e85 in Hungary

Buying a new Saab here in Australia is pretty expensive given the distance the cars have to travel to get here and their perceived place in the market. But we have a pretty decent standard of living and each year, around 1,500 to 2,000 of our residents or businesses manage to take a new one home. In the US and the UK incomes and markets are even bigger and the cars are comparatively cheaper (especially in the US).

In Australia, where I’ll take an educated guess that the average yearly income is around A$50,000, a Saab 9-5 costs around $57,000 in it’s most basic trim and continues on to over A$82,000 for the 9-5 Aero. In basic trim that’s about 1.14 times an average yearly income.

I’ll let you figure out the numbers for your own countries and maybe you’d like to post them in comments. You can read on for the numbers from Hungary.

The following information was passed on from Ivan in Hungary, where some investment has been made in ethanol plants recently in the hope that it’ll advance the industry, improve some conditions and give people some access to flex-fuel as E85 is taxed at a much more favourable rate than gasoline, at least for the next few years anyway.

Ivan’s provided a translated text of an article on E85 in Hungary. As I read the whole email I found myself feeling (1) pretty thankful for being fortunate enough to live in a comfortable country like Oz, (2) hopeful that rebuilding countries like Hungary can make it work, and (3) admiring of Saabnuts that tough it out in all sorts of places around the world.

Thanks Ivan.

————-

There is a article in one of the leading Hungarian newspapers called Magyar Hírlap.

I have sent a raw translation, sorry for my english.

Some background informations:

1. Hungary has a high capacity for agriculture but after the changes in 1989 it fell to a crisis because of the loss of former communist markets and the European Union limitations. To grow plants for producing bioethanol is a big chance for the farmers to break through these walls. Traditionally we are big producers of maize and corn and the cost of producing the E85 could be very competitive. A Swedish company has invested to build 5 bioethanol production factories in Hungary. If they could produce the Ethanol with full capacity, Hungary could became the second (or maybe the first!) biggest bioethanol producer in Europe, and as far as I know we will be in the first five of the world.

2. The revenue tax content of the petrol price is extremely high currently in Hungary and the petrol is quite expensive.

3. The average monthly salary in Hungary is net HUF 120,000 (about USD 545 or EUR 444). The Saab BioPower is HUF 8,800,000. If we suppose that half of this income he/she has to spend for costs of living, he/she has to work for 12 years to buy a new Saab. Of course, there are bank loans and leasings. The down payment is usually at least 20% and the bank lending rates are about 7-20% depending on the loan period.

I hope the article could be new and useful information for you.

Cheers,

Ivan

The article translation:

The biofuel could explode also in Hungary
Pulling down the legal barriers to sell E85 is approaching.

Sales of E85 could get off to a flying start because the Parliament decided to allow it’s trading revenue tax free.
The car industry is heavily promoting the E85 for the fuel companies to convince them that it’s worthwhile to sell it.
The Ministry of Economy and the Hungarian Standard Organization are at the last stage to sign a contract to make the new standard for E85. Without the standard it is not possible to use any of the new fuel in cars.

A small detail in the new tax law passed through the parliament at Monday has more importance. It declares that until the year 2012 only the 15% petrol content of the E85 is to be taxed. Practically, it means that the this fuel produced from maize, corn, sugar, or vine (which are overproduced in Hungary) could be almost tax free. The exact scheduling will be declared in an another law.

Experts said that it could be enough to make the price competitive compared to the petrol. Currently the cost of producing E85 without supports is almost twice more than the costs of producing petrol while the retail prices are similar. However, the European Committee count on the decreasing of the cost of producing E85 to the half till 2010 thanks to the intensively growing production capacity and the competition on the market. Four years after they expect a HUF 110-113 /liter production cost while the unleaded petrol cost is about HUF 100/liter currently.
According to the opinion of International Energy Agency the current price of E85 could be competitive if the price of oil is over 60 dollars/barrel.

However, the extension of the bio fuel unfortunately limited because they are just a few cars on the market able to use the E85 and these cars are relatively expensive for the Hungarian customers. Among the big multis there is GM owned Swedish Saab, Volvo and DaimlerChrysler sell bioethanol cars.

The Saab for instance, has a version of the premium 9-5 which is more powerful using E85 than using petrol. The Hungarian headquarter of Saab said that they sell 8-10 pieces of 9-5 by month and they sold even 5 pieces of BioPower in Hungary as well. (The buyer is the Swedish company invested to the bioethanol production plants.)
The price of basic model is HUF 8.800.000 and the BioPower is just a bit more expensive.

Car magazines estimated the costs of conversion petrol cars to E85 to HUF 30.000-100.000. These conversions are not radical: for instance the Saab 9-5 BioPower has only different electronic engine control, alcohol-tolerating fuel supply system and higher thermal tolerance valves.

Currently the petrol station networks are not really enthusiastic to sell E85. They have technical difficulties because all systems at the stations should be dewatered before they can install the new filling column for the E85.
Zsolt Müller, sales director of Shell Hungary told that it’s more realistic that only a few stations would specialized to the new fuel than to sale it on every stations. As far as we know, Mol (the market leader Hungarian oil company) don’t plan to sell E85 at all, even they want to became the regional leader of selling bio-diesel fuel.

