2003: Starting with Foreign Trade

Chapter 978 Reorganization and New Model Development

Yongcheng Zhixing has completed its initial capital injection of 3.8 million yuan into Jinling Zhidou. All procedures were legal, compliant, and extremely fast.

By the time Shufu realized what was happening, it was too late. This is Tan Jincheng's style of doing things. Once he sets his sights on something, he will seize the target with lightning speed. After paying the cash, he will have absolute control over the restructuring of Zhidou.

Geely's delay lies in its procedures, unlike Tan Jincheng, who often disregards procedures when making major decisions, much like his autocratic style during the early days of FlashCar.

The advantage of doing this is speed; to use a somewhat inappropriate phrase, it's a decision made on a whim, which can easily lead to significant losses if the decision is wrong.

However, the benefits are also obvious: Wei Lai's decision-making, under the long-term training of Tan Jincheng, appears to be particularly efficient.

The saying "A scholar should be looked at with new eyes after three days of separation" is most fitting for President Tan.

Ying Jianren sighed with emotion. Zhongtai is now struggling to survive, and Ying Jianren has lost his former glory, appearing somewhat dejected. Although his family's wealth has not been greatly affected, in fact, they have increased considerably through cashing out in recent years.

However, when a company faces bankruptcy, the actual controller is certainly not having an easy time. Entrepreneurs value not only their wealth but also their social status.

Watching his former "little brother" now acquire his related companies, Ying Jianren was far more shocked than Wei Lai had been by his rapid development over the years. Back then, Tan Jincheng, who held the production license, was unable to manufacture cars, while Ying Jianren held the initiative.

Now the tables have turned.

To resolve Zhongtai's predicament, Zhidou had already severed ties with Zhongtai. Ying Jianren's meeting with Tan Jincheng was merely to handle some follow-up matters. After that, all of Zhidou's restructuring would no longer be related to Zhongtai.

Zhidou's early foray into exporting cars was actually out of necessity, as they lacked the necessary qualifications in China and could only engage in export business. Their later collaboration with Zhongtai solved this problem, much like the relationship between Zhongtai and Tan Jincheng in the past.

Zhongtai's interim report this year was extremely poor. In the first half of the year, Zhongtai's revenue was only 7.7 million yuan, while the net profit attributable to shareholders of the listed company was a loss of 10.34 billion yuan, which is considered a serious financial disaster.

In terms of production and sales, Zhongtai's various bases are basically in a state of shutdown or partial shutdown, with a total of only 574 cars produced and 1417 cars sold in the first half of the year.

This production and sales capacity was insufficient even for Zhongtai at its peak, not even enough to cover a single day's production. Zhongtai had no choice but to go bankrupt.

The stock price has been hovering around one yuan for a long time, and it's already destined to become an ST stock.

Unlike Zhidou, from a purely financial perspective, no one dares to take over Zhongtai. As of the first half of 2020, Zhongtai had liabilities of 143.56 billion yuan and also suffered from asset impairment losses and credit impairment.

Zhongtai's parent company, Tieniu Group, has a debt of up to 750 billion yuan. To save Zhongtai, at least tens of billions of yuan would need to be invested. Instead of investing tens of billions of yuan to save a car manufacturer with a bad reputation and outdated technology, it would be better to directly establish a new force in the industry.

Even companies like Weilai, Xiaopeng, and WM Motor have only spent this much.

"It's a pity, we still couldn't make it through. Now I regret not listening to your technical suggestions back then."

Back when Zhongtai launched its first 2008 model, Tan Jincheng chatted with Ying Jianren about the importance of technology and quality. He said that while copying is acceptable, technological accumulation can be achieved in the process of copying, just like Geely, Chery, and BYD back then.

Unfortunately, Zhongtai did not pay enough attention. After the explosive sales in 2008, Ying Jianren focused more on capital operations, which was not a problem in itself. However, Zhongtai acquired some rubbish companies, which did not help improve Zhongtai's technology.

As a result, while Porsche was a huge hit, neither its technology nor its quality could keep up. Porsche's popularity only lasted for a few months, mainly because its quality was not up to par.

The Porsche is almost a one-to-one copy, but the technology is just not up to par. To put it bluntly, they didn't even copy it properly. Consumers are actually quite tolerant of copying car models.

To put it jokingly, few people can resist waking up to find their sleeping wife has turned into Liu Yifei.

If Zhongtai had seriously "copied" Porsche, paying close attention to product appearance and quality, Porsche's lifespan wouldn't have been so short, and Zhongtai wouldn't have gone bankrupt so quickly.

