2003: Starting with Foreign Trade

Chapter 804 The Formation of a Closed-Loop Industrial Chain

"Judging from your business strategies, you're not exactly a low-key person, so why are you so concerned about hiding yourself on the rich list?"

In recent years, Tan Jincheng's self-deceptive and ruthless reduction of assets on the rich list has been somewhat difficult for discerning people to understand.

Anyway, no matter how much I try not to bet, I'll never become the richest person, so why bother?

Furthermore, whether it's Flash, Weilai, or even Orange Technology, they have always acted in a very high-profile manner, so there's no question of them being low-profile.

"Haha, a company is a company, and an individual is an individual."

Arrogance inevitably leads to disaster. Tan Jincheng may not have a high level of education, but his business experience spans two lifetimes. Besides, he has seen far too many news stories like Old Ma's in his previous life.

In previous years, entertainment resources were not abundant, and the economic environment did not change significantly. Therefore, there was a particular focus on the wealth on the rich list, which was called the "slaughter list." In addition to the question of where the rich people's wealth came from, the excessive attention was also a factor.

When you look at something closely, it's impossible for it to be completely without problems.

However, it's already 2014, and Ali is going to relist this year. The stock prices of other internet companies like Tencent have also risen quite well, so there's no need to worry too much. In the era of fully smartphones, there are already many ways to have entertainment.

If the Xiaomi Mi 1, priced at 1999 yuan, gave counterfeit phone manufacturers a way to transform their business, then the Redmi Mi 1, launched last year at 799 yuan, completely cut off the survival path for counterfeit phones.

For Redmi users, they are using the first generation of the phone, but for users of counterfeit phones, they are using the last generation.

Starting this year, apart from the existing counterfeit models, there are no counterfeit phone brands left on the market. In addition, the popularization of 4G has also begun.

Times have completely changed; of course, the biggest reason why Boss Tan is unwilling to stand out is that he knows the future economic trend and that the good days of making money through investment are numbered in the next few years. At this time, making a fortune quietly and accumulating more cash flow for himself and his company is the most effective thing to do.

The news of Weilai Auto's application for listing has garnered some attention amidst the ride-hailing war, becoming a focal point of online discussion. The question of how much money Boss Tan has has even become one of the trending topics on Weibo.

After the Two Sessions concluded, the battle between these two ride-hailing companies reignited, and it has become increasingly intense, with subsidies becoming more and more substantial. On the other hand, the two companies have been fighting for nearly two months.

The small ride-hailing companies in the market have been almost wiped out, and even the follower Big Hornet is about to collapse.

Unfortunately, Baidu is too stingy. In the subsidy war between Didi and Kuaiche, Ali and Tencent provided half of the funds, and Baidu also provided some funds in the early stages, but now it is unknown when the war will end.

At this point, Lao Li's old habit resurfaced; like all investments, he planned to start strong but finish weak.

Meanwhile, Tan Jincheng learned that both Kuaidi and Didi were interested in acquiring Dahuangfeng. Starting with small-scale subsidies after the Spring Festival, it had been almost half a year by May. BAT had burned through countless amounts of money, and Kuaidi and Didi had also burned through countless amounts of money.

When the money runs out, the only option left is to raise funds. The entry of large capital and the resulting cash burn also lead to an increase in valuation. In the last round of financing, the valuation of Didi and Express Cars skyrocketed.

Didi's valuation has reached a staggering $300 billion, and its express car service is also valued at a high level. Thanks to the previous round of financing, Tan Jincheng, who holds Didi shares through Gaode Maps, exited early, reaping $2 million.

As for Kuaidi's shares, Tan Jincheng's shareholding also decreased from 20% at the time of venture capital to 8%. Under normal financing dilution, his share could not possibly decrease by such a large amount. It was simply that he cashed out, just like Didi.

From a valuation perspective, cashing out a large number of Didi and Kuaidi shares in the first half of 2014 was definitely a bit premature. However, Tan Jincheng also had his own considerations. Firstly, he didn't want to invest any more money later and was basically making money passively, so it wouldn't be appropriate to hold so many shares.

