2003: Starting with Foreign Trade

Chapter 985 Lei Jun Trying to Take Advantage of Others
People are often like this; things that exceed their expectations tend to make them uncomfortable. Lei Jun was like this when he didn't understand Tan Jincheng's true intentions.

A share reduction plan exceeding HK$500 billion is enormous in any securities market. Even after a year of hard work, Ma has only cashed out HK$430 billion.

The secondary market needs time to digest Tan Jincheng's share reduction, but it's uncertain how much impact it will have on Xiaomi this year.

In truth, the stock price fluctuations caused by their own handling of the rumors about Xiaomi making cars were greater.

In fact, as early as 2017, there were rumors that Xiaomi was going to manufacture cars. This year, the rumors reached their peak, and they became a trending topic almost every few months.

The head of Xiaomi's public relations department has repeatedly denied the allegations on Weibo.

It was in this process of repeated leaks and denials that Xiaomi's car manufacturing expectations were raised, and Xiaomi's stock price continued to break market value records. When it comes to playing tricks, Lei Jun is the one.

Given that Xiaomi is certain to manufacture cars and is already preparing for financing, it's hard not to suspect them of manipulating stock prices.

In addition, Lei Jun himself was equally ruthless in reducing his holdings and cashing out. During the period when the stock price continued to plummet, although Lei Jun promised not to reduce his holdings, he retained the clause for charitable donations.

In September of this year, he donated a total of approximately 6.16 million Class B shares to two charitable organizations, including 3.08 million shares to his own foundation and 3.08 million shares to the Xiaomi Foundation.

These two donations did not cause much controversy. Xiaomi explained that they would not affect Lei Jun's control over the company, since he controls both foundations. To use a somewhat inappropriate term, they are essentially a form of treasury splitting.

Based on the current market value, the two donations are estimated to be around HK$155 billion, which does not currently meet the criteria for selling shares and cashing out. However, those who know the intricacies of the situation understand the implications.

This does not include his previous small reductions in his holdings in Xiaomi.

"Why are you so excited? To be honest, I'm the most steadfast investor in Xiaomi."

After making Lei Jun a cup of tea and waiting for him to calm down, Tan Jincheng retorted with a smile.

On the tenth anniversary of its founding, Tan Jincheng has always been a strong supporter of Xiaomi, whether it was from the venture capital round or the later rounds, and whether it was when Xiaomi or Lei Jun himself encountered crises. He has full confidence in the entire Xiaomi Technology.

Even during the days when Xiaomi was being suppressed by companies like LeEco and Meizu, this was the case. Up until this reduction in holdings, among all the shareholders, only he and ByteDance's Jùliàng Engine maintained their entire stake.

When Xiaomi's stock price hit a low point, shareholders of all sizes, and even their own executives, were constantly selling off their shares. Tan Jincheng, the second largest shareholder, did not follow suit. Instead, he chose to put up real money and risk his reputation to support Xiaomi.

From an investor's perspective, Tan Jincheng's purchase of less than HK$800 million at the bottom of the market, which turned into HK$25 billion, was a huge profit. However, at the time, his purchase of real money had the effect of stabilizing investor sentiment.

Moreover, at the time, Xiaomi was considered unworthy of investment due to its market capitalization, and its PE ratio was even classified as manufacturing.

"To be honest, none of you in the management or shareholders have the right to comment on my and ByteDance's share reduction this time."

Lei Jun was speechless, then gave a bitter laugh: "You're right. We really don't have the right, or rather, we didn't mean for you not to reduce your holdings, but it's your own business. That's not what I meant."

The plan for ByteDance's engine to reduce its shareholding to around 5% is actually a good thing for Lei Jun. Not reducing his holdings for ten years has indeed helped stabilize morale within Xiaomi, especially since Tan Jincheng has a very high reputation in the investment field.

