2003: Starting with Foreign Trade

Chapter 1046 From ICU to KTV
The easing of the tight chip supply trend and the decline in raw material costs, along with the full reopening of North America, the European Union, and other regions in October, all indicate that the three-year-long special period is about to end.

"It should be finished by the end of this year. It's hard to say exactly when, but it should take about one or two months."

During the National Day holiday, Tan Jincheng received He Xiaopeng in Beicang. He had come to visit Weilai's most advanced super factory and also had some other things to discuss with Tan Jincheng, or rather, to ask Tan Jincheng for advice.

From being the top-selling new energy vehicle brand in 2021 to its rapid growth in the first half of 2022, achieving sales of nearly 70,000 vehicles in just six months, the flagship model P7 has achieved great success, with monthly sales in July reaching nearly 13,000 vehicles, setting a new record.

Although it is still far from the annual sales target of 25 units set by Xiaopeng, the results are already quite good. If there are no surprises, after the launch of the new G9 in September, Xiaopeng's annual sales will be at least 15 units. If the sales of the G9 explode, it is very likely to reach the 20 unit level.

With the addition of the flying car concept, Xiaopeng once became a very unique player among new energy vehicle startups. However, things started to change after August, when the launch of the G9 triggered a major outbreak of internal problems at Xiaopeng Motors.

The launch of the G9, a flagship SUV priced from 30.99 yuan to 46.99 yuan, was a disaster in automotive history. There were as many as six different models, and the naming conventions and corresponding versions were extremely complicated.

Users would find it difficult to remember these complicated names, but that's not the key issue. The most crucial factor was the G9 launch event, which earned Xiaopeng a reputation for exploiting consumers.

All the highlights advertised, such as XNGP driver assistance, 4C super-fast charging battery pack, and 5D music cockpit, are optional in South Africa, and there are also barriers to entry. The lowest-spec 570G not only cannot enjoy these features, but also has very basic configuration.

As a new energy vehicle priced at nearly 31 yuan, it lacks passive braking, and even features commonly found in this price range, such as a reversing camera and cruise control. This is not only a failure for a domestically produced new energy vehicle, but also inferior to joint venture models in terms of configuration, which is its most fatal flaw.

On the other hand, the configuration differences between the various models are not significant, making it difficult for users to clearly choose the right model based on their needs and budget. After the launch event, Xiaopeng was met with overwhelming criticism, and its already weak brand power was severely damaged.

Needless to say, the sales of the G9 were also disappointing. Although Xiaopeng made urgent modifications to the model two days later and made great efforts in terms of configuration, it did not bring about a significant turnaround in reputation. Instead, it aroused dissatisfaction among existing car owners.

"The first thing to do is to appease the existing car owners and refund the money that should be refunded. As for the cars that have already been delivered, my suggestion is to follow the owners' wishes, whether it is to change the configuration or to return or replace the car. Let's appease the existing car owners first."

In September, amid a decline in reputation, Xiaopeng experienced another significant drop in sales, following the decline in August. The total number of deliveries for the month fell below 9000, with only 184 G9s delivered.

Even with a full refund for all 184 units at the highest price, Xiaopeng could afford it, so there's absolutely no need for him to continue damaging his reputation.

However, the G9 was destined to fail. Originally intended to be a high-end model to compete with the L9 and Wenjie M9, it became the straw that broke Xiaopeng's back. Xiaopeng, which had established itself as a low-end brand, is now facing the biggest crisis since its inception.

"That's all it will be for now."

He Xiaopeng sighed, realizing the fragility of emerging electric vehicle companies. He felt that even if a flagship model failed, the impact would not be as great as it was for companies like Weilai and BYD.

At most, BYD's attempt to upgrade its brand image might be hindered, but other best-selling models will continue to sell as usual, and the brand can try to upgrade its image again next time. However, new energy vehicle companies do not have such an opportunity.

