Nissan’s failed ‘Taxi of Tomorrow’

The Nissan cab, which was supposed to replace nearly all of the 16 different models currently certified as New York City taxi-worthy, found itself detoured by a combination of technical shortcomings, city hall bumbling, and plain old political hardball. For Nissan, the failure of the NV200 to take over the entire fleet represents a financial loss of $50 million, a missed marketing opportunity, and a very public embarrassment.

What became the plan’s knockout punch was thrown in October when a state Supreme Court judge made a third adverse ruling preventing the city from going ahead with the plan. The Bloomberg Administration said it planned an immediate appeal, but with Mayor Bloomberg due to leave office on Dec. 31, little time is left to go forward, and neither of the two candidates expected to succeed him in 2014 favors the project.

Nissan executives tried to put the best face on the taxi tie-up. “From a volume and brand promotion standpoint, we believe the Taxi of Tomorrow program was and continues to be a very successful opportunity for Nissan,” said Joe Castelli, vice president, Commercial Vehicles & Fleet, Nissan North America.” But it is not our only opportunity, as we intend for the NV200 Taxi to show up in many cities throughout the country.”

As a weekly columnist for Fortune.com, it isn’t very often that I get a chance to say, “I told you so.” I’m often wrong, and when I hit closer to the target, I’m usually still wide of the mark. But my prediction two years ago that Nissan would find itself ensnared in messy Big Apple politics has proved remarkably prescient.

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After Nissan won the 2011 design competition to become the city’s exclusive taxi provider, I wrote “Good luck, Nissan. You are about to become the target of intense media scrutiny, unsolicited ‘advice’ from every politician who can get to a microphone, and complaints from most of the drivers and taxi fleet owners in the city.”

And that’s pretty much how it played out.

From the passenger’s point of view, there wasn’t much to complain about. The NV200, a modified Nissan van, has sliding doors on both sides for easy access and a flat floor for better legroom. There is seating for four, including three in the surprisingly roomy rear seat, where passengers can view the skyline through a panoramic sunroof. Tourists will appreciate the presence of a GPS system to prevent unexpected detours to the Bronx or Staten Island.

But with a sticker price of $29,700, the taxi was expensive for the low margin street-hire business, and it represented unwanted disruption for a group of operators who prefer the status quo. Worse, the taxi had two technical faults — lack of wheelchair access and a gas-electric hybrid version — which would prove damaging.

Opposition was vocal. “The so-called Taxi of Tomorrow is a misnomer,” Ethan Gerber, executive director of the Greater New York Taxi Association, which represents fleet owners, told Capital New York. “There is nothing ‘tomorrow’ about it. Let’s call it Taxi of Yesterday. It is not accessible. It is not clean-air. It is a non-accessible, non-hybrid, non-clean air, old-fashioned combustion engine.”

Other complaints were strictly nickel-and-dime. Example: Nissan’s see-through roof would prevent cabbies from selling roof-mounted advertising.

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As the exclusive provider of New York City taxis for the next 10 years, the contract would have been worth $1 billion in revenue to Nissan. While it was likely to result in sales of only about 25,000 vehicles, there were significant intangibles. The vehicle was intended to showcase the Nissan brand, and the promise of an electric version by 2017 would help Nissan maintain its position as a leader in EVs. “It’s a big contract,” CEO Carlos Ghosn said when the van was introduced at the New York auto show in 2012.” Six hundred thousand people a day will experience it. Hopefully, we’ll make money.”

The trouble started soon after the contract was announced in May, 2011. The city was sued by the United Spinal Association for selecting a model that was not wheelchair accessible. A compromise was reached, but the genie was out of the bottle. A second flaw in the contract was uncovered by fleet owners. They filed suit against the city arguing that the Nissan taxi violated a section of the city’s administrative code because there was no hybrid option available. Their argument was upheld by a State Supreme Court judge in May, who ruled that cab companies must still be able to buy hybrid electric vehicles from companies other than Nissan. Strike three came in October when a third state Supreme Court judge, ruling on another claim by the taxi lobby, said the Taxi & Limousine Commission couldn’t require the purchase of a particular vehicle, because the power to compel doesn’t exist under the city charter.

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So unless the Bloomberg administration can win an appeal before the end of the year when the mayor leaves office, the effort to standardize a fleet of more than 15,000 vehicles will die.

It is small consolation, but Nissan can still sell the taxi, which is made in Mexico, to individuals and fleet owners, and it will modify some of them for wheelchair users. It plans to deliver the first one by the end of October, and beginning in November, Nissan is free to sell it in other markets outside New York as well.

Nissan’s Castelli was philosophical in defeat. “Change is difficult, and change within the New York taxi industry is even tougher. You have a lot of competing interests. Add to this a robust political environment layered by an election cycle, and some might say that the ‘Taxi of Tomorrow’ program was challenged from the start.”

It certainly was.