The first day of the Saabfestival 2015 was marked with many compelling events on the agenda. Probably one of the most anticipated elements of all was the presentation by NEVS President Mattias Bergman. Details about the vision for the future, the new product portfolio, distribution strategy, the newly announced Chinese partners, SAAB and how he's continuing on the journey to make a difference….
“Welcome everyone here to the NEVS open house at the Saab Festival. My name is Mattias Bergman and I am the president at NEVS. This morning I was sitting in my office at the main gate and I saw car after car come by with registration plates from many different countries from all over Europe. Really fantastic and I want to wish you all a very warm welcome here!
What I'd like to do today is to update you. Then I'll be happy to answer any questions you may have.
First, it's very clear that NEVS was founded with a very clear mission: we want to make a real difference for future generations. We know that fossil fuels will end. We expect this to happen around 2050-2070, depending on what reports you're using. So we know that we can not wait until fossil fuels run out as the pollution from the cars wants to be addressed as well. So if we look around us, it's just in big cities like Beijing, London or Paris that we have pollution, the impact is broader and broader. 1 / 3rd of the total pollution. The pollution kills every year about 4 million people so we feel we have a responsibility. We believe in change and we believe we can actually make a difference. We are not going to be a "Me too" product with a big compromise, but a premium car that cares about the future.
So if you look at the development of the car - and I hope many of you will visit Frank Smit's seminar on that topic - you'll need to think about the process and the time needed to develop. If a process is 2-3 years to develop, the car program will typically last for 10 years and 15 years. It means we'll have to have a very long view when we plan our products. And of course, the key trend to understand is the care for the environment, this is crucial. Having said that, another trend to weigh is the shape of car ownership. Looking at our children -and I am looking forward to hearing from you car. The key for them is the ability to transport themselves. We can already see today that car sharing pools are getting more popular. And when we start talking about electric cars the business model wants change.
Half of the car's value is the battery and why would you own the battery? There are other companies that can do that and they can also be part of the battery's second life. 5 to 8 years, you will have a new battery to use for your solar energy.
The other trend is connectedness. Again, for all of us who have kids, we may say that they are connected to each other. Want to send a signal to the emergency center, but it also wants to be self-driving.
Then when I talk to many SAAB fans, they say "why should a car be self-driving? I want to drive ", that is still going to be the option. But thinking about the fact that 90% of all accidents are caused by the driver, that they are not careful enough. The driver is distracted by email or distracted by something else. So that will come, but I do not think all that is ready just yet.
Even if the technology wants to be ready soon, we do not have the legal systems in place yet. Who wants to be responsible in case of an issue: is it the internet provider, the hardware provider, the car manufacturer, etc so that will take some time to sort out.
Thinking about the development of our new cars. The cars of today have a value that is limited to 5%. But if you look 10 years ahead - and we have that in our planning - we estimate that the value of the software will be over 60%. At the same time, we have less than 10% of our staff in software engineering -and this is a general trend in the industry- so either we have to start with engineers from Sony Ericsson or etc. or we have to work together. When we look at the industry, automotive is most likely the most competitive landscape in the world. It's very capital intensive, you really have to do the right things.
So they are challenged by new actors. Tesla who understand that EV's are the future, but also by new actors. We see Virgin, we see Apple, we see Google who said that EV is the future, self-driving is the future and that they can not take the car. Or it the component makers like Bosch and Continental? I do not believe they are OEM and produce their own complete cars. Looking at the trends, there will be consolidation. Many of the car companies today do not understand the issues in the environment, connectivity and changing business models but we do. You will all, at least the Swedish part of the audience today, remember Facit. The story about a company that did not understand the time for typewriters was over and that the world was moving to computers. And if you do not understand the future trends, you're not part of the future.
And then we are here, based on the proud background in Trollhättan. Every premium car maker needs their positioning: safe and premium quality, but that's taken for granted. What is distinguishing a SAAB car, and what is distinguishing how we view the future? Not only the outer design needs to be beautiful, but also there needs to be based on simplicity and functions. You can't make it overcomplicated. Being a small company, we have to be innovative. We cannot just follow what others are doing and that has really shaped us that with limited resources that we have to find our own base and you have to be part of putting the standards for the future. We have some of the key engineers who have been part of building the SAAB history our first EV and they will also be part of building the future. They have been creating the turbo, side impact protection, nigh panel, so many more innovations that are today standard in the automotive industry. But these innovations have to be directed to implement our vision and that is the environment. To understand this trend, we're not putting a lot of R&D to develop conventional powertrains. That will other companies do.
