2003: Starting with Foreign Trade

Chapter 1031 "Hey bro, wanna get a discount?"

P.S.: It's the last day of July, so please use your monthly tickets if you have them, don't waste them.

Five hundred million euros is a considerable sum, exceeding 36 billion yuan at the current exchange rate. Even considering the current surge in sales for Weilai, this figure cannot be ignored.

However, Tan Jincheng was not interested in the 500 million euros; he was more interested in whether or not to share half of it.

According to the agreement with BMW when Yuchi Power was established, Yuchi Power would use its profits from the current year to make up for the losses of the previous five years. Before it truly achieved full profitability, neither BMW nor Yuchi Power would actually receive a single penny from Yuchi Power.

The cooperation model with Mitsubishi was the same in the beginning. In the first few years, we didn't actually get much in return; it was mainly about investment, so of course we didn't make much money.

However, during Mitsubishi's peak sales period from 2016 to 2018, annual revenue exceeding 10 billion yuan was still able to provide Weilai with stable profit sharing. For example, in 2017, Weilai Mitsubishi contributed 440 million yuan in net profit to Weilai, which played a certain role in Weilai's expansion at that time.

However, to be honest, Mitsubishi's biggest contribution to Weilai was not the annual profit sharing, but the production base and supplier collaboration that Mitsubishi transferred after deciding to withdraw from the domestic market.

The production base transferred by Mitsubishi has solved a major production capacity problem for the Aion series. The sales forecast for the Aion series in 2022 is between 20 and 25 units, with the main model, the Aion S, expected to sell more than 10 units in 2022.

Besides the wealth left behind by the exit, in terms of technology input, Wei Lai also gained some technical experience from Mitsubishi in engines and four-wheel drive systems, which indirectly provided some assistance to the development of Wei Lai's self-developed engines and other independent models.

"Relatively speaking, I am quite satisfied with the cooperation with Mitsubishi, and the cooperation with Yutaka Nagasawa is also quite pleasant. Although they are frugal, they are able to abide by the contract and have provided us with a lot of help."

Overall, the cooperation with Mitsubishi has been very beneficial for Weilai. At the beginning of the cooperation with Mitsubishi, although Weilai had made a certain reputation in China with its Yuechi series, in an era where joint venture brands are paramount, Mitsubishi's influence in China is still considerable, even though its business is declining.

Thanks to its joint venture factory with Mitsubishi, the Weilai brand has gained recognition from some domestic consumers in terms of brand awareness and technological expertise.

Most people believe that partnering with a joint venture brand indicates that the company has a certain level of strength, and they are more confident in their products. In a sense, Mitsubishi also played a role in "endorsing" Weilai at that time.

Yutaka Nagasawa was sent by Mitsubishi headquarters at the beginning of the cooperation. The young and promising Nagasawa got along well with Tan Jincheng. In order to seek development at the beginning of the cooperation, Mitsubishi headquarters gave Nagasawa some authority and provided him with resources.

Yutaka Nagasawa was also bold and decisive, and he quickly helped Mitsubishi regain its foothold in the domestic market. Although it could not achieve the same glory as top-tier joint venture brands, it was still doing quite well at the time.

Unfortunately, like most Japanese brands, Mitsubishi has been hesitant about the electrification transformation in China, overemphasized technology, and did not provide the same level of support to Yu Nagasawa as it did at the beginning of its establishment.

Gradually, Mitsubishi followed the same path as second-tier joint venture brands, being eliminated by the market step by step. This is the inertia of history and the inevitability of the market; it will not stop because of any one person.

However, regardless of the circumstances, Mitsubishi's role in Weilai's development has primarily been to provide assistance. If Weilai hadn't been unable to persuade Mitsubishi, there would have been no need for them to form a joint venture with BMW.

With Mitsubishi withdrawing, there's no doubt that resources for the joint venture factory will be tilted towards Weichi Power. However, how much of a tilt is tilted is not determined by BMW's attitude.

