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Saab bets on electric cars and China for revival

The logo of Swedish manufacturer Saab is seen on a car in Prague June 13, 2012.

Credit: Reuters/David W Cerny

(Reuters) – A year out of bankruptcy and with just two cars a day rolling off its production line, Saab is betting on an as yet unbuilt electric version of a decade old car to bring the iconic Swedish marque back from the dead.

Saab’s new owner, National Electric Vehicle Sweden (NEVS), is targeting its home market of China, where the government is promoting clean automotive technology with up to 100 billion yuan ($16 billion) in vehicle subsidies, R&D and infrastructure spending, according to research firm Frost & Sullivan.

However, the battery version of Saab’s 9-3 model will be up against the likes of BMW (BMWG.DE), VW (VOWG_p.DE) and Ford (F.N) in one of the most competitive industries in the world.

Even die-hard fans are skeptical.

The 9-3 is “already out of date” from a new buyer’s point of view, Chih Hao Yeh, who runs Saab Club Taiwan, said by email.

As for the electric version, “will it offer the pure driving pleasure regular Saabs do?” he asked.

For NEVS President Matthias Bergman, only bold action will resurrect a more than 60-year-old brand, which pioneered such auto innovations as side-impact protection, heated seats and headlight washers, but which was hurt by high labor costs and lost its quirky image under General Motors’ (GM.N) ownership.

And he thinks the timing is right.

“We are nearing a tipping point,” he told Reuters, predicting the market for electric vehicles (EVs) will turn up sharply around 2015. “The big volumes will be in China.”

Saab also has a few aces up its sleeve, such as its state-of-the-art plant in Trollhattan, south Sweden, courtesy of GM’s $4 billion of investment. It will also have cheap batteries supplied by NEVS’ sister company Beijing National Battery Technology, as well as political connections.

Quingdao city paid 2 billion Swedish crowns ($305 million) for a 22 percent stake in NEVS earlier this year and has ordered a fleet of 200 EVs for delivery next year.

Analysts think sales of EV fleets to local governments in China are a huge opportunity, as they own hundreds of thousands of vehicles and are under pressure to cut air pollution.

Quingdao, in eastern China’s Shandong province, has a population of 9 million – the same as the whole of Sweden – and NEVS Chief Executive Kai Johan Jiang believes demand for EVs in China will quickly outstrip supply.

“Electric cars will be a scarce commodity in China,” he said as the first Saab, a conventionally powered, black 9-3, rolled off the line in Trollhattan, Saab’s home since the late 1940s.

Beijing is ramping up a program to put 5 million all-electric battery vehicles and near all-electric plug-in hybrids on the road by 2020. In September, it renewed subsidies for buying green cars worth up to 60,000 yuan ($9,900) for an all-electric car and up to 35,000 yuan on a near-all one.

The challenge for Saab is immense, however. Manufacturing in Sweden will make cars expensive, at least until a plant in China comes on line, while NEVS lacks the financial muscle of rivals.

Reborn Saab has yet to build more than prototype EVs and a handful of petrol-driven cars, and its plans depends on a car designed a decade ago which never sold in profitable volumes.

“Just bolting an EV drive-train onto an old Saab 9-3 is not going to create a compelling product,” said Diarmuid O’Connell, Vice President, Business Development at Tesla (TSLA.O), which expects to deliver more than 20,000 of its Model S all-electric sports sedans this year. “I will believe it when I see it.”

POTENTIAL

Few doubt electric cars have potential given global warming, high oil prices and dwindling reserves of fossil fuels.
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