I watched the NEVS/Saab video – still unconvinced

FOREWORD – I wrote this post around a week ago. I’ve asked questions about NEVS on-site before and I’ve posed those questions to two officers from NEVS on two separate occasions via email. The second time was just last week, after drafting this. I was hoping to get some input from them that could inform what I wrote here, but to no avail.

I still believe that these are fundamental questions that NEVS need to address if they want conscientious people to follow what they’re doing with Saab with a sense of realism. I’m sure they’ve got answers. I just wish they’d come out and give those answers. SW

——

Saabs United hosted a gathering in Trollhattan a few weekends ago and one of the presenters at the evening session was a guy from NEVS named Mattias Bergman. He gave a 30-minute presentation on what NEVS has been doing and then took questions for another 30 minutes. You can watch the full video here.

I’ve already raised two key questions for NEVS, neither of which have been answered yet. When Tim from SU did an interview with NEVS I raised those questions again because they still hadn’t been answered. I took some flack for it, too.

Comparing Tim’s interview with Mattias’ presentation, it looks as if those present in Trollhattan were basically treated to the same content. We will only talk about what we’ve done, not the specifics of what we plan to do, etc.

I understand and respect a company’s right to select the information they want to put in the public domain. It’s their choice. But I still maintain that if you’re asking people to attach themselves to your brand (and NEVS have stated publicly that former Saab customers and the Saab brand/history are very important to them), there is a responsibility placed on you to provide a firm basis for that support. That obligation is only multiplied if you’re producing something completely brand new with no history to hang your hat on.

So……. my two questions once again. Let’s take the second question first.

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 the rights to?

I’m going to leave this one alone for the moment. It still doesn’t make sense to me. A lot of money wasted on redeveloping a very old platform when that money could be spent speeding up the development of a new platform and bringing it to market sooner. It seems to be an inefficient use of capital, but it’s a secondary issue and it’s a choice for them as to how they allocate their resources.

The following, however, is a more fundamental question that goes to the core of their business plan….

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?

Mattias confirmed that NEVS are looking to sell around 80% of their volume in China when they release their first vehicle, internally referred to as the EV1. This is the vehicle that will be based on the 2012 Saab 9-3 but with a substantial facelift to both the interior and exterior.

NEVS will also develop a group of vehicles based on Saab’s Phoenix architecture (EV-2 series). If they do not use Jason Castriota’s existing designs for this Phoenix based vehicle – and indications to me at this point say that they won’t – it’s going to take significantly more time and money to produce this vehicle than what it would have if they had picked up Jason’s designs. Again, that’s their choice but it does add to the cost of vehicle development and the time it will take to get it done.

The EV-1 will use batteries being made at a new factory in China, a plant that went operational in Beijing just recently. This factory will make batteries based on Lithium Iron Phosphate (LiFePO4) technology, a battery type with significant recent developments in the lab, in terms of capacity and charge time. Hopefully they’ve found a way to turn those lab results into real-life advancements.

Koenigsegg recently introduced Lithium Iron technology for their standard battery on the Agera, employing smart battery management technology that would ensure the battery never completely drains and will always preserve enough energy to start the car. That has nothing to do with running an EV, of course, but it’s interesting and shows that NEVS are employing very forward-looking technology. Kudos for that.

A point of concern with regards to the batteries, however, is the suggestion floating around that NEVS might make Saab’s vehicle bodies/interiors in Sweden and then fit the battery (at least, maybe the whole drivetrain) in China.

I can understand the basic logic in this thinking – avoid shipping a battery to Sweden only to bring it back into China and minimise the potential for import taxes on components already made in China. On the surface, it makes sense. I once asked the same question about Saabs that were shipped complete from Sweden to Australia with Australian-made V6’s under the hood. Why not just fit the engine in Australia?

Here’s a 4-minute video showing you the basic answer to that question. You don’t have to watch the whole four minutes to get the gist of it, but it’s interesting viewing if you do.

