Saab's bet on EVs, China faces long odds
A year out of bankruptcy and with just two cars a day rolling off its production line, Saab is betting on an as-yet unbuilt electric version of a decade-old car to bring the iconic Swedish marque back from the dead.
Saab's new owner, National Electric Vehicle Sweden, is targeting its home market of China, where the government is promoting clean automotive technology with up to 100 billion yuan ($16 billion) in vehicle subsidies, r&d and infrastructure spending, according to research firm Frost & Sullivan.
However, the battery version of Saab's 9-3 will be up against the likes of BMW AG, Volkswagen AG and Ford Motor Co. in one of the most competitive industries in the world.
Even die-hard fans are skeptical. The 9-3 is "already out of date" from a new buyer's point of view, Chih Hao Yeh, who runs Saab Club Taiwan, said by email. As for the electric version, "will it offer the pure driving pleasure regular Saabs do?" he asked.
For NEVS President Matthias Bergman, only bold action will resurrect a more than 60-year-old brand, which pioneered such innovations as side-impact protection, heated seats and headlight washers, but which was hurt by high labor costs and lost its quirky image under General Motors' ownership.
And he thinks the timing is right. "We are nearing a tipping point," he told Reuters, predicting the market for electric vehicles will turn up sharply around 2015. "The big volumes will be in China."
Saab also has a few aces up its sleeve, such as its state-of-the-art plant in Trollhattan, south Sweden, courtesy of GM's $4 billion investment. It will also have cheap batteries supplied by NEVS' sister company Beijing National Battery Technology, as well as political connections.
The city of Qingdao paid $305 million (1.8 billion yuan) for a 22 percent stake in NEVS earlier this year and has ordered a fleet of 200 EVs for delivery next year.
Analysts think sales of EV fleets to local governments in China are a huge opportunity, as they own hundreds of thousands of vehicles and are under pressure to cut air pollution. Qingdao, in eastern China's Shandong province, has a population of 9 million -- the same as the whole of Sweden -- and NEVS CEO Kai Johan Jiang believes demand for EVs in China will quickly outstrip supply.
"Electric cars will be a scarce commodity in China," he said as the first Saab, a conventionally powered black 9-3 sedan rolled off the line in Trollhattan, Saab's home since the late 1940s.
Beijing is launching a program to put 5 million electric cars and plug-in hybrid vehicles on the road by 2020. In September, it renewed subsidies for EVs and plug-ins worth up to 60,000 yuan for an all-electric car and up to 35,000 yuan on a plug-in hybrid.
The challenge for Saab is immense, however. Manufacturing in Sweden will make cars expensive, at least until a plant in China comes on line, while NEVS lacks the financial muscle of rivals.
Saab has yet to build more than prototype EVs and a handful of gasoline-fueled cars, and its hopes rest on a car designed a decade ago which never sold in profitable volumes.
"Just bolting an EV drive-train onto an old Saab 9-3 is not going to create a compelling product," said Diarmuid O'Connell, vice president of Business Development at Tesla, which expects to deliver more than 20,000 of its Model S all-electric sports sedans this year. "I will believe it when I see it."
Potential
Few doubt electric cars have potential given global warming, high oil prices and dwindling reserves of fossil fuels. But only 120,000 EVs were sold worldwide last year, and many firms have failed as hoped-for profits didn't materialize.
Saab was profitable for only one year after GM took over full ownership in 2000, and then ran up debts of $2 billion in three years under Dutch firm Spyker before going bankrupt.
Saab plans to launch EV production in 2014. Bergman would not say how quickly Saab hoped for a profit, but he stressed it would pare costs to the bone.
Staffing levels of around 600 are well below the 3,500 under GM, and its cheap, Chinese-made batteries will be at least as competitive on range as rivals, he said, without giving details.
While acknowledging the challenges, Bergman predicted demand would grow at a similar pace to Saab's ability to meet it. Trollhattan has a capacity to produce 190,000 cars a year, and NEVS has plans for a second facility in China.