A best-selling car model can completely save a company. Geely survived for many years thanks to the Emgrand. The popularity and sales of the Porsche when it was launched could actually be a lifeline for many companies.

Unfortunately, it was too late.

In the field of new energy, Zhongtai has lagged far behind in recent years. As the first company in China to obtain the production qualification for new energy vehicles, and with the cooperation of micro-car companies like Zhidou that are boosting sales, Zhongtai could have had a great future in the new energy vehicle sector.

Unfortunately, Zhongtai failed to seize their opportunity.

"A new wave of car replacements is coming."

After seeing Ying Jianren off, Tan Jincheng began to pay attention to Weilai's sales. The restructuring of Zhidou was not something that could be done overnight. Tan Jincheng only needed to keep control in his own hands, and leave the rest to the professional team.

In the second half of the year, domestic car sales gradually pick up, and the peak sales season of September and October is just around the corner. Considering the sales suppression in the first half of the year, this year's September and October sales will definitely be better than last year's.

"Yes, this year is almost the start of a new wave of car replacements."

Tan Jincheng liked to run around the workshop whenever he had free time, and Zhang Li was responsible for accompanying him.

In the history of automobile consumption in China, there have been roughly two peak periods of car replacement and purchase. The first was around 2000, when we had just joined the WTO and our income had increased significantly, which also ushered in the first wave of car purchases.

This was a process of going from nothing to something. Consumers were mainly first-time car buyers, and their demand was mainly for economy cars. The representative models were still mainly joint venture brands, but pioneering companies like BYD, Geely, and Chery also benefited a lot from this process.

This wave of car purchases can be considered as a pioneering effort by the first wealthy individuals. The second wave of car replacements occurred after 2010. Compared to the first wave of car purchases around 2000, consumers had a much deeper understanding of car consumption.

In addition, rising incomes and the stimulus of policies such as the "Cars to the Countryside" and "Trade-in Program" in 2009 also promoted the popularization of first-time car purchases, and some of the wealthier groups in rural areas also joined the car-buying group.

In addition, the first batch of car owners have been driving their cars for about ten years and have entered the replacement cycle. The trend of consumption upgrading has become obvious, and changes in family structure have also spurred the demand for larger vehicles.

The SUV market also emerged during this period. Although it was still dominated by joint venture brands, domestic brands developed rapidly during this time, especially companies like Great Wall and Wynn, which had set their sights on the SUV market early on and reaped the benefits of the era.

And this year, the third wave of car replacements is about to begin.

"This time is different from the previous two times, so the situation we are facing is more serious."

The previous two waves of car purchases and replacements were largely due to the rapid increase in people's consumption. People had more money in their pockets, so of course they had to spend it. Moreover, at that time, consumers didn't actually have a deep understanding of cars.

To put it bluntly, they are easily fooled. Whether it's a joint venture or a domestic brand, it's easy to deceive consumers. If the quality is poor, people will tolerate it, or they simply won't realize it.

Of course, it's mainly during periods of income growth. That's how people are; when they earn more money, they don't care as much, and they don't feel as bad about spending it. If they really get ripped off, they usually just curse the manufacturer and that's it.

However, this time is significantly different from the previous two. This time it's more about generational change. Many car owners have driven their cars for over ten or twenty years and have reached the point where they have no choice but to replace them. This special event has also accelerated the desire of most people to own a private car.

The so-called essential needs are a major factor in this wave of car replacements, but unlike the previous two income increases, this time it is not necessarily the case that everyone's income has increased.

If you're short on cash, you'll have to be even more careful with your spending when buying consumer goods. In addition, there's the rise in consumer awareness; consumers in the internet age are not as easily fooled as they used to be.

With current consumer trends, public relations are becoming increasingly difficult for businesses. A single public relations crisis can often plunge a company into trouble. Tan Jincheng's extensive efforts for Wei Lai are actually aimed at improving the company's ability to cope with public relations crises.

Small businesses are easily put on the defensive when facing a public relations crisis, and may even face the risk of bankruptcy, but large corporations are much better able to cope.

"In addition to these, the demand for replacing cars is also becoming more diversified."

After returning from the workshop, Tan Jincheng organized a small meeting with the management team and explained the reasons for participating in the restructuring of Zhidou Auto. He also mentioned that the diversification of consumer trends requires companies to have more ways to cope.

For example, family users tend to prefer mid-to-large SUVs and MPVs. The reason why the Weilai L1 sells so well is that it hits the pain points of family users. Younger users tend to prefer sporty sedans or crossovers, such as the Maodou 3, ET5, ES3, etc.

Young consumers are also very important right now. The Weilai brand originally started with young users, and although there is now competition in the family user segment, it certainly cannot give up on this group.

