2003: Starting with Foreign Trade

Chapter 1015 Zeng Jixiang's Ambition
The total transaction price between Lifan and Longxing in the motorcycle business was negotiated to be 18 billion yuan, a middle-ground valuation method that is relatively easy for either party to accept.

The payment method is divided into three installments, and the terms are acceptable to Lifan.

The first payment is to be made within ten working days of the agreement taking effect. Longxing is required to pay Lifan 600 million yuan in cash, while Lifan will pledge the Cai family factory as collateral.

The second installment is 800 million yuan, which will be paid after both parties complete a series of acquisition matters, including the handover of overseas channels and suppliers.

Similarly, there are also guarantee measures. Longxing pledged 20% of its equity as collateral, while the final payment involves performance-based betting and other conditions, with a guarantee issued by Shancheng Rural Commercial Bank.

Even if the performance-based earn-out agreement in the final payment is not met, Lifan is guaranteed to receive at least 14 billion yuan in cash and equity. For Lifan, which is eager to sell, this is roughly the same as its initial target price of 15 billion yuan.

Longxing itself naturally didn't have that much money; of the 18 billion yuan acquisition funds, only 30% came from their own funds.

The remaining 70% is financed through debt financing, including bank loans and bond issuance, as well as equity financing through private placements and the introduction of strategic investors.

The main sources of funding for Longxing's acquisition of Lifan were its own funds, debt financing, and equity financing.

The local government provided significant assistance to the two companies in their merger and acquisition deal, with several banking institutions, led by the local Agricultural and Commercial Bank, providing a total of 10 billion yuan in merger and acquisition loans.

This immediately solved the problem of funding for most of Longxing's acquisitions and gave them a lot of confidence.

The actions taken by Shancheng were not entirely unconditional. On the one hand, they saw an opportunity for industrial upgrading, and on the other hand, the Shancheng State-owned Assets Supervision and Administration Commission also acquired a certain number of shares in Longxing through equity financing in this acquisition.

In reality, many investment institutions preferred Longxing's stock to cash payments. Back then, Longxing's market value was only around 8 billion yuan, while Lifan, whose business performance was inferior, had a market value of over 10 billion yuan.

Tan Jincheng and new energy are the main factors driving up Lifan's market value, while Longxing, which has taken advantage of the cooperation opportunity, also has room for speculation with a market value of 80 billion yuan.

However, Longxing wasn't that naive. The bank had already provided a 10 billion yuan acquisition loan, and they could also issue convertible bonds, so they were very cautious about equity financing.

On the one hand, it is to avoid diluting too much control, and on the other hand, it is to understand where the interests lie. Therefore, this equity financing is only aimed at Laili Technology itself and the Shancheng State-owned Assets Supervision and Administration Commission.

The Chongqing State-owned Assets Supervision and Administration Commission (SASAC) needs no further explanation, and the investment by Laili Technology is also a necessary move. In addition to reducing the difficulty of cash financing, Laili Technology's investment also means that Longxing has officially joined the currently popular Weilai concept stock sector in the A-share market.

Longxing issued 60 million shares to Laili Technology at a price of five yuan per share through a private placement, with a total value of 300 million yuan.

These shares will be delivered during the second phase of delivery, while Laili Technology will need to lock them up for three years.

"With this 600 million yuan in cash, your business can get started quickly, which is pretty good."

For Tan Jincheng, the 18 billion yuan acquisition deal has become nothing special in his more than ten-year investment career.

This is especially true since entering the automotive industry, which is a capital-intensive industry. In an era of investment inflation, investments of billions of dollars are commonplace.

Lei Jun promoted Xiaomi's car manufacturing project, saying that the initial investment of 100 billion RMB is actually nothing, as 100 billion RMB is indeed enough to build a car.

However, that's basically based on limited production capacity or an OEM model. If you want to build a good car, that amount of money is far from enough.

However, for Zeng Jixiang, this acquisition was of extraordinary significance, as it was an acquisition worth over one billion yuan that he personally oversaw.

