IMPORTANT NEWS: National Electric Vehicle Sweden has agreed to buy the assets of Saab Automobile and the sale is expected to be finalized during the summer.

Tuesday, May 3, 2011

What does Saab gain from the partnership with Hawtai Motor?

Now that the Chinese dust has settled, it is time to look at what Saab Automobile can gain from the partnership with Hawtai Motor. Here is what I think is the key elements.

First of all, Saab get's EUR 120 million when Hawtai buys shares in Spyker Cars. But it doesn't end there, Saab also gets a EUR 30 million loan from Hawtai. This loan can be converted into shares. This means a new start for Saab now that the operations are financially secured for one more year. When the funds run out a year from now, Saab needs to be profitable or close to profitable. To become profitable Saab needs to drastically increase the sales. With some peace and quiet to concentrate on manufacturing and selling cars, this can hopefully be achieved.

Access to Chinese market
In the deal with Hawtai Motor, Saab has also gained access to the Chinese market. The first step of the deal is to get help from Hawtai to distribute and sell Saab cars through Hawtai's network of dealers. The second step is a joint-venture to manufacture the new Saab 9-3 set to launch in October next year. Hawtai has a lincense and capacity to built 350,000 cars annually, but only sold 80,000 cars last year. In other words, they free capacity. China is on the way to become the world's largest automobile market with an incredible growth each year and can prove to be a vital key for Saab to become profitable.

Diesel engines 
One thing the launch of the new Saab 9-4X painfully shows is that Saab lacks a powerful diesel engine. But maybe even more worrying is the fact that we have not heard anything about a diesel engine for the upcoming Saab 9-3 replacement. Last year Saab signed an engine deal with BMW, but only to buy their 1.6 liter turbo petrol engine. Saab's CEO Jan Åke Jonsson has earlier said that it takes two years to find, test, install and validate a diesel engine for the 9-4X. We must assume that it's no different with a diesel engine for the upcoming 9-3. The new 9-3 is only 18 months away, and if they haven't found a diesel engine yet it is urgent. Hawtai is said to have a new and modern diesel engine factory with the capacity to produce several hundred thousand engines each year. There they manufacture powerful and clean diesel engines on license from Italian engine developer VM Motori. Maybe this can be the solution for Saab?

In addition maybe even transmission, electric drive lines and other components and technology can be sourced from Hawtai. At least in the long run.

So what does Saab offer?
The most valuable asset Hawtai gets access to from Saab is the new PhoeniX architecture. Up till now Hawtai has been building cars on aging Hyundai SUV technology. If Hawtai is to succeed they need their own technology. Saab's PhoeniX technology and knowhow may prove to be a very valuable short cut for Hawtai. Richard Zhang of Hawtai also notes that they get access to an international network that they would have had spent years to built. I'm not sure if this means a network of automotive contacts or distribution and dealers. One can also assume that Hawtai sees a value in being associated with a world known premium brand. How they can use the Saab brand to add value to their own business is to be seen.