cars

on the road and with more than 60 million new cars produced in 2009xvi. Over the next 40 years the

global fleet of passenger cars is expected to quadruple to nearly 3 billionxvii. China, Japan, the US and

Germany currently dominate motor vehicle production, producing 14m, 8m, 6m and 5m vehicles

respectively in 2009xviii. The automobile industry is dominated by a few large American, European and

Japanese manufacturers, notably Toyota, General Motors, Volkswagen, Ford, Renault-Nissan, and

Honda [See Appendix 1 for details].

A maelstrom of unforeseen factors including the 2008 oil price shock [See Appendix 2] and the effect on

escalating raw material costs; the global financial crisisxix of 2007 to the present and the tightening of

consumer credit; and environmental politics and changes in consumer habits towards more

environmental-friendly, fuel-efficient vehicles all contributed to a crisis in the global automobile industry

during 2008 to the presentxx. A more sustainable transportation solutionxxi is needed, one that

combines more renewable sources of energy with more fuel-efficient technology.

However, the large auto-manufacturers have very different visions of a greener future – from enhanced

Internal Combustion Engine (ICE) Technologiesxxii designed to increase fuel efficiency and hybrid electric

vehiclesxxiii that combine ICE and electric motor power, to fully electric vehicles.

Background to the Electric Vehicle Industry

The electric vehicle has been touted as a cornerstone in the industry’s effort to reduce its environmental

impactxxiv. Electric vehicles could potentially be powered using low-carbon electricity sources (nuclear,

wind, solar etc), reducing emissions that contribute to climate change. The conditions needed to enable

high penetration of electric vehicles include reliable batteries that enable reasonable vehicle range, a

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significant shift in car manufacturing capacity to electric vehicles, and access to charging or battery

changing locations as a replacement for current gas station infrastructure. Penetration would largely be

determined by the economics of establishing and operating the new EV manufacturing and servicing

infrastructure, compared with the status quo petroleum-based transport system. The main technical

and economic risks relate to performance, driving range and the cost of the lithium ion batteries that

power the vehicles.

The Renault-Nissan Alliance

The Renault-Nissan Alliance was formed on March 27, 1999xxv between the French automaker Renault

SA and the Nissan Motor Company of Japan. Once called a “marriage of desperation for both parties”

the Renault-Nissan Alliance is now the most successful alliance in automotive historyxxvi, in no small part

due to the inspirational leadership of Carlos Ghosnxxvii xxviii xxix who became the CEO of Nissan in 2001 and

CEO of Renault in 2005. By 2009, Renault-Nissan was the fourth largest auto-manufacturer in the world,

behind Toyota, GM and Volkswagen but slightly larger than Fordxxx. Critical ingredients to the Alliance’s

success have been combined expertise and technology sharing between the two companiesxxxi.

Ghosn is a visionary and spotted the opportunity to take a leadership role in the emerging Car2.0

sustainable transportation war, betting the future of the alliance on electric vehiclesxxxii. Ghosn believes

that by 2020 purely electric zero-emission vehicles will represent 10% of the global car market, and

plans to make RN the first big manufacturer of zero-emission vehiclesxxxiii. Ghosn’s bold vision has been

met with a mixed response, and depends on three elements working in RN’s favor: cooperation of

governments, a rising oil price, and a change in habits of consumers, which is traditionally hard to

predictxxxiv. Despite his critics, Ghosn is ‘walking his talk’ and has committed more than $5.6billion to

developing a range of EVs and investing in car and battery factory capacity.

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Renault-Nissan’s commitment to EV

A key element of Renault-Nissan’s commitment to EV is the Alliance’s investment in battery technology.

This is through a Joint Venture (“JV”) called the ‘Automotive Energy Supply Corporation’ between Nissan

(51%), NEC Group (49%)xxxv. One battery researcher claims that the Nissan battery is significantly better

than the competitionxxxvi. In addition, Renault-Nissan has demonstrated its commitment to the future of

EVs through strong signaling and commitments. Since 2008, Nissan has made more than 60 agreements

with governments, utilities, EV infrastructure providers and fleet car companies to “advance electric

vehicle mobilityxxxvii.” A detailed list of these agreements is shown in Appendix 3. Figure 1, below, shows

the global extent of these agreements, demonstrating that Renault-Nissan is playing a global game.

Figure 1 – Renault-Nissan’s global EV agreementsxxxviii

The large number of agreements, and the public way that Renault-Nissan has displayed these on its

website is an example of social learning and trying to create a “cascade”. In addition, by being

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transparent about the details of its agreements, and by choosing reputable and influential partners,

Renault-Nissan can reduce the suspicion level of other parties that might consider joining the cascade.

The cascade is a critical element of EV’s future success. Consumer acceptance is a very real risk,

particularly while uncertainty remains around EV range and battery technology, and if EVs have a

different look and feel to the gas guzzling cars people are used to buying. However, if consumers

recognize that many organizations are committed to an EV future, they will be more confident about

deciding to purchase an EV.

Renault-Nissan has also been smart about how it has interacted with partners in forming agreements.

The agreements are flexible - official enough to be meaningful, but not too rigid so as to lock in

particular performance targets. This avoids locking partners into commitments that they are unable to

deliver on.

In addition to the cascade of signaling agreements, Renault-Nissan has made specific commitments to

capacity and R&D. In particular, it has announced car and battery manufacturing plants in Japan,

Tennessee and the UK, and battery manufacturing plants in Portugal and France (see Table 1 below).

This multi-billion dollar portfolio of investments shows Renault-Nissan’s commitment to EV’s mass-

market success.

Table 1: Renault-Nissan Commitment to EV Vehicle and Battery Production Capacityxxxix

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In August 2009, Renault-Nissan unveiled the Leaf, an EV with a range of 100 miles and a top speed of

over 85 miles per hour, the $25-30k Leaf also achieves 367 miles per gallonxl. RN plans to begin

production in Japan in the fall of 2010 starting with 50,000 EVs a yearxli. Nissan conducted an extensive

road show with the Leaf, pre-signing customers and coordinating with announcements on EV charging

infrastructurexlii. This created a complementary cascade of future EV customers in addition to the

cascade of EV industry stakeholders.

In January 2008, Renault-Nissan and “Project Better Place” (now “Better Place”) signed a memorandum

of understanding to catalyze the mass-market deployment of EVs in Israelxliii. This agreement

represented one of the first credible commitments to develop an EV battery infrastructure industry

standard, which would alleviate the battery range issues that have dogged the industry to date.

Renault-Nissan’s transparent and committed approach to EV investment is no doubt a deliberate effort

to build momentum in the EV industry and influence other auto players to pursue an EV strategy.

