SME fleets reluctant to use electric vehicles because of concerns over the lifespan of batteries will welcome news that Nissan will lease the batteries of its all-electric Leaf car when it goes on sale here next year.

By retaining ownership of the battery pack, Nissan hopes to make many of the lifespan and residual value concerns surrounding electric vehicles (EV) obsolete.

Taking the cost of the battery pack off will also significantly reduce the Leaf’s price tag meaning the car will be priced comparable to a well-specified Volkswagen Golf when it hits showrooms in 2010.

“If we included the price of the battery into the cost of the car it would be too expensive,” Nissan senior vice-president and the man responsible for the Japanese carmaker’s zero-emission unit, Andy Palmer, told Fleet News.

“It would be a consumer barrier, so we are going to lease the battery separately.”

The retail price will look even more attractive in 2011 when a Government subsidy of between £2,000 and £5,000 per vehicle comes into play, although the exact terms of how the subsidy will be offered will not be decided before the end of the year.

“Affordability will be essential,” said Palmer.

“Therefore you can’t expect consumers to pay more for an electric vehicle, so incentives are needed.”

Even without the subsidy, the Leaf will be the world’s first affordable zero-emission car, said Palmer.

However, leasing the battery will add a significant extra monthly cost to any fleet that is considering placing orders.

Nissan estimates that a fleet will only save 20% compared to the cost of refuelling a diesel car when the lease of the battery is included in the monthly cost of running its new EV.

Although, Palmer said that this has not put fleets off. “We have had a lot of interest in the Leaf from lease companies,” he said.

“Memorandums of understanding have already been signed with several lease companies and hire companies.”

Lease companies and individual fleets have cited concerns over the life expectancy of EV battery packs as a major reason for resisting electric vehicles.

If the life expectancy cannot be guaranteed then residual values will be adversely affected.

Now, as several mainstream electric cars near production, carmakers have been addressing this issue.

The use of lithium-ion batteries means battery life expectancy is now increasing - five years during normal running conditions, although after this the batteries become unable to hold a full charge.

However, such batteries are expensive – approximately £6,000 for a typical four-door car, such as the Leaf, with a range of 100 miles rising to £12,000 for a larger pack that provides a 200-mile range.

Therefore Nissan said leasing the batteries will be the preferred way of getting EVs to market.

The expert’s view:

Jason King, head of market intelligence at Glass's.

“The speed of development in battery technology is the biggest issue when considering residual values for EVs.

"Models currently being trialled have a range of around 100 miles and a charging time of eight hours or so. Yet within a short space of time battery capabilities will no doubt be vastly improved and ranges of 200 miles and four-hour charges may be possible.

"These advances are certain to reach the market before the current models have been de-fleeted. So the early cars risk being seen as outdated: in the same way that there is hardly a market for last year’s PC or first-generation iPods, it is possible that EVs with ‘redundant’ technology may suffer the same fate.

“Nissan’s idea of replacing batteries is an interesting one. Traditionally a car without an engine is not worth a great deal, so how will the industry react to being asked to pay for a used car where the power source is not included in the price? Will the battery lease be transferable as part of the agreement when buying the Leaf as a used car?

"There may well be a dual market, with values for examples with and without batteries. Not forcing owners to pay up-front for the batteries will vastly reduce the initial purchase cost and enable such models to compete with traditional petrol and diesel powered alternatives.

"But careful calculations are required to ascertain whether leasing the battery will make EVs more costly to run over the term of an agreement.

"Range-extending technology, as seen in the forthcoming Chevrolet Volt and Opel Ampera, seems to be the best way forward in the short term. These cars promise real-world usability and the equivalent of 200mpg, giving them the eco-credentials to appeal to fleet managers.”