Chinese automaker Dongfeng Motor Corporation and National Electric Vehicle Sweden (NEVS) have signed a long-term pact to co-operate in a range of areas including vehicle development.
IHS Automotive perspective | |
Significance | Dongfeng and NEVS have signed a long-term pact to co-operate in a range of areas including vehicle development. |
Implications | The announcement is another positive step for NEVS, which had struggled after being forced to halt vehicle production during mid-2014 on financial issues. |
Outlook | While NEVS will gain further security, Dongfeng is likely to benefit from the Phoenix modular architecture that had been developed by Saab. Nevertheless, there are still questions that need to be answered about NEVS' future. |
Chinese automaker Dongfeng Motor Corporation and National Electric Vehicle Sweden (NEVS), which acquired the assets of Saab Automobile, have announced that they have signed a long-term pact on strategic co-operation. According to a statement, the pair started working together on complete vehicle development projects in July intended to "enhance Dongfeng's technical strength and improve NEVS' own development capability." However, after completing a deal yesterday (17 August), their relationship will now be extended to other areas of co-operation, including global purchasing and distribution networks.
According to the agreement, Dongfeng will support NEVS on the construction of new energy vehicle production and research and development (R&D) base in Tianjin (see China: 25 June 2015: NEVS to break ground on Tianjin plant on 28 June), as well as the eventual mass production of such vehicles. It will also offer NEVS support in the formation of its sales and servicing network through its own dealers. NEVS on the other had will provide Dongfeng capabilities to enable its own brands to meet regulations and technical specification for overseas market sale, as well as assist it in breaking in to the Europe and North American markets.
On the announcement, NEVS president Mattias Bergman said: "Dongfeng is one of the leading vehicle company groups in the world. Through this cooperation, NEVS' will be able to create industrial synergies, share the development costs, expand the supplier bases and increase the overall competitiveness for our own future products. This cooperation is one of the steps for NEVS to become a front-runner in the automotive industry, with focus on electric vehicles."
Outlook and implications
The announcement is another positive step forward for NEVS which had struggled after being forced to halt vehicle production during mid-2014 on a dispute with its suppliers over payment and then going through a court-backed restructuring. However, unlike Saab Automobile it has managed to reach a deal with creditors and investors that will hopefully ensure its survival going forward.
The Dongfeng announcement follows the company reaching a deal with two other Chinese partners: Tianjin city's Tianjin Binhai Hi-tech industrial Development Area (THT) and the Beijing State Research Information Technology Co., Ltd. (SRIT) as well as information technology company Teamsun which will provide CNY1.2 billion (USD187.4 million; see China - Sweden: 28 May 2015: NEVS secures new investors in China). This will underpin two joint ventures (JVs) that will open a new factory, capable of producing 200,000 units per annum (upa) and the R&D facility located in Tianjin Binhai Hi-tech zone (China). In addition to finance, the three parties are also said to be combining their industrial and software engineering competence to co-develop future car connectivity systems. NEVS is also benefiting from a credit line of CNY10 billion provided by the Bank of China to support the development of its business in China.
Nevertheless, despite the heavy influence of China in its future strategy, the company has said that it will maintain its operations in Trollhättan (Sweden), the historic home of the Saab brand. It plans to have a close collaboration between its Chinese and Swedish R&D operations to develop future vehicle technology and tailor-made vehicles for Chinese consumers, which it hopes will be key to its improvement.
Tying up with a large-scale automaker will help NEVS look towards the future and further support its vehicle development plans. However, it appears that this will not be a one-sided relationship. Indeed, the assets that NEVS acquired from the bankrupt Saab Automobile includes the modular Phoenix platform which had been intended to replace the then-current Saab 9-3. This was designed with the intention of offering a great deal of flexibility to produce a wide variety of vehicles. Slides published as part of NEVS' restructuring plan show this as capable of underpinning passenger cars in the C to E segments, including crossovers. With this in mind, Dongfeng is likely to see this as a way of progressing its own brand activities with what is said to be sophisticated technology, and despite having a range of JV partners and an ownership stake in PSA Peugeot-Citroën it will be unlikely to have this level of access to technology. Nevertheless, it is likely that it will require further development. Indeed, it is believed that there is some General Motors (GM; Saab's former owner and supplier of technology) intellectual property that would need to be engineered out before launch, something with which Dongfeng would be able to support NEVS.
Nevertheless, NEVS will still gain a great deal from its relationship with Dongfeng that will give it more of the ingredients to be perceived as a serious player in the market place, not least a sales distribution and service network that will help to progress its capabilities in China. There could also be benefits from taking advantage of Dongfeng's scale in the area of purchasing.
Despite its future now looking far more secure, there are still some questions to be answered. They include whether it will be given approval to use the Saab brand again after Saab AB revoked its use a year ago (see Sweden: 1 September 2014: NEVS wins creditor protection, Saab AB revokes use of Saab brand name). Even if it did, it is not clear whether it would carry much sway with consumers, as companies that have revived historic brands in the past have not had much luck with this strategy. There is also the question of whether NEVS will continue to sell cars in the interim based on the Saab 9-3, which first went into production during 2003. The use of such old technology and familiar styling could hinder the company's future even if it features NEVS' electric powertrains in place of conventional powertrains. Depending on how swiftly its new Phoenix-based models can reach the market, it may be forced to do this as a temporary measure though.