We make our resources our resources to implement the vision for us. Then, at the moment, we will be building our future, and we are going to be there. Today we are 350 people, just the bare minimum with key competences in manufacturing and design, purchasing and marketing. But it is key to continuing the journey. Anyone can buy the same machines, anyone can buy the same software to develop cars, but not just anyone can use them the way we can. SAAB cars are now safe and they are doing today's high quality, safe and -meeting the DNA of SAAB- are fun to drive. The people in the company are not very competent, so they have a unique attitude. This "we can do it" attitude. We believe in the vision, we believe in where we are going. When I talk to other people in the industry, they are actually very impressed with our staff. We have a really difficult year behind us, but we have not lost anyone, maybe 4 or 5 people, but we're all so proud of what we do. This is a key resource.
But of course the plant is a key resource as well. Last year it was part of an international evaluation of the GM year 2008. It was ranked in Productivity as one of the highest, competing with BMW, Mercedes, etc, really top notch production facilities. But the production facility is as I said, not the machinery, it is the people. GM has been neglecting maintenance of the plant over the last few years and now it is starting to catch up. Last year, even though it was difficult, we paid salaries and kept the maintenance of the equipment, so the equipment in the factory is ready to start , What are in process to invest in the body shop. To adjust the body shop to be.
So people, physical factory and then the IP. The IP or Intellectual Property We have the knowledge of how to build quality premium cars. That means everything from electronics to propulsion system, the chassis system, the safety system, etc. And that together with the knowledge how to put together a great car. However, it is currently the strongest in is self-driving. This is an area I'll come back to.
But the IP is continuing to build, the Phoenix platform is key. The Phoenix, originally named SAAB Automobile to be independent from GM platforms. If you are a large company, you may have a limited number of car models, but you are as good as we can use the same subsystems and structures in more models than one. Then you have to make it easier in production. Scania is probably the master of modularity. From SUVs to convertibles to cars, from SUVs to converts to cars.
If you look at Volkswagen, you can share a platform with a brand like Audi and with Skoda. It is, therefore, what we intend to do: the brand and part of this differentiation wants to be done with other companies. This will give us synergies in purchasing, synergies in sharing development. This modularization therefore wants to be used in our core for the future: our battery technology.
SAAB Automobile had before. To understand what this modularity has to offer. Different, different body types, different body types, different body types, different body types, different body types, different body types, different body types, different body types, different body types, different body types, different body types interiors, etc. so they can be reused. So we have these interfaces very clear, and understand the different requirements as we do, then we need to look at it for a premium car or is it for a volume brand. We would like to make a C-segment car with a conventional engine, but under the name of SAAB, we would like to make a commitment to use this kind of transmission, powertrains and this kind of body structure. And if we then decide that for us, this is at EV SUV for our brand, our premium brand, then you will use this kind of powertrain module, this is the same and this module is there you have the power in creating this approach. Because we are very clear: our future is electric cars. Electric cars is the only way to implement the vision; that have sustainable powertrains but are not compromising on the fun to drive, the driving experience. So there are not only 100% EV's, so there are hybrids, and there are different stages of hybrids. Our focus is on light hybrids that can have an electric range extender. The battery technology is developing fast, the Watthours per kilo is improving, costs per battery kilo is increasing and by doing that we can get more power into the battery pack. Then we have a choice: either we are using this to go from 300km today to 400-500kms, or we keep the weight the same. Today the batteries weigh about 400 kilos. Or we decide for a lighter battery, which means lower cost and a more affordable car. Different customers, different needs.
90% of car owners drive a maximum of 100km per day, and if you drive 100kms a day, the battery needs to have a capacity of 300 kilometres to be on the safe side. But if you commute more than 100 kms a day, yes, then you need a longer range. And that can be done with a range extender, where you have a small gasoline engine that works to charge the battery and extend the range.
You've seen it outside and you can see it throughout the day, this is our first EV. We're really proud of it. When i talk to journalists ixnumx and Nissan Leaf, it's a very good car. We are meeting the capabilities of a larger car; We even have a longer driving range than the competitors.
But our future can not be achieved by ourselves. We need to cooperate with others. And there wants to be different partners, companies that share our vision. There are plans to create synergies in development, they want to share infrastructure, sharing components. When we share components, it reduces our cost but at the same time it gives us synergies in purchasing. 3 cars 200,000 cars, there is huge difference in the cost of the material you are negotiating with it as a volume game. So we need economies of scale. But we also need technological partners that add modules and technologies, so we need financial partners. So it's not just one partner we need, we need a number of them.
