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.

Thursday, May 31, 2012

A Japanese-Chinese electrified Saab dream - Take two

After months of uncertainty a decision on the Saab saga can come this week. But who will be the new owner of Saab and what does its plan for Saab look like?

The company that has been tipped as the favorite the last week or so is National Electric Vehicle Sweden. It is a company owned by Chinese energy corporation National Modern Energy Holdings and the Japanese risk-capital firm Sun Investment. There might also be Swedish stakeholders involved.

Back in March when we got the first word that a Japanese-Chinese consortium was interested in buying Saab and make electric vehicles, I wrote an entry titled "A Japanese-Chinese electrified Saab dream". This is take two.

National Electric Vehicle Sweden is said to only be interested in electric and hybrid cars. It plans to first launch an electric car based on the current Saab 9-3 (look to the ePower concept) while the development continue of the Saab phoenix platform to be the base for future electric and hybrid cars. Other electric vehicles might also be produced on license in the mean time.

But is this a viable business plan?

First of all, I hope the owners have deep pockets. My assertion is that no company will make any money on electric cars for years to come. Most companies won't even cover the costs of developing and manufacturing the cars.

In Western Europe and in the United States, which traditionally have been Saab's play ground, just a little over 20,000 electric cars were sold in 2011. In Western Europe 11,563 electric cars left the dealer lots. That is only a 0.09 per cent market share. In the United States only around 10,000 electric cars were sold.

You might argue that 2011 was the first year that true competitive electric cars were available, which is a good point. The sales will of course increase considerably when more and more electric cars become available, but that will also mean that the competition will get tougher and tougher.

So just how much of the electric car market is Saab going to take?

In the "good old days" before Saab's problems started in 2009, Saab had maybe around 0.25 per cent of the global car sales. It would be daring to expect that Saab would do considerably better selling electric cars. The competitors will be the same.

Gartner, the world's largest technology market research firm, in January forecasted 100,000 electric cars to be sold in 2012 in the United States. 0.25 per cent of this is only 250 cars...

If we include hybrid cars, still less than 1 million was sold in 2011. And Gartner expects less than 3 million to be sold in 2017. 0.25 per cent of 1 million is 2,500 and of 3 million is 7,500.

And remember that Saab's hybrid cars are maybe 2-3 years away from being launched. That's how much time "experts" say that Saab needs to complete the phoenix platform and launch cars.

The Trollhättan plant is scaled to produce 150,000 cars. 7,500 cars is just two weeks of production...

We know from the past year that to run Saab Automobile costs hundred of millions each month. Even if the work force is cut down to a minimum, the money will pour out. And so I repeat: I hope the owners of National Electric Vehicle Sweden have deep pockets!

And to make matters worse, National Electric Vehicle Sweden doesn't seem to care about the current Saab owners. I make this assertion based on reports that National Electric Vehicle Sweden is not interested in buying Saab Automobile Parts, the company that supply genuine spare parts to Saab cars around the world. Saab Parts is the link between Saab and the owner of older Saab cars. And National Electric Vehicle Sweden is not interested in nurturing this link.

Don't get me wrong, I am not against electric cars or hybrid cars. Saab needs both (or at least hybrid cars) in its portfolio. But the most important thing for a company like Saab is its current customers and not some future unknown customer who likes electric gadgets. We, the current loyal fans and customers, must be the fundament of the future customer base. But how on earth are National Electric Vehicle Sweden going to keep us when it doesn't even want to serve our current cars?

So National Electric Vehicle Sweden, you have a lot of work to do to convince me (and I am sure many other Saab fans as well) that you are the best future owner of Saab and that you have the financial backbone to steer Saab through meagre years and to a bright future.