Any investment project personally involved by Tan Jincheng can attract the attention of the capital market. In the early stages of Xiaomi's development, it also received a lot of support in terms of resources, and benefited greatly from both capital and resources.

However, it was precisely this powerful influence, his status as the second largest shareholder and a director of Xiaomi, that put immense pressure and threat on Lei Jun's management, even though Tan Jincheng did not participate in any affairs and never voted for Xiaomi.

However, with such a powerful figure watching over him, if he doesn't perform well, he might be questioned by him. In the event of a crisis, the investors might even allow Tan Jincheng to temporarily take over.

In terms of business operations, Tan Jincheng is on the same side as Lei Jun, but in terms of interests, Tan Jincheng represents the capital side.

Now that Tan Jincheng has decided to reduce his shareholding to around 5%, the shackles that were once placed on him are now completely removed.

"Look, you've come to your senses now. My reduction in holdings this time will indeed have some impact on your financing, but I can't just keep not reducing them. I'm going to die sooner or later anyway."

Some things are unspoken but understood. If Tan Jincheng still maintains his influence within Xiaomi, it will have a significant impact on Xiaomi's car manufacturing efforts.

What are you planning to do with this money after you reduce your holdings?

After resolving his inner conflict, Lei Jun became curious. In the last two trading days of this week, ByteDance's advertising platform was not only reducing its holdings in Xiaomi Group, but also in the Hong Kong and US stock markets, where it concentrated on reducing its holdings in a large number of internet companies.

In the Hong Kong stock market alone, there are companies including Tencent, JD.com, Meituan, and hog farm, which had a secondary listing in June this year. These include major domestic internet companies. Although they do not need to make announcements due to shareholding issues, they cannot escape the eyes of those who are interested.

In addition, in the US stock market, ByteDance also carried out a large-scale reduction in its holdings in the internet industry, including Orange Technology, which it controls, and Orange Live, which is controlled by Orange Technology.

For holding companies and those reducing their holdings by more than 5%, there are announcements. Roughly calculated, in just two trading days this week, the reduction of holdings in Hong Kong and US stocks by ByteDance, Tan Jincheng personally, and his family fund involved at least several billion.

Aside from the necessary announcements, ByteDance's advertising platform did not promote the share reduction plan on a large scale. Even the share reduction announcement was kept low-key. However, this did not escape the notice of well-informed investors.

All indications suggest that ByteDance is significantly reducing its holdings in internet companies, including its own.

What will ByteDance do with such a huge amount of funding? It's not just Lei Jun who's concerned about this question.

Tan Jincheng curled his lip: "Of course we'll spend it. We can't just leave so much money in the bank to earn interest."

"As for the direction, it's mainly in the semiconductor and our old business of new energy vehicles."

With tens of billions in cash, everyone would be eyeing it, but Tan Jincheng wasn't worried about being coveted. Even before the money arrived in his account, its intended use was already decided. This time, Tan Jincheng was going to play a big game.

The competition in the future new energy vehicle market will become increasingly fierce. With its first-mover advantage, Weilai is currently able to maintain its position in the first tier in the fields of range-extended electric vehicles, pure electric vehicles, and battery technology. However, the first-mover advantage cannot last forever.

Ultimately, it all comes down to technological breakthroughs. Only through technological breakthroughs can Weilai maintain its position in the top tier. As a full-stack self-developed company, Weilai needs to find its core positioning.

The core of Weilai is to be a Tier 1 supplier. On the surface, it is an OEM, but behind the scenes it does the work of a Tier 1 supplier.

What is Tier 1? It's actually easy to understand. OEMs usually do the work of original equipment manufacturers, while Tier 1 is the first-tier supplier that supplies parts to car manufacturers.

Bosch, Continental, ZF, BYD, and Huawei are all Tier 1 suppliers. What Weilai wants to do is not only be a main engine supplier, but also a Tier 1 supplier.

The company's subsidiary, Weilai Technology, which is not yet well-known, is preparing for this plan: to sell cars to end consumers and solutions and parts to OEMs.

