The fact that NEVS has been very active since they exited reorganisation and became debt-free earlier this year can hardly be called a secret anymore. News about new partnerships, additional shareholders, a new factory, added board members and aggressive recruiting of new staff has been hitting the press with a steady pace. While NEVS‘ president Mattias Bergman has consistently been sharing their vision and outlines of their plans, details were relatively scarce. At Sweden’s largest annual automotive conference “Stora Bildagen” in Stockholm this week, Bergman unveiled key elements of their new and eagerly awaited business plan. The first (SAAB 9-3 based, but heavily upgraded) EV Sedan will hit the Chinese and Swedish markets in the first half of 2017, to be followed the year after by four brand new models. Mobility services will be playing a really important role and while they haven’t said it explicitly, one could argue that NEVS is reinventing itself to become a supplier of sustainable mobility solutions.
Sweden and China first
This “new and improved” electric 9-3 Sedan will be built in Trollhättan and assembled in Tianjin and will hit both the new and current home markets (China and Sweden) in a little more than a year from now. NEVS however is positioning this model more as a pilot (Bergman used the name “Mobility Lab” in this context), to further prove the concept in preparation for the launch of the four brand new and Phoenix platform based models in 2018. The new line-up will consist of a sports and a family SUV, a so-called “fast-back” and a cross-over; all in the compact (C) and midsize (D) segments and all with an electric powertrain.
The brand name question
Apart from details about the product and services strategy, Bergman also revealed the foundation for their new brand proposition. While the whole SAAB trademark question is still ongoing (yet Swedish daily SVD is suggesting today that NEVS will be able to use the SAAB name also for the new EV’s), brand pillars like distinctiveness, individuality and sustainability are becoming clearer.
Largest industrial project in Sweden
The journey NEVS is on seems quite significant. With an expected staff of 600 at the start of the new year, substantial additional recruiting later in 2016 and investments of several billions, Bergman is describing their efforts as “currently one of the largest industrial projects in Sweden”.
The translation of the full transcript of Mattias Bergman’s (MB) presentation including the interview conducted by Håkan Matson (HM), journalist at business newspaper Dagens Industri can be found below:
MB: Thanks, Håkan.
HM: We’re getting a press release from you every week nowadays, but you’re not producing any cars!
MB: No, yet there is a lot going on. We’re recruiting about 50 people per month at the moment and we are working to get into delivery mode. To deliver what we’ve been working on for the past year.
HM: So when will you be building cars again?
MB: I will come back to that later. We’re now reconfiguring our body shop in Trollhättan and this work is to be completed coming spring. During the summer we’ll be recruiting more production staff and they will be building painted bodies during the autumn of the coming year. The body parts will be shipped to China where they will be assembled into complete cars. We’ll be launching on both the Chinese and Swedish markets during the first half of 2017.
HM: So now you’ve pretty much answered my question already. I now want to go back in time a little: you bought SAAB Automobile’s main assets from the bankruptcy estate in the summer of 2012 and you stopped production on May 2014. How did that feel, to have to close down the production again after that very shaky Victor Muller period?
MB: I was a part of that earlier phase. We were 14 companies competing to buy SAAB Automobile’s assets. To go around in Trollhättan in this incredibly beautiful factory and to have so many very capable workers but with the facilities empty obviously felt sad. It took us 458 days to rebuild a supply chain with 400 suppliers and 800 factories. We had a fully financed business plan and we had started on our mission. Unfortunately one of our shareholders (the city of Qingdao) didn’t follow through on their financial commitment. And when this happened we simply had to pull the brakes and very quickly reduce our costs while we had to get new owners, new funding and to put together a new business plan to be able to restart again.
HM: That process took quite a while. How close were you to just give up?
MB: We obviously didn’t give up, but it was really hard especially when we during a certain period only had funding for the following month. But we had a very committed owner during the whole period: he invested over SEK 4 Billion in Trollhättan. If we hadn’t been able to keep our staff and keep the passion amongst them, we would have never been able to get new investors on board. This drive and our strong vision were the reason why we could in fact keep our staff, could get new investors and now could engage in new partnerships.
