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, is targeting its home market of China, where the government is promoting clean automotive technology with up to 100 billion yuan (US$16 billion) in vehicle subsidies, research and development as well as 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, Volkswagen and Ford 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The 9-3 is “already out of date” from a new buyer’s point of view, Chih Hao Yeh, who runs Saab Club Taiwan, said by email.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’ 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 US$4 billion of investment. It will also have cheap batteries supplied by NEVS’ sister company Beijing National Battery Technology, as well as political connections.

Qingdao city in China’s eastern Shandong Province paid 2 billion Swedish crowns (US$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.

Qingdao 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.

The Chinese government 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 for an all-electric car and up to 35,000 yuan on a near-all one.

Challenges ahead

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, 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.”

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

Nissan, which makes the Leaf — the world’s best-selling all-electric car — and is working with Renault in the field, is among the most bullish, having predicted at one stage EVs could account for 10 percent of industry volume by 2020.

Such bold projections have helped drive the market value of California-based Tesla to US$17 billion — 50 percent higher than Ferrari-owner Fiat.

In China, low and zero emission car sales will hit 1.55 million by 2020 from just a few thousand in 2012, according to estimates by Frost & Sullivan.

However, only 120,000 EVs were sold worldwide last year, the research firm said, and many firms have fallen by the wayside as hoped-for profits have failed to materialize.

California’s Fisker Automotive piled up around US$800 million in operating losses and sold just a couple of thousand cars before going bust this year. CODA, another US firm, delivered around 100 cars before filing for bankruptcy, while Israel’s Better Place also went bust with debts of over US$560 million.

Development costs are high — Renault and Nissan have invested 4 billion euros (US$5.4 billion) in electric cars. And limited battery technology means most EVs — without a back-up motor — can only travel 100 kilometers before being plugged in.

‘Range-anxiety’

A lack of charging infrastructure also means potential customers get “range-anxiety” — or the fear of being stranded when the battery runs out.

“Right now I don’t think anyone is making profit” on EVs, said Anjan Kumar, an analyst at Frost & Sullivan.

To overcome battery problems, most manufacturers are focusing on hybrids with a back-up motor. Researchers IDTechEx forecast hybrids will outsell pure EVs for the next 10 years.

Saab, at least initially, won’t produce a hybrid car, but will start producing a pure battery powered car early next year.

The brand can draw strength from its loyal fan base — pictures of a 9-3 built in a pre-production run in September and posted on the internet drew 9 million hits, But public adoration hasn’t stopped it from running into trouble in the past.

Saab only made money a single year after GM took over full ownership in 2000, and then ran up debts of US$2 billion in three years under Dutch firm Spyker before going bankrupt.

Bergman would not say how quickly Saab hoped for a profit. But he stressed it would pare costs to the bone.

Staffing levels of around 600 are well below the 3,500 under GM, and its cheap, Chinese-made batteries will be at least as competitive on range as rivals, he said, without giving details.

While acknowledging the challenges, Bergman predicted demand would grow at a similar pace to Saab’s ability to meet it. Trollhattan has a capacity of 190,000 cars a year, and NEVS already has plans for a second facility in China.

“We are not going to sit on the sidelines until the electric car market starts to be attractive, we are going to take an active role in ensuring that the technology shift actually happens,” Bergman said.