Renault-Nissan’s Rivals

Toyota, the world’s largest automobile manufacturer, appears committed to continuing production of

its plug-in hybrids, following the success of the Toyota Prius hybrid EVxliv. Toyota’s President Masatami

Takimoto commented in 2009, “the time is not here” for electric carsxlv affirming Toyota’s strategy to

wait until battery technology had improved before mass producing EVs. Honda, the other large

Japanese manufacturer and hybrid EV evangelistxlvi also appears uncommitted to pursuing an EV

strategy and does not plan to roll out mini-EVs until 2015xlvii. In 2009, the hybrid market was dominated

by the US and Japan, and despite an overall reduction in hybrid sales in 2009 [see Appendix 4], some

analysts predicted substantial growth in the market by 2015xlviii.

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General Motors and Ford, both big recipients of money from the American Recovery and Reinvestment

Actxlix appear to be hedging their bets – happy to take government subsidies to invest in EV and battery

R&D, but less committed than Renault-Nissan in their pursuit of a greener future.

GM’s green solution, the “Chevy Volt,” is a plug-in hybrid and not fully electric, despite GM describing it

as an electric vehiclel. GM appears to be hedging its bets on EV technology, pursuing a flexible but more

expensive half-way technology solution. The danger for GM is that rather than getting the best of both

worlds, the company instead risks getting the worst of each and being left behind once the green Car2.0

standard war is won. GM has been criticized for its insular and inward-looking culture, and its inability to

innovateli. Therefore, some automobile commentators are skeptical about the Volt’s prospects. In

August 2009, Compact Power (LG) received a $151m Recovery Act award to develop lithium-ion

batteries for the GM Chevy Voltlii, but GM is also partnering with A123 to supply batteries. Ford is

producing a fully electric version of the Focus for launch in 2011liii.

Volkswagen, the other large auto-manufacture was dabbling in a number of greener technologies, from

clean-diesel, neat ethanol vehicles, flexible-fuel vehicles, hybrids and EVsliv. In September 2009, Ulrich

Hackenberg, Volkswagen’s R&D boss commented that VW would be coming out with an Electric Vehicle

in the US in 2013, but would not pursue a battery-swapping solutionlv.

In addition to vehicle manufacturing incumbents and new entrants, Renault-Nissan also needs to

consider its rivals and new entrants in the lithium-ion battery sector. Chief among these is Sanyo-

Panasonic, the world’s largest lithium battery producerlvi, which is making moves to break into the EV

battery market, initially through a supply deal with the niche brand EV Teslalvii and potentially through

its joint venture with Toyota that makes lithium batteries for the Prius hybridlviii.

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Framing the Game

There are many players in the auto manufacturing industry with varying capabilities, strategies, and

visions of the future. Before analyzing the strategies and responses of RN and its rivals, we simplified

the game by grouping together players with similar visions:

The EV evangelists including Renault-Nissan and smaller startups such as Tesla Motors etc;

The hybrid evangelists including Toyota and Honda; and

Those hedging their bets and adopting a middle of the road strategy between hybrid and EV,

including General Motors and Ford

For the purposes of this game we will refer to these 3 groups as “Renault-Nissan”, “Toyota & Hybrids”,

and “GM, Ford & Hedgers”.

Mental Models

Renault-Nissan

Renault-Nissan’s mental model is that the future of the Car2.0 will be EV and that the RN alliance will be

a leading player in this new green automobile paradigm. RN’s strong belief stems from its inspirational

leader’s vision and the need for the alliance to find new growth opportunities after the companies have

stumbled somewhat following their initial success together. RN believes that it has superior battery

technology and the willpower to deliver a successful market leading EV entry within the next 2 years.

The alliance sees EV as more than just a judo strategy in the automobile market, and that the time for

mass market EVs is upon us. RN believes that alliances provide a great way for companies to share

technologies and expand the pie.

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Toyota & Hybrid

Toyota, Honda and other hybrid players believe that hybrids represent a better solution for Car2.0 and

that the world is not ready for EV yet. This relatively risk-averse strategy reflects the large risks and

uncertainty they associate with battery technology and consumer adoption of EVs. Toyota’s risk

aversion around EVs is probably accentuated by the recent brake recall crisislix that has led to a loss of

confidence and management focus. Toyota likely views Renault-Nissan’s investment in EVs as a judo

strategy, not a mass market one, and will sit on the EV sidelines waiting to see if the technology proves

successful.

GM, Ford & Hedgers

To GM, Ford and other automobile manufacturers, EVs present an opportunity to get government

subsidieslx, both for technology and factory investment. For GM in particular, this presents a good time

to try launching EVs againlxi. At the same time, as GM, Ford and others emerge from the auto-industry

crisis of 2008-2010lxii, and for GM and Chrysler, in particular, emerge from administration, they do so

with a degree of caution, hesitant to take large risks and make the large commitments that Renault-

Nissan has made, while not wanting to be left behind. Therefore, their mental model is to adopt a

hedging strategy, with EVs representing a judo strategy in the automobile market.

Decisions and the Game

Car2.0 is a complex dynamic game that will evolve over a period of years. To help simplify the game

further, we considered three key phases during which the future of Car2.0 will evolve:

Phase 1 – “Technology Uncertainty,” defined by considerable risk and uncertainty as large

investments are made into developing battery technology and capacity to support the future EV

industry.

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Phase 2 – “Doubling Up,” in which critical decisions will be made by all players on whether to

enter the market, continue investment in EV technology or quit.

Phase 3 – “Ramping Up,” where players must decide whether to commit to major production of

EVs, or not.

Phase 1 – Technology Uncertainty [Present to c.2012]

Phase 1 is already underway and auto-manufacturers have already placed their bets on battery and EV

technology. RN has placed a large bet on EV and battery technology, while on the other end of the

spectrum, Toyota & Hybrid have chosen to stay out of the game during this phase while the uncertainty

surrounding battery technology remains. GM, Ford & Hedgers have placed smaller bets, hoping not to

be left behind if the technology proves successful.

Phase 2 – Doubling Up [c.2012 to c.2015]

Given the size of its commitments to date, Carlos Ghosn’s strong vision and statements in the press, and

based on past resolve in following through on difficult initiatives, we believe RN has effectively

committed to pursuing EV manufacture in Phase 2, regardless of the success of EV technology

development in Phase 1. However, RN will need to decide whether to offer its battery technology

platform to other auto-manufacturers and under what terms the company will offer it.

GM, Ford & hedgers appear less resolved to an EV future and their decisions in Phase 2 will be

influenced by the success of their technology development in Phase 1, and the responses of other

players. If Phase 1 is successful then GM, Ford & Hedgers will likely double up on their investments

seeking to maintain their comparative lead over Toyota and other potential entrants. If Phase 1 is less

successful then GM, Ford & Hedgers will need to decide whether to quit the market or perhaps stay in

and possibly leverage RN battery technology if available.