The company is no longer the same as it was more than a decade ago, and the joint venture is no longer the same either. Although the BBA (BMW, Mercedes-Benz, Audi) halo remains, it has faded considerably.

To say that BMW lacks sincerity by taking on half of the 5 million euros is truly unfair to them. They're essentially offering themselves up for nearly 20 billion euros without needing to contribute anything; that would be incredibly generous of any company.

However, this kind of one-off deal is clearly not what Tan Jincheng values. It's not impossible for Wei Lai to come up with 2.5 million euros. Compared to 2.5 million euros, Wei Lai is more focused on long-term planning.

BMW has a new assessment of the powertrain, and the same applies to the future.

Based on last year's sales figures and this year's growth rate, Weichi Power's revenue in 2022 is estimated to be between 25 billion and 30 billion yuan. Revenue in 2023 may exceed 40 billion yuan, and by 2025, annual revenue is very likely to exceed 60 billion yuan, making it one of the benchmark companies in the luxury pure electric vehicle sector.

But to be honest, even if Weichi Power achieves revenue of 10 billion, it won't have a significant impact on Weichi now.

"What Wei Lai wants is to increase his bargaining power in the supply chain. In addition, we also have certain demands regarding BMW's technology."

On February 18th, the eighteenth day of the first lunar month, Tan Jincheng arrived in Zhangjiagang. This was his first public industrial inspection after the Lunar New Year. He chose Zhangjiagang because he wanted to talk to the senior management of Weichi Power about Weichi's demands.

Yuchi Power adopts a ten-member board of directors system. When there are disagreements in decision-making, more than eight votes are required for approval. The board of directors adopts a CEO rotation system, with Yuchi and the senior executives dispatched by BMW serving as CEOs for two-year terms.

This year, the rotating CEO of Yuchi Power is from BMW.

"Thank you very much for the face-to-face communication, Mr. Tan. The headquarters has also informed us that they have received your email."

Fu Yao, Global Vice President of BMW Group and Rotating CEO of Weichi Power, is one of the key figures in BMW's decision to increase investment in its domestic new energy vehicle project.

Based in China, Fu Yao is well aware of Weilai's capabilities in new energy vehicles, especially in the field of pure electric technology. BMW's attitude and resource allocation towards Weilai are very important in leveraging Weilai Power to increase its domestic business.

In 2021, Weilai did not allocate many resources to Weichi Power. Apart from the senior executives dispatched, the operations team was also mainly dispatched and acted rather casually. However, even under such circumstances, the first MINI pure electric model still achieved sales of 8000 units.

BMW is actually in a rather awkward position right now. Its total sales of 84.62 vehicles for the year, while showing a slight increase compared to 2020, only 4.8 were new energy vehicles, with a penetration rate of just 5.7%.

Of the 4.8 vehicles, 8000 were MINIs. Since they were sold under the BMW brand, the sales of the vehicles produced by Weichi Power were also counted under BMW ZG. If these 8000 vehicles were removed, their new energy vehicle penetration rate would drop by one percentage point.

The total sales of 84.62 units are not necessarily secure. The arrival of the L1 in the second half of the year will have a significant impact on some BMW models. The domestically produced i3 will be delivered this year, and together with the ix3, these two electric models will be the main drivers of BMW's sales in 2022.

BMW's i series are their electric models, and the localization of the X5 has also given BMW greater confidence in the competition.

Among the three German luxury brands (BBA), BMW was the top seller in 2021, while the other two sold less than 80 vehicles each. However, both brands are aiming to achieve annual sales of one million vehicles by leveraging the strong growth of the domestic new energy vehicle market.

However, Fu Yao also knew that achieving the sales target of one million vehicles would not be easy, and the sales of new energy vehicles were the key to BMW's breakthrough.

In 2022, BMW expects to sell 10 to 15 vehicles in China. To achieve this growth rate, it is crucial that MINI outperforms the main brand last year. Therefore, it is only natural that BMW will increase its resource allocation to MINI.

