2003: Starting with Foreign Trade

Chapter 1044 Boss Tan as Seen by Suppliers
In September, the weather in Beicang gradually cooled down, but the situation in Ningbo was not good, especially in Beicang District.

Having experienced this once in his previous life, Tan Jincheng still vividly remembers the changes in Beicang District during this period. However, he couldn't really make any changes; all he could do was go with the flow of the times.

Fortunately, it all ended in just two or three months.

As a district that accounts for about 40% of Ningbo's industrial output, Weilai itself is a white-listed enterprise. However, when other supply chain suppliers encounter production problems, Weilai is also significantly affected.

"It's like everyone's been hit once in a row."

Due to regional factors, Top Group was the first to be affected in the automotive industry in Beicang District. As a core supplier for companies such as Weilai, Tesla, and Geely, Weilai immediately noticed the changes in Top's production capacity.

Tan Jincheng also appeared at Top's workshop to pay attention to Top's production capacity. If the production capacity is affected too much, it will greatly affect the supply of parts to Weilai.

"Haha, that's right, now it's our turn."

Accompanying Tan Jincheng on the inspection was the chairman of Top. Tan Jincheng's way of complaining, which involved swearing, suited the tastes of these traditional entrepreneurs born in the 1960s. Since the beginning of the year, large car companies, including BYD and Tesla, have been greatly affected in terms of production.

Comparatively speaking, Weilai is in a better position, as Beicang is less affected. However, now it's their turn. Once this thing breaks out, it will affect production capacity for at least half a month.

In April, Tesla's production capacity was affected in the Shanghai Stock Exchange for nearly a month, and it didn't return to normal until June. Given the hot sales of new energy vehicles, this impact was significant.

"Don't worry, Mr. Tan. For core customers like Weilai, we will definitely do our best to ensure your production capacity. Currently, the impact is on the district. The Hangcheng Bay New Area has not been affected yet. We can adjust the production schedule. In addition, we can temporarily allocate some orders to other unaffected cities, such as Shancheng. You also have a base there, so the allocation will be more convenient."

With the arrival of Captain and Tesla, Top enjoys immense success. However, since its listing in 2015, Top's stock price has been sluggish and has been below its IPO price for a long time. In 2019, the stock price once fell below 10 yuan.

However, with the boom in the industry chain, Top also ushered in a stock price explosion. In July, the stock price once soared to 100 yuan. In three years, the stock price increased nearly tenfold, and the market value exceeded 80 billion yuan.

Compared to Joyson, Top's stock price has risen much better. Joyson, which is more accustomed to capital operations, has seen its stock price hardly change during the hottest years of new energy vehicles. From a financial perspective, Tan Jincheng's strategic investment in Joyson is still currently a loss.

The strategic investment in Top has been incredibly profitable. Core suppliers like Top and Joyson also hold shares in Wynn, making it a mutually beneficial arrangement.

Tan Jincheng nodded: "Then I'll have to trouble you, Mr. Wu."

In fact, we share inventory and production capacity data with these core suppliers in real time. When production capacity changes, we can quickly adjust our resources without affecting production. Tan Jincheng's visit this time was not really to see any data, but rather to show that Wei Lai values ​​its partners.

Besides Top, he would also make a trip to several suppliers in Ningbo, such as Xushen and Junsheng, to express his support.

"No trouble, this is what we should do."

Wu Jianshu looked at the young man in front of him with a smile. He was 58 years old this year. When he started his business, the young man in front of him was not even born yet, but until 2010, Top could only be considered a small factory in Ningbo.

After completing its shareholding reform in 2011, the company began to show some promise. Its real growth period began when it became a core supplier of chassis structural components for Weilai, and subsequently, on Weilai's recommendation, it became a core supplier for Tesla.

To be honest, this young man in front of him can be considered a "benefactor" in his career. Without the technical and financial support provided by Wei Lai, Top's development would not have been so fast. Some of his capital moves were also learned from Wei Lai. In particular, this young man provided a lot of connections to help him acquire North American parts companies.

Putting all that aside, just considering a high-quality customer like Wei Lai, who not only places large orders but also pays promptly, they have to prioritize ensuring supply.

"Okay, if you need any help, please feel free to contact me."

Weilai's cooperation model with its suppliers is basically modeled after Apple and Tesla. The core suppliers are not just simple contractors. The two parties adopt technology collaboration and joint development, and some factories are even established in the form of joint ventures.

Core components such as the integrated die-cast chassis and suspension system supplied by Top are developed in a joint research and development manner, and the principle of "whoever takes the lead benefits" applies to intellectual property rights.

Regarding payment terms, they currently vary from 30 to 90 days depending on the supplier's level, but generally speaking, the payment cycle for domestic suppliers is 10 to 15 days shorter than that for overseas suppliers.