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Toyota & Hybrids must decide whether to enter the EV market or stay out, effectively for good. If

Toyota & Hybrids enter the market they must decide whether to leverage existing battery technology or

develop their own, hoping to learn from others mistakes and leapfrog the competition.

Phase 3 – Ramping Up

All auto-manufacturers will then need to decide whether to ramp up production and if so, by how much.

The decisions depend on actions taken in previous rounds.

A summary of the critical decisions each group of players will make is shown in Appendix 5.

Overview of the Game Tree and Payoffs

A simplified version of the game tree is shown in Figure 2 below. The first node represents the

uncertainty relating to battery technology. While there are a number of possible outcomes ranging

from RN and its current EV rivals (GM & Ford etc.) succeeding in developing EV & battery technology to

all players failing, our analysis focuses on those of interest to RN – where the company is still in the

game, but the success of its current EV rivals is less clear.

While subsequent decisions in Phase 2 will in reality evolve over time and involve negotiations among

players, we have considered them sequentially in a logical order. For example, Nissan must offer support

with battery technology before another player accepts that offer, etc.

Figure 2 – Overview of the Simplified Game Tree

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Overview of Potential Outcomes

The top branch of the game tree represents the scenario in which both RN and its current EV rivals, GM,

Ford & hedgers all succeed in developing EV and battery technology in Phase 1.

Scenario A: Mass Market with a Nissan Platform represents the best of all worlds for RN. Battery

technology is successful, and while current EV rivals will likely pursue their own technology platforms,

RN proactively offers its EV battery platform as a means for Toyota and other new entrants to enter the

market quickly. While RN has significant power in this partnership, they make the decision easy for

entrants with low licensing or cost structures. Momentum behind EV grows, ultimately resulting in mass

market adoption of EVs and RN is in a strong position as both an EV manufacturer and battery platform

provider. RN also maintains a monopoly position using its EV battery platform.

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Scenario B1: Mass Market with signaling dictates that RN does not capture significant profit from their

battery platform. All players invest in EV cars and car battery technology, therefore EV cars achieve mass

market penetration. Both RN and the rivals succeed, new entrants enter the market, and RN in turn

proactively makes the offer to share EV battery technology. The entrants (Toyota and Honda) are

concerned about the potential holdup by RN or negotiations breakdown between them and the entrants

reject RN’s EV battery offer potentially signaling confidence in their own technology. From a power

perspective, the signaling and rejection of the offer demonstrate that RN and the entrants are on equal

footing. This scenario results in more modest profits for RN because they must rely solely on

partnerships and their own sales as channels for distributing their batteries.

Scenario C: Multi-player Judo ensures relatively high profits for RN and rivals in a small market. Despite

RN and rival’s modicum of success, entrants signal they perceive it as a niche market by declining to

enter. Rivals continue to use their own EV battery technology. Two sub scenarios exist where RN either

offers or declines to share their battery technology with entrants. RN dominates the market and, due to

their battery production capabilities, can lower their costs and either out price competitors or collect

higher margins.

Scenario B2: Mass Market without signaling guarantees high margins for RN. RN declines to offer their

technology to the market and all players use distinct, proprietary battery technology and thus, there is

no cooperation. Rivals are successful and entrants perceive the market potential and enter. Demand for

EV vehicles grows and entrants have high fixed costs. RN obtains significant market share because of

both its mature products and ability to compete on price.

The lower branch of the game tree represents the scenario in which RN succeeds in developing EV and

battery technology in Phase 1 but RN’s current EV rivals, GM, Ford & hedgers fail.

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Scenario D: Nissan wins the Standards War ensures high profits for RN based on their proactive sharing

of their EV battery platform. Rivals fail and accept RN’s platform. Nevertheless, entrants still perceive

potential for the market, enter, and even adopt RN’s platform as a way to quickly improve their

competitiveness. This scenario offers a high degree of cooperation among players. RN has significant

power in the sharing/licensing negotiations for two reasons: 1) the rivals have already adopted the

technology as a proven standard and 2) the entrants are late to market.

Scenario E1: War of attrition with the Entrant splits the landscape into two parties – the entrants with

an alternative battery technology and RN’s proven platform. Rivals fail using their own technology and

adopt the RN’s battery. RN proactively signals desire for cooperation with entrants, but they reject the

offer either out of fear of hold up or rolling the dice one too many times. RN dominates the car market

because they have proven technology, are the biggest brand name, and the entrants are late to market.

Scenario E2: War of attrition with the Entrant replicates scenario E1, except it is a slightly smaller

market because the rivals exit.

Scenario F: Judo with a Nissan battery improves on the multi-player judo strategy. Rivals fail and adopt

RN’s battery platform, while entrants signal they perceive EV as a niche market and decline to enter. RN

dominates the smaller car market, has a monopoly over the EV car battery market, which the company

proactively pushes into the market place, and then extracts profits accordingly.

Scenario G: Leapfrog empowers RN to leverage their first-mover advantage and low cost structure

against new entrants. Rivals fail and exit the market. Entrants adopt a new EV technology in an attempt

to trump RN’s EV platform. RN extracts most of the profits equally from the car and car battery

industries, but the market is significantly smaller in size than mass market.

Scenario E2: War of attrition with New Entrant splits the landscape into two parties – the entrants with

an alternative battery technology and RN. Rivals fail using their own technology and exit the market. RN

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proactively signals desire for cooperation with entrants, but they reject the offer either out of fear of

hold up or rolling the dice one too many times. RN shares the car market with entrants because they

have proven technology, a significant brand name, first mover advantage, and potentially higher

margins.

Scenario H: Sumo-Judo enables RN to be a monopoly in a niche market. Their investments in battery

technology allow them to operate profitably. Rivals fail and exit the market. Entrants observe rivals

exiting the market, perceive the market to be too small, and decline to enter the market. Two sub-

games exist: either RN proactively offers the EV platform to entrants or does not. In both cases, they

reject the offer.

Special Note – Scenario Z: Nissan Fails RN may also fail and exit the market, losing its almost $6 billion in

investment. In which case, we assume that no other players will follow.

Payoffs

For each scenario above, we estimated the present value of future profits for each of the major groups

of players based on the range of predicted Electric Vehicle penetration rates that industry analyst and

commentators predicted and on potential margins that batteries and EVs are predicted to make.

Gompertz curveslxiii, i.e. sigmoid functions that mathematically model time series where growth is

slowest at the start and end of a period were used to model the future development of the EV industry

under each scenario and the curves were fitted to the appropriate industry penetration predictions.

