Auto Industry

Saab set to sizzle?

Swedish brand in green relaunch – but China sales targets look like a stretch

Saab set to sizzle?

In late January, Shanghai experienced a landmark moment: Qian Jun, a local resident, received the keys for his new Roewe E50. According to the Shanghai Daily Qian became the proud owner of the city’s first fully electric car.

The vehicle, which was made locally by SAIC, has a range of 180km, which Qian says is fine for him, as his daily commute is just 20km. He’s also lucky that his place of work – the Shanghai International Automobile City in suburban Jiading – is one of 12 locations in the metropolis with a charging station.

Shanghai has been making robust efforts to promote green cars lately. One key initiative: those who purchase electric vehicles can get their licence plates in a day and virtually for free, paying just Rmb125 ($20). In contrast, drivers of gas-guzzlers must join the licence plate auction. The bids in last month’s auction saw the average price for a Shanghai plate soar to Rmb75,000 (up from an average of Rmb50,000 in 2012).

For those who want to drive standard cars, a Shanghai plate now costs as much as a mid-range sedan (Shanghai Daily compares the licence fee to a Geely MK-II, which sells for Rmb75,000 too).

Policy incentives are bringing down the total ownership costs for green vehicles. For example, the sticker price of Qian’s Roewe E50 is Rmb234,900. But after central and local government subsidies had kicked in, Qian paid Rmb130,000. Plus there was the further saving on the Shanghai licence plate.

The city’s only electric car dealer – Gaozhan New Energy Vehicles – says it has orders for a further 230 cars and will deliver them by March.

But as car industry blogger and author Greg Anderson points out, it is still far from clear that enough Chinese consumers are interested in buying green vehicles.

Last year only 12,791 battery-powered and hybrid cars were sold in China. Admittedly that is 52% more than the year before but Anderson still labels it as “inconsequential” when weighed against the 19.3 million vehicles purchased in total by the Chinese last year.

Anderson adds that the government has pushed back some of its targets for the sales of green cars. For example, it had originally envisaged there’d be 500,000 of them on the roads by 2011; that goal has now been delayed to 2015.

One city that will be hoping that the target is met is Trollhaetten. It is home to Saab, a brand that has gone through financial trauma since General Motors decided to dispose of it in 2008.

Saab’s new owner is National Electric Vehicle (Nevs), a Chinese entity that rescued the Swedish firm from bankruptcy in August. The latest plan is to relaunch Saab as a maker of electric cars targeted at the Chinese market. But Bloomberg says the success of the project hinges on whether China’s ambitious targets for green car sales come to fruition.

Nevs is betting that they will. “China realises the need to meet the climate challenges through electric vehicles,” Mikael Oestlund, a company spokeman told the US news agency. “The business plan is well thought-out and completely realistic,” agreed Trollhaettan mayor Paul Aakerlund.

Perhaps the mayor is right, although the sales goals look pretty aggressive. The Chinese firm forecasts it will be selling 120,000 battery-powered Saab sedans a year by 2016 – a massive multiple on the meagre number of green vehicles sold in China last year.

One crumb of comfort for Saab is that it will have Qingdao – population 8.7 million – on its side. That’s because the coastal city purchased a 22% stake in Nevs this month for just over $300 million, reports Bloomberg.

Should sales of Saab’s electric vehicles reach targets, the agreement envisages a second company factory opening in Qingdao.

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