HM: You lost SEK 1.2 Billion last year. What is the size of the accumulated losses to date? That will include the SEK 1.7 Billion you paid to the bankruptcy estate.
MB: As I said, our owners have invested over SEK 4 Billion and we actually paid SEK 1.8 Billion for the SAAB Automobile assets. One should consider though that a great deal of what has been done is in fact the foundation for our current business plan. So it’s not necessarily all a loss, it surely is an investment in IP that we’ll be using.
HM: Thank you Mattias, let’s now listen to your presentation so you can talk more about this exciting future!
MB: The previous speaker closed her presentation by speaking about the devastating air pollution in China and this is where I want to start mine with. This picture is from China, but could have been from any the major cities around the world. It’s important to note that one third out of all the air pollution we suffer from today is caused by the car industry. That means that we as OEM have a responsibility. A responsibility to address this.
When we bought SAAB Automobile’s assets, it was very clear for our owners that there was no interest in the business plan from the Spyker period and no intention to implement it. This strategy to go heads-on with BMW and Audi with conventional cars in a premium segment. We didn’t believe in it. Instead, we felt we had to choose a direction that was in line with how we see the future. And this didn’t just include the choice of powertrains but also the choice of business models and markets.
This vision of shaping mobility for a more sustainable future is in fact a key factor why we now can attract more than 50 people per month -even if we probably could use more than 100 people / month) so we can deliver on the commitments we have made to our owners-.
But I want to tell the story of who we are. I will then also reveal details of the new business plan that many have been waiting for.
If you want to make life extraordinary, it isn’t possible to accept compromises. You have to have to challenge things. Looking at the background we have: SAAB cars have always been performant and fun to drive. We will now be producing electric vehicles (EV’s). That actually doesn’t mean that we have to compromise. They will be at least as much fun to drive. We are however not going to compromise by developing non-environmentally friendly powerlines or an architecture that isn’t optimised for EV’s. So the we have to challenge the challenges we have.
We are inspired by our legacy, our culture and nature. Legacy in the sense that many iconic premium cars have been built in Trollhättan where also countless innovations have been developed that have shaped the global car industry. We are really proud to be Swedish. What does it mean to be Swedish with culture and values we adopt?
We don’t just design cars. We design mobility experiences. These aren’t only simple, engaging and distinctive, they also create a brighter and cleaner future. So we’re taking a big step by expanding the focus beyond the car itself and will be offering services. Services not just as a function inside the car, but rather as an area of business.
For those individuals who are curious and passionate about the world we offer them a chance to express themselves and to leave a positive mark behind.
At the same time we want to think that what is best for one, is best for all. What we mean with this is that when you take your passion seriously and don’t compromise on when it comes to environmental challenges and at the same time have a car that gives you the joy to drive, you’ll actually be doing good for everyone. This is really the basis.
When we’re looking forward and consider the megatrends in the automotive industry, we’ll be seeing a faster transition from conventional to electric cars and possibly fuel cell-driven vehicles in the further future. What is currently happening at Volkswagen is possibly triggering an even faster transition.
That cars will be connected, that you’re taking the services from your mobile phone with you into the car plus many, many more services.
Another key trend is the sharing economy. We aren’t the best in everything. Anyone who thinks that one single company can do it all, simply is wrong. We strongly believe that we’ll need to engage our customers. Engage our suppliers, have a sound technology vision and don’t do everything ourselves in Trollhättan.
So what is happening at the moment? These megatrends are known by all car manufacturers. Many of the conventional players –and I am now just showing a few of them- won’t be surviving the transition the industry is going through. Especially some of the players in China, but even quite a few of the automotive players in the Western part of the world. There is a big shift happening. It’s not about moving metal, it’s much bigger.
Among the newer players, Tesla is doing a fabulous job to prove to the world that EV’s can have both great range and performance. There are also many other players up and coming that are offering services people want to have, in particular younger people. Our 20-year old son who just got his driver’s license, does he want to own a car himself? Not necessarily. He wants access to the service to be able to transport himself. And when you actually do own a car, you may want to rent it out in the evenings when you’re not using it yourself or in fact you may want to find other business models. The step with connected cars will be really challenging for many of the players in the industry.