An overview of the projected penetration rates under each scenario through 2020 and beyond is set out

in Figures 3 and 4 below. Table 2 summarizes the estimated payoffs for each group of players under

the different scenarios. For more details on the assumptions and calculations used in estimating future

profits please refer to Appendices 6 and 7.

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Figure 3 – Projected EV Penetration Rates through 2020

Figure 3 – EV Penetration Rates for each scenario through 2040

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Table 2: NPV Future Profits for the Three Players under each scenario

Results in Table 2 reflect our best estimates based on available data. In practice, payoffs, particularly

those representing non-mass market scenarios, may be more difficult to predict.

All the payoffs in Table 2 are forward looking and do not include any losses that might be incurred if

rivals exit and lose their EV development investments to date. Hence if either RN or its rivals fail, they

will lose their investments, which are approximately $6 billion for RN and at least several hundred

million dollars each for rivals. Those losses are not shown on the game tree as they are now sunk costs.

Solving the Game Tree

The game tree is solved by looking forward and reasoning back. We analyze the game assuming that

industry analysts are correct in assessing that Renault-Nissan has the superior battery technology, and

that through its heavy commitment to EV, becomes the EV leader.

Renault-Nissan has recognized that payoffs for all players will generally increase if the overall EV market

expands more rapidly. As more EV complementary companies (e.g. utilities, battery changing/charging

companies such as Better Place) are established, and the product offerings in EV expand, consumer

acceptance of EVs is also likely to grow through a cascade effect. There is also a network effect that

NPV Future Profits ($bn)

Scenario Description Nissan Rivals Entrants

A Mass Market w/ Nissan Battery $178 $31 $42

B Mass Market $75 $25 $34

C Multi-player-Judo $68 $23 $0

D1 Nissan wins the Standards War $193 $15 $23

D2 Nissan wins the smaller Standards War $116 $0 $23

E1 War of Attrition w/ Entrants $51 $5 $8

E2 War of Attrition w/ New Entrants $36 $0 $12

F Judo with Nissan battery $101 $11 $0

G Leapfrog $111 $0 $16

H Sumo-Judo $31 $0 $0

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lowers the incremental cost of new consumers buying and driving EVs as economies of scale increase

and infrastructure utilization also increases as the market expands. Therefore, it is in RN’s interest to

help grow the overall market. Because RN has invested more in the EV future than any other car

manufacturer, it stands to gain more than other players, but also increases the payoffs for rivals and

new entrants. RN wants the whole market to succeed, as long as it can maintain leadership in EV.

The equilibrium in the game depends on two main factors. First, it is influenced by the ability for the

current EV rivals (GM, Ford) to succeed. Given that GM and Ford have not invested in EVs as heavily as

Renault-Nissan, and given GM’s poor track record, it is quite probable that the lower branch (rivals fail)

eventuates. The second main factor affecting the game is whether Renault-Nissan offers and whether

rivals and new entrants agree to take up a Nissan battery platform or not. If the EV industry aligns

behind Nissan’s superior battery standard, this will improve consumer acceptance, help increase the

overall market size, and increase profit for all the automotive players, especially Renault-Nissan. Hence

we determine that the equilibrium cases are A (mass market with new entrants adopting Nissan

standard battery) if the rivals initially succeed with their battery technology and D1 (rivals and new

entrants adopt the Nissan standard battery in a smaller market) if the rivals initially fail. For a completed

Game Tree with payoffs please refer to Appendix 8.

Offering the Nissan battery technology would be consistent with the mental model of Renault-Nissan to

strengthen and build the zero-emissions mobility mass market. However, Renault-Nissan would only

seek to do this if it can extract some value, e.g. through a license agreement or by manufacturing

batteries for a profit.

It will probably be easier for the rivals to agree to take up the Nissan battery platform if the rivals

initially fail. After their initial investment, rivals do not want to abandon their EV strategy altogether or

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to be hamstrung by poor battery technology. Therefore, they would have a strong incentive to come to

some agreement with Nissan to use its superior battery technology.

If Nissan hopes to become the battery standard and platform for other vehicle manufacturers it needs

to consider the mental models and behavioral aspects of rivals and new entrants. Table 3 summarizes

the primary obstacles to rivals and new entrants taking up the Nissan battery platform, and ways that

Renault-Nissan could overcome such obstacles.

Table 3 – Primary obstacles and potential solutions facing RN

Primary Obstacle Ways that Renault-Nissan can Overcome Obstacle

Lack of belief in EV by rivals and new

entrants

Continue to build a cascade of complementers and consumers,

continue commitments to capacity and maintain extreme

management focus on the successful launch of the Leaf.

Economic risk of hold and value

capture by Nissan. Includes R&D hold

up on improved future generation

batteries, and conflict of interest with

existing battery supply partners (e.g.

A123, Panasonic).

Allow rivals and new entrants to take a stake in the battery

company (e.g. The Great American Battery Co). Consistent

with their alliance model. Also through structuring and

negotiation of licensing agreement. Performance based

payments. Some option and flexibility for competitors to “get

out”. E.g Dolby model. Well-written contracts and favorable

pricing to encourage adoption.

Inability to customize to meet auto

manufacturers own requirements,

limiting design, features and

performance of rival/new entrant EVs.

“HDK” – sell the battery components and allow the vehicle

manufactures to adjust and customize the actual battery fit

based on car type – SUV, sedan, sports car, etc. Nissan needs

to be flexible and the customers need to take ownership and

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customize.

Cultural/ego – e.g. using Japanese

technology in American cars. Brand

image etc.

Made in USA to persuade American manufactures. Don’t make

a big deal about “Nissan inside” – create a different brand, e.g.

the great American battery company”. In contrast to “Intel

inside”.

Nissan should clearly demonstrate its ongoing confidence in its technology, continued strong signals and

commitment and investment in preparing for Phase 3. If the rivals and entrants believe that Renault-

Nissan’s EV strategy is starting to work, they do not want to be left behind and will feel compelled to try

to catch up and participate in the EV market.

Risks

Significant technological risk remains around batteries for EVs and integration of EV infrastructure,

particularly battery charging and battery life. There is further risk of technology disruption that could act

like a “cold fusion” event and render Renault-Nissan’s EV investments obsolete. The payoffs determined

rely on estimates of market growth and penetration and margins on units. Even without a disruptive

technological event, it is possible that significant technological development by rivals and new entrants

will occur in the medium to long-term future that will significantly change the payoffs for the players.

