First, to the press release:
Qingdao to become NEVS’ strategic gateway to China for Saab cars
NEVS has entered a long time partnership with the City of Qingdao in China’s Shandong-province. Qingdao initially invests SEK 2 billion, obtaining a 22 percent ownership share of NEVS through a directed share issue. Further investments will be made in a joint venture company in China. NEVS is headquartered in Trollhättan, Sweden where product development and manufacturing is located.
Qingdao’s investment in NEVS will be made in successive stages, and provides NEVS with a financially stable investor, as well as a business partner which provides access to a key market. The City of Qingdao has, through its investment company Qingdao Qingbo Investment Co, Ltd, signed a contract with NEVS’ parent company National Modern Energy Holdings Ltd. and with National Electric Vehicle Sweden AB (NEVS).
”This agreement provides financial resources that form an important contribution to enable implementation of the NEVS business plan,” said NEVS Chairman Karl-Erling Trogen.
”Qingdao is a long term strategic partner in China, which also provides us with a large customer,” said Kai Johan Jiang, CEO and main owner, NEVS.
”Vehicles based on new energy sources are the future. Qingdao wants to take an active part in this development,” said Zhang Xingi, Mayor of Qingdao.
Trollhättan is the NEVS headquarters, with product development and vehicle assembly. China is a key market with great potential demand for Saab vehicles. Qingdao is set to become the hub for NEVS’ efforts in the Chinese market, which means that exports will be shipped through the Port of Qingdao, strategically located on the Chinese East Coast. As production at the Trollhättan plant will reach capacity, a complementary manufacturing facility will gradually be established in Qingdao.
The municipality of Qingdao has a population of nine million, while close to 100 million people live in the Shandong province. The City [of] Qingdao is a large buyer of passenger cars, including both conventionally fuelled and electric vehicles. The NEVS investment is an important step to secure the region’s access to electric vehicles, and to build an industrial structure where the vehicle industry, including EVs, is key for the future.
As part of the agreement, a feasibility study is now conducted to guide the future partnership.
On August 31, 2012, NEVS acquired the main assets of the Saab Automobile bankruptcy estates, and currently studies the opportunity to commence production of the present Saab 9-3 model in the second half of 2013. The first electric vehicle model is planned for launch in early 2014. In October 2012, a sister company of NEVS in China opened a plant in Beijing producing high-performance batteries for automotive applications.
A few thoughts on this new information and what we’ve heard from NEVS so far….
The name at the bottom of this press release is Mikael Ostlund. That’s the same guy I spoke to for my NEVS interview a few months ago. In that interview, he said that NEVS’ strategy was still based on electric vehicles and that plans to build the Saab 9-3 with a conventional petrol/diesel engine were merely opportunistic – a chance to get cashflow and get the Trollhattan plant up and running.
Mikael also said that once production was at capacity in Trollhattan, only then would they start to consider production in China.
When we reach maximum capacity at the Trollhattan plant, there is the possibility of then building in China.
At the very least, the production plans have been contradicted to some degree in this press release. If they build this factory in China, they’re not going to wait until Trollhattan is at capacity to start using it. They’ll use it as soon as it’s ready, regardless of how full (or otherwise) Trollhattan is.
If the China Auto Web story that preceded this press release was accurate – which is no definite thing – then NEVS may be planning to build conventional vehicles in Qingdao, too. That would make some sense to you and me, but it would also be inconsistent with their stated long term product plans.
Maybe they could invoke the Elwood Blues defence?
JAKE: You lied to a Nun?
ELWOOD: It wasn’t lies. It was just…. bull$h1t
I know that there are some internal questions at NEVS about PR strategy and I got the feeling during the interview with Mikael last year that he needed more resources. The number of questions that he didn’t have answers for surprised me. Now that this press release has come out, I’m surprised even more by the inconsistency between previous statements and these new Chinese production plans.
I think NEVS can be a bit more direct with their communications than what they’ve been so far. As I’ve written before, you can take this Wallenberg-like approach of being the strong silent type IF you’ve got no need to build customer goodwill, if you’ve got the goods to back you up and the resources to sustain yourself. On the other hand, if you need to build up a customer base, especially a customer base that comes with built-in scepticism like Saab’s, it might help to get people onside a bit more.
Inconsistent, but….more realistic
Whilst there might be some inconsistencies here, there do seem to be some more realistic plans in some respects.
NEVS were always going to need a Chinese manufacturing facility to make a business case for manufacturing in China. A lot of people mentioned this right from the get-go and were shouted down by notions of “Swedish quality” and “European prestige”. Yes, those things matter to a degree, but there’s no way they would overcome the tariffs that NEVS would face bringing cars from a relatively expensive country like Sweden to sell in China. It simply didn’t make sense.
The basic plan here seems much more realistic and is a general cause for optimism in terms of this company actually making cars and having a future. The big question now is how much that future is split between Sweden and China?
There will be theories that claim this is the first step in moving Saab out of Sweden completely. I don’t agree. If that was the case, why would they campaign so hard for the Saab name? The name is worthless without a genuine Swedish link. They may as well have just bought the assets, hired the know-how and developed a new corporate identity from scratch.
The Saab name has value to NEVS and that value will mostly lie in the company’s reputation for engineering and the general Scandinavian values that come with it.
Tying this up with a genuinely resource-rich backer in China is a common sense move and quite possibly the first concrete proof I’ve seen that this venture has some legs. Before this announcement is was mostly just good intentions, butterflies and a battery plant. This is something more real.
Having said that…..
… let me say this:
This is the car business. It always is and always will be about the product. NEVS can have all the strategic partners in the world and it won’t mean a thing if the product’s no good. This announcement is encouraging because it reflects some of the realism that I was begging for in previous columns on NEVS. But we still have to see some product to know if this is going to go anywhere at all.
I also wonder about the capacities mentioned. The press release doesn’t mention the capacity of the Qingdao plant but a figure of 400,000 vehicles was mentioned in the news story preceding it. Combine that with Trollhattan’s 190,000 vehicle capacity and you’ve got nearly 600,000 in capacity for a brand that’s never sold more than 135,000 cars in year. I know this is essentially a different company and they’ll be selling primarily in a different (and growing) market, but there’s still a question as to why they’re going so big, so early. As one website opined this morning, a Chinese government body doesn’t hand out that sort of money merely to prop up jobs elsewhere.
It’s going to be interesting to watch this situation as it continues to unfold. Again, I’m interested because of the Saab name and the implications it has for friends and former colleagues in Trollhattan and elsewhere. The cars don’t interest me that much – yet.
Wait and see.