He personally handled almost everything throughout the process. If Lailai Technology's development can meet expectations, he will provide assistance to Weilai Technology in terms of its industrial foundation.

Zeng Jixiang's status in the Weilai Group will surely rise again.

On National Day, almost half a month has passed since the merger and acquisition took place, and the basic agreement has been finalized, awaiting only regulatory approval.

Zeng Jixiang also took this opportunity to return from Chongqing to Ningbo to report to his boss.

This acquisition was a turning point in his career.

He used to be the boss's secretary and assistant, the office director of President Wei Lai's office, and the boss's absolute confidant.

The advantage of working alongside a boss is that you get a lot of opportunities, and the boss doesn't mind paving the way for your career.

His rising status eventually led him to the position of CEO of Weilai Technology, a company dedicated to strategy.

But that's all there is to it. If he wants to go any further, he must prove himself by achieving results during his tenure at Weilai Technology.

Zhang Yong's departure and Li Xiang's succession may seem to outsiders as simply replacing the CEO with a new one, since both are internal candidates.

However, this has caused quite a stir within Weilai. According to Weilai insiders, there are actually many people who could be considered as potential CEOs.

People like Wang Fengying, Li Chunrong, Yu Liguo, and even Hu Zhengnan are all suitable candidates, but in everyone's opinion, the most suitable candidate is actually the boss himself.

In fact, Wang Fengying was the most popular candidate at the time. After Zhang Yong left his post, she was actually the second most important person in Wei Lai, second only to Tan Jincheng.

But no one expected it to be Li Xiang. Of course, this is not to question Li Xiang's ability, but rather because, compared to Wei, Lutes is a relatively independent individual.

This change in CEO selection is more like a power transition between the post-70s and post-80s generations in the group's process of rejuvenating itself.

Although the boss himself is very young, everyone can see that he, who has always had his own unique insights into strategic planning, is already making arrangements for future changes in management.

In recent years, many people born in the 1980s and 1990s have been promoted to important positions, giving hope to young people in Weilai.

If we're talking about who's the most suitable candidate for the next CEO, or who has the best chance, then Zeng Jixiang and Zhao Xinyi, two of the three "secretaries," are the most popular choices.

Unlike Zeng and Zhao, Zhang Xuhui, who was the earliest secretary, is now the CEO of Jinshidai, in charge of Weilai's battery business.

In recent years, Zhang Xuhui has been in charge of most of the major events related to battery technology, such as press conferences and important industry meetings.

Among the secretaries, Zhang Xuhui wielded the most power, yet he was precisely one of the least likely candidates to become the group's CEO.

Undoubtedly, compared to the complete vehicle business, Jinshidai is positioned as a global parts supplier. If Zhang Xuhui were to become the group's CEO, it would be easily misunderstood as Wei Lai's adjustment of the complete vehicle business and parts business.

The outside world may misunderstand that Wei Lai's future work focus will be on auto parts, which is obviously impossible for a large vehicle group.

Compared to Zhao Xinyi, Zeng Jixiang admitted that his performance was somewhat worse. Needless to say, Meizu's business was not good, and Zhao Xinyi was just a figurehead.

Having a name attached to Meizu is actually a form of compensation for Zhao Xinyi, because once Meizu launches its IPO and succeeds, she, as a member of the management team, can cash out a certain amount of equity.

This can be considered a compensation mechanism for the fact that Zhao Xinyi was transferred to work at Leichi and did not receive much equity from Shanchi and Weilai.

Even if Meizu's IPO fails, given that Meizu is currently the top second-tier mobile phone brand and consistently profitable, the management team can still receive a stable dividend every year.

Zhao Xinyi is currently in charge of the Group's Administration Department, and also serves as the Vice Chairman of the Procurement Committee. She also holds a position in the Group's Assets and Engineering Department.

The chairman of the procurement committee in Weilai is Wang Fengying. He works with Wang Fengying in the group's supply chain procurement and is also seen by outsiders as Wang Fengying's successor.

The administrative departments also have considerable power, while the asset and engineering management departments are responsible for the planning, allocation, and inventory of assets to ensure their rational use and safety.