Because the entire EV industry is relying on government incentives to stimulate R&D and investment,

there is risk if the political climate shifts, or if macroeconomic conditions turn unfavorable. For example,

under the Bush administration, the hydrogen fuel cell was widely cited as the green car of the future and

it provided considerable R&D resources to advance the hydrogen economy, funding that was

subsequently withdrawn by the Obama administrationlxiv. Renault-Nissan has an agreement with the

government of Portugal to help fund its battery factory there, but the looming European debt crisis

Page | 22

could potentially stall such initiatives. Government deficits across the world could reduce the capacity

of governments to subsidize the roll out of EVs.

Another macroeconomic factor that could greatly affect EV penetration is the future price of oil. BCG

determined that the penetration of EVs will be much lower in a low future oil price scenario because this

reduces the economic incentive to switch to EVlxv.

For Renault-Nissan, a very real risk exists if rivals and new entrants try and fail badly in their efforts to

launch EVs. This could damage the overall perception around EVs by governments, complementers in

the EV value chain, and consumers. This could also potentially cripple the EV cascade and damage

Renault-Nissan’s EV strategy. This risk places more urgency on Renault-Nissan to support rivals if their

technologies are faltering. In particular, Renault-Nissan must watch its closest competitor, Ford as it

launches the Transit Connect and Focus EVs in 2011. The Focus appeals to the same segments as the

Nissan Leaf, whereas the Chevy Volt is actually a more expensive plug-in hybrid. Renault-Nissan could

reasonably distance the Volt from the wider EV sector, but this is not so for the Ford pure EVs.

A real risk to coordination exists as Nissan and Ford start to partner with increasingly powerful

companies regarding EV charging and infrastructure. For example, Ford recently teamed with Microsoft

to develop smart-grid capabilitylxvi, while Nissan has really partnered with GE to develop smart-charging

technologieslxvii. Renault-Nissan will need to watch the development of such partnerships and signal or

communicate with rivals to avoid damage to the overall perceptions of the EV sector.

All players, including GM, Toyota, and RN, must be conscious of the sunk cost fallacy and avoid making

future decisions based on past investments however large. Strong signals increase commitment and the

propensity to roll the dice again.

Page | 23

A final organization risk exists for Renault-Nissan. CEO, Carlos Ghosn appears to be the driving force

behind the alliance’s EV strategy. Without his leadership, the alliance could lose significant momentum

and this could critically weaken the launch of the Leaf.

Conclusions and Recommendations

Renault-Nissan has played the game well to date. The company’s cascading series of alliances engender

trust with potential partners and create a positively reinforcing cycle that attracts more partners by the

week. Additionally, RN’s public relation’s machine is on a rampage announcing the almost $6 billion in

investments and partnerships including global investments in battery technology and electric vehicle

manufacturing plants and sending clear signals to the industry. Moving forward, we propose short-,

medium-, long-term strategies as follows:

Short term, RN must successfully launch the Nissan Leaf in the eyes of consumers, existing partners and

potential allies. This will establish RN as the leader of the electric vehicle manufacturers and create a

proof point for their battery platform. Moreover, the Leaf’s success will grow the market and encourage

other players to enter the market.

Medium term, RN must establish itself as the go-to-EV battery manufacturer by encouraging and

providing incentives for other major car manufacturers to adopt their platform. RN must be flexible in

achieving this goal and willing to adapt their business model to ensure successful adoption as mentioned

earlier. A major partnership with Tier-1 car manufacturers will spurn on adoption by Tier-II

manufactures and consumers.

Long term, RN must consider the likely response of competitors and alternative technology

manufacturers and where appropriate sacrifice shorter-term benefits, for longer-term gains, e.g.

consider splitting off the battery platform as an independent company in order to gain market

Page | 24

acceptance and become the industry standard. RN must also remain cognizant of the potential for

future disruptions in technology development and remain flexible enough to adapt and ensure that it

remains at the forefront of automotive transportation.

Page | 25

Appendix 1 – World Motor Vehicle Production in 2008lxviii

Page | 26

Appendix 2 – Oil price shock of 2008lxix lxx

Page | 27

Appendix 3 – List of Renault-Nissan EV Partnershipslxxi

Page | 28

Appendix 4 – Hybrid market dashboard –2009lxxii

Page | 29

Appendix 5 – summary of key decisions in the simplified game

Appendix 6 – Summary of payoffs and key assumptions

Key Assumptions

Total vehicle sales in 2010: 70,000,000

Margin on Cars (excluding battery): $500

Margin on Batteries: $1,000

Growth rate: 3.50%

Discount rate: 10%

Range of Penetration rates 2020 1-10%

Range of Penetration rates 2040 5-50%













Sources

http://en.wikipedia.org/wiki/Automotive_industry

Electric cars: Charge !, Economist, The (London, England) - Saturday, September 5, 2009

Electric cars: A Netscape moment?- Economist, The (London, England) - Saturday, February 6, 2010;PJ Balducci "Plug in Hybrid Electric Vehicle Market Penetration Scenarios" US Department of Energy. September 2008

Electric cars: A Netscape moment?- Economist, The (London, England) - Saturday, February 6, 2010;PJ Balducci "Plug in Hybrid Electric Vehicle Market Penetration Scenarios" US Department of Energy. September 2008

Notes

Sales of new cars were 79.9m in 2007 and more than 60m in 2009. We assumed 70m in 2010

Margins taken by averaging estimates taken from industry reports and comments from Auto-manufacturers

Margins taken by averaging estimates taken from industry reports and comments from Auto-manufacturers

The number of passenger cars is expected to quadruple in the next 40 years => 3.5% per year growth

Penetration rates taken from industry reports and comments from Auto-manufacturers

Penetration rates taken from industry reports and comments from Auto-manufacturers

0

5

10

15

20

25

30

35

40

45

50

% o

f to

tal A

uto

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ket

EV penetration

A

B

C

D1

E1

E2

F

G

H

Page | 30

Appendix 7 – More detailed calculations

Key Assumptions Sources Notes

Total vehicle sales in 2010: 70,000,000 http://en.wikipedia.org/wiki/Automotive_industry Sales of new cars were 79.9m in 2007 and more than 60m in 2009. We assumed 70m in 2010

Margin on Cars (excluding battery): $500 Margins taken by averaging estimates taken from industry reports and comments from Auto-manufacturers

Margin on Batteries: $1,000 Margins taken by averaging estimates taken from industry reports and comments from Auto-manufacturers

Growth rate: 3.50% Electric cars: Charge !, Economist, The (London, England) - Saturday, September 5, 2009 The number of passenger cars is expected to quadruple in the next 40 years => 3.5% per year growth

Discount rate: 10% Electric cars: A Netscape moment?- Economist, The (London, England) - Saturday, February 6, 2010;PJ Balducci "Plug in Hybrid Electric Vehicle Market Penetration Scenarios" US Department of Energy. September 2008