Secondly, this is the most convenient time to cash out, as numerous institutions, including Tencent, are willing to take over, making it extremely easy to cash out.

As for the remaining 8% stake, Tan Jincheng plans to cash out again after the merger of the two companies and exit the market directly.

Ali partnered with Didi, and Tencent partnered with Kuaidi. Their strengths have changed somewhat since the previous era. Chen Wei is clearly stronger in business than Chen Weixin and Lü Chuanwei, but unfortunately, Tencent's advantage in the social networking field is too great.

After banning Didi from sharing on WeChat and QQ, the advantage that Didi and Ali had previously built up with Alipay Wallet's market share has gradually declined. Now they can only survive by investing more money in subsidies than Tencent.

Neither company will give up the fight, but according to Tan Jincheng's expectations, if this situation continues for another year, neither company can hold on. Burning through hundreds of billions of yuan a year, a merger is inevitable.

In late May, Tan Jincheng flew to Germany, where BMW selected Xuanwu Battery as the exclusive battery supplier for another of its electric vehicles, the 530LE. The wholly-owned subsidiary in Germany needs to expand further.

"Sales are doing alright in Europe, but it's a pity we don't have the North American market."

Li Xiang accompanied Tan Jincheng to the signing ceremony with BMW and toured Weilai's stores in Europe with Tan Jincheng.

In the first half of the year, the ES6 sold an average of about 150 units per month in Europe, which is a significant increase compared to last year. Based on the performance of the ES6, the Aion S has also decided to enter the European market.

The pricing for the Aion S in Europe has also been set, ranging from 2 to 2.5 euros.

This price is significantly different from that of the Elan S. Based on the performance of the Elan S in Europe, Tan Jincheng also wanted to see if the low-priced electric car, the Aion S, would be suitable for the European market.

“Our models have no advantage in North America. Besides, the area is too big, and it is very inconvenient to choose a store location. Opening a store ourselves would be a losing proposition.”

If there's a distributor, it might be worth a try.

In the first half of 2014, North America remained the largest market for electric vehicles. However, the situation changed after July, as the elimination of the purchase tax was bound to bring about a qualitative change in the sales of electric vehicles.

"That's true. The Elephant S is so popular in North America. I wonder if our sedan version can capture some of the market."

On average, Tesla sells more than 2000 vehicles per month. This year, Tesla's sales target has been raised to 3.5 vehicles, a 60% increase compared to last year. Last year, Tesla barely made a profit, but this year it is fully profitable.

Tesla's cost control is undoubtedly a clear advantage, but this also shows how high the profit margin of electric vehicles can be. Just one model, the Model S, can achieve profitability as long as annual sales exceed 3 units.

"It's a bit difficult, but we'll try to grab whatever we can. Our advantage lies in SUVs."

Li Xiang, who was involved in the design of Wei Lai's ET series, was naturally aware of this during the development and design process.

However, Tan Jincheng did not have high hopes for the sales of the ET series. No company can do well in every product. For example, BYD has always focused on the sedan market, and it is difficult for them to do well in the SUV market.

Occasionally, a particular SUV model might sell well, but its sales momentum will wane after a while.

The first model under the Weilai brand is an SUV, which is essentially an electric version of the Yuechi. Using the Weilai brand to produce a sedan, and not at a low price, Tan Jincheng is really unsure how well it will sell.

Ningbo.

This is the second time Chen Weixin has visited Ningbo since founding Kuaidi.

Unlike his somewhat apprehensive attitude last time, Chen Chuanxin was in high spirits on his second trip to Ningbo. He had secured the top share of the domestic ride-hailing market, and his fierce battle with Didi had brought him immense prestige.

Didi's initial offensive was very strong, so strong that it seized a large market share in a very short time, and even briefly surpassed the market share of Didi Express.

However, after the subsidy war began and several months of competition, and after Tencent blocked its sharing links, Didi has found it increasingly difficult to threaten Didi's leading position in the ride-hailing market.

