Saab's New Chapter: Manufacturing Electric Cars for the Chinese Market

I think I've spotted a trend in the car industry – companies file for bankruptcy and come out of it sporting a greener version of themselves. First it was GM and now it’s Saab. Earlier this week, a Chinese-Swedish-Japanese investment group has agreed to buy the bankrupt car maker for an undisclosed sum and announced it will aim to make electric vehicles under the brand name. The group plans to keep manufacturing the Saabs in Sweden, while initially focusing its marketing efforts on China, which is projected to be the largest and most important EV market.

The new buyers said the first model to be developed will be based on the current Saab 9-3, which will be modified for electric using advanced EV technology from Japan. The buyers hope to have it on the market by the end of 2013 or early 2014. While they received the IP rights to Saab 9-3 and a development platform for future Saabs, called Phoenix, they didn’t receive the rights for the Saab 9-5 and 9-4X, which are owned by Saab’s former owner, GM.

This is very exciting news for electric car followers but first and foremost for Saab fans. Operating since 1947, Saab filed for bankruptcy in December 2011 after its last owner, the Dutch luxury car group Spyke, who bought Saab from GM in 2010, failed to get sufficient backing for the company. Despite its distinctive brand and loyal fanbase, Saab has failed to stay competitive, something many blamed on GM. The company diluted Saab’s brand integrity by merging it into GM's production system, and failed to support it financially, operationally and managerially, Alex Taylor of Fortune Magazine explained.

The buyers established a new company called National Electric Vehicle Sweden (NEVS) to buy Saab’s assets. Fifty-one percent of NEVS is owned by Hong Kong-based National Modern Energy Holdings, whose founder Kai Johan Jiang is its main shareholder, the other 49 percent is owned by Japanese investment group Sun Investment, which was recently formed for the purpose of bidding on Saab. The majority owner, National Modern Energy Holdings is the holding company for State Power Group, which is a group of companies that have made pioneering efforts to develop clean energy sources in China. Today, the group has 28 biofuel power plants in operation across China and 7,000 employees.

As the new owners emphasized in their presentation this week, Saab’s future will be based on three elements: Swedish manufacturing and design skills, Japanese advanced technology and China’s progressive initiatives in sustainable transportation solutions. The combination of these elements, they say, will help making Saab the leading manufacturing of electric cars.

The focus on the Chinese market is quite obvious. The electric car market barley exists there yet - in 2011, China only sold 8,000 electric vehicles, accounting for less than 1 percent of the total global sales volume. But this is going to change soon, at least according to China Electric Vehicle Industry Report, 2012. The report mentioned that in April 2012, China issued the electric vehicle plan, which established an output and sales goal of 500,000 electric cars in 2015 and 5 million in 2020. The new owners also believe that the Chinese are not just ready for electric cars, but also for premium electric cars. "Chinese customers demand a premium electric vehicle, which we will be able to offer by acquiring Saab," Kai Johan Jiang said in a statement.

Karl-Erling Trogen, a former executive of Volvo Trucks and chairman of the newly created group, was excited not just about the prospects of the Chinese market, but also about the Swedish added value to the new venture. "We will match Swedish automobile design and manufacturing experience with Japanese electric vehicle technology and a strong presence in China. Electric vehicles powered by clean electricity are the future, and the electric car of the future will be produced in Trollhattan," he said.

But not everyone shares the enthusiasm and optimism of Johan Jiang and Trogen. “We’re struggling to see how this enterprise is going to work,” Ian Fletcher, a senior analyst for IHS Global Insight told the New York Times. “Do they have some kind of magic bullet?” His point was that the market for electric cars is still tiny and that it’s not clear how a midsize car like the Saab 9-3 would be a good fit for an electric car, not to mention that exporting cars to China is expensive. “The only reason I can think of to make them in Trollhattan is that maybe it would take too long to get the necessary approvals to make them in China,” he said.

Only time will tell who got it right and who was wrong, but in the meantime, we want to believe that the new injection of cash and appreciation for the brand might be able to change Saab’s course in history, adding the next chapter to its legacy.

[Image credit: trollpowersaab, Flickr Creative Commons]

Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Department of Business Administration, CUNY and the New School, teaching courses in green business and new product development.