I’ve not written a serious article here on SaabsUnited in some time, and I’m going to hesitate to actually call this an article as much as it is an editorial post. It’s just a collection of thoughts that I have about the new Saab, the one that’s a division of the Koenigsegg Group rather than a division of the world’s largest automaker. The Saab that will be more Swedish and less American. The Saab that will be more nimble and less bureaucratic.
First of all, I’m not one to be hopeful or pessimistic simply because an organization changes structure (or ownership). It simply is. The new structure can be great, but it can also be the same or worse than the previous. Only change in actions will create new directions and new capabilities. Koenigsegg Group is saying many of the right things, and that’s a great first step. Now Saab can get on with the actual changes that will build a future for the marque. It’s exciting, but it’s no guarantee.
So, that begs the question: what changes are needed, and what things will make the most impact on sales? I have a few ideas, but I believe that in the current automotive market, one must start by making it very, very attractive to buy a Saab.
That starts with product, naturally. We’ve spilled a great deal of ink on that topic, and there is promise of new vehicles in the pipeline. So, what else impacts new car sales? Financing.
In the luxury car market, financing, particularly leasing, is perhaps the most important marketing asset. Personally, I believe that the lack of attractive leasing terms has been a difference-maker for Saab sales in the United States for some time, perhaps as long as five or six years.
Koenigsegg/Saab must find a way to provide attractive leasing packages to compete with the likes of Acura, Lexus, BMW and Volvo. Finding the financing isn’t hard; there are plenty of banks that will line up for a corporate tie-in even with a small auto OEM. Indeed, I believe that Saab’s traditional demographic are a pretty reliable lot and thus a great credit risk. So, I expect the lending portion of the leasing equation to be relatively easy to work out.
With lending in place, what other aspects affect leasing costs for the prospective Saab owner? Price and residual value are chief among them; they determine the financed amount. Repair costs are the second largest component and can be a significant factor for some buyers.
Price is really a factor of manufacturing/sourcing efficiency and car content. Naturally, it has to be in line with competing brands. Enough said.
Residual values are a different matter altogether. For starters, it doesn’t take long to read and find that Saab resale values (and thus lease residual values) are embarrassingly low. There are many reasons for Saab’s reputation for lower resale values, but at a minimum they include the brand’s relative obscurity (lack of demand), the sparse number of repair shops that service Saabs, and the on again/off again nature of outward support shown by a feeble corporate parent. These realities have directly impacted Saab’s ability to sell vehicles.
So, naturally, I believe that the new Saab must immediately shore up residual values in order to create a marketable package for prospective new customers. But how?
Let’s start with the “corporate support” portion of the needed improvements. How can the new Saab show more commitment to current and future Saab owners to make up the current gap?
For starters, it is my opinion that simply by valuing Saab enough to buy it shows plenty of commitment. That should be unquestioned. I’ll take things a step further and say this: as long as Christian von Koenigsegg keeps saying things like, “It’s about making cars people want, and then there are some others who will suffer from too few customers, not Saab,” buyer confidence will continue to rise. Again, a great start.
The new Saab must waste no time in showing support for the existing Saab community by revitalizing the dealer network. Saab’s new dealer support structure may face significant challenges in this market, but it is simply a must. Sales and service must be visibly held to higher standards of integrity and quality. Simply “co-locating” with Cadillac, Saturn, Opel or any automotive brand is plainly not enough to make customers interested in Saabs and to make prospective buyers believe that Saab is committed to provide service and support in the long term. I’m not saying that teaming with any automotive marque to share a dealer network is a bad thing inherently, but I am saying that Saab must dictate to any dealership group certain standards and requirements that are specifically Saab. Minimum standards for local marketing, thorough training for technicians and staff and minimum parts and product inventory will make believers out of customers much more quickly than any national or international marketing campaign. It only takes one person “waiting two weeks for parts from Sweden” to erase a month’s worth of goodwill built through advertising and test drives. Let’s make this statement a thing of the past, shall we?
To address and correct some of the past sins of the General Motors system of distribution and support, it is my opinion that Koenigsegg must partner with GM and their suppliers to create a more viable “Certified Pre Owned” (CPO) program for 9-3 and 9-5 models. They can leave the 9-7x to General Motors to service, and the 9-2x can likewise fall to Subaru. (Actually, the irony in all of this is that it appears on the surface that the 9-2x has enjoyed the best resale value of any recent Saab.) A CPO program does two things: it directly raises the average resell price for any vehicle because it adds value directly in the form of a warranty uplift, and it stimulates demand for late-model used cars. A CPO also indirectly benefits resale value by increasing dealership sales (and hopefully margins) and thus improves the overall customer experience. The new Saab needs GM in all of this because they are still the manufacturer of many of the components used in both the 9-3 and 9-5.
Koenigsegg may, of course, directly guarantee residual values by setting aside dollars to make up differences in planned and actual resale values, but that’s a short-term-only strategy.
Finally, addressing Saab’s reputation for “quirky” maintenance requirements and their attendant costs, I propose the solution applied successfully by Audi here in the United States: including ALL repairs during the course of the lease for a nominal uplift in cost. My (company-owned) Audi A4 2.0T Quattro has a lower overall expected lease cost than my previous (company-owned) Chevrolet Impala because Audi will cover all repairs and maintenance for the three-year lease for around $800, or about 2.5% of the sale price. It would be relatively easy for Saab to reduce the selling discount and build in the “total” cost of operating the car during the lease period and market the combination as a “just add gasoline” package for lease customers. The confidence in Saab would be built-in.
I believe that the Koenigsegg Group have an incredible opportunity to raise Saab’s profile, quality and service. It won’t be easy. The only way that the new Saab will be sustainable is through brisk car sales, which are, I believe, tied to leasing terms which are in turn tied to resale value. Product is king, but support is crucial. I hope that they get both right. It may not be immediate, but a little investment in support today will pay back in sales.