"It's so easy to communicate with Mr. Tan. I wonder what you mean by increasing your bargaining power in the supply chain and your technological demands?"

After calming herself down, Fu Yao continued to ask.

The sales target of 10 to 15 new energy vehicles is very important for BMW, but for Weilai, it only represents the sales of the Weilai L1 model. It's quite a contrast.

Domestic brands, led by Weilai, have made remarkable progress in recent years, and Weilai is even able to threaten the status of BBA (BMW, Mercedes-Benz, and Audi) in China.

MINI sales are not counted under Weilai, so Weilai will not receive any money this year. At most, Weilai can get some new energy vehicle credits from them, but these credits are not very important to Weilai.

Wei Lai has more new energy credits than he can ever spend.

The headquarters' offer was indeed sincere, as it didn't require Wei Lai to contribute any money. But so what? Whether Wei Lai needed the 2.5 million euros or not, the development of Wei Chi Power itself had a negligible impact on a group worth hundreds of billions.

Strategically, it is not as important as BMW; to put it bluntly, for Weichi Power, it is no exaggeration to say that it is a "white elephant".

"Then I'll just say it directly."

"Please."

Fu Yao smiled and gestured, saying that among domestic car companies, there are very few that can talk to Tan Jincheng face to face. Those who know Tan Jincheng also know that if you want to cooperate with Wei Lai, talking directly to Tan Jincheng is the simplest and most direct way.

Firstly, Tan Jincheng was able to make decisions on the spot. Secondly, Tan Jincheng was used to being direct in the negotiation process, putting the conditions, demands, and concessions on the table, just like buying groceries.

This straightforward approach is extremely rare among car company leaders, but once you get used to his pace, it will greatly speed up the negotiation process and benefit both parties.

"First, let's talk about the supply chain. With the increase in sales of MINI and BMW's main brand new energy vehicles, the supply of power batteries will inevitably be improved. Jinshidai hopes to sign a new long-term battery procurement contract with BMW."

"In addition, we hope you will give more consideration to Weilai in areas such as charging networks, intelligent technology, and local in-vehicle application innovation. We have a deep foundation for cooperation in these areas."

BMW's long-term plan for the penetration rate of new energy vehicles is to reach more than 20% of total sales, and to reach 50% by 2030.

Based on BMW's global sales of 252.15 million vehicles in 2021, and assuming a total of 250 million vehicles, this would be the baseline of 50 vehicles.

Theoretically, from 2022 to 2030, BMW's global sales of new energy vehicles are expected to increase from 35 units to 130 million units annually, and by 2024 sales will exceed 50 units, of which pure electric models will exceed 40 units.

This is the foundation of a century-old enterprise; once they get serious, their growth rate is quite astonishing.

For Jinsheng Technology, securing BMW's global battery supply is no less impactful than Tesla's. Among the three German luxury brands (BMW, Mercedes-Benz, and Audi), BMW is the most optimistic about its electrification transformation. BMW's current battery supply mainly comes from Jinsheng Technology and Samsung SDI. In 2021, BMW purchased approximately 25 GWh from Jinsheng Technology, accounting for more than 60% of BMW's total battery demand.

Fu Yao frowned: "An exclusivity agreement? That seems a bit inappropriate. Jinxin Technology's battery supply in North America isn't very convenient either."

Apart from North America, BMW would not choose Jinshidai in South Korea either, especially since their ambition seems too great, as BMW has an internal five-year plan for power battery supply.

那就是从30GWh到200GWh的五年跃进，锦新时代2021年度的锂离子产能为170.39GWh，其中动力电池占比超90%。

In 2021, Jinxin Technology achieved a breakthrough in production capacity, and its power battery production capacity in 2022 can reach 350GWh. Luzhou, Liyang, Shanghai, as well as the German factory and the soon-to-be-operational base in Hungary are Jinxin's main production areas.

