2003: Starting with Foreign Trade

Chapter 1026 The New Forces' Suppression Begins

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With the traditional dealer system in disarray and consumer reputation collapsing, for Boatman and BYD, it's less about having foresight and making early moves into new energy vehicles, and more about their gasoline-powered cars simply not selling anymore.

As a traditional car company with such a mature system for gasoline-powered vehicles, how could any company possibly give up such lucrative profits and completely abandon its gasoline-powered vehicle business? Everyone knows that gasoline-powered vehicles and electric vehicles can coexist.

Even during the peak of the electric vehicle craze, cost-effective gasoline cars still sold very well. Geely and Great Wall's slow transformation in 2021 was certainly due to their own strategic reasons, but ultimately it was because their gasoline cars were selling so well.

Looking at the sales figures of these two companies in 2021, Geely sold 132.8 million vehicles and Great Wall sold 128.1 million vehicles, totaling 260.9 million vehicles. Of these, only 23.7 were new energy vehicles.

In third- and fourth-tier cities and county-level markets, the coverage of charging infrastructure is insufficient, and gasoline vehicles are still the mainstay of this market. The mature gasoline vehicle lineup and domestically produced gasoline vehicles with high cost performance after price reductions are very popular among these user groups.

Although BYD's sales of gasoline vehicles have declined, its sales of over 70 units are still enviable for many automakers. This is the sales figure after cutting many models. The fundamental reason why BYD is playing the same trick as the new energy vehicle companies is that its gasoline vehicles are not competitive enough.

Before the explosion of new energy vehicles, BYD could sell more than 400,000 cars a year. But for a large vehicle company, this sales volume was not enough. If it weren't for other businesses such as electronics manufacturing, BYD might not have been able to survive until the explosion of new energy vehicles on its own.

"Hehe, why not take advantage of the existing hype? And congratulations, Uncle, your sales have taken a step up this year."

The recent dispute between Tesla and Wray is not over yet. Tesla's claim of 140 million sales is the perfect target for Wray. The competition between the two is not just about standards. The title of the world's number one new energy vehicle company is a good fundraising gimmick for either of them.

The company's annual sales target of 141 million new energy vehicles is a clear indication that it aims to regain its title as the world's number one new energy vehicle manufacturer in 2022.

"Yes, it can be said that the hard times have finally come to an end."

The boatman naturally understood the meaning behind Tan Jincheng's words. Since its establishment in 1995, BYD's sales exceeded 10 vehicles in 2007 thanks to the explosive popularity of the F3. In 2009, it took another step up to 40 vehicles. It was also in 2009 that Buffett invested in BYD.

However, in the following years, BYD's misjudgment of the market and a series of problems with its own products caused a crisis of brand trust, leading to the biggest crisis BYD has experienced since its establishment in 2011.

Even the boatman had to publicly admit that BYD had not handled its relationships with customers, distributors, and the media well. It was after experiencing this crisis that BYD began to transform from a scale-oriented to a quality-oriented approach.

From the life-or-death decision to venture into car manufacturing, to the collapse of dealerships and the crisis of brand trust, and then to the high-stakes gamble on new energy vehicles, every transformation of BYD has been a last resort, simply because it encountered a survival crisis.

"The gamble of completely halting the production of gasoline-powered vehicles will have a significant impact on BYD, not to mention the long-term consequences."

Although gasoline-powered vehicles account for less than 2% of Dizi's business, the gross profit margin of some models is as high as 15%. After production is halted, in the short term, Dizi will lose at least 8000 million yuan in profit each month, which is why Weilai will not give up gasoline-powered vehicles.

“We’re not like you guys. Even though we’ve rebranded, nobody really recognizes our gasoline-powered cars.”

The boatman looked helpless. BYD claims to be a traditional car company, but almost no consumers recognize the word "traditional." No other traditional car company has such low sales of gasoline-powered vehicles.

Yes, there were some, but they all went out of business.

BYD did not go bankrupt. Besides the support of other businesses, the biggest reason was their grasp of policies and government resources. In addition, they were also lucky. For example, their big bet on new energy and their complete escape from difficulties was largely due to luck.

