My two questions for NEVS

So NEVS have completed the transaction to purchase the remaining assets from Saab’s estate. I feel pleased that some friends in Trollhattan – those that haven’t taken jobs elsewhere already – have a chance to do something on Saab’s premises once again.

I don’t really have any questions just yet about the specific product that NEVS will build. I guess we’ll find out what it looks like, how it drives and how comfortable it is, all in good time.

I do have two fundamental questions about their business plan, however:

1.

Why would NEVS consider developing and building their vehicles in Sweden in order to sell them in China? Given the difference in labor costs and the tariffs on vehicles brought into China, it makes no economic sense. Is that really their plan?

2.

Why would NEVS spend any money bringing out an electric car based on the Saab 9-3? Why not just develop the Phoenix platform they’ve bought rights to? First, you’re spending big money on a platform that will be outdated by your own product in the near-medium term. And second, everyone knows that your first product will soon be outdated, and unless they’re in a hurry to spend a bundle of money on inferior technology, they’ll wait for the better product that’s supposed to come shortly thereafter.

——

I hope someone in the Swedish press has the good sense to get firm answers to these questions because until they’re answered, there are some big holes in what’s been publicly disclosed as their business plan.

Call me skeptical, but willing to learn.

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23 Comments

    1. No, it is not available. And has not been for more than a year. And will, in its current incarnation, never be available again. We are talking about a heavily modified car with electric propulsion based on the mechanical platform of that 9-3, and presumably its body parts.

      So, I think that Swade’s question is valid. My answer to this for now:
      The 9-3 platform is mature and there is an electrified version that has been tested. Replacing it’s electronics with new ones, as apparently planned, may be simpler and faster, and would give a first test product to show. The main input from NEVS will not be in the platform, and maybe, all this mechnical stuff is not so important for electric cars. Maybe it is not too difficult to put this into whatever platform there is available.

  1. Another question: Do they have a sales plan in place? Where do you sell your cars to?
    I read in svd.se that the idea is to put the batteries and powerline in place in China, so they’ll be exporting semi-finished from Sweden to China and complete them there.

  2. I think that the answer to 2. is that the 9-3 is essentially free.
    It will buy NEVS some time, bring in some revenue, and keep them in the public eye while they work-out the kinks in the new car. Think of it as a dress rehearsal for their new technology.
    The 9-3 is arguably outdated, but it’s got good bones. The basic structure is safe, and it proved itself capable of achieving great efficiency numbers in its last iteration (119g CO2/km diesels).

    1. I agree with you on the goodness of the 9-3’s bones, Bernard, but……

      Correct me if I’m wrong, but what they’re planning is to release an electric version of the 9-3, not just release the 9-3 as Saab used to sell it (i.e. with an internal combustion engine). Electrifying the 9-3 does not come for free. According to my source in a phone call half an hour ago (he does this planning cars stuff for a living) it’s going to cost a coupla-hundred million euros to develop the tech and adapt both the electric drivetrain and the 9-3 to suit each other.

      Hence the question – why spend that money on electrifying the 9-3 when you could spend it de-GMifying Phoenix and have a pristine, brand new product just a little bit later than your planned electric 9-3? And who’ll buy the 9-3 version if they know the Phoenix version will be coming, say…. 12 months later?

      It just doesn’t make sense, good bones or not.

      1. It may cost a few hundred million Euros, but I’m assuming that much of that investment will also apply to the Phoenix platform. In other words, the electric 9-3 could be half Phoenix, half old 9-3.

  3. This is why I have and will continue to follow Swade’s blogs, no matter where he decides to go —- he is always spot on. Two outstanding, very meaningful and telling questions.

    I am not a fan of NEVS business plan or the company, at this point. I, too, do not see how their current plan will bring SAAB to profitability. My heart goes out to all the workers and their families in Trollhattan. However, at some point I would prefer to see “SAAB” as I have known them for the past 24 years, simply retire and be remembered for all their great accomplishments as opposed to seeing them continue to make bad business decisions, struggle financially and be torn down by the media.

    My gut tells me there is a real possibility of a hidden agenda here. All of the points Swade has brought up are indeed spot on, yet also very telling in my opinion.

  4. Maybe they are just trying to get something on the markets for the investers. I am sure it is all driven by the loan covenets or the lenders. Just have to wait and see. Also as far as the reason to build in Sweden it again is the money and the deal cut when they bought the assets I am sure. I feel this new firm will go the way of the bickland a flash in the pan. Car firms need to look at natural gas, H20, compressed air and the list goes on. Electric is a source but still very expensive, just my thoughts and we will see. Have a good day and week. Mark

  5. Great questions Swade. Developing/building an electric vehicle is not cheap so it does seem odd to throw bad money after good on a platform that will last 12 months till it’s outdated. Maybe they know the Chinese market better than any of us.

    That said, the Volt is DOA here in the US as it’s plagued by problems and costs a huge premium. However diesel is having a nice comeback led by VW for the most part. I really think for NEVS to compete anywhere they have to offer various fuel options.

  6. Your first question is answered in the interview I did with NEVS, its on SU right now.

    Regarding the second question, the Phoenix platform is still at least 12-18 months away from being fully developed, and thats with about 10% GM technology in it which needs to be removed as well. Until they need to build and sell a product so they will “re-develop” the current 9-3 into an attractive electric car and sell it while work is being completed on the Phoenix.