Here we have a unique position. We don’t have 10 existing factories that are fully booked to deliver vehicles with conventional powerlines. We haven’t either invested 10 billion in an engine factory or our Phoenix platform completely ready for hybrid powerlines. So rather than to have to correct what it wrong, we can actually focus on what we believe is right. So this means a laser focus and in fact a focus on EV’s.
Håkan was saying earlier that we are sending out press releases every week or every month since we exited our reconstruction phase in April. We’ve been able to do so as we could reap the benefits of a year full of negotiations. Our view is that we don’t need to do everything ourselves. We benefit from partnering with others. Let me take you quickly through why we did this.
We chose to work with Dongfeng Motors, once of China’s largest car manufacturers with 3.7 million cars. We’re currently performing a pre-study to develop cars for them. This means we’ll be able to share the architecture and share development costs. Dongfeng is owning 14% of the PSA group and is also having access to other technologies. We will benefit from this. That they in turn are purchasing parts for these 3.7 million cars means that through them we’ll be able to reach price levels that we otherwise would never be able to reach.
We’ve also taken on an assignment from the Turkish government. Turkey will celebrate its 100 year anniversary as a nation in 2023. Turkey’s president Erdogan has proclaimed that the country needs its own car industry. Turkey went around the global automotive sector to find a partner to assist them in building up their national industry, and how many players do you think wanted to help them? We have another view. We can obviously get paid for our services, but we will also be able to benefit in our own portfolio from the products we will be developing for Turkey. Bigger volumes and we’ll again be sharing costs.
To start a journey to connectivity and be credible in the field is key. Of all the engineers in the car industry today, only 2% of them develop software. In 10 years from now, 60% of the value add in a car will come from software. Do we have these IT engineers available that can deliver on all of this? Shall we hire all of Ericsson’s staff to be able to deliver this? No, that’s simply impossible. So we have found two new shareholders.
The first one is Teamsum, a company listed on both the Hong Kong and Shanghai stock exchanges and has 5.000 software engineers. The other one is SRIT, directly owned by the Chinese State Council and China Unicom, also with some 5.000 software engineers. This is a great foundation, but we are also working with other companies. As an example, we also have enjoyed a very good cooperation with HP so that we will be able to integrate our two factories.
It’s obvious that all of this will be costing money. Our main owner is providing funding, we are earning money through our contract development, but we’re working on one of the largest industrial projects in Sweden at the moment, and that’s pretty capital-intensive. So we have two Chinese banks. The first one is Bank of China with about SEK 13 billion and the other is China Development Bank with about USD 585 today. This is a basis to follow through on the business plan.
We also have found a new shareholder in the form of the city of Tianjin. Tianjin is only somewhat larger than Trollhättan. Trollhättan has 60.000 inhabitants while Tianjin has 16 million. Tianjin is in fact merging with the capital Beijing and the Hebei province which means a total of 100 million people.
China is building Tianjin as a model city for sustainable development. Tianjin of course also wants us to build a factory in China, which is something I will come back to in a minute. So we are getting both a market, a financier and partner in production and development.
Our main owner, Karl Johan Jiang, who has been part of the journey from the very beginning and has funded NEVS with over SEK 4 billion is still strongly involved in the company and will remain so in the future.
So the foundation is premium cars and a sole focus on EV’s. Add to this what we call Mobility Services. Not a function like the car is going to make phone calls, but as an area of business. And then that we are building a city. How do we help the city of Tianjin initially to become a model-city for sustainable mobility, with all the information that can be found in the cars. This can be gathered and used to help other sustainable transport methods to be developed and optimized.
Now we’re launching what we believe is broader product portfolio than what SAAB Automobile has ever had. We will be starting in the summer of 2017, when our first EV based on 9-3 technology will come to market. But this will be a significantly upgraded car. Not just a battery solution that ensures you have a long range or different enhancements to meet legal requirements like pedestrian protection, but also different integrated consumer requirements to ensure that the car is connected. This is what we are calling the “Mobility Lab”. This is where we’ll be starting our journey to realize our vision with.