In 2020, the outbreak of special events and the disruption of the supply chain led BYD to seek solutions through cross-industry collaboration. By producing masks, BYD gained public favor and became one of the world's largest mask suppliers. This not only alleviated the pressure but also generated 15 billion yuan in revenue through mask sales.

Vertical integration of the supply chain, mass production of self-developed IGBT chips, and dual battery supply system have enabled the company to seize the opportunities presented by China's new infrastructure initiative. At the local government level, the company has also secured electric bus orders from multiple cities, including Shenzhen. Commercial vehicle sales increased by 23% year-on-year in 2020.

Wei Lai also modified the mask production line, but not as aggressively as Boatman. It was mainly used to supply masks to the surrounding areas of Ningbo and his hometown. Other masks were handled by Inco Medical. In terms of production capacity, it was not as exaggerated as BYD.

Although it has gained a lot of goodwill, it is still somewhat inferior to Wuling and BYD. In addition, Weilai itself has a good reputation among consumers, so it does not have the extreme contrast in reputation with BYD.

"Speaking of which, I envy you guys. In the future, the sales ratio of your gasoline cars to new energy vehicles should be around 60% to 40% or 70% to 30%, with both sales volume and profit."

This year, the proportion of fuel vehicles and new energy vehicles in Weilai's total sales is almost 50/50. According to Weilai's sales forecast for 2022, the company's strategic pattern has been determined.

The split might be 60/40 or 70/30, and this could change in the future depending on market conditions, but the overall pattern will remain the same.

"Hehe, actually it's the experience that seniors like you have given to us juniors. We're standing on the shoulders of giants."

Tan Jincheng wasn't exaggerating. Although he had experience with new energy vehicles in his previous life, running a business is not that simple. Whether it was a leading domestic brand like BYD, Geely, or Great Wall, or a bankrupt company like Lifan or Zhongtai, Tan Jincheng fully absorbed their successful experiences and analyzed their failures in the process of dealing with them.

In summary, it all boils down to two things: quality and service. Most traditional domestic brands are actually not good at these aspects, and their marketing capabilities are also weak.

"You're still as sharp-tongued as ever, but you're not wrong. Observe how your opponents succeed and fail."

"Also, let's talk about it after this is over."

The full-scale transformation to new energy vehicles is another gamble for BYD. In addition to the monthly profit reduction, BYD will need to invest an additional 50 billion yuan in 2022 to upgrade its production lines, which will put it under tremendous pressure.

Although subsidies have decreased, most of BYD's profits still come from new energy subsidies, so BYD faces much greater financial pressure than Weilai.

Attending this New Year's gathering was also an attempt to build relationships and see if I could secure some financing opportunities. The person in front of me is a big spender. Although the two companies are competitors in business, they are also partners.

BYD's investment arm holds shares in WYD, and the investment arm of ByteDance's advertising platform also holds BYD's shares. This cross-shareholding model means that whichever company succeeds, it's not a bad thing for the other.

Coexistence amidst competition is a tacit understanding that the two companies have built up over the years.

"What? Need to borrow money?"

Tan Jincheng didn't need to think too much about it. With the New Year approaching, everyone was busy, and the boatman wouldn't be looking for him to reminisce. The first problem any company had to solve during its transformation was definitely funding.

"Could you please not put it so harshly? This is called financing. Our company is planning to issue some corporate bonds. If possible, could you have your ByteDance engine subscribe to some and help support us?"

Although he has reduced his activities in the investment circle, Tan Jincheng's name is still well-known in the investment community. Whenever Tan Jincheng endorses a stock or a bond is subscribed to by ByteDance, it attracts market attention.

This also makes it easier for publishers to promote the product.

"Okay, I'll let Lao Cheng and Lao Huang know when the time comes. You can send someone to talk to them about the details, but the amount of money shouldn't be too large."

"I know, you only spent 20 billion, you're really rich; don't worry, it won't cost much, we're just borrowing your name to make the issuance go more smoothly."