This alone is enough to attract most domestic suppliers. For domestic supply chain companies, even paying a day earlier has special significance.

"Then I won't stand on ceremony. I'll definitely trouble you if I need anything."

Having cooperated for many years, Wu Jianshu knew that Tan Jincheng was not just being polite. In the Beicang District, Tan Jincheng from Weilai was definitely one of the most influential people. In a sense, establishing a long-term cooperative relationship with Weilai was not just about business benefits.

However, the reason why suppliers in Ningbo are willing to cooperate with Wei Lai is not only because Wei Lai treats suppliers fairly, but also because of Tan Jincheng himself.

In the last century, those who started businesses in the auto parts industry, even those who went into business for personal reasons, were mostly rough and unrefined. To put it bluntly, if there were other better ways to make money, who would bother tightening screws?

Tan Jincheng's low level of education might be a point of ridicule among car company leaders, but for these suppliers, it can actually help them get closer. In addition, Tan Jincheng is generous and will not refuse to help if he can, and the cooperation is transparent.

Most importantly, as Weilai becomes the number one new energy vehicle company in China, Tan Jincheng's status has risen accordingly. At 37 years old, he is the number one person in the domestic car company. Which supplier wouldn't want to maintain this relationship? This can benefit future generations.

He is already 58 years old. How many more years can he work? His son will graduate next year and will inevitably have to take over the company. Tan Jincheng is the best candidate for "passing on the torch" in the eyes of these old guys.

Tan Jincheng's business covers vehicles ranging from two-wheeled to four-wheeled. In addition to manufacturing, he also has a huge influence in the internet, technology and finance sectors. Those who can establish connections with him have many investments overseas. The intricacies of this situation are self-evident.

Unbeknownst to many, Tan Jincheng had become a big shot in the industry. Wu Jianshu felt a bit emotional, recalling how, when this young man approached him for cooperation, he, like other entrepreneurs, thought it was somewhat unreliable.

There was no way around it; Tan Jincheng was too young at the time. Every year, countless people rush into the automotive industry, and countless companies are eliminated. It was perfectly normal that the young Tan Jincheng, despite his many remarkable achievements, was not well-regarded.

Giants like Xiaomi and Huawei were also initially met with skepticism when they first entered the automotive industry. This wasn't out of contempt, but rather a normal way of thinking.

During the peak sales season of September and October, Weilai's production capacity was affected in September, which was somewhat unlucky compared to BYD and Tesla in the first half of the year. However, Weilai made some preparations in terms of inventory.

"Overall, we'll still shift our production capacity more towards new energy."

The production capacity in the Ningbo area mainly consists of Yuechi, Aion, and Exeed. The production capacity of the L series has not been greatly affected because it is located in Changzhou, while the production capacity of the E series high-end models has been less affected because it is based in Luzhou.

Since Exeed's production capacity cannot be affected, we have no choice but to sacrifice some of the production capacity of the Yuechi series.

"I understand. At Yuechi, we mainly focus our production capacity on the Galaxy series."

Wang Fengying could understand her boss's decision. When the market penetration rate of new energy vehicles reached 30%, the market landscape of gasoline vehicles had undergone fundamental changes. Although the policy of halving the purchase tax on gasoline vehicles was introduced in June and gasoline vehicle sales increased in the second half of the year, the overall landscape could not be changed.

In short, the gasoline-powered vehicle market has entered a phase of competition in the existing market. The traditional gasoline-powered vehicle market, priced between 10 and 20 yuan, is the most affected by new energy vehicles.

The strong sales of BYD's Qin series, Exeed S01, and other models have had a significant impact on vehicles in this price range. The Yuechi A series is one of the affected models; even without production capacity constraints, the gradual reduction in production capacity is irreversible.

Fortunately, the Galaxy series is selling well. BYD has completely stopped producing gasoline vehicles, and Changan has also announced that it will stop producing gasoline vehicles in 2025. Among joint venture brands, FAW-Volkswagen has also shut down some production lines this year.

Short-term policy stimulus has had little effect.

"The existing market has always been the most difficult to operate in, but it is definitely impossible to completely abandon this market, as the profits in this area are quite considerable."

In a mature industry, revenues of tens or hundreds of billions are substantial. Even a net profit margin of only one percentage point is considerable, not to mention the strong cash flow. For Yuechi Auto, which has been hit the hardest, simply reducing production capacity and lowering prices will not be enough to preserve these profits.

"The technological upgrade of gasoline-powered vehicles also needs to be accelerated."

Wang Fengying understood what Tan Jincheng was talking about. Yuechi Automobile started with low-end, cost-effective models. With the penetration rate of new energy vehicles reaching the critical point of 30%, gasoline-powered vehicles had to consider survival.