Each of their models could determine the life or death of the company. Even if they cannot succeed, they cannot fail, especially high-end models. To some extent, Xiaopeng's move to go high-end this year has made the same mistake as Nezha.

That is, with the increase in sales, the brand's influence has been overestimated. Little do they know that this year's sales increase is more due to market factors. In a booming market environment, as long as the product is not too bad, consumers will buy it.

It's true that Xiaopeng has its own core selling points, but frankly speaking, they don't have many. They can attract a portion of consumers, but they are far from truly establishing their own core brand image.

"Is G9 really beyond saving?"

Tan Jincheng is adept at revitalizing companies facing crises. He has saved four car companies, including Proton and Tesla. Given his product development capabilities, when Xiaopeng Motors encountered problems, He Xiaopeng's first reaction was to seek out this industry leader who had provided significant assistance to Xiaopeng Motors in the early stages and remains a major shareholder.

The decline in Xiaopeng's sales in August was mainly due to the decline in P7 sales, which was partly due to the impact of Tesla and BYD, but more so due to the impact of ET5.

Since the ET5 has been operating at full capacity, it has posed a significant threat to several major competitors. The Nezha S, which, like Xiaomi, is committed to the high-end market, has been almost completely silenced.

While competition between car manufacturers is fierce, and even models from the same company can compete with each other, the cooperative relationships between car manufacturers are also very close. When Xiaopeng Motors faced a crisis, it was not a problem for He Xiaopeng, as a strategic partner, to turn to Tan Jincheng.

Moreover, Xiaopeng Motors has always been considered a member of the "Weilai Group".

Tan Jincheng shook his head: "It's a bit difficult for now. We can only leave it to time. We can try to salvage it by making changes later. The most urgent thing for you is to make changes as soon as possible."

One of He Xiaopeng's strengths is his ability to learn and listen to advice. When the company faces a crisis, he is quick to seek advice from peers, which is truly commendable.

In addition to the major trouble caused by G9, Xiaopeng's management is also experiencing turmoil. Co-founder Xia Heng has resigned as executive director to focus on product development, effective this month.

The failure of G9 actually exposed the problems in management. How did such a plan get to the official launch meeting, and how was it approved? Internal reform is now imperative.

Without Wang Fengying, how will He Xiaopeng deal with the internal reforms?
"Then we can only launch a new model in the G series as soon as possible. It looks like the G6 will have to be launched ahead of schedule."

He Xiaopeng also knew that G9's failure made it too difficult to recover its reputation in a short period of time. The reason he asked this question was simply because he still had some hope in his heart.

The G series is Xiaopeng's SUV model. For any new brand that wants to establish itself in the market, making a breakthrough in SUV models is the most crucial thing. In this regard, one has to admire Yu Chengdong and Yu Dazui; their vision is really sharp.

Seres, with its deep integration of technology, has achieved great success with both of its models.

G3, G6, and G9 are the three models currently planned for the Xiaopeng G series. Judging from their names, we can see their respective positioning. If the G9 doesn't work out, then the G6 will be the only option, and it is the best "alternative".

"There's no need to rush. There's still time. We need to focus on improving the G6's product capabilities. Any product needs to have sufficient product strength."

For a new model to stand out, product strength is the most direct factor. Xiaopeng has its own selling points, so the G6 should demonstrate its product strength, instead of being like the G9, which has flashy marketing but requires consumers to pay extra for all its selling points and even sets up purchase thresholds. That's just nonsense.

Xiaopeng's intelligent assisted driving system is currently the third largest domestic assisted driving system on the market, after Weilai and Chrysanthemum. Although its performance is not as good as the other two, its reputation is still good. In addition, Xiaopeng's fast charging technology is also good. If these two selling points are well done, many consumers will still buy it.

"In terms of product capabilities, the most important thing to do right now is to quickly complete the process from technological leadership to application scenarios."

The reason why the G9 is advertised as having so many optional features and even setting up barriers to entry is simply because, frankly speaking, Xiaopeng is still only at the level of technological leadership in most aspects, and cannot achieve large-scale mass production.