"Driven by policies, car replacements will definitely tend towards new energy vehicles. We need to do a better job in balancing our models. For family users, we mainly offer the Weilai L1, but for younger users, we need to offer more personalized options."

What are the characteristics of young people's consumption?
Everyone can say things like focusing on experience and quality, pursuing personalization or diversification, or that young consumers have a more pragmatic consumption concept. But overall, you could describe the consumption characteristics of young people as having no characteristics at all.

The so-called lack of distinctive features doesn't mean there are no distinctive features at all, but rather that everything is decided based on personal preferences. They buy whatever they like, and they don't even care about consuming in advance.

This unpredictable consumer mentality requires businesses to take more action.

Further optimizations need to be made based on feedback from actual consumers regarding models such as the ET5 and ES3. More models that meet the consumption concepts of young people also need to be developed, including the restructuring of Zhidou.

“The Zhidou brand is different from Zhongtai. Although it was tarnished by Zhongtai at one point, its overall reputation is still not bad. What we need to do is update the models and design them to better suit the aesthetics of young people.”

"Just look at the sales volume and consumer base of the Wuling Hongguang MINI, and you'll understand that Zhidou still has great potential."

Mini cars, to put it simply, are city commuter cars. Although they also target the lower-tier market, they are still very attractive to young people in cities. They are cheap, easy to park, and if you take out a car loan, the cost of owning a commuter car is greatly reduced, and the monthly payments are affordable.

"Besides these, women are also a significant consumer group, and microcars are a major consumer force for them." While Weilai has done a good job developing its male customer base, there's still a gap in its market for women. Although the electric version of the BMW MINI is appealing to women, it's not a Weilai brand.

It's kind of funny, but currently, the best-selling model for women, including Yuechi Auto, is actually the Tank 300. The red Tank 300 is quite popular among women.

"The fact that Zhidou is in the hands of another company may be a problem, but it doesn't pose any problem for us."

There are five major challenges to overcome in order for Zhidou to fully resume production.

The first risk is policy risk. First, Zhidou Auto's models need to be upgraded to meet the new subsidy policy, which means a range of more than 150 kilometers.

Secondly, there is the financial risk. Zhidou's historical debts and tight cash flow may drag down Weilai.

Thirdly, there are market risks. Increased competition and a generally poor brand image are the reasons why the Zhidou brand has not fared well.

The fourth point is integration risks. Cultural conflicts between Zhidou and Weilai, as well as talent loss, are risks in the integration process.

Finally, there is the technological risk. Since 2018, Zhidou has been struggling and has been in trouble for more than two years. Outdated products and insufficient research and development are inevitable consequences.

However, none of these five points are problems for Weilai Auto.

The first and last points can be categorized into the same type: the rapid iteration of new energy vehicle technology and the continuous progress of core technologies such as batteries, motors, and electronic controls have caused Zhidou, which has stagnated for several years, to fall behind.

However, this is precisely where Weilai's advantage lies. In terms of the three core electric components (battery, motor, and electronic control), Weilai can use its technology to support Zhidou, enabling Zhidou to quickly get on the road in new models.

The technology from Weilai, the batteries from Jinxin New Era, the intelligent cockpit and vehicle networking system from Jinxin Power, etc., can all provide assistance to Zhidou Auto.

Once the product's competitiveness is improved, Zhidou Auto's market risk can be greatly reduced. With its advanced technology, even if Zhidou can't beat the national icon Wuling, it still has no problem securing a place in the microcar market.

"Wuling Motors is the king of the microcar market, which is not something we can surpass in a short time, but we can take Wuling as our target."

"Our first step is to optimize the vehicle models. If you ask me, we should just get rid of all the old models from Zhidou Auto and design them ourselves. For now, we'll leave this to Wei Lai Research Institute. Does Mr. Hu have any questions?"

Hu Zhengnan smiled and said, "No problem, we will give Prophet Bean a sample and let them see how the car should be designed."

Hu Zhengnan is very confident and absolutely arrogant. In his opinion, the existing models of Zhidou are no different from those of old people's cars.

In some ways, Hu Zhengnan even thinks that Zhidou Auto's models are not as well-designed as Leichi's electric vehicles for senior citizens.

In terms of technology and performance, it's not necessarily comparable to the Leichi's "old man's car". The "old man's car" is only due to policy reasons. Otherwise, Weilai would not have needed to acquire Zhidou in the microcar field.

Tan Jincheng smiled and said, "Good, as long as you have confidence."

Tan Jincheng didn't see anything wrong with Wei Lai's high morale and boastful talk. If a large company is hesitant and afraid of everything, then there's no point in expanding; it might as well just retire.