If you’re going to be a mass-producer of vehicles, as NEVS wishes to be, then this is the accepted way of moving those vehicles to market, en masse, in an efficient manner.

Hopefully you noticed that the cars are being driven on to the ship, which is hard to do when the main source of energy for the vehicle – the battery pack – is thousands of kilometers away.

Of course, NEVS might have plans for a new, innovative way of loading and unloading thousands of vehicles at a time. They might have enough money to build or modify their own ships to do this. I don’t know, but the basic proposition of building vehicles and Sweden and fitting the powertrain in China just doesn’t make sense in 2012 business terms.

And that’s the whole problem of this proposition: It simply doesn’t make economic sense to build vehicles in Sweden to sell them in China based on current knowledge.

Why this matters

I don’t want to know the specifics of NEVS’s vehicles, the interior features, colors, the performance figures. That’s all stuff that NEVS/Saab should indeed keep to themselves until launch. I like what Mattias had to say about the potential for swappable battery packs and I believe the EV industry is heading towards a tipping point that will make them more feasible for a sustainable portion of the market. I think NEVS is positioning Saab into a genuine market of the future. How they’re going to pull it off is still a mystery, however.

What I want to know, what I think any Saab fan interested in NEVS’s work should know, what industry analysts would love to find out, I’m sure, is encapsulated in the question I posted above – How is a business plan (what little we know of it) going to work when it defies so much common logic? How can you sustainably manufacture in Sweden and sell at a reasonable price, as an import, in China?

I really, REALLY want to have faith in NEVS and what they will do with the Saab brand. I have a substantial chunk of my own personal history tied up in Trollhattan. I desperately want to see Saab do well, to see the region get back on its feet. I’ve also got a lot of friends in the Saab community and many of them are quite interested in what NEVS are doing, even if an EV isn’t (yet) in their personal plans for the near future.

My concern is that there are a lot of people I care about pinning their hopes on what NEVS are doing with the Saab name and yet there are still too many basic, fundamental and very reasonable unanswered questions. I still think NEVS should answer those questions if they want/expect people to maintain a serious interest in their future product.

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22 Comments

  1. Question One really never occured to me. I just thought that the EV-1 was already there, ready to be built with just a bit of battery replacement, since Saab already had developed that car. They wanted to build a fleet of hundred test cars, didn’t they? But you know more than I do. So, I now start wondering…

    Regarding the second question, the only answer that comes to mind is “prestige”.

    Regarding the third part of your article, however, it seems that the answer is already in it. If the battery pack is replaceable, Saab could just put a small “transfer battery” into each car which allows it to be driven onto the carrier ship by itself. We are probably only talking about a couple of hundred meters here. The battery is removed in China, replaced by the proper one, Chinese built, and sent back to Sweden for the next transfer. Feasible? Maybe…

    1. Regarding the EV1 – As far as I know, NEVS are not simply planning on finishing the electric vehicle that Saab was working on. They’ll be doing their own thing with their own battery unit, electric engine, etc. They also plan a significant re-skin inside and out.

      Batteries and shipping?

      Anything’s feasible if you’ve got the $$$$$. Absolutely. And I’m sure they’ve got a solution in mind. But bear in mind that there’s more involved here than just putting them on a ship.

      A car is usually tested under its own power at the end of the production line. It’s much easier to fix a build problem on the line than at a dealer later on. After the test, it’s driven to a holding yard where it waits while enough cars are built to justify the cost of shipping. It’ll be driven on to a transport, then driven on to the ship.

      A small battery pack is possible for these duties, but it’ll require some clever management to get all that done (plus build the charging infrastructure for all those small packs at the factory).

      As I said, anything can be done, but it all costs $$$$$ and that cost will have to be weighed against the financial and logistical opportunity cost of doing it the conventional way.