The biggest variable now is Bumblebee; whoever acquires Bumblebee will be the absolute king of the market.

He came to Ningbo this time to discuss cooperation with Weilai Automobile.

At its inception, KuaiChe started a car rental company with the support of Weilai Auto. At that time, it was only to solve policy problems and its actual operational capabilities were limited. Now, with a large amount of financing, KuaiChe is able to operate a car rental company independently.

Kuaidi Dache plans to enter the enterprise market in the second half of the year, establishing Yihao Zhuanche based on its existing car rental company, launching an enterprise version of its product in the domestic business car rental field, and opening up the B-end market.

He came to Ningbo to purchase ES6s, Yuechi A3s, and even Tank 300s from Weilai Automobile.

These models are all well-suited for the corporate car rental market.

"Um, a total of 1000 vehicles?"

Zhang Yong received Chen Weixin. He had been stationed in Ningbo while Tan Jincheng was abroad, and he hadn't expected Chen Weixin to be there to purchase cars.

"Yes, we plan to set up a car rental company targeting the B2B market in the second half of the year, so we intend to purchase another batch of cars from Weilai. What do you think, Mr. Zhang?"

"Thank you so much, we at Weilai would certainly be very happy to welcome you."

The purchase of 1000 vehicles, including some gasoline cars, is not a large number. However, such corporate-level purchases enhance the brand image. The fact that the express car service plans to use the ES6 demonstrates the market's recognition of the ES6's high-end image.

"Haha, the quantity isn't large enough, but I still hope Mr. Zhang can give us a discount. Also, regarding electric vehicles, I hope the price will be based on the price after the purchase tax was abolished in July."

"Haha, Mr. Chen, you're overthinking it. We'll definitely give you the best possible deal. As for the purchase tax, we can just make the delivery after July."

These 1,000 vehicles are unlikely to be delivered immediately. Some will be customized with features to meet their needs. Delivery after July is already considered relatively fast, since Weilai Auto is not worried about selling its vehicles now.

Due to the exemption of purchase tax for electric vehicles in July, the overall sales of electric vehicles have not changed much in the past two months. However, market research has shown that once the purchase tax is officially abolished, the electric vehicle market will undergo significant changes.

The Luzhou Electric Vehicle Industrial Base is now in full production of the Aion S and ES6 to meet market demand in the second half of the year.

“That’s easy to say. We plan to set up our ride-hailing company after July, so there’s no rush. I’m here today mainly to discuss the specific requirements with Mr. Zhang.”

"Don't you need buses? Our company has buses available for purchase."

Upon receiving Chen Weixin's procurement contract, Zhang Yong noticed that it didn't include passenger buses. If they were targeting the B2B market, there would definitely be a demand for passenger buses. Chen Weixin said regretfully, "Um, we were planning to look at BYD's K9 for passenger buses. Sorry."

The express car company has plenty of money. When facing the B-end market, they need to purchase a batch of mid-to-high-end models, including ES6, A3, BMW, Audi, etc. The required models are all priced at least 20 yuan or more.

They did consider buses, of course, but BYD's K9 custom model looks better, the downside being that it's expensive.

Buying a few less to save face is much better than purchasing a bunch of ordinary cars.

Zhang Yong gave a wry smile. Oh well, the boss had said before that internet companies are all rich and they care about appearances, but they don't really care much about practicality.

In the boss's words, they mainly play these games to hype up concepts and further increase the company's valuation; costs are not within their consideration.

BYD's K9, a customized model, costs nearly 150 million yuan, and even after subsidies, it still amounts to a million yuan, which is 30% higher than the price of Huanghai buses. Ordinary bus companies tend to prefer Huanghai buses.

However, the K9 pure electric model has already made its mark in the high-end market.

“Alright, then we’ll do as Mr. Chen requests. We’ll arrange a production line for your company as soon as possible, and I’ll offer you a discounted price overall.”

1000 vehicles may not seem like much compared to overall sales, but it still represents hundreds of millions in sales. The main benefit is that it can enhance the brand image. With express cars available, will Didi be far behind?