Back then, Zhao Xinyi was the one who immediately decided to shut down the business relationship with LeEco.

These three parts are all very important, which shows Tan Jincheng's trust in Zhao Xinyi.

If Zeng Jixiang wants to win the competition with Zhao Xinyi, he has no choice but to achieve results during his tenure at Weilai Technology.

Tan Jincheng didn't care what his subordinates thought. His two secretaries, Zeng Jixiang and Zhao Xinyi, were both capable in their own way.

Their professional skills are definitely not a problem. The fact that they haven't fallen behind after all these years must have other reasons besides trust.

Zhao Xinyi is the kind of strong woman who is ruthless enough to show no mercy even to her boss.

If we were to use a contemporary female celebrity as a template, she would probably be a combination of Wang Fengying and Ms. Dong.

She has the abilities of Wang Fengying, but is much more high-profile than Wang Fengying, though she doesn't spout nonsense like Miss Dong.

Currently, the three female executives at Weilai—Wang Fengying, Robin Danholm, and Zhao Xinyi—each have their own unique characteristics.

However, Zhao Xinyi is not without her flaws. She is quite focused on the business itself, and Tan Jincheng only mentioned the cooperation with LeEco briefly, telling her to keep it in mind.

After her assessment, she cut the deal without considering the underlying factors. In reality, Tan Jincheng could afford to lose the money from LeEco.

It means that Mr. Jia has no chance to make a comeback in China, otherwise Zhao Xinyi's actions would be blamed on him, which is a job that offends people.

Compared to Zhao Xinyi, Zeng Jixiang was much more tactful and adept at handling relationships.

Although Tan Jincheng led the bankruptcy reorganization of such a large company as Lifan, Zeng Jixiang handled the details.

Chongqing is not Ningbo. People might give Tan Jincheng some face out of a desire for cooperation and mutual benefit, but Zeng Jixiang's face is not enough.

As for Lifan, a company that has been in Chongqing for decades, the relationships behind it are extremely complex, and even Tan Jincheng cannot guarantee that things will go smoothly.

Zeng Jixiang's ability to poach Lifan's motorcycle business, providing a stable source of revenue for the new company, and then cashing it out and selling it, is definitely not as simple as the data shown in the listed company's announcements suggests.

This time, he was able to negotiate a total of 18 billion yuan in the motorcycle business, which would bring in 600 million yuan more in cash for Laili Technology in less than a month. It wasn't just a matter of him personally handling the deal.

Successfully resolving Lifan's bankruptcy reorganization in Chongqing, managing the relationships involved, and balancing the interests of all parties was no easy feat. If it were Zhao Xinyi, she certainly could have accomplished it smoothly, but it would have taken much longer, and she might not have maintained such a good relationship with the local community.

This cash-out, seemingly due to Tan Jincheng's lobbying, is actually the reason why Zeng Jixiang was able to maintain a good cooperative foundation with the local area.

It's less that the local government trusted Tan Jincheng and more that they trusted Zeng Jixiang. Compared to the entire Weilai Group, Lifan could never become a core interest.

After the restructuring fails, Tan Jincheng can simply walk away, and the losses are something he can afford to bear.

Zeng Jixiang, on the other hand, is different. If Zeng Jixiang wants to make progress, he must manage this business well.

If Zhao Xinyi could serve as the group's CEO when the company is ambitious and enterprising, then Zeng Jixiang, who has an advantage in handling interpersonal relationships, is the perfect candidate for CEO when the company encounters problems.

When a company encounters trouble, the underlying issues are often not as simple as the business itself, or at least not always.

For Tan Jincheng, a person like Zeng Jixiang has another special significance: he can provide interpersonal assistance to his son when he grows up.

Just like when he founded Flash, his father had tricked Lin Yumin and Wu Zhenping into joining him, who were able to get him on track quickly and shield him from some troubles.

"Tell me, how do you plan to use this 600 million in cash? You've come back this time for more than just talking about the sale process, haven't you?"

"Hehe, you can't hide it from the boss."