The power of big car manufacturer companies could be enough to get over the technical difficulties. The management of GM Central-Europe makes big efforts to convince one of the big petrol station networks to sell E85.

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6 Comments

  1. According to this source:
    http://www.infoplease.com/ipa/A0104652.html
    the US per capita income is around US$34,500. The MSRP for a base 9-5 is US$34,800. Virtually the same. Of course, you can see from the chart that the incomes vary quite a bit from the Northeast (Massachusetts, Connecticut, New York, New Jersey) to the South Central (Mississippi, Louisiana, Arkansas), which partially explains the higher concentration of Saabs in the Northeast.

    Ignoring the BioPower for the moment, the Hungarian pricing for the base 9-5 is HUF8,695,000 which is US$38,800 at today’s rates — around 10% above the US. However, according to the World Bank, the average wage in Hungary is only US$8,820! A Saab 9-5 is about 4.4 times the national average.

    Wow. Huge difference.

  2. In Sweden the average yearly salary is 284.400SEK (2004)
    A basic 9-5 costs 254.000 SEK
    So a basic Saab 9-5 represents 89% of an average yearly income.

    The gas is becoming a bit expensive now… 13 SEK = 1.8US$ The e85 is only 1 US$…That’s why BioPower is a big hit!

  3. A completelu differnet thing: Rick Wagoner has been interviewed by a Swedish finance magazine (Dagens Industri)

    My very own translation…And not necessarily the best one…

    “2006-07-19
    London
    GM-chef Rick Wagoner is saluting Saab Automobile.
    ‘Saab have done a very good job the last 18 month. And together with Hummer and Saturn they now attract customers GM never would have attracted without this brands’, he says in an interview with Dagens Industri.

    The statement is extra noticeable because Saab and Hummer was pointed out as brands GM would be better of if sold, according to the eccentric billionaire Kirk Kerkorian who own 9.9% of GM.

    -Have Kerkorian dropped his demands of selling Saab?
    -“I’ve never heard that demand myself. I’ve read that he had that demand in some speech. But we are continuing with our plan for Saab.”

    The fact that Rick Wagoner is a bit acid toward Kirk Kekorian is obvious. Kirk Kekorian have pushed Rick Wagoner into negotiations with Renault/Nissan about an alliance, something Rick Wagoner seems to be less enthusiastic about.

    -“We have a lot of owners and one of them came up with this idée, and we are studying it for 90 days. But we will only progress after this if the ledership and most of our shareowners want us to. Not necessarily every one. I can promise everyone that the barr is set high and an alliance must provide a real value for both parts.”

    With the alliance with Fiat in his memory, which drained GM for 2 billion US$ to pull out, he might be a bit reluctant.
    He says:”The alliance with Fiat did provide a value in form of new diesel engines and lower prices on our purchase”

    The new Opel Corsa is developed in cooperation with Fiat. The car is produced with 30% of same parts as Fiat Grande Punto.

    On the other hand GM has pulled out of three other partnerships lately (Isuzu, Suzuki and Subaru) and those business have given GM some incomes in term of sales of shares in those businesses.

    “We have about 20US$ billion in our funds and the liquidity is performing well. Our financial status isn’t the very best but it’s wrong to say we are in need of capital. It’s definitely not one of the top priorities as of now”

    This statement seems to be a message to Kirk Kekorian who is arguing that GM is in need of new capital (4 US$ billions) and to get this thru the sales of there 20% share in Renault/Nissan

    For Rick Wagoner there are three completely different tasks on the agenda.
    “We must get a solution for the situation with Delphi, we have to complete the sales of GMAC (GMs share is 51%). This gives us 14US$ billions. Also we need to turn around our sales in the North American market. It doesn’t matter how well we sells in the rest of the world if we can’t defend our home market.”

  4. With the price of a 9-5 in Hungary so high, I can understand why they sell them in pieces. Sorta like that old Johnny Cash song “I got it one piece at a time, and it didn’t cost me a dime.”

  5. Hi,
    First of all, thanks to Wade to publishing the info, I am the sender of the mentioned translation and background info.
    The situation of course not so bad as seems for many people in US or Australia. The avarage incomes could be very different based on the location. In the capitol (Budapest) where 20% of the population live can be much higher and a well educatet couple with financial/law/marketing/informatics profession can earn a quite competitive salary. Also hungarian employes have more add-on incomes which are “hidden” from the official staitistics.
    Many international companies bought cars for the middle and top management, the Saab is among them quite popular in bank managements, as far as I know.
    Hovever, even Saab owned a good reputation in previuos decade, the reliability and cost of service pulled it down. In one hand the reason is that the hungarian owners are extremely cost sensitive and many of them miss the preventive maintenance, in other hand the road quality (especially in Budapest) is terrible.
    Saab owners can be separated mostly to 2 groups: enthusiast club members, they usually buy second hand cars because the fall of the price is dramatic, a five year old car is only the 25-30% of the original price, the other group of owners just want a more unique and stylish car, usually they are well payed managers, medical doctors, lawyers, etc.
    I have a 9-3 SE HOT (2001 model year) and I could buy it for a very reasonable price.
    At last, sorry again for my poor english.Ivan

  6. Ivan, no need to apologise!
    I did the translation from your text into Swedish just fine.
    And no one out there can tell if I was wrong or not 😉

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