Compared to traditional automakers, emerging brands with an internet background tend to be much more extravagant in their marketing. Most of them start marketing heavily after developing a technology, even before they have the capability for large-scale production. This is also the case with Chrysanthemum.

Doing this would certainly have many advantages, but the problem is that Chrysanthemum has a strong technological background and brand trust. They can market in advance and quickly follow up through technological research and development, while most other new forces do not have this level.

Xiao Peng is one of them. Overdoing marketing can backfire, and Wei Lai is now consciously reducing its pre-marketing efforts.

"In addition to product strength, Xiaopeng also needs to accelerate the platformization and cost reduction through scale. The sharing of parts for new models can also be followed. Next year, battery costs should drop significantly, and Xiaopeng can then boost sales through official price reductions."

“The G6 absolutely cannot fail again. In 2023, PHEV needs to use the G6 as a fulcrum and the XNGP as leverage to make further improvements in areas such as the supply chain and channels.”

"As for your internal affairs, I shouldn't interfere too much. It mainly depends on your execution ability, Mr. He."

As of the end of the third quarter, the shareholdings of Wei Lai and Tan Jincheng in Xiaopeng Motors remained largely unchanged, and they remained among the top ten shareholders. Wei Lai and Xiaopeng Motors are also strategic partners.

Tan Jincheng is still very concerned about the operation of Xiaopeng Motors. Although Wang Fengying is no longer with the company, Xiaopeng Motors has reduced its per-vehicle cost significantly after the strategic cooperation with Weilai and the cooperation of the supply chain between the two parties, and it did not have the situation of being much higher than its peers in the early stage.

However, Xiaopeng Motors' per-vehicle cost was much higher than its competitors in the early stages. He Xiaopeng himself knew why: there were internal problems. But sales were very good in the first half of the year, so He Xiaopeng couldn't make any big moves.

Everything is based on sales volume.

However, the current problems with Xiaopeng Motors' sales and new models have given He Xiaopeng an excuse for internal reforms.

"I understand. To be honest, I really feel bad for the investors this year."

He Xiaopeng nodded. Tan Jincheng had a good grasp of how to manage Xiaopeng Auto's affairs, offering strategic suggestions without interfering in their internal matters. This reassured He Xiaopeng and was why he dared to come and seek advice. "Haha, then we'll need to work even harder next year."

After its listing on the Hong Kong Stock Exchange, Xiaopeng Motors' stock price reached a high of HK$199.2 on January 3rd and US$40 in early January, but then declined all the way down. In particular, during the three months from July to September, Xiaopeng Motors' stock price in both Hong Kong and the US fell by more than 60%.

Compared to the overall 45% drop in Wenjie, XPeng Motors' overall drop of over 74% is the market's punishment for its strategic mistakes, and investors have begun irrational selling.

Institutional investors were the main force behind the sell-off. Early shareholders such as Tiger Global Management had already exited the top ten holdings, and the proportion of foreign ownership dropped from 35% in 2021 to 18% in Q3 of this year.

Of the three emerging forces of that year, WM Motor has already failed, Wenjie almost failed as well, and now Xiaopeng is rumored to be going bankrupt. He Xiaopeng must be under tremendous pressure.

With its market value evaporating by more than HK$100 billion, both Tan Jincheng and Wei Lai have been significantly affected in terms of investment returns. The two companies have a strategic partnership, which is much closer than that of Leapmotor. In addition, given Tan Jincheng's personal influence, they do not engage in the same frequent trading activities as foreign investors.

The loss can only be borne by the market. Incidentally, Leapmotor, which caught the last train of the new energy industry to go public, did not perform well when it listed on the Hong Kong Stock Exchange on September 29. Leapmotor, which was listed at an issue price of HK$48, showed a pessimistic performance from the grey market.