Weilai has performed very well in the mid-to-high-end vehicle and ride-hailing sectors. As for a microcar, let's not even talk about how well it will sell after the takeover.

But if even the design is flawed, then all those years of investment have been wasted.

"Then let's get the design done as soon as possible. I plan to have our Wei take over the initial R&D and design of Zhidou. You guys give them a good overview."

"General Manager Bao from Zhidou will be coming over in a few days. He will help you optimize the R&D and design, and you can also connect with them regarding production."

The restructuring of Zhidou is underway, but Tan Jincheng will not waste any time until the restructuring is truly completed.

Tan Jincheng hopes to complete the restructuring and production resumption simultaneously. Once the restructuring is officially completed, the new Zhidou model will need to be put into mass production.

Competition among modern enterprises is intensifying, and they are facing more and more problems, one of which is the iteration of vehicle models.

“Okay, no problem, I’ll cooperate.”

Zhang Yong accepted the task; he was responsible for the overall daily operations of Weilai, including external affairs.

Zhang Yong's role in Wei's eyes has clearly become less important, which is something Tan Jincheng intentionally did.

In the early stages of its establishment, due to its small scale, Wei Lai could not hire many high-level talents, so he and Zhang Yong were able to manage.

Therefore, Zhang Yong was the most important senior executive besides himself in the early days of Weilai, although there was no so-called partner system like that of Internet companies.

However, Zhang Yong also holds the most shares in Weilai, so it's fair to say he's Weilai's partner.

However, as Weilai continues to expand, it would be detrimental to Zhang Yong's control over the company if power remained with him.

The decision to spin off Yuechi Auto and bring in Wang Fengying to oversee the project was driven not only by its own development needs but also by considerations regarding Zhang Yongquan's share of the profits.

Currently, Zhang Yong is in charge of the overall operation of Weilai, Wang Fengying is in charge of Yuechi Auto, and Hu Zhengnan is in charge of Weilai Research Institute.

The rights of these three parties can be well balanced, preventing any one party from having too much power, and making it more conducive to his control over the company.

Zhang Yong clearly understood Tan Jincheng's arrangement, so he never spoke too much on topics that did not involve management.

Through years of tacit cooperation, Zhang Yong knew that this young boss would not mistreat those who started the business with him, and at times he seemed to have little desire for power.

However, if you try to challenge his power, things won't go so smoothly.

In any case, the current benefits have been more than enough for him, after multiple rounds of financing and the issuance of convertible bonds.

Currently, Zhang Yong holds approximately 3000 million shares of Weilai Co., Ltd. through various means, with a current market value of about 61.8 billion yuan.

Including his other assets, Zhang Yong is now a well-deserved billionaire, a stark contrast to his previous life.

However, in the current dynamic automotive market, quite a few emerging companies have indeed extended olive branches to Zhang Yong.

Zhang Yong was also considering whether to change his environment. He had already achieved considerable success in Weilai, and whether to accept new challenges was one of his current considerations for his future.

In fact, Tan Jincheng had contacted the company's HR director through Zhao Xinyi some time ago, and the contracts of the company's key technical personnel had been reviewed again. He was aware of this.

Recently, there has been an increasing number of poaching attempts targeting Weilai's technical staff. In addition to the entry of new players, Weilai's technological breakthroughs this year are also one of the reasons.

Once a company achieves a technological breakthrough that puts it at the forefront of the industry, it will inevitably face a wave of poaching from its competitors.

"Okay, Mr. Zhang will take charge of this, and Mr. Hu will assist with the rest."

"Alright, that concludes today's meeting. Everyone, please get back to your work. Mr. Hu, please stay behind."

One by one, the meeting participants left, and Tan Jincheng invited Hu Zhengnan to his office, where the two sat down.

Tan Jincheng made Hu Zhengnan a cup of coffee.

"Speaking of which, our business trips have been greatly restricted this year, so it's been a long time since we've had coffee together like this."

Hu Zhengnan is a very busy man. From the northern desert to Hainan, from extreme cold to extreme heat, he personally participates in the testing of the new model of Weilai.

In addition, Hu Zhengnan was in charge of some of the competitions that Wei participated in, and he also had to travel abroad frequently, so he didn't see Tan Jincheng very often throughout the year.

It's quite rare to see us meet so often in Ningbo this year, and be able to leisurely enjoy coffee together.

"That's right, boss, you kept me here because you wanted to ask about my career prospects, right?"

"That's right, it's Star Path."

Exeed has been established for almost a year, and Tan Jincheng is indeed eager to know the progress of the design of its first model.

(End of this chapter)