High-end luxury brands like BBA can rely on brand premium, while mainstream cars can transition with hybrid technology, thus delaying the inevitable. However, the low-end market faces the problem of survival.

If we continue with the old market mindset, no matter what kind of national brand it is or how illustrious its history is, its rapid demise is inevitable.

Currently, Yuechi Technology's upgrade solution for gasoline vehicles is the popularization of small-displacement turbocharged engines. The 1.5T engine has become the mainstream in this price range. The Yuechi A series currently promotes the combination of a 1.5T small-displacement engine and an efficient transmission, reducing fuel consumption to 6 liters per 100 kilometers.

The thermal efficiency of the engine also needs to be improved. The 1.8L hybrid engine currently used in the Yuechi Galaxy model is also being considered for technology transfer.

In addition, regarding the deployment of intelligent features, L2 assisted driving will be standard on gasoline vehicles priced around 10 yuan in the fourth quarter, slowing down the pace of new energy vehicle replacement and using time to create space. "We have prepared three plans to address short-, medium- and long-term strategies respectively."

The limited production capacity gave Yuechi Auto an excuse, and Wang Fengying used this as a pretext to report to Tan Jincheng on Yuechi Auto's future plans for its fuel vehicle business.

"Tell me."

Most companies don't take long-term strategic planning as seriously as people imagine. For example, when market trends change, various operations teams need to come up with corresponding strategies.

By summarizing future trends from these ordinary, subtle changes, and then presenting a strategic plan to Tan Jincheng, a relatively complete strategy has been formed.

What Tan Jincheng had to do was listen to the opinions of the senior executives, and then, based on his own judgment, either agree, disagree, or make modifications.

This is somewhat similar to the news flow in the A-share market; by the time the news becomes widely known, it is often already time when the policy has been implemented.

"There's not much to say about the long and medium term, it's just about pure electric and hybrid power, and the Galaxy series has already proven the feasibility of this."

The sales of the Galaxy P1 are quite good. Excluding range-extended hybrid models, six of the top ten best-selling models are from BYD, making its dominant position unshakeable. However, Wei Lai still managed to squeeze into fifth place with the Galaxy P1.

Unfortunately, the top four spots were taken by BYD's Dynasty series. Galaxy's ability to rank in the top five is mainly due to the brand power of Yuechi and Weilai, as well as the positive word-of-mouth that has grown with increased sales.

If it were a different company, the first hybrid model wouldn't have achieved such good sales, just like when the range-extended electric vehicle was first launched, it didn't enjoy the same success as it has in the last two years.

Once brand power increases, it is indeed of great benefit to a company. Even the image of a low-end model is enough to reap the benefits of brand advantages.

"To be honest, there's no debate about whether gasoline-powered cars will be phased out; that's impossible. But how much the market will shrink is something nobody knows."

Wang Fengying smiled helplessly. Li Xiang recently attended an event in Europe, and according to the information he sent, the once extremely radical EU and European car companies seem to have a different attitude towards electrification.

Taking BBA (BMW, Mercedes-Benz, and Audi) as an example, BMW has achieved good results in electrification. The MINI electric model, developed in cooperation with Weilai, gave them an unexpected surprise. Therefore, BMW is quite determined to pursue electrification.

Mercedes-Benz and Audi, on the other hand, have taken a more ambiguous stance. Most notably, Mercedes-Benz seems to have slowed down its electrification efforts, which is quite interesting.

Furthermore, even Germany, which has the most radical environmental policies, seems to have taken a different approach.

"It's tough. The Europeans have fooled themselves. Back then, they dismantled all the coal-fired power plants. I said back then that this behavior was like that of an idiot. But no one can really say exactly how much they've shrunk."

In the second half of the year, the purchase tax on gasoline vehicles will be halved, and the subsidy policy is temporary. In reality, when a product is no longer the first choice for consumers, even if subsidies are given, the effect will not be so good.

"That's right, so it's difficult for us to make specific plans for the production and sales of gasoline-powered vehicles in 2023 and beyond."

Besides no longer being the mainstream in the market, another reason is that the subsidy policy for new energy vehicles will eventually be the same as that for gasoline vehicles, and there will be no more subsidies. What will happen to the sales of new energy vehicles after the subsidies are gone? Will the sales of gasoline vehicles rise at that time?

“A price reduction is certain. Adjusting the starting price to below 10 yuan is almost a certainty. The starting price of the Qin series has already dropped to this level, so our advantage is indeed gone.”

"Yes, that's true. Let's take advantage of the subsidies these next few months and lower the price. Let's keep it in the range of 8 to 10 yuan."

With the starting price reduced to below 10 yuan and coupled with temporary subsidies, dealers' inventory can be cleared as quickly as possible. In fact, the most affected by the sudden changes in sales of the two major categories this year are those dealers with high inventory levels.