      1. I’ve thought about this before, and the obvious answer is indeed a temporary battery pack. Something with 1% of the capacity of the final pack should be plenty, so say 5-10kg. You just need to add a plug for this pack somewhere in the car, or re-use the existing charging connector.

        This becomes fascinating when you consider the possibility of autonomous loading. The cars will likely have all of the necessary hardware already: electric steering, parking proximity sensors, GPS. You could install differential GPS transmitters on the ship for centimeter accuracy and program the cars to find their own spots. The team that secures the cars can retrieve the packs.

        The same packs can be used inside the factory and for limited shakedown runs. Obviously, you would need full-capacity packs for extended QC and high speed runs, but that only applies to a small percentage of the production run.

          1. That’s where differential GPS comes in. You can set-up small GPS transmitters inside the ship (search for “GPS augmentation”).

            You can also do the same thing by dead reckoning using a known starting point and chassis sensors (ABS, steering, parking proximity). It’s conceptually similar to navigating a terrain map in a video game. Using the ship’s floor plan, you can map-out your route in advance and provide each car with a customized route using sequential USB data sticks. You can always provide a human at the other end to finish the job and strap-down the car.

            The implementation details would be fascinating, but the main point is that, as an engineering problem, it’s do-able. Most of the elements already exist. They just need to be integrated.

          2. Bernard, I understood the idea with the DGPS receivers, but that would actually require rebuilding a complete GPS “net” or frame on every deck, with at least 4 transmitters. And if there is stray transmission, the situation gets really complicated.

    2. I always assumed the same as Thyl — that the basic designs (and perhaps more importantly, most of the tooling) were already done for the 9-3 and that would speed the NEVS car to market.

      Prestige also came to mind for why Sweden would be a good choice for manufacturing. Additionally, the plant and tooling are already there, and that combination could mean a much shorter break even target depending upon the other variables. Chinese manufacturing for automobiles isn’t as cheap as it used to be.

      As for the logistics of getting the cars to China to fit them with the drivetrain, there are myriad ways to do it. The hard part is making it pay.

      1. This was my take as well. Seeing that the 9-3 is already completed, it wouldn’t take much to turn it into an electric car. But why make exterior/interior changes? Except for the fact that customers always want something a little different, it seems like a waste of money.

  2. “based on the 2012 Saab 9-3 but with a substantial facelift to both the interior and exterior”

    I don’t get this. I can somewhat understand the idea about using the 9-3 to earn money and test new tech while engineering the next brand new car. But why spend resources on a facelift? Are they going to change body works as well? Isn’t that very expensive if new tooling is needed? And for other smaller bits and pieces, both exterior and interior… I guess some suppliers still have tools for production of parts for the last 9-3. Why, then, have suppliers make new tools for production of parts? And all this for a model that is only going to bridge a small gap until the first “new” car is ready. Not to mention the work on the drivetrain… How many cars will they be able to spread the cost for all this design and engineering work on? I would be surprised if they sell more than 5.000 electric 9-3s in 2014. Why not try to do as little as possible just to get the 9-3 out of the door to earn some money and concentrate resources on the next new car. Unless they are planning to ship body parts to China and then source most of the other stuff from local Chinese suppliers that can deliver at very low cost… And what about the other stuff that made Saab a Saab? Does NEVS has all the expertise in design, safety, etc. to carry out this redesign and produce a model worthy the Saab name?

    But then there is the question about the huge plant they bought. Why take the cost for all this production capabilities? Surely they can’t expect to sell even 50.000 electric 9-3s in Europe even in 2015? What about the comment by NEVS earlier this summer that they intend to utilize the Trollhättan plants full capacity (about 170.000 cars if I remember correctly) “as soon as possible”. What vehicles are the gonna produce? Is their business plan really built on the assumption that they gonna sell that many electric cars in 2015-2016 in Europe (because I can’t imagine for one second that the gonna export fully built cars to China)?