Range of Penetration rates 2020 1-10% Electric cars: A Netscape moment?- Economist, The (London, England) - Saturday, February 6, 2010;PJ Balducci "Plug in Hybrid Electric Vehicle Market Penetration Scenarios" US Department of Energy. September 2008Penetration rates taken from industry reports and comments from Auto-manufacturers

Range of Penetration rates 2040 5-50% Penetration rates taken from industry reports and comments from Auto-manufacturers













Electric Vehicle market in 2020

Share of

battery market

No. of

batteries

Scenario Description % of car market No. of EVs Nissan Nissan Rivals New Entrants Nissan Nissan Rivals

New

Entrants

Nissan

Batteries

Nissan

EVs

Nissan

Total Rivals

New

Entrants

A Mass Market w/ Nissan Battery 10% 9,874,000 70% 30% 30% 40% 6,911,800 2,962,000 2,962,200 3,949,600 $6,912 $1,481 $8,393 $1,481 $1,975

B Mass Market 8% 7,899,000 30% 30% 30% 40% 2,369,700 2,370,000 2,369,700 3,159,600 $2,370 $1,185 $3,555 $1,185 $1,580

C Multi-player-Judo 5% 4,937,000 50% 50% 50% 0% 2,468,500 2,469,000 2,468,500 - $2,469 $1,235 $3,703 $1,234 $0

D1 Nissan wins the Standards War 5% 4,937,000 100% 50% 20% 30% 4,937,000 2,469,000 987,400 1,481,100 $4,937 $1,235 $6,172 $494 $741

D2 Nissan wins the Standards War 3% 2,962,000 100% 50% 0% 50% 2,962,000 1,481,000 - 1,481,000 $2,962 $741 $3,703 $0 $741

E1 War of Attrition w/ Entrants 4% 3,950,000 70% 50% 20% 30% 2,765,000 1,975,000 790,000 1,185,000 $2,765 $988 $3,753 $395 $593

E2 War of Attrition w/ New Entrants 3% 2,962,000 50% 50% 0% 50% 1,481,000 1,481,000 - 1,481,000 $1,481 $741 $2,222 $0 $741

F Judo with Nissan battery 3% 2,962,000 100% 70% 30% 0% 2,962,000 2,073,000 888,600 - $2,962 $1,037 $3,999 $444 $0

G Leapfrog 3% 2,962,000 70% 70% 0% 30% 2,073,400 2,073,000 - 888,600 $2,073 $1,037 $3,110 $0 $444

H Sumo-Judo 1% 987,000 100% 100% 0% 0% 987,000 987,000 - - $987 $494 $1,481 $0 $0

Terminal

Penetration 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040

Scenario Description

A Mass Market w/ Nissan Battery 50% 0.05 0.12 0.27 0.55 1.02 1.74 2.76 4.10 5.77 7.75 10.00 12.46 15.07 17.75 20.45 23.11 25.68 28.13 30.43 32.57 34.54 36.33 37.95 39.41 40.71 41.87 42.90 43.81 44.61 45.31 45.92

B Mass Market 40% 0.04 0.09 0.22 0.44 0.82 1.39 2.21 3.28 4.62 6.20 8.00 9.97 12.05 14.20 16.36 18.49 20.55 22.51 24.35 26.06 27.63 29.06 30.36 31.53 32.57 33.50 34.32 35.05 35.69 36.25 36.74

C Multi-player-Judo 20% 0.02 0.05 0.13 0.27 0.51 0.89 1.41 2.10 2.94 3.92 5.00 6.15 7.34 8.52 9.68 10.79 11.83 12.80 13.68 14.48 15.20 15.84 16.40 16.89 17.32 17.70 18.03 18.31 18.55 18.76 18.94

D1 Nissan wins the Standards War 50% 0.05 0.10 0.18 0.33 0.56 0.90 1.38 2.01 2.82 3.81 5.00 6.37 7.91 9.61 11.43 13.35 15.34 17.37 19.41 21.45 23.44 25.39 27.27 29.06 30.77 32.38 33.90 35.31 36.63 37.85 38.97

D2 Nissan wins the Standards War 30% 0.03 0.06 0.11 0.20 0.34 0.54 0.83 1.21 1.69 2.29 3.00 3.82 4.75 5.76 6.86 8.01 9.20 10.42 11.65 12.86 14.06 15.23 16.36 17.43 18.46 19.43 20.34 21.18 21.97 22.71 23.38

E1 War of Attrition w/ Entrants 10% 0.01 0.03 0.09 0.22 0.45 0.79 1.27 1.85 2.53 3.25 4.00 4.73 5.43 6.08 6.66 7.18 7.63 8.02 8.35 8.63 8.87 9.07 9.23 9.37 9.48 9.58 9.65 9.72 9.77 9.81 9.84

E2 War of Attrition w/ New Entrants 10% 0.01 0.03 0.07 0.16 0.31 0.55 0.88 1.30 1.80 2.38 3.00 3.64 4.29 4.92 5.51 6.07 6.58 7.04 7.45 7.81 8.13 8.41 8.64 8.85 9.03 9.18 9.31 9.41 9.51 9.58 9.65

F Judo with Nissan battery 20% 0.02 0.04 0.09 0.18 0.31 0.52 0.82 1.21 1.70 2.30 3.00 3.78 4.64 5.55 6.49 7.45 8.41 9.35 10.26 11.13 11.96 12.74 13.46 14.13 14.74 15.30 15.81 16.27 16.69 17.06 17.40

G Leapfrog 40% 0.04 0.07 0.13 0.22 0.36 0.57 0.85 1.22 1.70 2.29 3.00 3.83 4.79 5.85 7.02 8.28 9.61 10.99 12.42 13.88 15.34 16.80 18.23 19.64 21.01 22.33 23.59 24.80 25.95 27.04 28.06

H Sumo-Judo 5% 0.00 0.01 0.03 0.06 0.10 0.17 0.28 0.41 0.58 0.78 1.00 1.25 1.51 1.78 2.05 2.31 2.57 2.81 3.04 3.26 3.45 3.63 3.79 3.94 4.07 4.19 4.29 4.38 4.46 4.53 4.59

Total New Vehicle Sales (millions) 70.00 72.45 74.99 77.61 80.33 83.14 86.05 89.06 92.18 95.40 98.74 102.20 105.77 109.48 113.31 117.27 121.38 125.63 130.02 134.58 139.29 144.16 149.21 154.43 159.83 165.43 171.22 177.21 183.41 189.83 196.48

Total number of EVs 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040


A Mass Market w/ Nissan Battery 0 0 0 0 1 1 2 4 5 7 10 13 16 19 23 27 31 35 40 44 48 52 57 61 65 69 73 78 82 86 90