We have been negotiating for quite some time with different partners. Internally I called it the “ketchup effect” as we have been shaking this bottle for a while and finally something came out. We announced partnerships not when we just have a letter of intent or when we have a preliminary agreement but when we have a signed agreement, money is in our bank account, and we have permission from those partners to communicate. Some of them are listed on the stock exchange, some are connected with a government, so we have to respect when and how we announce.
So last week the first part of the ketchup came out: two strategic partnerships, with the city of Tianjin and with SRIT. Let me introduce those two partners:
Tianjin is the harbor city outside Beijing. but also Beijing and Tianjin our now merging into one 100 million people. On the pictures I showed you earlier, because of all this pollution and because of the political power here, there is the highest pressure to make a change and reduce the pollution. There is a lot of pressure to introduce electric cars and doing that, there are a lot of incentives. 10,000 Euro in government subsidy on the Chinese market, compared to 3,000 on the Swedish market. Of course that makes a big difference on the business case.
So Tianjin, they are a city of 16 million people and this city is reporting directly to the central government. This is also the city where Toyota produces, Hawtai produces and many other car companies are present, which means that there is an existing base of skilled workers and critical suppliers. So this gives us the market and the industrial base. In Tianjin, we will build one factory with a similar size as Trollhättan and one R&D center. Not with the same skillset and the same setup as here, but with complementary skills compared to what we have here.
The other company is SRIT: State Research Information & Technology. It's a government-owned company, owned in part by the State Council of the central government and by China Unicom. China Unicom is the 3rd largest mobile operator in the world. They will be providing with the area that I pointed out earlier, the future of making the cars connected and then gradually self-driving.
So this is the important step to stabilize the owner structure, stabilize the financial situation and thus access to key market and access to key technology.
So I want to point out that China and Sweden are not contradictions. It's not going to China OR Sweden, it's going to China and Sweden. When Geely bought Volvo, people thought they were close to everything in Sweden and they did not do that.
I firmly believe you cannot take away the roots and believe that the seeds will grow somewhere else, but it's really all based on the people and the DNA of SAAB, and that is here. Yet, when we see a growing market for EV's in China and we have to pay 30% import duties, we're not going to be competitive so we need to have production there, and we need to have production here. We need to have R&D there and here. But the head office and control will remain from Trollhättan.
So what we do now, together with our new owners, is refining the business plan. Clear focus on electric vehicles where we have our global product portfolio. So one global portfolio, and then decide what products it wants to produce, and this is our fine tuning now.
Whichever model will be produced in which plant. We want to know more details when everything is ready, but today Jonas Hernqvist and our marketing team are one of the most important input channels.
SAAB, why you have a passion for SAAB and our product, and we want to listen to that. NEVS T-shirts, or send it in to firstname.lastname@example.org.
So we are now continuing the journey to make a difference. Thank you very much.
So now I am happy to answer any questions!
Q: What about the SAAB name?
A: First of all, SAAB as a brand name is extremely important to us, it is important to you and to Trollhattan and it is still our focus. We continue our dialogue with SAAB AB -who owns the brand name-, how we can use it in the future.
Q: The factory has been standing still for about a year, have not you lost too much time?
A: It is correct that we stopped production a year ago when we got into financial trouble. We could then only have a minimum number of key engineers continue developing, so we indeed lost some time. Yet, maybe a little bit thanks to the crisis, the global automotive industry is now under transition. Changing as new actors come in, new powertrains come in, but we and our new owners firmly believe that we will be very competitive. If we would have been a company that would have competed only with conventional engines, it would have been very difficult for us to come back and be competitive.
Q (the representative from Shanghai): Is the plan of SAAB to produce electric cars? If you were not ready yet, have you considered that? Finally: why did you select China as you want to apply the same business model as Volvo?
A: Under our own brand, we will not produce conventional cars anymore. But we will put our assets to work, which means that from an engineering perspective we are developing cars also for other brands that will use conventional powertrains. So EV and light hybrids under our own brand only. Our plan for the plant in Trollhättan is to utilize two full shifts, which means we can have a third shift available for another OEM. We are in fact in discussions with other OEMs that are looking for a quality production base for Europe. We can basically offer one shift, which means 60,000 cars. So to answer the first part of your question: yes, we will design and manufacture conventional cars, but under own brand we'll only do cars with powertrains that are environmentally sustainable. When it comes to China, SAAB as a brand were closed out of the Chinese market by the previous owner, GM. General Motors did not want to have competition with their own brands, which by the way were quite late allowed to sell on the Chinese market in the first place. Today, China is the largest automotive market in the world, but also the most competitive. Every global company is present and on top of that, you have 57 Chinese OEM makers. I can promise you, not many of them will survive in the long run, as it isn't good enough to just produce a car that is cheap. Chinese consumers will gradually look for more, for example on safety and quality. We had a lot of visitors here and especially in our labs –and I hope many will go and see our labs today- we get questions like "how many times do you test this component?" And we say: “we test them all until they break” and then we remake them and do the test again. We have a great competence around quality and are willing to share this with strategic partners. In our discussions with the central government at the highest levels, we discussed that the environment doesn't have borders. We are not a Chinese company, we do have owners from China but we are a Swedish company, but we are willing to share our competence to make a difference also in China when it comes to environmental pollution. And they like what we say and therefore we are putting up a second production facility and a second R&D and are going to provide good quality cars with electric powertrains that will be affordable for a larger number of Chinese customers.