In the past, dealers would stockpile inventory of popular car models in order to earn more profit, since they weren't in a hurry and could sell them slowly. But things are different now.

In terms of pricing, Weilai has very strict management, strictly prohibiting distributors from arbitrarily lowering prices. Even top domestic distributors are not tolerated by Weilai. Once a distributor lowers prices arbitrarily, Weilai will impose severe penalties, up to and including termination of the cooperation.

The purpose of doing this, besides maintaining the brand image, is also to protect the interests of the huge user base. However, this is somewhat unfair to distributors, especially those with poor risk control capabilities who like to hoard inventory.

There is a need to balance the interests of car manufacturers, dealers, and users. It is understandable that Wei Lai is acting from the perspective of himself and the users. However, dealers also need to survive. Therefore, Wei Lai turns a blind eye to dealers selling cars with large discounts in private.

As long as it doesn't affect the pricing system, Wei Lai won't interfere too much.

Historically, Weilai has always used official price reductions to regulate the market and ensure that prices remain consistent across most parts of the country.

The official price reduction of the Yuechi A1 to the 8 yuan range is now inevitable.

"By transferring technology and offering official price reductions, we aim to maintain the sales volume of the Yuechi series at around 15% to 18% in 2023. That's our goal for this year. As for production capacity after 2023..."

Currently, in the SUV market segment between 10 and 15 yuan, the market share of the Yuechi series has dropped to 20%, a decline that has continued for many years and has seriously affected its market share.

Don't be fooled by the number of Yuechi A1 cars on the road; those are all existing models, and new cars are really hard to sell.

After a pause, Tan Jincheng slowly said, "As for production capacity, the plan is to set it at 50 vehicles."

Setting the annual production capacity at 50 vehicles somewhat suggests the decline of an once-great enterprise.

"Shouldn't we try exporting to Russia?"

As a traditional automotive professional, Wang Fengying clearly still wanted to make a final push. Due to geopolitical reasons, car companies outside of my country have almost completely withdrawn from the Russian market, and Russia's domestic manufacturing industry has almost entirely disappeared.

The huge market gap has allowed several major gasoline vehicle companies that have established operations in Russia to thrive. For example, in the domestic SUV market priced between 10 and 15 yuan, Russia accounts for 35% of the export volume.

And what about Weilai's investment in and export volume to Russia, given its ambition for globalization? Zero.

If BYD only produces pure electric vehicles, that would be understandable. But the problem is that, given its global capabilities and the popularity of its gasoline-powered vehicles, it is fully capable of exporting to the Russian market. This is what the industry finds most incomprehensible.

Admittedly, everyone knows the risks of the bear market, but there are very few domestic car companies as aggressive as Weilai.

"Forget it, let's focus on developing the Middle East and African markets instead. We won't do business with Russia."

The Southeast Asian market for gasoline-powered vehicles is too competitive. South America, especially Mexico, is a good option, offering low tariffs and creating a certain demand for gasoline-powered vehicles. Developing the South American market seems like a good choice.

However, in the South American market, Weilai mainly focuses on new energy vehicles, and since these areas are not being considered, the remaining market is very limited.

In the Middle East, the cars featured in the news are often luxury vehicles, but in fact, mid-to-low-end models are also very popular, currently accounting for about 25% of the market share of gasoline-powered vehicle exports.

While Africa has a small market share, this small market share also provides room for growth. Despite its relatively underdeveloped economy and weak infrastructure, the demand for automobiles is rising significantly.

"Okay, then we'll focus on developing the Middle East market."

Wang Fengying sighed inwardly. Sometimes she didn't quite understand her boss. Great Wall and Geely were doing very well in Russia, with their export volume rising rapidly and making a lot of money. However, Yuechi hadn't made any moves. She was somewhat unwilling to accept this.

Through promotional videos by some online influencers, the Yuechi series has gained popularity in some parts of Russia due to its high cost-performance ratio and durability, and many consumers are interested in purchasing it.

The boss can be quite radical at times.

The two major markets of Russia and India are completely ignored by Wei Lai and her executives, who are somewhat helpless about this.

"Actually, if you control the risks well, there is no problem in doing business in these two markets, but in the future, you should not mention these kinds of insider information anymore."

Tan Jincheng admitted that he personally has some prejudice against the Russian and Indian markets. Most of the export business of all his companies does not include these two regions, and he also makes relatively harsh requirements on the import requests of some local distributors.

"The overall production capacity will be based on 50 units. As for whether the sales of gasoline vehicles will increase in the future, we'll talk about that later."

50 vehicles is Tan Jincheng's first psychological defense line, while the second psychological defense line is 20 vehicles. If new energy vehicles completely dominate the market and gasoline vehicles become completely unsellable, with sales declining to the 20 level, then the discontinuation of the Yuechi A series will be put on the agenda.

(End of this chapter)