News reports state that there’s a new bidder in the hunt for Saab Automobile’s bankrupt estate. Apparently it’s a consortium of Chinese and Japanese investors who are looking to build electric cars. Is it just me, or has this got disaster written all over it?
I retain some hope that Saab can be sold to a buyer who wants to make Saabs. Personally speaking, if that company is to be chosen from Mahindra, Youngman, or this Sino-Japanese consortium, then my vote goes to Mahindra. They are a genuine international industrial company who I think have a realistic feel for what’s actually involved in the car industry and can see a role for Saab in their portfolio. Unfortunately, though, realism hasn’t played a prominent role in the fate of Saab for some time.
Reports coming through (covered on SU today) seem to indicate that the Swedish government are neck-deep in talks regarding this electric car proposition. This isn’t overly surprising as the government in Sweden seems fixated on outcomes that either confirm or deliver political messages. Electric cars present a nice, happy, ‘green’ picture that’s very Swedish, even if it’s not overly realistic.
The electrification of the automobile is well and truly underway and it’s more a matter of when, rather than if, we’ll be driving vehicles powered by something other then liquefied Brontosaurus. That particular when, however, is a long way away and the charge (pardon the pun) is not likely to be led from a higher-cost nation like Sweden. Just ask the companies behind Think! vehicles what sort of prospects exist for a company focused just on fully electric vehicles. Or Tesla. Or Fisker. All of them are struggling and none of them are likely to have ever got off the ground without massive government grants or subsidies.
The only companies having any sort of real success with electrification are those existing car companies with a solid range of regular vehicles to support their spear-head efforts in the hybrid/electric arena. They want to (and will) enjoy first-mover advantages but won’t bankrupt themselves to do so.
A few examples:
Toyota have built a massive cash reserve and invest solidly in hybrid platforms, but even they haven’t seen massive sales of hybrid vehicles. That is quite likely going to change with the addition of their hybrid system to more vehicle lines, and the addition of the cheaper Prius C to their range, but Toyota have been the industry leaders in this field and could only do so because of the success of their other vehicles.
The Chevrolet Volt, regardless of what you think of its styling and politics, is an admirable technical achievement. Unfortunately for GM, it’s also been a sales flop. People don’t like the “high” price they have to pay for the car in the US market and as a result, GM have recently had to halt production of the Volt lest they vastly oversupply the market. Demand just isn’t there.
We’ve been told by advertisers over and over again that the electrification of the automobile is a wonderful thing. We’ll be surrounded by beautiful gardens and all creatures great and small – from badgers to butterflies – will thank us in return. We’ve all seen the celebrities in their Toyota Priuses doing their bit for the environment (and many have objected to their holier-than-thou presence). I think most of us even agree that the electrification of the automobile is a good thing for the environment, especially if more clean power sources can be developed.
The problem is that people don’t, won’t and in many cases, can’t buy these vehicles based on good feelings alone. The vast majority of people will select from a pool of vehicles that is based on price first. Factors like styling, safety, convenience, utility and reliability will also govern. I’m not sure where ‘green’ fits in for most people, but I’d suggest the most prominent thought attached to efficiency is “how much will it cost to run?” rather than “how many fruit bats will I save/kill with this car?”
Simply put – Whilst we all like the nice, shiny image that hybrids/electrics project, the fact is that the market doesn’t have products available that are both utilitarian enough or cheap enough to convince people to switch from more traditionally powered vehicles. Companies building solely electric vehicles are struggling and their customers are few and far between.
For the Swedish government, negotiating with a buyer like this will present a nice, shiny outcome that stimulates industry to some degree and presents a wonderful image. I fear that the reality will be a much duller, however.
I don’t know exactly what this new consortium has in mind, but the high cost of electric vehicles dictates that their future success will depend on development and manufacturing in lower cost countries. I’m 100% confident that the Swedes have the know-how to build great electric cars, but I’m not confident that the cost could be kept to a level that would make those vehicles a success in the marketplace.
I think we’ll look back in 30 years and find that the electrification of the automobile will come from the established players, with a kick in the pants from some well-heeled innovators along the way (who will mostly fall by the wayside, unfortunately).
Saab were developing an electric vehicle right up to the end of 2011. I even got to go for a ride in it and I enjoyed it. I never thought Saab’s near-term future was as a manufacturer of electric vehicles, however. This is technology that Saab would have developed and sold as a halo vehicle, with meagre (if any) profitability included. The hope would have been to gain a foothold in the sector, enjoy trickle-down benefits for regular hybrid vehicles and enjoy a reputation boost along the way.
The Swedish government took a political stand when Saab were first earmarked for sale back in 2009, saying that they weren’t going to put taxpayer money into a company if it couldn’t survive on their own. They stuck with that decision all they way, right up to the time when Saab declared bankruptcy. As an aside, I can’t help but wonder if it’s dawned on anyone in Sweden that Saab are only costing the taxpayers real, substantial money now that Saab has folded and all those people have to be supported, re-trained, etc. It would have been far cheaper for the Swedish people to help create conditions for Saab’s survival (as so many other governments have done in the last few years), even if it was less politically palatable.
I believe in Saab’s capacity as a carmaker with a good, solid owner behind them. I believe Saab can start with the 9-3 replacement that was already under development and build a solid range of vehicles from that base. I believe they can innovate and add electrification to a solid base of consumer vehicles and do it well.
I don’t know what stance the Swedish government will take in this instance, but I don’t believe in pipe-dreams, which is what I think this electrical venture could turn out to be.
I guess we’ll just have to wait and see the details.