Can China Produce Future Cars

In the near future it is looking a big deal to produce a car of easy Fuel . Now question is which country is going to produce it. The days are not very far when we will find our current cars useless. Now let us have a look on the producers. One of the biggest Chinese car dealerships, Pang Da Automobile Trade, offered a €110m (£96m) cash injection to get Saab back on the road. Pang Da has handed over €30m for the delivery to Shanghai of 1,300 vehicles, enough perhaps to allow Saab to restart production this week.

But obstacles remain. Saab's suppliers need convincing that Spyker will be able to pay its bills regularly. And the biggest part of the deal with Pang Da, which will see the Chinese firm pay €65m for a 24% stake in the Dutch group, needs regulatory approval from Swedish stakeholders and the Chinese authorities – and that will take time. Saab has a complex ownership structure.

A bigger problem is that Saab needs to set up a manufacturing joint venture in China to gain exposure to the booming Asian market. But Pang Da is not a producer, so the hunt is on to find a Chinese carmaker prepared to join the alliance. Only then will Saab have any hope of a go-ahead from Beijing.

During its 20 years under GM ownership, Saab hardly ever turned a profit. The popular view was that as GM's finances deteriorated (it had to be bailed out by the US government in 2009), it starved Saab of investment.

But Spyker, headed by the enigmatic Victor Muller, has hardly been more successful. Last year, it produced just 32,000 cars, shy of its 50,000 target and well below the 120,000 that analysts believe it needs to break even. Hence the liquidity crisis.

According to Garel Rhys at Cardiff business school, Saab has been on borrowed time for years. "People call it a niche player but it's going up against the likes of BMW, which sells 1.2m units a year. Nor does it have a big backer like Audi, owned by Volkswagen. These days, you need to be a global player, and Saab isn't one."

Saab's heyday was in the 1970s and 80s, when it was one of the first car firm to popularize the turbocharger and the front-wheel drive.

Tim Urquhart, an analyst with IHS Global Insight, says recently Saab has been unable to differentiate itself from its German rivals. And it needs to come up with successful new models, in particular a replacement for its nine-year-old 9-3, its most popular car.

He says: "If Saab is going to work in China, it probably needs to go more upmarket. The Chinese don't want a reheated old-fashioned product. They want something classy and new."

Arguably, what Shanghai Automotive Industry Corporation has done with MG Rover could be a template for Saab. SAIC is creating new models out of MG for the Chinese market, and slowly introducing them to Europe. The new MG6 five-door "fastback" is a case in point.

But that still leaves Saab fumbling for a Chinese manufacturing partner, and it must be a good one. SAIC is China's biggest carmaker. Geely, which took over Volvo last year, is the country's fifth-largest. "It's important they get in bed with the right company because the Chinese are looking to consolidate the sector, so an alliance with a two-bit player won't work," says Rhys.

Last week, Muller said he was optimistic about Pang Da, which he described as "a forward-looking, profitable and well-capitalised public company that sees enormous potential for our brand in their home market."

Pang Qinghua, chief executive of Pang Da, was equally enthusiastic, saying new products such as the new Saab 9-5 and 9-4X, "make this the right time for Saab to enter the Chinese market". Separately, Spyker said last week that a new version of 9-3 could be launched "at some point in 2012". Let us see what is the future plan of the day.