Batteries, electric drives, headlights, seats, radar, cameras, and a whole host of other integrated solutions are all included in this massive project.

Currently, several companies from Weilai have made it onto the list of Tier 1 suppliers, such as Jinxin Technology in battery supply and Jinxin Power in intelligent assisted driving, both of which have a considerable market share.

In terms of the three core components of electric vehicles, WILTECH, BYD, CATL, and Tesla are all in the first tier. Currently, the weakest area in overall solutions is in electronics, especially chips, which is where Jinxin Technology is located.

By acting as both an OEM and a Tier 1 supplier, the Jinxin series can be self-sufficient while also supplying other OEMs, which is a form of vertical integration in the industry chain.

Electronics, especially chips, is currently a key area for vertical integration. Tan Jincheng plans to allocate 70% of the proceeds from this share reduction, including subsequent cash-outs, to the chip design and manufacturing sector, led by National Technology.

The remaining 20% ​​will be used to invest in the industry chain, and the other 10% will be used to supplement the cash flow of ByteDance's advertising platform and for dividends and other matters.

ByteDance's advertising platform is destined to never go public, so it needs to provide excellent compensation and dividends to ensure internal stability. In addition to Tan Jincheng, Huang Ming and Cheng Linfeng, two other key management members, are also shareholders of ByteDance.

After this large-scale cash-out, Tan Jincheng plans to implement a partnership program, upgrading these two individuals to partners, and also granting stock options to outstanding internal employees, allowing them to enjoy profit sharing rights in order to ensure the company's stability.

In terms of wealth creation ability, ByteDance's advertising platform is in no way inferior to Ant Group, except that it has fewer employees at its headquarters. Currently, ByteDance's investment areas cover consumer goods, technology, healthcare, and other fields.

Aside from its own holding company, it manages over 2000 billion yuan, comparable to the investment departments of Tencent and Alibaba, making it a top-tier investment company in China, but only considered average on a global scale.

ByteDance's advertising platform adopts a decentralized and hierarchical management model, concentrating core tasks such as fund allocation, investment, and important personnel appointments at headquarters. It does not differentiate horizontal business units and vertical functions into dedicated departments, thus maximizing the streamlining of functions.

At headquarters, the number of employees is very small, but the number of employees in the numerous subsidiaries is quite large. In fact, employees of Weilai Group and Orange Group can be considered employees of ByteDance Engine.

The employees at ByteDance's headquarters are all millionaires on average, with core management members possessing assets exceeding ten million. Besides salaries and performance KPIs, a stable profit-sharing mechanism is also crucial for future development. "Is the semiconductor business related to that National Technology company you acquired? Are you planning to increase investment in it?"

Since completing its privatization acquisition, National Technology has kept a low profile, especially given the special circumstances this year. However, it has made significant moves in the industry. In addition to stabilizing the existing management team, the first thing Tan Jincheng did was to have Cheng Linfeng poach talent.

We are recruiting outstanding talents worldwide to supplement the talent pool of National Technology. In addition, in September, National Technology acquired a plot of land in Shenzhen, Ningbo and Yizhuang respectively.

The design team has also moved into the industrial park of Weilai's Shanghai branch, which has been rumored in the semiconductor industry.

"Yes, we plan to expand and strengthen our automotive-grade chip business. If you start making cars, remember to give us some business!"

Currently, the main industrial chain for automotive-grade chips in China is concentrated in the Yangtze River Delta, the Pearl River Delta, and the Beijing-Tianjin-Hebei region. The Yangtze River Delta accounts for half of the industrial chain capacity, representing a complete industrial chain layout.

The Pearl River Delta and the Beijing-Tianjin-Hebei region each have their own focus. To produce automotive-grade chips, it is essential to establish a foothold in these three regions. Well-funded companies like Guomin Technology will naturally think of acquiring land in these regions first, leveraging the advantages of the industrial chain and policies to develop.