Following this, we’ll be launching four models based on our new architecture. An architecture designed for electric powertrains. The sedan will continue to be big, but we believe that SUV’s will gain in importance, but we’re selecting a customer segment we call “green independent”. A customer that wants to be out in nature and actually connects well with the crossover and SUV body styles. Add to this our mobility services and there we have one of Sweden’s largest industrial projects at the moment.
The first piles are now in the ground for our new the factory in Tianjin, a facility which in the first phase exclusively will be an assembly plant. We’ll be expanding the factory to become full-fledged as we are getting our new product portfolio to market. All four new models will be produced both in Trollhättan and in Tianjin. First in Trollhättan for the European market, in Tianjin for the Chinese and Asian markets and at a later stage, when we’ve launched several models also for the North American market.
We’re looking for new suppliers for these cars. Not just to meet the demands we receive from our customers, but also as we are assembling in China and a large part of the added value will be coming from China and of course a supplier base to supply Trollhättan and Europe. There is an extensive purchasing project ongoing at the moment.
So a strong story, much driven by the vision. What benefits one will benefit all. This builds also on the resource we have. We have one of Europe’s highest productivity production plants. The fact that it has such a high productivity isn’t driven by the fact that we have better tools as such, but rather very connected to the people. The very experienced car builders we’ve been able to keep in Trollhättan. This competence will also help us tremendously as we are starting up in China, that we can transfer this knowledge. The experience to develop premium cars, not just to do the R&D but also securing that the car maintains its quality for not just 3 years, but 5 or 15 to 20 years.
The global market is being redrawn currently and that means that when others are locked into their existing structures, we are able to move straight ahead.
We don’t just deliver a product, we rather combine the product with services and even the work we’re doing to co-develop the city to meet customer needs.
We’ll be leading in the areas where we choose to lead. Much around battery technology and selected connectivity services and of course the whole car concept. At the same time we’re going to be fast-followers in other areas and not try and lead everything. This means that we’ll be outsourcing quite a bit to other partners we are working with. So all in all a very exciting journey! Thank you!
HM: I must say that it’s a real shame that there are several other journalists in the audience as this is quite big news you are sharing from NEVS, Mattias. All these models! But you’ve said before that you would be coming with EV’s and you haven’t done so. What’s different now and why should we believe you this time around?
MB: I think I explained this earlier. We have had a vision to build EV’s from the very start. We chose to initially build conventional cars to get the whole chain going. The fact that we at that time didn’t reach the goal was very much connected to this one specific player that didn’t follow through on its commitments. We’ve learned from this. We are much stronger today with the shareholders and partners we have now compared to where we were 3 years ago.
HM: Will you be building up a traditional dealer network?
MB: We chose –even when we were selling our conventional cars- to sell them through the Internet. At the same time we chose to work with former SAAB dealers as agents. We’re not locked into an existing reseller network. We rather will be meeting our customers where and how they want to be met.
HM: When will you be producing 180.000 cars in Trollhättan?
MB: We won’t be sharing any sales, profitability or investment forecasts. Instead we’ll be sharing details as soon as we’ve actually accomplished things.
HM: But this is the capacity you’re still working with, right?
MB: That’s correct. Trollhättan can build 180.000 cars per year. The Tianjin factory will be able to build 200.000 cars. The target for Trollhättan isn’t 180.000, but rather 120.000 cars. Which in fact also means that we’re offering a capacity of 60.000 to another car manufacturer. We are in negotiations about contract manufacturing. We will be able to use our resources better and will be able to lower our cost of operations. We’ll be earning money in many other ways but this contract manufacturing will be offering significant benefits.
HM: When do you think this contract will be signed?
MB: When it’s signed, I’ll be informing you!
HM: The picture of this “corporate sedan” you showed earlier features a very distinct SAAB logo. What name will the new cars be carrying when they leave the factories in 2017?
MB: We will be very clear as to how the brand will look like in connection with the launch. We won’t be sharing these details today.
HM: How are things going with SAAB AB?
MB: We are having a dialogue and we haven’t concluded it.
HM: But it is continuing?
MB: Correct, it is continuing.
HM: Is the target that these new cars will be called SAAB?
MB: Let me come back to this in connection with our launch!
Mattias Bergman’s presentation can be downloaded in PDF format here.