Once fully operational, the European production capacity will be sufficient to cover 40% of the European region's total capacity. However, Jinxin has as many as 50 customers. BMW's purchases are increasing, and other customers such as Tesla, Weizi, and small and medium-sized enterprises will also see a significant increase in their purchases.

"No, no, no, Mr. Fu, you misunderstand. Wei Lai would never sign such an agreement. It doesn't conform to market rules. We're not in a lawsuit with Tesla right now."

Fu Yao then realized what was happening and laughed, saying, "I knew President Tan wouldn't be so domineering."

Within the supplier system, Tan Jincheng is relatively mild-mannered. Although he follows a full-stack self-developed route, Weilai does not reject in-depth cooperation with suppliers, and is also relatively restrained in terms of market share.

To paraphrase Tan Jincheng's speech at the supplier conference, we should all make money together, and Weilai and Jinxin will never use their market position to act domineeringly.

"Could you disclose your company's battery cell procurement budget for this year? This shouldn't be considered a trade secret, right?"

"That's not the case. Our battery cell procurement budget for this year is 200 billion euros."

BMW will hold its annual financial report meeting in two days, and these figures will be announced at the meeting. Letting Tan Jincheng know a couple of days in advance is not considered a leak. Besides, this is just a budget.

"This is equivalent to approximately RMB 1406 billion, which corresponds to a procurement volume of roughly 160 GWh."

Tan Jincheng pondered inwardly, then said calmly, "I wonder if BMW has considered pursuing a major customer program, which would greatly reduce your procurement costs."

According to Jinshidai's major customer discount mechanism, strategic major customers can usually get a discount of 15% to 20%. Tesla currently enjoys this discount, and if BMW makes a large-scale purchase, it will certainly offer the biggest discount.

With raw material prices soaring in the past two years and supply chains disrupted, the cost of purchasing power batteries has increased significantly. Securing the best possible discounts would greatly reduce BMW's procurement costs.

For Jinshidai, this means securing orders from major clients in advance, which allows for better allocation of production capacity.

The price of power batteries will definitely drop in the next few years, but the extent of the drop depends on Jinxin Technology or Tan Jincheng's attitude.

Looking at all industries in China, once they reach maturity, they all face the problem of overcapacity. This is the case for photovoltaic companies recently, and if the production capacity of power batteries remains the same, they will also face the problem of overcapacity.

The same applies to the automotive industry. The root cause is disorderly expansion and the continuous opening of new factories, which ultimately leads to intensified internal competition. There is no other way to compete except by driving up prices.

But now, things are a little different.

Both Jinxin and Weilai Auto need to go through a large-scale capacity expansion phase, which is unavoidable in the development process of large enterprises. However, Tan Jincheng is still very cautious about capacity expansion.

Neither Wei Lai nor Jin Xin had any plans for Tan Jincheng to build factories on a large scale every year. Once the production capacity reached the expected level, he would never blindly expand production.

For example, Flashpoint Technology maintained a stable production capacity range for a long time. If it weren't for the sudden surge in market sales in 2020, Flashpoint would never have been able to expand its production capacity.

Flash, Weilai, and Jinxin are all industry leaders. If industry leaders don't blindly expand production on a large scale, then other companies will have to think twice.

As long as there is no blind expansion of production and no excessive infighting among enterprises, the price reduction of power batteries will only be regulated in a healthy way according to the market. Jinshidai, which affects nearly half of the global power battery raw material market, has enough power to influence the price of power batteries in the next few years.

Every extra ton of lithium ore mined and every additional batch of battery cells produced is enough to influence market regulation, and securing a large customer base is part of Tan Jincheng's plan.

"We don't need much. Most of the supply from China and Europe can be handled by us. In addition, we hope that you will consider our domestic companies with production capacity in North America. This is a private request."

From the beginning of the cooperation until 2021, due to limited procurement volume, BMW sourced most of its battery cells from Jinsheng New Era, with the proportion consistently remaining above 60%.

However, given BMW's massive procurement plan for 2022, it's impossible for Najin New Era to secure more than 60% of the procurement volume. For the sake of supply chain security, BMW must also introduce a new supplier matrix.