In addition, the central and western regions have also developed well in recent years, but for the time being, National Technology does not yet have the capability to deploy nationwide, nor is it necessary to do so.

The decision to acquire land in Ningbo, Shenzhen, and Yizhuang was made after careful consideration. Ningbo and Shenzhen are self-explanatory, while Yizhuang is located in the heart of China, allowing for a better and faster experience of policy advantages.

These things didn't require Tan Jincheng to worry about; Sun Yingtong and the others could figure them out. In any case, Tan Jincheng's task for National Technology was to spend money, to spend money like crazy, within three years.

Lei Jun chuckled again: "You little rascal, I haven't even gotten my hands on this car yet, and you've already got your eye on it. But that's exactly what I'm here to talk to you about today."

He didn't need to pretend with his own people. In fact, he came to Ningbo today to talk to Tan Jincheng about supply chain matters.

If Xiaomi was a complete mess in terms of supply chain integration in its early years, then by its tenth anniversary, it has become an absolute top-tier company in China in this regard. In terms of supply chain integration capabilities, Xiaomi has truly made remarkable progress over the years.

When an army sets out to fight, supplies must come first. Xiaomi has reached a consensus internally that it wants to build cars. The next thing to talk about is the supply chain. In order to become an instant success, in addition to outstanding design, the supply chain is also very important.

Weilai is an important supplier that cannot be bypassed, both domestically and globally, especially in battery supply. Jinshidai's integrated solutions are quite good, and many OEMs have chosen this cooperation model.

When they first met, although they were somewhat surprised by Tan Jincheng's sudden reduction in holdings, there was also an element of pretense involved. They simply hoped to influence Tan Jincheng's mindset and thus gain a certain advantage in the negotiations.

However, this tactic had no effect whatsoever, and instead, he was lectured by Tan Jincheng.

“We do full-stack self-development. In the future, we hope that the self-production rate of parts for our own cars can reach 70%, so choosing Weilai for parts supply is the right choice.”

"Of course, you may not be interested in our automotive-grade chips now, but it will take at least two or three years for your cars to be developed. Who knows what will happen in two or three years, right?"

Lei Jun was speechless. He came today to talk about the battery supply issue. He was actually unsure about building cars. Xiaomi could be said to have nothing to do with money except for an idea and a secretly assembled team.

Although he had invested in many car-related companies from the very beginning, he was still completely clueless.

Xiaomi had no idea whether its car design and production would be accepted by the market, to what extent it would be accepted, or how many cars it could sell.

Without specific data, production capacity cannot be guaranteed, which puts us at a disadvantage when negotiating with suppliers. This is similar to the situation when Xiaomi's first generation was being produced. Tier 1 suppliers are not just any OEM manufacturer that will take on a job.

"Alright, alright, stop pushing your vague automotive-grade chips. Who knows what will happen in three years? We don't even know if Xiaomi Cars can survive for three years. Let's talk about the battery supply issue first."

"Oh, right, speaking of chips, don't you guys also have Horizon Robotics? You should put in a good word for me with that."

Jinxin Technology has advantages in ternary lithium batteries, lithium iron phosphate batteries, and BMS management systems. Apart from the direct supply of parts to Tan Jincheng's subsidiaries, he plans to stay in Ningbo for two days this time.

Tan Jincheng wields considerable influence over Horizon Robotics, which provides intelligent driver assistance chips; Top Group, which supplies air suspension and air springs; and Junsheng Electronics, all of which are core domestic component suppliers.

Junsheng Electronics holds the second largest market share globally in automotive safety systems, and also ranks among the top five globally in automotive electronic systems and high-end automotive functional components.

Through in-depth cooperation with Weilai, Junsheng Electronics has received a great deal of assistance from Weilai in global mergers and acquisitions. It is also one of Weilai's most core suppliers. Over the years, Junsheng Electronics' influence in the industry has been growing.