The boss is right. As long as the ride-hailing market continues to be this competitive, car sales will rise rapidly.

This purchase did not include the Aion S; instead, it used mid-to-high-end models. It seems that Weilai Auto needs to start preparing for its own car rental company.

"Thank you very much, Mr. Zhang. By the way, when will Mr. Tan be back?"

"It will probably take a while, there are some things to take care of in Germany."

BMW has increased its purchases of power batteries. In addition, Mercedes-Benz is also interested in purchasing Xuanwu batteries. Besides signing a contract with BMW, the boss also needs to meet with senior executives of Mercedes-Benz to see if he can secure Mercedes-Benz's battery supply.

To date, in the battery supply sector, Weilai has already secured a large number of customers, including Yutong Bus, Dongfeng Motor, BMW, Tesla, Zhongtai, BAIC New Energy, JAC, and Chery.

In addition, SAIC Motor plans to cooperate with Weilai on power batteries, and the Lingang Industrial Park in Shanghai has also begun construction. The original five-year cycle has been accelerated due to the smooth progress of the listing and fundraising.

Based on the current situation, the Lingang Industrial Park should be able to officially start production within two years.

In the first half of the year, Weilai Auto not only accounted for half of the sales of C-end models in the new energy vehicle market, but also in terms of battery supply.

In terms of 18650 battery supply, Weilai is definitely the leading domestic manufacturer.

With policy support, Weilai's power battery business segment has begun to show its potential.

On June 19, Weilai Auto successfully acquired BNP Paribas, defeating competitors such as CATL, and began to lay out its power battery recycling business, creating an ecological closed loop of battery production, use, secondary use, recycling and resource regeneration.

It has formed its own closed-loop service system covering the entire battery lifecycle.

Xuanwu Battery, which has formed its own ecosystem, has once again fueled the IPO fundraising of Weilai Auto, and its advantages are becoming increasingly apparent.

Speaking of 18650 power batteries, they are not only used in cars. For example, power banks that have become popular with smartphones can also use 18650 power batteries. This is just one aspect. They can also be used in two-wheeled electric vehicles, three-wheeled electric vehicles, and electric vehicles for the elderly.

The recycled power batteries are not just scrapped; they can also be processed and used in these secondary products.

The acquisition of BNP Paribas is of extraordinary significance to the Weilai Power Battery project in terms of both resource reuse and cost control, which is why Tan Jincheng is willing to pay any price to acquire it.

The closed-loop production system has enabled Weilai's power batteries to form a complete industrial chain product system. Even if we take a step back and assume that it is like BYD now, which only supplies its own products, Xuanwu batteries can still achieve absolute excellence.

From upstream mineral resources to downstream battery recycling, Weilai has products at every level in between.

This advantage is not something all companies possess. On the surface, it is a car company, but in reality, it is a power battery company that can control the entire production chain. Cars are just one part of their power battery promotion process.

Now everyone understands why Wei Lai explained in the prospectus that the main reason for this fundraising was for the power battery project.

"So it seems we can get the Liyang project started next year or the year after?"

Tan Jincheng, who had just returned from Europe, didn't participate in many roadshows. He was quite busy with industrial planning, so Zhang Yong usually took his place in the roadshows.

Of course, he will also attend some very important occasions.

Judging from the results of the roadshow, Wei Lai's subscription effect was very ideal, even though he did not appear in person.

"That's pretty much possible. This way, the Lingang Industrial Park and the Liyang Industrial Base can start production one after another without a long interval, which is of great significance for improving our production capacity."

"By the way, boss, SAIC wants to change the way we cooperate; oh, and Geely too."

"Hmm? How do they want to cooperate?"

"They want to form a joint venture like Tesla, but their joint venture plan is a little different from Tesla's. Their idea is to build a factory together and have equal shareholdings."

SAIC and Geely's intention is to jointly establish a battery factory, so that they can keep battery safety in their own hands, which is quite farsighted.