The boatman's tone was tinged with envy. While competing with Tesla, Weilai is also actively expanding its industrial chain. At the end of last year, Weilai's subsidiary, Jinshidai, made a strategic investment of 20 billion yuan in Shengxin Lithium Energy, a leading lithium salt company, and subscribed for 4663 million shares through private placement, holding a 5.11% stake.

Wei Lai explained that the investment was strategic, aimed at securing lithium resource supply and strengthening its upstream position in power batteries. The two parties agreed to deepen cooperation in areas such as raw material purchase and sales and technological collaboration.

According to the 2022 procurement plan, Jinxin New Era intends to purchase approximately 30 billion yuan worth of lithium salts from Shengxin Lithium Energy in 2022. Although this is an investment and the current price is somewhat too high, this investment strategically facilitates the expansion of Jinxin New Era's power battery production capacity.

Following its strategic investment in Shengxin Lithium Energy, Jinxin Times has accumulated stakes in or controlled as many as seven lithium mining companies through direct holding, joint ventures, and strategic investments, covering core lithium resource producing areas in Sichuan, Jiangxi, and Guangdong provinces in China, as well as Australia.

With two wholly-owned subsidiaries, one 90% owned subsidiary, and the remaining five holding between 5% and 40% of the shares, Jinshidai has secured over 50% of the global lithium resource supply through long-term contracts and technological cooperation.

Before Weilai Auto even had a prototype, Huang Ming, the general manager of ByteDance Engine, was buying stocks of lithium mining-related companies all over the world. After Jinshidai grew, Huang Ming brought Zhang Xuhui to discuss cooperation.

After more than a decade of planning, Jinshidai has formed a closed loop from resources to manufacturing to sales.

BYD also wanted to discuss strategic investment with Shengxin, but firstly, they couldn't come up with that much capital at the moment, and secondly, when they approached Shengxin and its responsible person, they were told that Huang Ming, the general manager of Juling, and Zhang Xuhui, the CEO of Jinxin, were already in talks with them.

Compared to the general manager of the secondary market investment department, Huang Ming, who focuses on the primary market, is much more low-key. His investments are mainly based on the overall strategy of the ByteDance Group and he does not blindly pursue investment profits.

From the booming internet of a few years ago to the burgeoning new energy sector today, Huang Ming has always played the role of Tan Jincheng's shadow. In the field of power batteries, Huang Ming is now a figure who can shake the market with a stomp of his foot.

"Sure, sure, you go ahead with your work, I have something to do here." Social interactions are also part of business competition. Dizi isn't a bad company, so he doesn't mind using his name to attract some investment, as long as it doesn't cost too much money.

Even if a company wanted to spend a lot, Old Wang probably wouldn't agree.

"Okay, you go."

The boatman glanced at Zhang Yong, who was walking briskly towards them, and smiled knowingly.

"Boss, I'd like to wish you a Happy New Year in advance."

Zhang Yong, who was walking briskly, greeted Tan Jincheng with a smile and cupped his hands in greeting. Years of habit had made Zhang Yong unconsciously use his usual form of address when facing Tan Jincheng.

"Sit down. It's been a few months. Let's have a good chat."

Without deliberately correcting Zhang Yong's form of address, Tan Jincheng pointed to the seat the boatman had just sat in, and Zhang Yong readily accepted.

"Nezha has been doing quite well this year. How about the IPO?"

In 2021, Nezha was the biggest dark horse among emerging electric vehicle brands, with nearly 70,000 vehicles delivered throughout the year, exceeding the sales target of 40,000 to 50,000 vehicles at the beginning of the year. The Nezha V, with sales of nearly 50,000 vehicles, can also be considered a small hit in the pure electric vehicle sector.

With its monthly deliveries exceeding 10,000 units in December, Nezha has entered the ranks of companies delivering over 10,000 vehicles per month, becoming the third new energy vehicle company to achieve this milestone. In essence, Nezha has entered the ranks of first-tier new energy vehicle companies.