B Mass Market 0 0 0 0 1 1 2 3 4 6 8 10 13 16 19 22 25 28 32 35 38 42 45 49 52 55 59 62 65 69 72

C Multi-player-Judo 0 0 0 0 0 1 1 2 3 4 5 6 8 9 11 13 14 16 18 19 21 23 24 26 28 29 31 32 34 36 37

D1 Nissan wins the Standards War 0 0 0 0 0 1 1 2 3 4 5 7 8 11 13 16 19 22 25 29 33 37 41 45 49 54 58 63 67 72 77

D2 Nissan wins the Standards War 0 0 0 0 0 0 1 1 2 2 3 4 5 6 8 9 11 13 15 17 20 22 24 27 30 32 35 38 40 43 46

E1 War of Attrition w/ Entrants 0 0 0 0 0 1 1 2 2 3 4 5 6 7 8 8 9 10 11 12 12 13 14 14 15 16 17 17 18 19 19

E2 War of Attrition w/ New Entrants 0 0 0 0 0 0 1 1 2 2 3 4 5 5 6 7 8 9 10 11 11 12 13 14 14 15 16 17 17 18 19

F Judo with Nissan battery 0 0 0 0 0 0 1 1 2 2 3 4 5 6 7 9 10 12 13 15 17 18 20 22 24 25 27 29 31 32 34

G Leapfrog 0 0 0 0 0 0 1 1 2 2 3 4 5 6 8 10 12 14 16 19 21 24 27 30 34 37 40 44 48 51 55

H Sumo-Judo 0 0 0 0 0 0 0 0 1 1 1 1 2 2 2 3 3 4 4 4 5 5 6 6 7 7 7 8 8 9 9

Nissan Profit ($millions) NPV 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040


A Mass Market w/ Nissan Battery $178,051 27 73 173 365 699 1232 2017 3102 4520 6285 8394 10825 13548 16520 19699 23038 26498 30040 33635 37257 40888 44515 48130 51728 55310 58877 62433 65986 69541 73107 76692

B Mass Market $75,410 11 31 73 155 296 522 854 1314 1914 2662 3555 4585 5738 6997 8343 9757 11223 12723 14245 15779 17317 18853 20384 21908 23425 24936 26442 27947 29453 30963 32481

C Multi-player-Judo $68,345 10 28 71 157 309 553 912 1403 2034 2804 3703 4715 5821 6999 8229 9492 10774 12061 13344 14617 15877 17121 18350 19564 20767 21960 23148 24333 25520 26711 27912

D1 Nissan wins the Standards War $193,218 40 86 173 322 565 938 1481 2237 3247 4548 6171 8139 10463 13147 16187 19568 23273 27276 31553 36076 40817 45751 50852 56100 61475 66962 72547 78221 83977 89809 95717


E1 War of Attrition w/ Entrants $51,066 6 23 67 164 343 628 1035 1567 2212 2949 3752 4597 5459 6322 7171 7997 8798 9571 10316 11037 11737 12418 13087 13745 14398 15048 15700 16355 17018 17690 18374

E2 War of Attrition w/ New Entrants $36,482 5 15 41 94 189 342 566 867 1248 1703 2222 2793 3402 4037 4685 5338 5989 6632 7264 7885 8492 9088 9674 10251 10821 11386 11949 12512 13077 13645 14220

F Judo with Nissan battery $100,632 17 42 92 185 341 587 949 1453 2120 2966 3999 5221 6625 8200 9929 11794 13775 15853 18009 20226 22490 24789 27113 29456 31811 34177 36551 38934 41326 43730 46149

G Leapfrog $111,485 27 54 101 181 306 494 765 1141 1643 2293 3111 4114 5316 6726 8350 10190 12243 14502 16961 19609 22434 25424 28566 31847 35257 38784 42419 46152 49977 53888 57881

H Sumo-Judo $31,421 5 13 31 64 123 217 356 547 798 1109 1481 1910 2391 2915 3476 4066 4676 5301 5936 6575 7216 7856 8493 9128 9761 10390 11018 11645 12272 12901 13534

Rivals profit ($millions) NPV 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040



B Mass Market $25,137 4 10 24 52 99 174 285 438 638 887 1185 1528 1913 2332 2781 3252 3741 4241 4748 5260 5772 6284 6795 7303 7808 8312 8814 9316 9818 10321 10827

C Multi-player-Judo $22,782 3 9 24 52 103 184 304 468 678 935 1234 1572 1940 2333 2743 3164 3591 4020 4448 4872 5292 5707 6117 6521 6922 7320 7716 8111 8507 8904 9304


D2 Nissan wins the Standards War $0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0


E2 War of Attrition w/ New Entrants $0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

F Judo with Nissan battery $11,181 2 5 10 21 38 65 105 161 236 330 444 580 736 911 1103 1310 1531 1761 2001 2247 2499 2754 3013 3273 3535 3797 4061 4326 4592 4859 5128

G Leapfrog $0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

H Sumo-Judo $0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

New Entrant's profit ($millions) NPV 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040



B Mass Market $33,516 5 14 33 69 132 232 380 584 851 1183 1580 2038 2550 3110 3708 4337 4988 5655 6331 7013 7697 8379 9060 9737 10411 11083 11752 12421 13090 13761 14436

C Multi-player-Judo $0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0




E2 War of Attrition w/ New Entrants $12,161 2 5 14 31 63 114 189 289 416 568 741 931 1134 1346 1562 1779 1996 2211 2421 2628 2831 3029 3225 3417 3607 3795 3983 4171 4359 4548 4740

F Judo with Nissan battery $0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

G Leapfrog $15,926 4 8 14 26 44 71 109 163 235 328 444 588 759 961 1193 1456 1749 2072 2423 2801 3205 3632 4081 4550 5037 5541 6060 6593 7140 7698 8269

H Sumo-Judo $0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Projected penetration

(EV as % of total Auto market)

Profit ($m)Size of EV market Share of EV market No. of EVS

0

5

10

15

20

25

30

35

40

45

50

20

10

20

12

20

14

20

16

20

18

20

20

20

22

20

24

20

26

20

28

20

30

20

32

20

34

20

36

20

38

20

40

% o

f to

tal A

uto

-mar

ket

EV penetration

A

B

C

D1

E1

E2

F

G

H

Page | 31

Appendix 8 – completed Game Tree with Payoffs

Page | 32

References

i http://www.nissan-zeroemission.com/EN/VISION/ ii http://www.greenbang.com/us-banks-billions-on-an-electric-car-future_13462.html

iii http://www.independent.co.uk/news/business/analysis-and-features/renault-bets-on-electric-827716.html

iv http://en.wikipedia.org/wiki/Deepwater_Horizon_drilling_rig_explosion

vReuters,http://www.thepeninsulaqatar.com/Display_news.asp?section=business_news&subsection=market+new

s&month=May2010&file=Business_News201005013209.xml vi http://green.yahoo.com/news/afp/20100427/ts_alt_afp/usblastoilenergypollutiondisaster.html

vii http://www.guardian.co.uk/environment/2010/apr/30/bp-cost-deepwater-horizon-spill

viii An economic and environmental blueprint for the future of energy and transportation, Better Place, December