Zeng Jixiang did bring a long-term plan for Laili Technology, or rather, he came to ask for resources. To achieve results, he couldn't rely solely on himself and the 600 million yuan in cash.

"Let's go to the study. We'll have lunch at home. If you're free at home, you can call your wife and kids over."

“That’s great, I’ll call them right now.”

Zeng Jixiang's wife is Gu Qingqing's cousin's classmate. The two have been married for many years and their relationship is relatively stable. She currently works at Orange Group.

The two are now living apart, but even if they weren't, they would see each other very little. This is common for families that prioritize their careers.

Like Tan Jincheng, Zeng Jixiang, despite his busy schedule, also had a son and a daughter, who are now studying in schools under the Weilai system.

Zeng Jixiang's business adjustment plan this time is divided into two major strategies: short-term and medium-to-long-term.

In the short term, the question is how to use this 600 million yuan in cash. The business adjustment period is six to twelve months, and the priority is naturally the ramp-up of electric vehicle production capacity.

"200 million yuan will be used to upgrade the production line in Liangjiang New Area to be compatible with multiple models. Another 100 million yuan is planned to be used to purchase platform technology licenses from Weilai, which can shorten the research and development cycle."

"Our plan is to expand our annual production capacity to 5 vehicles, as we have mentioned before."

After completing this part of the renovation, the revenue in 2023 can indeed increase significantly, reaching approximately 50 billion yuan per year.

This revenue stream accounts for 167% of the original motorcycle business revenue, which is sufficient to fulfill the performance commitments made to regulators and minority shareholders.

In addition, to Tan Jincheng's surprise, Zeng Jixiang also planned to develop a battery leasing model, which was actually based on Li Bing's BaaS model.

“That is indeed feasible. Lifan already has a battery swapping business, so you have some experience in re-establishing it.”

While renting batteries lowers the barrier to car ownership for passenger vehicle owners, there's still a psychological hurdle to overcome. Additionally, having to pay monthly battery rental fees makes the car feel less like their own.

If Laili were to implement this strategy, it wouldn't be a problem, because Laili mainly deals with commercial vehicle services, so drivers wouldn't have any psychological barriers to it; in fact, they would welcome it.

Li Bing's business model resulted in huge losses, and people on the internet often joked that if he had switched to operating commercial vehicles, things would definitely not be like this.

The battery swapping model can lower the barrier to entry for drivers to purchase a vehicle, and their cow sheds are the best place for drivers to rest.

Another reason why battery swapping is not viable is that each manufacturer's battery specifications are different, making it impossible to standardize the specifications, which prevents the cost from being reduced.

If Lailai were to do it, it would be much simpler. They would only build their own dedicated tracks and use their own batteries. Although the scale would not be very large, the cost would be reduced significantly.

Simply put, the battery swapping model is not suitable for large-scale development because every battery company and every car manufacturer has its own interests.

Given that Wei Lai's battery standards are designed for vehicle models based on those standards, it's highly unlikely that they would follow Li Bing's battery swapping standards.

Breaking it down into smaller parts is different, because battery swapping can indeed coexist with existing battery technology. As for solid-state batteries, that's still several years away.

"Yes, we only aim for revenue of 50 billion to 100 billion yuan, which is different from Mr. Li's large-scale operation, so our costs are controllable."

It is now October, and Zeng Jixiang plans to spend six months transforming the production line to increase production capacity from the current 10,000 vehicles to 50,000 vehicles.

By licensing its technology to Weilai, patent disputes can be avoided and mass production can be accelerated. The development of the battery swapping system is also expected to provide Lailai with an annual revenue of about 100 million yuan in 2023.

With these three factors combined, LaiLi plans to invest approximately 3.5 million yuan, with the remaining funds used for working capital reserves and special dividends for minority shareholders, in order to stabilize the stock price and reduce resistance to inquiries.

This is a short-term plan of 600 million yuan, while Zeng Jixiang has given a 12- to 36-month strategy for the medium and long term.

This includes the external supply of the three-electric system (battery, motor, and electronic control system), utilizing Weilai technology to produce battery packs and electric drives, which are then supplied to second-tier automakers.