Of course, this is also related to their scale. While BYD and Chery were making great strides into the new energy vehicle industry, Geely lagged behind. In recent years, they have been busy digesting the technology brought by the acquisition of Volvo.

The acquisition of Volvo was a case of a snake swallowing an elephant for Geely at the time. Although they swallowed it, digesting it was not easy. For many years, Geely has been digesting Volvo.

However, they have now mastered a lot of Volvo's technology and are ready to make their move.

It's too late for them to develop power batteries, but they can't rely on others for the safety of components. Joint ventures are the best option, even if it requires a huge investment.

SAIC goes without saying; they have the strength and the capability.

"Okay, then we'll agree to their terms. In the future, if any other manufacturers want to form a joint venture with us, we'll be happy to do so, but only with top-tier brand manufacturers. We won't consider smaller companies than us."

Currently, in terms of both sales volume and scale, Weilai has entered the segment between first-tier and second-tier brands. Annual sales of over 40 vehicles can squeeze into the first tier, while annual sales of less than 20 vehicles belong to the third tier.

Not all companies have the strength or qualifications to form a joint venture with Weilai. To a certain extent, the investment required for a power battery company to achieve a certain scale is greater than that required for the automotive industry.

Take Zhongtai as an example. This year, they acquired a brand called Zhidou, which focuses on new energy. Judging from their sales figures, it seems to be quite good. The batteries they use are also from Weilai.

But Tan Jincheng actually knew that selling this thing for 10 to 20 yuan was just a joke. The actual sales volume was very small, and most of them were sold to the car rental company he established.

In my previous life, there were quite a few of these cars in Ningbo. They were too expensive for anyone to buy, but they could be rented. It seemed to cost 1500 yuan a month. They were about the same size as the Chery QQ EV, or even smaller, and belonged to the microcar category.

It's okay for commuting to and from get off work, but it's useless for longer distances.

In a fair comparison, the Zhidou products held by Zhongtai are similar in nature to Leichi's old man's cars, the only difference being that one has a new energy production qualification while the other does not.

To put it bluntly, these are products that are fraudulently obtained subsidies. There's no way Weilai would agree to establish any joint venture with such a brand. He'd be willing to purchase from them, even at a lower price, but a joint venture is definitely out of the question. It would be a complete waste of their own resources.

It's obvious that Boss Ying has lost interest in seriously developing Zhongtai. He's been adding more and more fancy tricks to the game, and Zhongtai also seems to have plans to go public. All that's missing is a Porsche Tai.

"Okay, then we'll follow this approach when negotiating with SAIC and Geely. That way, some of our existing partners should also have plans to build factories."

"Haha, who knows? Let's build a factory then. But not all manufacturers are willing to build factories, after all, there are costs involved, and there's also the issue of the company's core products."

Take Great Wall Motors as an example. Last year, they became the top-selling domestic brand. They are now doing very well in the field of gasoline vehicles and have no plans to enter the new energy vehicle industry on a large scale.

They're just throwing together a couple of models to get by, so naturally they have no plans to establish joint ventures or factories. The same goes for other automakers that focus on gasoline-powered vehicles.

In many cases, direct procurement is far more cost-effective than producing in-house.

At the end of June, just like the gradually heating weather, the competition for Weilai Group's IPO, which adopted the inquiry-based pricing system, also gradually intensified. The listing price had been pushed up to 23.57 yuan, and the market value before the IPO had reached 510 billion yuan.

However, this is not his final step; the price could change at any time during the months of pre-announcement.

Shen Nanpeng grinned from ear to ear. Of the 5% share that Red Shirt was going to transfer, part of it was transferred to Zhang Xupeng and part to Lei Jun. If anyone wanted the rest, it would be a favor from him.

While Wei Lai's shares are very popular, he is one of the biggest beneficiaries. Through these shares, Sequoia Capital is able to expand into more investment areas.

Besides Shen Nanpeng, several other urban investment companies that originally had no intention of selling their shares were also approached by various connections, wanting to get a share of the pie, even if it was just a few tens of thousands of shares.

This made the bosses of the city investment company both happy and distressed.

(End of this chapter)