2008 ix http://www.oppapers.com/essays/Economic-Impact-Rising-Oil-Prices-Automotive/140915

x http://goliath.ecnext.com/coms2/gi_0199-5876056/US-auto-industry-faces-major.html

xi http://en.wikipedia.org/wiki/General_Motors

xii http://en.wikipedia.org/wiki/Chrysler

xiii Project Better Place White Paper 07/10/08

xiv http://en.wikipedia.org/wiki/Karl_Benz

xv Project Better Place White Paper – Projecting the Future of Energy, Transportation and the Environment –

October 5, 2007 xvi

http://en.wikipedia.org/wiki/Automotive_industry xvii

Electric cars: Charge !, Economist, The (London, England) - Saturday, September 5, 2009 xviii

http://en.wikipedia.org/wiki/List_of_countries_by_motor_vehicle_production xix

http://en.wikipedia.org/wiki/Financial_crisis_of_2008 xx

http://en.wikipedia.org/wiki/Automotive_industry_crisis_of_2008%E2%80%932009 xxi

http://www.worldenergy.org/publications/809.asp xxii

http://en.wikipedia.org/wiki/Internal_combustion_engine xxiii

http://en.wikipedia.org/wiki/Hybrid_vehicle xxiv

BCG, The Comeback of the Electric Car?, Jan 2009 xxv

http://www.renault.com/en/groupe/l-alliance-renault-nissan/pages/l-alliance-renault-nissan.aspx xxvi

The Renault Nissan Alliance in 2008: Exploiting the Potential of a Novel Organizational Form, Stanford Graduate School of Business, Case SM-166, May 19, 2008 xxvii

http://en.wikipedia.org/wiki/Carlos_Ghosn xxviii

The Global Leadership of Carlos Ghosn at Nissan, Thunderbird, The Gavin School of International Management – A07-03-0014 xxix

http://news.bbc.co.uk/2/hi/business/4291105.stm xxx

See Appendix 1 for details xxxi

http://www.renault.com/en/groupe/l-alliance-renault-nissan/pages/l-alliance-renault-nissan.aspx xxxii

Renault’s electric-car gamble: Mr Ghosn bets the company - Economist, The (London, England) - Saturday, October 17, 2009 xxxiii

The electrification of motoring: The electric -fuel-trade acid test - Economist, The (London, England) - Saturday, September 5, 2009 xxxiv

Renault’s electric-car gamble: Mr Ghosn bets the company- Economist, The (London, England) - Saturday, October 17, 2009 xxxv

http://www.eco-aesc.com/en/overview.html xxxvi

Alex Taylor III, Here Comes the Electric Nissan, Fortune, Mar 1, 2010 xxxvii

http://www.nissan-zeroemission.com/EN/NEWS/ xxxviii

http://www.nissan-zeroemission.com/EN/PARTNERSHIPS/ xxxix

http://www.nissan-zeroemission.com/EN/NEWS/ xl The Global Electric Car Industry in 2009: Developments in the US, China and Rest of the World – Stanford

Graduate School of Business, Case SM-175 09/10/09

Page | 33

xli

The Global Electric Car Industry in 2009: Developments in the US, China and Rest of the World – Stanford Graduate School of Business, Case SM-175 09/10/09 xlii

http://www.earthtechling.com/2009/10/nissan-announces-tour-dates-for-leaf-ev-road-show/ xliii

http://www.greencarcongress.com/2008/01/renault-nissan.html xliv

http://articles.sfgate.com/2006-04-24/news/17289136_1_highlander-suv-prius-toyota-city xlv

The Global Electric Car Industry in 2009: Developments in the US, China and Rest of the World – Stanford Graduate School of Business, Case SM-175 09/10/09 xlvi

http://www.independent.co.uk/news/business/analysis-and-features/renault-bets-on-electric-827716.html xlvii

The Global Electric Car Industry in 2009: Developments in the US, China and Rest of the World – Stanford Graduate School of Business, Case SM-175 09/10/09 xlviii

http://www.hybridcars.com/news/jd-power-forecasts-three-fold-growth-hybrids-and-diesels.html xlix

http://www.recovery.gov/Pages/home.aspx l http://en.wikipedia.org/wiki/Chevrolet_Volt li http://www.reuters.com/article/idUSTRE52104N20090302

lii http://www1.eere.energy.gov/recovery/pdfs/battery_awardee_list.pdf

liii http://www.thefordstory.com/green/ford-focus-electric-coming-soon/

liv http://en.wikipedia.org/wiki/Volkswagen

lv http://www.greentechmedia.com/articles/read/volkswagen-says-no-to-battery-swapping-yes-to-electrics-in-u.s/

lvi http://blogs.edmunds.com/greencaradvisor/2010/05/sanyo-plans-to-launch-mass-production-of-li-ion-

batteries-for-evs-by-fiscal-2012.html lvii

http://earth2tech.com/2010/01/07/tesla-panasonic-make-it-official-buddy-up-for-batteries/ lviii

http://online.wsj.com/article/BT-CO-20100224-700084.html lix

http://pressroom.toyota.com/pr/tms/toyota/toyota-consumer-safety-advisory-102572.aspx#anchor 1 lx http://www.recovery.gov/Pages/home.aspx

lxi http://en.wikipedia.org/wiki/General_Motors_EV1

lxii http://en.wikipedia.org/wiki/Automotive_industry_crisis_of_2008%E2%80%932010

lxiii http://en.wikipedia.org/wiki/Gompertz_function

lxiv http://earth2tech.com/2009/05/14/a-lesson-for-electric-car-makers-in-hydrogen-vehicles-loss/

lxv BCG, The Comeback of the Electric Car?, Jan 2009

lxvi http://www.pcmag.com/article2/0,2817,2362140,00.asp

lxvii http://news.cnet.com/8301-11128_3-20003373-54.html

lxviii http://oica.net/wp-content/uploads/world-ranking-2008.pdf

lxix http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=wtotusa&f=w

lxx http://en.wikipedia.org/wiki/File:Price_of_oil_(2003-2008).png

lxxi http://www.nissan-zeroemission.com/EN/NEWS/

lxxii http://www.hybridcars.com/hybrid-sales-dashboard/december-2009-dashboard.html

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