In addition, Tan Jincheng also has a strong network of connections with domestic and foreign suppliers such as Sanhua, Wanxiang, Bosch, NXP, and NVIDIA.

For Xiaomi to quickly enter the car manufacturing field, it is crucial to have the help of Tan Jincheng or Weilai Group. This would allow them to avoid many detours, as evidenced by the development of Xiaopeng Motors in recent years.

Honest He Xiaopeng listened to Tan Jincheng's advice and did whatever he was told. Now, not only are the cars selling well, but the company has also gone public. Moreover, there haven't been any incidents like the one in his previous life where he was bullied by the management team, resulting in costs that were 20% to 30% higher than his competitors.

GAC has been underperforming in recent years, while Xiaopeng Motors has gradually gained prominence in Guangzhou. Li Bing, who initially refused to listen to advice, also started to improve his situation after changing his approach in time.

To put it bluntly, he's here today to freeload.

"Uncertain production capacity makes it impossible to determine the purchase quantity, which is indeed a problem."

After hearing Lei Jun's idea, Tan Jincheng hesitated. Making connections was no problem, and his company could offer certain discounts if they had a good personal relationship. But he couldn't let other parts manufacturers also get cheaper prices, could he?
Negotiation requires leverage; this is the normal logic of business.

With Lei Jun and Xiaomi's marketing capabilities, as long as the pricing can target specific consumer groups, sales will definitely be good regardless of how well the cars are made. Over the past ten years, Xiaomi has gained a large fan base.

In fact, in terms of marketing models, Xiaomi and Huawei follow the same path: through years of subtle influence, they have solidified their consumer base and tapped into the consumption potential of their fan base.

This tactic works for everything from mobile phones to cars; it applies to any consumer product. You could call it exploiting consumers, but as long as someone is willing to pay, it's fine.

"It is indeed a big problem. We are prepared to lose money, but it's always better to lose less. Mr. Tan, do you have any good ideas?"

Ignoring Tan Jincheng's expression, he figured since he was already there, he had to take something back with him; it wasn't the first time he'd done this.

"There is indeed a solution, but I don't know if you'd be willing to accept it."

Seeing that he couldn't avoid it, Tan Jincheng had no choice but to seriously discuss the topic. However, he did have a solution, which he had discussed with He Xiaopeng at an industry forum, but he hadn't put it into action yet.

Leibusi said happily, "I knew you had a way. Tell me quickly."

"It's actually quite simple: joint procurement. I've discussed this issue with Mr. He before."

The so-called joint procurement is when an OEM with bargaining power in the supply chain, together with one or several smaller manufacturers, places orders with core component suppliers. In this way, everyone can benefit in terms of both procurement costs and bargaining power.

Even companies like Weilai Auto, which purchase batteries from Jinshidai, can enjoy the same benefits, maximizing the protection of supply chain costs and security.

"Joint procurement?"

Lei Jun immediately understood the key point: joint procurement is nothing new and can indeed bring benefits to multiple parties. In terms of modular component supply, there are indeed no problems.

However, this applies to new energy vehicles. Volkswagen has unified the supply of auto parts, but new energy vehicles have separated this aspect. Take the most basic door handle as an example, there are all sorts of door handles on the market.

To put it nicely, it's about pursuing personalization; to put it bluntly, it's about creating trouble for consumers and the supply chain.

If joint procurement is to be carried out, then naturally there must be a production standard, and who should be the one to follow that standard?

"You really don't get the best deals easily, kid. I'll think about it some more. By the way, could you introduce me to the owners of Top and Junsheng?"

"No problem, you're not in a hurry anyway."

Just last month, the head of public relations was still denying that they were going to build cars, saying there was no rush.

"I'll be staying in Ningbo for two days. Could I take the opportunity to visit your research institute? It's been doing quite well these past few years, and I'd like to learn from it."

(End of this chapter)