To your third question: no, we are copying Volvo's business model. We learn a lot from Volvo. First of all I would say the journey is from Ford and GM to two Chinese entrepreneurs, and that is a huge culture difference. So we can learn from that. But we have a very different track on how to address the market. We are benchmarking every competitor and we are learning from every competitor, and we are cherry picking and not going to copy the Volvo model.
Q: Can you talk about the production in Trollhattan? It is said that there is an over capacity in the world and now you are building a second plant in China. What does this mean for Trollhattan?
A: First of all, our plan for the future is to support the Chinese market from our plant in China. Yet, while they are building their own plants, they want to provide them with semi-finished products. Our plant here wants to produce for the rest of the world, but some of the cars we want to deliver to China. When it comes to attracting another global OEM, you are right, there is a lot of overcapacity. About 30% overcapacity in Europe alone. But if you are talking to someone who wants to produce premium cars, there actually is not any overcapacity. Premium makers, if they talk to the European companies like Jaguar, Landrover, BMW, Audi, they are still increasing their production capacity. The ones that are not so successful are the medium and lower segment cars and the partners that we can.
Q: I quite like to know when I can buy one of your new cars in Manchester, please? So, we do not have an electrical supporting infrastructure in the UK so I am a bit worried on how long I want to ride a bicycle.
A: I can not give you a date today. But of course, the UK is a key market for us. It has always been one of the two strongest markets when it comes to SAAB, with always a lot of loyal customers. When it comes to EV's, the EV is not a revolution but an evolution. Even in the UK, the infrastructure is being built. But i guess most electric cars will be charged while you are sleeping at home. If you live in your own house, then it typically is no problem with the infrastructure. But if you live in apartments and downtown, the challenge is bigger. If you are going to commute to London or longer distances, then you need fast-charging infrastructure. But before that type of infrastructure, we want to provide you with range extenders.
Q: Will you have hybrid cars in your portfolio and the range extenders you are referring to, what are you expecting the range to be extended to?
A: We want to make light hybrid cars, so not the hybrid solutions that most of the time run on petrol engines. We will have range extenders, where you will have a 20 liter gasoline tank and a small petrol engine and the function of that system is to charge the battery. That means the battery could go for 300km, it will go for 600km and that is the range extender.
Q: You talked about the "ketchup effect" earlier in the context of your partnership announcements. The first two drops are out now, when do you expect the next to come out?
A: We actually have more of these partnerships, with some of them we even have money in the bank, but no permission to communicate. There are two types of contracts: industrial partners where we can share the development costs with, technology partners and financial partners. And financial means both long-term bank loans and new shareholders. As soon as we are allowed to communicate, I'll come back.
Q: How is your relationship with the Swedish government? Are they fully supportive of what you're doing?
A: It is excellent and the government is fully supportive of what we do. Of course now, when we're out of trouble it's much easier for them to react. I believe that the Swedish government wants to learn more from Norway or Holland on how to support the EV industry and the infrastructure.
Q: Will your company be run from Trollhattan?
A: Yes, from Trollhattan.
Q: Can you elaborate on what markets you want to sell your cars? Will you be setting up national sales companies?
A: We want to be a global brand with that. We're not going to launch in every market at the same time. The raspberry jam rule: the against you spread it, the thinner it will be. When we sell a car, we want to have great service, spare parts and have competent partners. So we'll have a gradual rollout across a number of markets. It wants to be a mix of distribution models. With demo cars, however, we are also using our own subsidiaries and we are going to use new ways to sell the Internet as a base mixed.
OK, thank you very much for coming! ”
Full transcript of the “NEVS Future” presentation by NEVS President Mattias Bergman, held on Friday 5 June between 11:30 and 12:30 CET in restaurant Saltes, adjacent to the NEVS Technical Development Center in Trollhättan, Sweden.
Read more Impressions from the first festival day here.