The stock opened below its IPO price and plummeted 33.54% throughout the day, setting a record for the largest first-day drop among Hong Kong-listed new energy vehicle companies in 2022.
This drop set a record for the largest first-day decline among Hong Kong-listed new energy vehicle companies in 2022. The stock price fell another 22.26% the following day. In just two days, Leapmotor's stock price was nearly halved, making it one of the weakest performing IPOs in Hong Kong in 2022.

Aside from changes in the macro market, the new players in the market generally fared poorly in the second half of the year. Even with the backing of Tan Jincheng's investment reputation, they still had to fall.

"The competitiveness of new players is indeed a bit weaker, but don't worry too much. You still have cash on hand, and sales haven't completely collapsed. It mainly depends on your personal determination."

As founders and CEOs, He Xiaopeng and Li Xiang, both from the internet industry, have different styles. Without the pressure of starting his own company, Li Xiang is more at ease and fully committed to the role of CEO, managing Weilai very well.

At Weilai, Tan Jincheng controls the overall direction. With him in charge, the balance between Weilai's various brands can be well regulated. All of this comes from the founder-centric system that Weilai established from the very beginning.

Whether it's the management team or institutional investors, Tan Jincheng's "one-man show" style, which he brought from Flashpoint and Orange Technology, ensures that there will be no strategic disagreements in Weilai.

Those in the industry know that Tan Jincheng, who appears gentle and generous, actually has a temper that is not so good. After more than ten years of autocratic rule, a single glance from Tan Jincheng is enough to put pressure on the management of Weilai.

He Xiaopeng, on the other hand, is different. Although he is the founder of Xiaopeng Motors, the co-founder system adopted by Xiaopeng Motors at the beginning, coupled with the deep involvement of capital, has made He Xiaopeng lack the prestige of Tan Jincheng.

One is the soul of the company, while the other is merely its helmsman.

"Actually, this is also an opportunity for you. It all depends on whether you can bring Xiaopeng Car from the ICU to the KTV."

From the ICU to a karaoke bar?

They are all smart people. Tan Jincheng made a casual remark, and He Xiaopeng immediately understood the deeper meaning. Without saying more, Xia Heng, as a co-founder, who had just resigned as executive director, held a 4.5% stake in Xiaopeng Motors.

A 4.5% stake is not low in the internet industry. As a co-founder and core member of the management team, Xia Heng plays a key role in technology research and development and product strategy. He Xiaopeng could not possibly treat Hu Zhengnan the way Tan Jincheng did.

Throughout business history, there is a high probability that someone like Xia Heng would replace He Xiaopeng in business operations. This time, the strategic problems with the G9 product are a major blow to Xiaopeng Motors.

But for He Xiaopeng himself, this can be considered a "positive development".

"That's right. It all depends on how determined you are. I believe you can do it. Also, there's something I can say to you right now: although we can't increase our holdings of Xiaopeng's stock, I can personally express my continued optimism about Xiaopeng Motors."

On September 23, the day of G9's secondary listing, He Xiaopeng personally spent nearly $30 million to increase his shareholding in an attempt to boost investor confidence. Although there was a brief rebound, it was ultimately ineffective.

At this point, the attitude of institutional investors, especially early-stage institutional investors like Tan Jincheng, is the most crucial factor.

"That's wonderful, Mr. Tan, just watch my determination."

Tan Jincheng's words clearly showed that he was on Tan Jincheng's side, giving him a lot of confidence.

“It’s nothing, let’s go; let’s go to the factory. I’ve invited Ms. Wang from Yuechi to come along. You can ask her for advice on reforms; she’s very experienced in this area.”

Back then, Wei Lai also had some problems. After Wang Fengying joined, there were also anti-corruption actions in the supply chain, procurement and other aspects. The Iron Lady was very good at this job.

Sending Wang Fengying to Xiaopeng Motors is definitely impossible, but having her give He Xiaopeng some advice or act as a personal consultant is still possible.