    Just look at the condition of the European market, and then apply that on a new electric car that will probably carry a very premium price tag. A car from a brand that has been dragged in the mud for years. How are they even gonna find dealers willing to risk money on that when the market is already in deep trouble? Spending money on floor space, advertising, sales people, technician training, spare parts, etc.?

    I would love to see them succeed – mostly for Trollhättan and all the talented people that used to work there building fine cars. But as much as I want that I just can’t see if coming together with what we know so far. If they had announced some substantial deal with an Asian car maker that saw them using Trollhättan to build cars for the European market, while merging resources on a brand new electric and hybrid Saab lineup in 3-4 years time – then maybe. But then again, why would some volume producer choose Trollhättan up north for producing budget-segment cars for the cut-throat central, south, and eastern markets of Europe?

    Sadly, I fear it is just gonna be a fizzle. Yes, there may be an electric 9-3 but it is not gonna work out more than a year due to reality. All production will move to China in 2015, and design/engineering will follow within two years. Saab will carry on for a few more years as an exotic entity building cheap electric cars for South Eastern Asia until bought buy some of the countless other vehicle makers there. The agreement using the Saab brand name will end, and all that is left is the Saab Museum in Trollhättan.

    1. You are absolutely, completely on the money imho. And I would add to this that the sales figures you mention here are a VERY, VERY favorable piece of speculation towards NEVS. You’re actually being nice to them there.

      I mean, think about it: 50.000 electric cars sold? In Europe? In 2015? By this company? Just look at the electric car market in general. I’d be surprised if NEVS manages to sell more than 1.000 cars worldwide in their first full year of production.

  3. Some speculation on my part.

    Q: Why not re-use Jason’s design? A: Because it’s a design for a liquid-fueled car, and that means that major components are positioned differently and that cooling requirements are completely different. Liquid-fueled cars are only 30-35% efficient at best, so you need to dissipate two units of heat for each unit of power sent to the wheels. That’s why modern cars have up to a square meter of radiators, intercoolers, oil coolers, etc. Also, liquid-fueled cars have minimal power and autonomy constraints. If you want more autonomy, you use a bigger tank; if you want more top speed, you use a bigger engine; and so on. That luxury is not available with electric technology. In other words, NEVS needs to completely redesign Jason Castriota’s design. They may as well start with a clean sheet.

    Q: Why use the current 9-3 instead of Phoenix

    A: Time to market. Also, NEVS hinted that they were working on more advanced battery technology for their second-gen (Phoenix-based) cars. I’m sure they’ve run the business cases and found that releasing a 9-3 based car would make sense. Does this take away major resources that could be assigned to the Phoenix? Maybe, but it also allows them to utilize other resources that would be idle while waiting for an all-new platform. This includes the factory, of course, but also workers who can’t afford to wait around a few years.

    Q: Why build in Sweden and not China?

    A1: The initial costs and associated risks are significantly lower. The factory is already there, along with trained production staff. That saves them a few billion right off the top, not to mention a few years in a fast-moving marketplace.

    A2: Running costs are not that much higher in Sweden. The Trollhättan plant isn’t some industrial relic that needs to be torn-down and rebuilt. It’s as efficient as any modern automotive factory, and that means that per-unit labor costs are low. If you figure that they can build a car using 20 hours of labor (which would be competitive but not world-beating), and that this labor costs them twice as much in Sweden, that only makes a small difference in the final price. In fact, it’s almost immaterial compared to the initial tooling cost.
    A friend of mine used to work for a company that had factories in Canada, the US and Mexico. He told me that the cheapest factories were always the most modern ones, irrespective of labor cost and location. If they retooled the Ontario factory, it became cheaper to run than the Mexican factory, even while paying 10 times the labor rate. The situation reversed itself when the next factory was retooled. That knowledge not prevent his company (and most others) from demanding huge government concessions and threatening to shut-down factories every few years.

    A3: As mentioned above, European provenance is worth a premium in the marketplace, which partly offsets additional labor costs.

    1. Yes, the factory and tooling are there. They should be able to get some talented staff back (although I don’t think it will be that easy).