"We are not going to sit on the sidelines until the electric car market starts to be attractive, we are going to take an active role in ensuring that the technology shift actually happens," Bergman said.
However, the battery version of Saab's 9-3 will be up against the likes of BMW AG, Volkswagen AG and Ford Motor Co. in one of the most competitive industries in the world.
Even die-hard fans are skeptical. The 9-3 is "already out of date" from a new buyer's point of view, Chih Hao Yeh, who runs Saab Club Taiwan, said by email. As for the electric version, "will it offer the pure driving pleasure regular Saabs do?" he asked.
For NEVS President Matthias Bergman, only bold action will resurrect a more than 60-year-old brand, which pioneered such innovations as side-impact protection, heated seats and headlight washers, but which was hurt by high labor costs and lost its quirky image under General Motors' ownership.
And he thinks the timing is right. "We are nearing a tipping point," he told Reuters, predicting the market for electric vehicles will turn up sharply around 2015. "The big volumes will be in China."
Saab also has a few aces up its sleeve, such as its state-of-the-art plant in Trollhattan, south Sweden, courtesy of GM's $4 billion investment. It will also have cheap batteries supplied by NEVS' sister company Beijing National Battery Technology, as well as political connections.
The city of Qingdao paid $305 million (1.8 billion yuan) for a 22 percent stake in NEVS earlier this year and has ordered a fleet of 200 EVs for delivery next year.
Analysts think sales of EV fleets to local governments in China are a huge opportunity, as they own hundreds of thousands of vehicles and are under pressure to cut air pollution. Qingdao, in eastern China's Shandong province, has a population of 9 million -- the same as the whole of Sweden -- and NEVS CEO Kai Johan Jiang believes demand for EVs in China will quickly outstrip supply.
"Electric cars will be a scarce commodity in China," he said as the first Saab, a conventionally powered black 9-3 sedan rolled off the line in Trollhattan, Saab's home since the late 1940s.
Beijing is launching a program to put 5 million electric cars and plug-in hybrid vehicles on the road by 2020. In September, it renewed subsidies for EVs and plug-ins worth up to 60,000 yuan for an all-electric car and up to 35,000 yuan on a plug-in hybrid.
The challenge for Saab is immense, however. Manufacturing in Sweden will make cars expensive, at least until a plant in China comes on line, while NEVS lacks the financial muscle of rivals.
Saab has yet to build more than prototype EVs and a handful of gasoline-fueled cars, and its hopes rest on a car designed a decade ago which never sold in profitable volumes.
"Just bolting an EV drive-train onto an old Saab 9-3 is not going to create a compelling product," said Diarmuid O'Connell, vice president of Business Development at Tesla, which expects to deliver more than 20,000 of its Model S all-electric sports sedans this year. "I will believe it when I see it."
Potential
Few doubt electric cars have potential given global warming, high oil prices and dwindling reserves of fossil fuels. But only 120,000 EVs were sold worldwide last year, and many firms have failed as hoped-for profits didn't materialize.
Saab was profitable for only one year after GM took over full ownership in 2000, and then ran up debts of $2 billion in three years under Dutch firm Spyker before going bankrupt.
Saab plans to launch EV production in 2014. Bergman would not say how quickly Saab hoped for a profit, but he stressed it would pare costs to the bone.
Staffing levels of around 600 are well below the 3,500 under GM, and its cheap, Chinese-made batteries will be at least as competitive on range as rivals, he said, without giving details.
While acknowledging the challenges, Bergman predicted demand would grow at a similar pace to Saab's ability to meet it. Trollhattan has a capacity to produce 190,000 cars a year, and NEVS has plans for a second facility in China.
"We are not going to sit on the sidelines until the electric car market starts to be attractive, we are going to take an active role in ensuring that the technology shift actually happens," Bergman said.