"The IPO didn't go very smoothly. Although sales were good, as you know, boss, most of them were ride-hailing vehicles."

Nezha V, which accounts for over 70% of sales, is primarily targeted at the B2B market. In the B2C market, Nezha's market share is extremely low, and it cannot compare with leading brands like Wenjie and Xiaopeng.

It's even worse than companies like WM Motor that are facing cash flow risks. This is currently the biggest obstacle in Nezha's IPO process. The B-end market is almost entirely dominated by Aion and BYD. No matter what Nezha does, it can't turn the tide.

Low sales volume means low valuation during the IPO process. The Science and Technology Innovation Board rejected their listing plan, citing low technological content as the reason, but in reality, it was because they were not optimistic about their business model.

Nezha is currently planning to submit an IPO application to the Hong Kong Stock Exchange. However, after absorbing 360, CATL, and state-owned assets from multiple regions, Nezha's pre-IPO valuation of 220 billion yuan is a major issue.

“For emerging brands, going public might not guarantee their survival, but not going public is a sure thing. You've already missed the best window of opportunity, so you need to speed things up.”

"Yes, we missed out on too much time because we didn't get a spot on the Science and Technology Innovation Board."

Zhang Yong sighed. Nezha has done well this year, but the mature market is already in a strangulation phase for new brands. New brands that do not have enough foundation may not survive by going public, but they are almost certain to die if they do not go public.

Leapmotor, another emerging brand invested by Tan Jincheng, is currently submitting its IPO plan to the Hong Kong Stock Exchange. Unlike Nezha, which chose to list domestically for the first time, Leapmotor is much smarter and is going directly to the Hong Kong Stock Exchange.

Starting in 2020, emerging electric vehicle brands experienced a crisis, with seven going bankrupt and four facing operational difficulties. This included WM Motor, once the leading emerging electric vehicle brand, which sold only 4.4 vehicles in 2021 and experienced frequent intermittent factory shutdowns.

WM Motor's crisis has further eroded consumer trust in emerging brands and put immense pressure on second-tier brands like Nezha.

What seemed like a dark horse emerging from the crowd, a year of unparalleled glory, was anything but easy for Zhang Yong. Leaving Weilai to join Nezha was a major adventure in his career.

Zhang Yong received high praise from the outside world for Nezha's performance this year, but only he knows the difficulties he faced. Nezha was far from being as glamorous as imagined.

After its first IPO failed, Nezha repeatedly sought capital. While investors like 360 ​​and CATL were relatively easy to deal with, Nezha's problems only increased after several local state-owned enterprises invested in it.

"It's very simple. Times have changed. The state-owned assets of today are different from those of the past."

Zhang Yong wasn't actually seeking help from his former boss, Tan Jincheng. He now somewhat understood why his boss hadn't been optimistic about Nezha and had advised him against joining the project. However, there was no turning back now that the arrow had been released.

The real reason he came to the New Year's gathering with General Manager Fang was to attract more investment and make Nezha's IPO go more smoothly. His purpose in approaching Tan Jincheng was simply to say hello to his former boss, have a chat, and catch up.

Of course, it wasn't that Zhang Yong didn't want to ask Tan Jincheng for help. In fact, General Manager Fang of Hezhong had mentioned this issue before. However, Zhang Yong knew his former boss's personality. When he didn't think highly of a company, he wouldn't invest a single penny, even if it meant missing an investment opportunity, and he wouldn't do it out of personal favors.

In Zhang Yong's view, the boss was simply protecting his reputation.

"Yes, it's definitely different from before."

Hezhong's financing model is somewhat similar to that of Flash Technology and Weilai Auto in the past, which combines local state-owned assets with international investment institutions. However, the effects on the company are completely different.

The investments made by local state-owned assets in Shanchi and Weilaila were both before 2010. At that time, the market environment was much better than it is now. Local state-owned assets were more concerned with the introduction of projects and the creation of jobs, and were not so willing to focus on investment returns and corporate control.

But things are different now. The new energy vehicle industry is indeed a good project, and bringing it to the local area can certainly bring political achievements, but the frequent defaults have made local state-owned assets more vigilant.