Secondly, there is the energy storage business, which involves policy benefits and allows for undertaking projects in the Shancheng Industrial Park and cooperation with the Shancheng Power Grid Company.

The third is data monetization, which involves monetizing data based on user profiles.

The three medium- and long-term strategies are expected to generate about 25 billion yuan in revenue for Lailai Technology. It is anticipated that by 2024, Lailai Technology's revenue can be increased to around 75 billion yuan, and if things go well, 10 billion yuan is not impossible.

"There are two corresponding company templates, one is JAC Motors, and the other is GCL Energy Technology."

JAC Motors saw a significant increase in revenue and its market value doubled as it rode the wave of the new energy vehicle sector by manufacturing for Wenjie.

Meanwhile, GCL Energy Technology, an A-share listed company, saw its PE ratio rise from 15 to 40 times after transforming into a battery swapping operation.

The key to breaking the current deadlock is to concentrate and quickly utilize these 600 million yuan in funds, obtain assistance from the group company, and strive to achieve the goal of annual revenue of 5 billion yuan in 2023.

At the same time, the battery leasing business can lock in long-term cash flow, and the new energy business can completely replace the motorcycle sector within three years.

Furthermore, it can also drive up the valuation of listed companies.

"Good idea, go for it. Now that we've restructured Lifan, we need to do it well. If you need any help, you can ask the group, and I'll let the relevant departments know."

Just as Zeng Jixiang planned, the industry will transform from a relatively backward traditional manufacturing industry to intelligent manufacturing based on new energy.

Then, Lailai Technology truly deserves the title of "technology".

In addition to these strategic plans, Zeng Jixiang also brought a document that was not circulated within ByteDance's internal system, which was about the market value assessment of Laili Technology after its transformation.

The document provides three assumptions about Zeng Jixiang's transformation strategy and its corresponding A-share market value, with 2024 being the timeline for Laili Technology.

Technological breakthroughs, increased market share, and intensified competition leading to failed transformations correspond to three valuation factors.

In a pessimistic scenario, Lailai Technology's market value could fall below 40 billion yuan, in a neutral scenario it could be around 70 billion yuan, and in an optimistic scenario it could reach 150 billion yuan.

"A huge range of 40 billion to 150 billion. ByteDance's evaluation report is quite well-known in the industry, so that's your potential."

Even with the most optimistic expectations, Zeng Jixiang's transformation strategy is the best explanation he can give to Chongqing and Lifan Company.

Lifan and Zhidou Auto are two companies on the verge of bankruptcy that he has taken over in recent years. He is jokingly referred to as Tan Jincheng, who is good at turning waste into treasure. The problems he faces in these two companies are different.

Compared to Zhidou Auto, Lifan is much more complex. Zhidou's business is very simple, and its production line is intact, so it can continue to operate with just a little modification.

Lifan is in much more trouble; in addition to its huge debts, its business is riddled with problems.

Motorcycles, cars, real estate, football—he tries to do everything, but he doesn't do anything well. What Zeng Jixiang is doing now is basically just cleaning up messes.

In its core automotive business, Lifan doesn't even understand its own core selling points, like a headless fly.

Although Wuling dominates the A00-class car market, Zhidou at least knows its core selling points and still has a chance to be competitive.

In September, Zhidou Auto's deliveries surpassed those of ORA Black Cat, rising to fourth place. ORA was severely impacted by BYD Dolphin and Seagull, with sales dropping by nearly 3000 units.

"Thank you, boss. To be honest, I came back this time to beg for alms."

Zeng Jixiang smiled happily. With the boss's support, he was full of confidence in transforming Lifan.

"Don't get too excited yet. The level of market competition is different now than it was a few years ago. Just look at the ORA series and you'll see."

With BYD's exit from the market, ORA's sales plummeted. And Weilai and Geely haven't even started to exert their efforts yet. This is only reflected in the segment.

For Laili Technology, which aims to operate both battery swapping and pure electric vehicles, the challenge is immense, even though it doesn't intend to achieve a large scale.

(End of this chapter)