      But…

      The whole plant costs huge money, production or no production. The costs have to be spread out on the cars that generate income. They need to do something about that. They can’t just have that plant sitting there 95% idle yet another year and then have a production of maybe just 5.000 cars in 2014. That would be a huge pile money spent on nothing.

  4. Steven, I’m totally with you on this.

    I love my 9-3, but it’s now an old car and launching anything based on this platform will NOT sell in even remotely acceptable volumes in the developed, western markets. Just look at the rehashed and positively ancient (chinese) MGF for evidence of that. Phoenix allegedly had the modularity and flexibility to scale up and down in size, which would make it seem far more sensible. Like you I simply don’t buy the argument that “speed to market” for the old platform is the answer. It may get to market 6 months sooner, but it’s long term value as a product and likely market penetration is tiny in comparison to the new platform and therefore the ROCI is way too low.

    As to the issue of building in Sweden to ship to China. The ONLY answer is that of prestige. I’ve said before, and you know what my Dad will say about this, the wealthy Chinese elite require the real deal, not a local facsimile. They are prepared to pay for it too, and their numbers are ever growing. but is it enough, and is the product likely to be THAT attractive? I can’t see it. I don’t know enough about the real potential of the Chinese EV market. I know it’s being hyped up to be big (by those with product to sell, or who may have product to sell, eventually…), but where is the empirical evidence to support it? Flying a kite I say. Flying a kite bearing our favourite car brand. Not good.

    Frankly, while I don’t want to see yet another failure in Trollhattan, I almost hope they fail fast and hard, before they come to market. The Saab brand has taken enough of a knock from those who did not have the substance behind their plans to make it work. One more, and it will TRULY be the end. If that wasn’t last January. On the upside though, how many times have the likes of Lotus and Ginetta gone tits up, only to get more investment and go on to greater things? But they did so as boutique manufacturers of specialist cars, not as a “volume” player.

  5. Thanks all for the thoughts an ideas. They’re all good, and I’m quite sure they’re all feasible. But that feasibility comes at a price and when you’re building what’s already going to be an expensive car, cost control’s going to be a major factor.

    A few thoughts on some of the things people mentioned.

    The factory – Victor once mentioned to me that the factory costs around 5million Euro a month when it’s not running, just to keep the lights on and keep things maintained.

    European provenance and genuineness – I don’t know how many Audis sold in China are built in Germany, but I do know that Audi make a hell of a lot of cars with partners in China. Buick is prestigious in China and is made in China. I tend to think the brands considered in the “must-be-genuine” class would be at the true high-end of the market (Rolls, Ferrari, high-end Benz, etc). Maybe I’m just too Swedish now – all that jante law messing with my head – but I just struggle to see Saab being a brand that moves into that company. Then again, if Buick is desirable, anything’s possible, right?

    All this concern of mine would be cancelled out if they have buckets and buckets of money and can play the long game – taking losses early whilst building cars and slowly building a brand.

    I guess I’m just not used to owners of Saab having those resources or that dedication to long-term brand building.

  6. About the question No. 2. I can only see two possible reasons for NEVS to produce cars for Chinese market in Sweden:

    First many have already mentioned, it’s a “Made in Sweden” tag. I have no clue how much it means in China, but I understand that Chinese customers prefer EU-produced cars over their own.

    The second, and I will speculate on this one, because I don’t know what kind of agreement there may be, is about rights to use Saab brand name. I tend to think that Saab Defense AB and possibly Scania AB presented NEVS with a condition: produce in Sweden or no Saab brand rights… and NEVS chose the first option rather than start completely anew.

    Think that they estimated that having and option to buy a modern car development/production/distribution facility in THN really cheap with possibility to quickly grab required expertise, despite higher running costs outweights building or buying appropriate facilities in China without a recognizable brand name.