  7. Good questions Swade … and I look forward to checking out Tim’s answers on SU. If I was faced with the prospect of a revised 9-3 sporting the NEVS powertrain, assuming the car is as good as we hope it will be – yes and I know that’s the $64,000 question – then I will gladly buy one. I agree with the point that obviously a huge whack of the investment that goes into getting the 9-3 to run on the new powertrain will then carry over into Pheonix. After all, they used Epsilon as a reference point when desigining Pheonix so it can’t be a million miles apart. (have to now go and read what Tim has posted…)

    As I said before, I am totally ecstatic about this news. It is like Christmas as far as I am concerned.

    Allan B

  8. Hi Swade
    it would be interesting to have thei answers.
    On the first one I personally do not have an explanation, the only thing I can think of is that foreign-built cars in the Chinese market have better status and reputation than domestically built. And command a premium!
    On the second one, I feel they want to reach revenue-making stage as soon as possible, and possibly using the current 9-3 platform is quicker …. (and requires less investment than completing the Phoenix).
    What do you think?

  9. off topic but i’d be skeptical after watching carlton this season…wishing nevs good fortune…maybe a front for magna…

  10. I’m still sceptical that this electric stuff will work, but let’s look on the bright side.

    Launching an all electric vehicle on an old chassis, will mean that they can concentrate mainly on the drivetrain. Being an old shape is probably irrelevant in China, when you look at what they buy at the moment. It probably isn’t expected to sell worldwide anyway.

    It will also avoid what many manufacturers have found in the past, launching a new car which has no parts from a tried and tested old model, is a recipe for disaster. Much better that a car is launched in stages. New engine in old body. Then next upgrade is new body on same engine. Then repeat.

    If NEVS launch a completely new car, the risk that something proves unreliable is doubled. And a car that gets a bad press at launch will kill the company.

    1. I think those are very good points about the wisdom of not trying to run before you can walk. Use a tried and tested platform for the new powertrain first to get up and running. Apparently, they are in fact going to redesign the body and interior of the 9-3 so it will look and feel like a new car anyway.

  11. Relevant questions. My guesses (and they are really guesses since I have zero inside or expertise knowledge).

    1.
    In the beginning, the answer is in the answer for question 2. But we don’t know for how long the production will be Sweden only, do we? It may only be for the current 9-3 model.

    2.
    Yes, it will probably cost lots of money to adjust the current Epsilon platform for the 9-3 into using an electric drivetrain. The reasons for doing it could be that there is a factory with tooling for production of that platform (tools are very expensive!) and that could be used even with the necessary changes to “electrify” the platform. Some suppliers still have tooling for 9-3 parts up and running. Production of that car could start sooner than a brand new model on the Phoenix platform, so then they have a car that could generate some income even if it is exported to China. And the 9-3 is not a bad car. I think it still looks modern, it is of course very safe, and the components and engineering are tested after 10 years. I hope they don’t do a sloppy job redesigning it… I don’t know how much of the Phoenix platform that is finished, but a car is so much more than the platform. I think it is at least 2 years until there are fully developed cars they can start doing basic tests with – if they want to compete with Europeans brands.

    I have some other questions:

    NEVS has paid for the assets. So far, so good. But will they just shell out massive amounts of money to keep the company going until cars eventually generate some income? With those development costs, they need volume in sales for years before the production is profitable. That plant costs a lot. I would be surprised if they (IF everything works out, that is) will build more than a few thousands 9-3s in 2014; and that in a huge plant that can build 170.000 cars. Isn’t there a plan to utilize the plant for other type of production? NEVS stated in June that they expect to utilize the plants full capacity within a few years. That’s a bold plan. Surely no investors will believe that they will be able to produce over 150.000 electric Saabs there in 2016, so what other cars will they build at the plant?

    I read today that development work is already going on in China (I think – I’m too tired to check facts now). That was new to me. Did that work start after NEVS were formed or is that work that NEVS investors brought to the table? What type of development work? What, then, will be developed in Sweden?

    How will they attract all the staff that’s needed to develop a car? It’s not just about engineers for drivetrain, safety, handling, chassi, etc. There are so much expertise in different areas that goes into developing a modern car (and, then, for marketing, etc.). But it seems many of the old Saab staff is on to new jobs. I think they will have a hard time recruting… Or is the focus for Trollhättan mainly platform (incl. safety) and drivetrain, while the other stuff is done in China?

    How are they going to sell the cars? How will they get dealerships signed up? In other words, will dealerships in 2013 bet their money on the new Saab brands electric cars after all that has happened tha last few years and the market the way it is?

    I also saw a few hours ago that NEVS said they will design a new logotype. It sounded to me that it will replace the Griffin which they can’t use. Please no… The world is filled with lousy, pathetic, convoluted logos! Just use the word SAAB with the old classic font, OK? 🙂

      1. Yes, I know. Scania (or anyone else) can’t protect the griffin since that is general symbol. It’s just a very specific incarnation of it making up a recognizable logotype that can be protected. The worst case scenario to me would be to see NEVS designing a new variant of the griffin logo…

  12. Re. question 1.: Lets wait and see how many suppliers will be Chinese, until we judge were the car is actually built. If the batteries and electric motors/electronics will be from China, that will be the majority of the car’s value.

  13. There is a lot of wisdom in the comments above but for what its worth, I think the answer might be as simple as “because its there” in both cases. The factory is in Sweden so that’s where they’ll start. The 93 is what they’ve got, so thats’ what they’ll start with. Things will develop from there.

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