To put it bluntly, more than a decade ago, if you had a good project and agreed to implement it, the local government would offer a lot of preferential policies and financial assistance. But now, those kinds of good things are no longer available.

Among the shares of Hezhong, there are three local state-owned enterprises, and their shareholdings are roughly equal. Each of them wants to lead the industry to settle in their local city, resulting in Nezha's resources being scattered across the three places.

The annual production capacity is 70,000 cars, which is just over a month's production capacity of Tesla's Shanghai factory. However, it has to be distributed to three locations, and the transportation costs alone are off the charts, not to mention that they are selling low-end models.

Furthermore, these three cities do not have a very good industrial base. They are far inferior to Ningbo and Luzhou, let alone first-tier cities. However, Nezha did not have a better choice.

Like Tan Jincheng, Lao Fang of Hezhong had also approached Luzhou back then, but Luzhou preferred to invest in Li Bing and take a risk rather than accept Hezhong, which shows that Luzhou's investment ability is not entirely based on luck.

Li Bing's battery swapping business, sales volume, and losses have been heavily criticized, and rumors of their impending bankruptcy circulate from time to time. However, regardless of the circumstances, the Luzhou government's multi-billion yuan investment in Wenjie has undoubtedly been a huge success.

When the cooperation was facilitated, Wenjie's market value was only 38 billion US dollars, while its peak market value in 2021 reached 100 billion US dollars. The financial return alone is a huge figure. This deal is definitely not a loss for the Luzhou government.

"Hurry up with the IPO, try to go public together with Leapmotor. Also, here's another suggestion: your car infotainment system should not be called 360."

Tan Jincheng wasn't particularly concerned about how Nezha Auto operated, nor was it his place to care. The only connection between Wei Lai and Nezha was actually with Zhang Yong. However, during a casual chat, when Zhang Yong talked about their strategic plans, Tan Jincheng couldn't help but make a sarcastic remark.

Everyone acknowledges 360's strength in security, even its most stubborn haters agree. But if you mention the 360 ​​system, the first thing that probably pops into everyone's mind is advertising.

Unfortunately, Zhou Hongyi and his company are not very good at internet products and reputation. Nowadays, smart cars attract a new generation of consumers who follow the technology route. How many of these people haven't been scammed by 360 products?
"Well, we'll consider it, but as you know, Mr. Zhou is our major shareholder, so this is a bit tricky."

Zhang Yong smiled wryly. The major shareholder wanted to use their products, and this was not something he, as the CEO, could simply veto. This was completely different from when he came to Weilai.

"Hehe, that's true. If there are any problems, get out of there as soon as possible, but my advice is to go public as soon as possible."

Leapmotor's IPO has been in preparation for more than three months, and the preliminary work has been basically completed. It plans to formally submit its prospectus to the Hong Kong Stock Exchange after the Chinese New Year. Unlike Wenjie and Xiaopeng, Leapmotor is the first new energy vehicle company to go public in Hong Kong directly with a domestic main structure.

Tan Jincheng currently holds 5.7% of Leapmotor's shares, ranking as the fifth largest shareholder after Hangzhou's state-owned assets. He is an industrial capital and long-term investor, and Jincheng New Era is also one of Leapmotor's battery suppliers.

Nezha could have used this name to list on the Hong Kong Stock Exchange before Leapmotor, but unfortunately they missed the opportunity.

"Understood, we will proceed as soon as possible."

Zhang Yong nodded. He originally had a lot more to say, but Tan Jincheng's words, "Get out of here as soon as possible if there are any problems," shut him up.

Ken reminded him that the boss had already done everything he could, and forced a smile as he said, "By the way, Wei Lai's 2021 financial report must be very impressive, right? Congratulations in advance, boss."

After WILTE announced its 2021 sales figures and 2022 forecasts, WILTE's financial report became the biggest focus of the market. Whether new energy vehicles are profitable or not is clear from the perspective of Tesla abroad and WILTE domestically.

(End of this chapter)