These days, who doesn't have a side hustle? As long as it doesn't affect Wei Lai's operations, Tan Jincheng doesn't mind employees having some private business on the side.

“Okay, I’ll treat you to dinner tonight, Mr. Wang.”

Sure enough, when He Xiaopeng heard that Wang Fengying was accompanying him to inspect the factory, he was delighted. The company was facing problems and the management was being replaced. He had considered bringing in talent from outside, but there weren't many people he liked.

Wang Fengying was one of them, but unfortunately it was too difficult to poach her. Wang Fengying and her husband were treated very well in Weilai. Although Yuechi Automobile's sales of gasoline vehicles declined year by year, Tan Jincheng's trust in Wang Fengying remained unchanged.

In terms of personal benefits, the income of Wang Fengying and her husband is incomparable to that of their time at Great Wall Motors. Whether it is position, level of trust, salary or personal career planning, Xiaopeng Motors' size cannot attract Wang Fengying.

Even if he manages to persuade Wang Fengying to join the company, he still has to consider the "retaliation" from Tan Jincheng. Just a few actions from President Lei have already provoked a counterattack from President Tan. Although the relationship between the two companies is still good now, it is no longer as close as it used to be.

The mere act of selling off stocks is enough to give him a run for his money.

In the capital market, it's hard to guarantee whether the companies that Mr. Tan invests in and has high hopes for in the long term will develop as expected. However, so far, all the companies that Mr. Tan has sold off have gone bankrupt.

When Tan Jincheng announced Wenjie's plan to reduce its holdings, Li Bing was so frightened that he came to Tan's door and begged him to retain a certain number of shares.

"No need for a dinner party, let's have dinner at our place tonight. It's a bit inconvenient for us to eat out these days. I'll find you two a quiet room so you can have a good chat. Don't worry, I've already spoken to Mr. Wang in advance."

He Xiaopeng nodded and said nothing more.

In terms of execution, He Xiaopeng, who was able to create UC and successfully sell it to Ali, is also quite capable. After visiting Wei Lai, He Xiaopeng returned to Guangzhou and spearheaded the largest organizational restructuring in the history of Xiaopeng Motors.

Xiaopeng Motors established five major committees: Product, Strategy, Technology, Sales, and OTA. He Xiaopeng personally served as the director of the Product and Strategy committees, directly taking over the core business. Taking the failure of G9 as an opportunity, He Xiaopeng seized absolute control of the company with swift and decisive measures.

In addition, He Xiaopeng frequently faced the camera in crisis public relations and public opinion management, publicly apologizing multiple times, acknowledging problems in product definition, user insights, and pricing, and promising to overcome the setbacks.

Xiaopeng Motors has also launched a variety of compensation measures and a series of operational activities for existing car owners to enhance brand loyalty. For the 184 G9 owners who received their cars in September and those who will receive their cars in October, there is no option to return the car or exchange it for another one.

"That's just like President Tan's style. Old He really took it to heart."

Li Xiang and He Xiaopeng were old acquaintances. After returning from Europe, upon learning of the changes at Xiaopeng Auto, he went straight to Tan Jincheng's office out of curiosity. Having spent more than a month in Europe, Li Xiang had a thorough understanding of the changes in Weilai's overseas market over the past year.

The Weilai Overseas Business Division is practically half Proton. Besides being wholly owned by the group headquarters, it has considerable autonomy in its operations. Once the German factory is fully operational, it can be upgraded to a branch company.

"If Mr. He misses such a good opportunity, we really need to consider selling our shares."

This is indeed Tan Jincheng's style. The previous management style was somewhat similar to a decentralized management model dominated by tech geek culture. This major adjustment, however, is to centralize decision-making power at the highest level.

"That's true. These new forces are too obsessed with high-end products. In fact, this strategy is wrong, at least for the current new forces."

In Li Xiang's view, pursuing high-end products blindly is not necessarily a good thing for a small or medium-sized car company.

(End of this chapter)