    About the first question, I really have no clue. I thought that maybe, just maybe, by producing a 9-3 based car would help them save a small portion of -by now all but destroyed – distribution network. But on second thought, that makes no sense for many resons, one of them being their focus on China. Also Mr. Bergman clearly told, that NEVS has no answer on how to keep custumer loyalty through the years of their absence from western markets.

  7. Tesla is arguably the most ‘successful’ of the current crop of ev’s, they have a ground up car in production, that at least looks like a $60-100 000 car as opposed to a $35000 car that looks like its worth $15000 (Nissan Leaf).

    An electric 9-3 , made in small numbers ( because the market is really small) will mean the component prices, if even available, will be far higher than they were for a conventional 9 3 .

    If you assume the donor vehicle for the leaf is the Nissan versa, ( a cheap car) and where it is priced in the marketplace, and where the Saab 9 3 was, then an electric 9 3 in US market terms, would project to be $50 -60000 .

    Even at that , I could guess that they would be losing bucketloads of cash. (Tesla is)

    The market currently in the USA at least, for a Saab at those prices, is about zero.

    Nevs is a head scratcher, if you look at their website, they only have 2 job openings. If they plan to develop and launch a car in 2014, then you would think they would be looking for 100 s or 1000 s of employees.

  8. for low volume but very loyal saab markets like Australia the nevs plan is akin to a warning shot between the eyes, i wish nevs well [for the sake of SAAB] but their electric business plan does not take into account why people like me like cars and buy cars…

  9. Seems pretty obvious that using the current 9-3 will provide NEVS with a vehicle to sell much quicker than completing the Phoenix first. The current 9-3 already exists as an EV thanks to Saab, so there shouldn’t be too much for NEVS to figure out. Building in Sweden seems pretty straight-foward – the factory and the engineers are there. It would take a while to establish that sort of facility in China. That’s my thinking at least.

  10. As an owner of a SAAB 9-3X Turbo4 XWD and a Volvo V60 R-design D5 AWD, I have to comment on the sort of general understanding that the 9-3 is “very old”. The SAAB 9-3 platform may be old in terms of years since it was developed, but when I compare the roadholding, steering feedback and brakes to the V60, the difference is minimal – I feel just as safe in the SAAB as in the Volvo, and I am not sure which car would be fastest from A to B on a twisting back road.
    Using the 9-3 platform would probably be an advantage in the short term and it could help NEVS to get some cars on the road faster than with the Phoenix platform.
    The SAAB is far behind the Volvo in terms of “infotainment” though: The SAAB has just a few functions that can be influenced by the user, while other cars, like the Volvo have a much more up to date approach to what a user needs: Loads of user-controllable functions and built-in bluetooth giving you handsfree telephone (with complete control of address book showing up on the infotainment screen) and streaming of music.
    NEVS will have room for improvement in that category.

  11. I haven’t exactly been viewing NEVS with rose coloured glasses like some. I might give it the benefit of if there is enough evidence of it’s true intentions, but so far I don’t think we have really seen those and there are still many questions that need to be asked.

    A while ago on SU, I espoused a theory that NEVS isn’t really about making cars but rather developing an updated battery platform that it will either license to other manufacturers or totally sell on.

    If NEVS had an updated platform (nothing radical, but substantially ahead of most competitors) that it wanted to develop without prying eyes, wouldn’t it be very convenient if it could do that under the guise of actually being a car manufacturer? It could go about it’s business supposedly making an electric Saab and attracting relatively minor interest from competitors when really it’s intentions were quite different. Testing this technology under the current 9-3 wouldn’t attract much attention and it only has to vaguely mention newer models that it perhaps has little or no intention to build?

    It’s only a theory but…

  12. Hello swade,
    my simple answer to your second question is. For a newcomer in car business it seems to be easier and specially cheaper to implement a new engine system, which will surely have difficulties at its beginning, into a known and well proved car-body than to implement this new engine-system into a platform which is only existing as an idea and unproved draft without any daily experience of driving.

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