"Could you give me a more specific number?"

Tan Jincheng replied to the email from BMW headquarters, mentioning these points. As a result, Fu Yao was authorized by BMW headquarters to represent BMW in negotiations with Tan Jincheng.

Just as there are different price points for new energy vehicles, there are also different price points for BMW vehicles.

"50%, or 55% if possible."

Of the 200 billion euro procurement plan, Tan Jincheng aims to secure 100 billion euros. Although the market share has decreased, it will still be BMW's largest power battery supplier and will be able to take the largest share.

As for asking for favors from other domestic manufacturers later, it's nothing more than an attempt to seize Samsung's market share. In fact, Jinxin has also made plans in North America. When it acquired Ford's German factory last year, Jinxin also signed an agreement with Ford.

Through technology licensing, Jinsheng Technology reached an agreement with Ford to provide it with lithium iron phosphate battery technology, supporting Ford in building a battery factory in North America and indirectly participating in the North American supply chain through technology transfer.

This was the best solution Tan Jincheng could think of, but Ford's battery factory plan was still a few years away, so they couldn't get a piece of that big pie for the time being.

However, we can't let Samsung get away with this. If Samsung's market share increases, it will be a major threat to domestic power battery companies.

Currently, Guoxuan and EVE both have a certain production capacity in North America. In addition, there is Envision Power, which, although a subsidiary of Nissan, is a subsidiary of Envision Technology, and is a North American production capacity with Chinese investment.

Tan Jincheng's boss, Shen Nanpeng, is also one of the directors of Vision Power.

Of these three companies, Vision is the strongest and has the highest probability of becoming a supplier for BMW in North America. However, Tan Jincheng still wants to try to secure Guoxuan and EVE, as these two companies have the closest relationship with him.

Even if we can't take the whole thing, taking a small part is good, as long as we can stop Samsung.

"We can offer BMW a discount of 15% to 20%, depending on your purchase volume. If it reaches 55%, then I can decide to offer you a discount of up to 20%."

"In addition, based on the upgrade of the strategies of both parties, we will provide BMW MINI with greater resource support."

"Including but not limited to the technological breakthroughs and production capacity guarantees of the blade battery, MINI is a top-tier customer this year, regardless of whether its demand for power batteries is high or low."

"In addition, in terms of electric platform and intelligent technology, WIL can also provide dimensional reduction empowerment, directly solving MINI's core pain points in the electrification transformation from four dimensions: battery technology, electric platform, supply chain, and intelligence."

"Of course, if MINI wants to join Weilai Auto's procurement system like Xiaopeng Auto, we would be very happy to do so, and all cooperation models will be treated the same as Xiaopeng."

"Furthermore, if you don't mind, MINI models can also be added to the Weilai APP system and appear in Weilai stores. Weilai can endorse the MINI brand and even provide certain after-sales services."

"Of course, this only applies to the all-electric MINI models."

Fu Yao was speechless. This was really Tan Jincheng's style: first set conditions, then lure him with benefits.

However, the conditions are indeed quite tempting, especially the last one: MINI sales will not be counted in the Weilai system. This is equivalent to Weilai helping BMW sell MINI. With the Weilai APP's large user base and stickiness, once it is included, it will definitely be a big boost to sales.

It's a bit embarrassing on the surface. MINI may be MINI, but it's still BMW. When did BMW start needing its own brands to help boost sales?

After a moment of silence, Fu Yao said in a deep voice, "I can agree to the first few points now, but I cannot answer the last one for the time being. I hope President Tan can give me a few days."

It's not just a matter of appearances; it's also about brand value. Joining the Weilai APP can certainly boost sales, but it will inevitably have some impact on the MINI brand value.

"Alright, let's organize the team to discuss the contract details. As for the last point, your company doesn't need to worry too much. We, Weilai, are a representative of high-end domestic products."

BMW is a symbol of luxury, but MINI may not be.

(End of this chapter)