2003: Starting with Foreign Trade

Chapter 987 is causing trouble again!
The integration of Zhidou Auto has been underway for several months now, and progress has been relatively smooth.

Zhidou has completed its business registration change, increasing its registered capital to 14.2 billion yuan. The management team has also been reorganized, with Zeng Jixiang, CEO of Weilai Technology, serving as chairman of Jinling Zhidou and also as its legal representative.

Besides Zeng Jixiang, the other five board members include Zhang Xupeng, Zhang Xuhui, Hu Zhengnan, and Bao Wenguang, who also serves as the part-time general manager. There is also an investor representative. Zhidou has officially entered a stage where it is led by Weilai Group.

As one of the few new energy vehicle companies in the country with dual qualifications, Zhidou, which has two major production bases in Gansu Province and Ninghai, has the most important task at present: to resume production.

The Gansu base, with an annual production capacity of 40,000 to 60,000 vehicles, is currently the focus of the resumption of work. This is one of Zhidou's most core assets, and according to the plan, the Gansu base will resume production in early 2021.

The first model after the reorganization was named Zhidou Rainbow, which means rebirth. This year, Zhidou will also follow this type of weather-related name system in its naming system.

BYD has an ocean series, and Weilai is preparing to create a sky series for Zhidou, echoing the major brands of its parent company.

"The Rainbow Project will roll off the production line at the Gansu production base in April next year, and pre-orders will begin in June. Our priority is to meet the needs of domestic customers."

"As for exports, our plan is to wait until the domestic market stabilizes before restarting them."

Bao Wenguang has been extremely busy lately. He is not only a member of the board of directors of Xinzhidou, but also the general manager of Gansu Zhidou, which is the production company.

Besides cooperating with the head office to restructure the company, his primary task was to get Zhidou back to production as soon as possible.

Previously, due to debt disputes, the two bases were either pledged or idled, and were almost completely shut down.

The Gansu base is ready to resume production. As for the Ninghai base, this production base, which is planned to produce 30 vehicles per year, is currently basically abandoned and is not yet included in Zhidou's production resumption plan.

Wei Lai also has a long-term plan for Zhidou, which is to first resume production at the Gansu base and start selling cars.

Once the company is back on track, it will restart its overseas export channels, which will be followed by capacity expansion at the Gansu base and reconstruction of the Ninghai base.

According to long-term plans, the Gansu base will have an annual production capacity of over 10 vehicles. Combined with the planned Ninghai base, the annual production capacity of 40 vehicles will be sufficient to guarantee Zhidou's production capacity in the microcar sector.

But that's all speculation. If the car doesn't sell well after it goes on the market, it'll be a flop.

"What about the cost?"

The Wuling Hongguang MINI EV is priced between 2.88 and 3.88 yuan, which is about the same price as a decent electric scooter for seniors.

It has basically reached its limit. It can be said that the Hongguang MINI EV has locked down the price of micro electric vehicles. If you want to sell well, you have to refer to this price standard.

This is what is known as market-driven pricing, just like the current situation in the high-end pure electric SUV market.

From compact SUVs to mid-to-large SUVs, Weilai covers the entire product line with the ES3, ES6, and ES8.

If L1 is added, Weilai is currently the absolute sales leader in this field, and other companies that want to enter the market must refer to Weilai's pricing.

Just like Apple in the mobile phone market, Apple, which previously held the power of pricing, was doing very well both domestically and internationally.

Previously, both internationally and domestically, Apple faced threats from Samsung and Huawei regarding pricing power.

This is actually a major reason why Apple's market share is not as high as before. In the end, the competition between companies is actually a competition for the power to price products.

The chrysanthemum factory's extensive marketing efforts, even resorting to methods that some passersby find offensive, are actually aimed at gaining pricing power.

The same applies to Xiaomi now. Previously, the 1999 yuan price point was Xiaomi's domain, but both the brand's move towards high-end positioning and the intensity of market competition have made Xiaomi dissatisfied or unable to stop there.

"In terms of cost, we can only say that we try to match the cost of the Hongguang MNIN EV. In the early stages, our costs are definitely not as high as Wuling's, but fortunately we have the support of the head office."

How can a car that sells for 20,000 to 30,000 yuan make a profit? This is the biggest question for consumers. As a major consumer good, a strategy of simply offering low prices is not a particularly good approach until consumers' perceptions are changed.

Consumers will worry: if you sell it so cheaply, you're not even making a profit. What if you go out of business? Where will I get my car repaired?
At this point, the endorsement of a large group is crucial. Hongguang is produced by the national brand Wuling, while Zhidou is backed by Weilai. Using Weilai's identity for publicity and marketing is the best breakthrough point in the early stage.

Of course, no company would actually sell cars at a loss; the difference is just a matter of how much profit they make. Although the Hongguang MINI EV is sold cheaply, it also has its own survival rules under extreme compression.

According to the teardown data of the top-of-the-line model (3.88 yuan) by a professor from Xiao Rizi University, the material cost of the Hongguang MINI EV is about 2.69 yuan, accounting for 69% of the selling price.

Based on our own disassembly and SAIC's financial analysis, the total cost of the 2020 Wuling Hongguang MINEV is approximately between 2.6 and 2.9 yuan.

With a price range of 2.88 to 3.88 yuan, the theoretical direct profit margin is very limited.

There have been rumors on the market that the profit of a Hongguang MINI EV is only 89 yuan, which is obviously a marketing tactic.

The actual profit of a car is not calculated in this way. The profit shown by the Wuling Hongguang is indeed small, but there are also hidden benefits.

As a model that accounts for 70% of Wuling's sales, the first profit driver is new energy vehicle credits.

According to the current dual-credit policy, each Hongguang MINI EV can generate approximately one positive new energy credit.

Based on this year's points trading price, each point is worth approximately 3000 yuan, meaning the Hongguang MINI EV's annual revenue from points alone is close to 400 million yuan.

In addition, if the Hongguang MINI EV had not been produced, SAIC-GM-Wuling would have had to pay a fine of approximately 36 billion yuan for the negative credits of 92.2 gasoline vehicles in 2020. By offsetting these credits, SAIC-GM-Wuling directly saved a huge amount of money.

In addition to points, government subsidies are also an important source of income.

Tan Jincheng nodded: "As long as the cost is within the selling price range, it's fine. In the early stages, it's okay if it exceeds the price a little. As sales gradually increase, the cost will come down."

Under the same pricing strategy as the Hongguang MINI EV, the Zhidou Rainbow is priced between 2.79 yuan and 3.99 yuan.

Any automaker knows that if the price exceeds this level, it will be impossible to compete with the Wuling Hongguang MINI EV.

However, Tan Jincheng is well aware that the profit model for low-end models will never be based on the car itself.

As long as the cost can be kept within the selling price range, even if it exceeds it slightly, it doesn't matter. In the early stages, Tan Jincheng didn't expect Zhidou to make money.

Compared to the advantages brought by SAIC's top-tier background, Weilai is actually not too bad in terms of key components.

First, there's the three core components of new energy vehicles: the electric drive system, the battery, and the motor. This is the core cost, and the supply of this part can basically be self-sufficient.

Just because Zhidou isn't making money doesn't mean Weilai isn't making money.

Secondly, regarding the body and parts, we can share some of the parts from our existing low-end models to achieve large-scale procurement.

Furthermore, key components such as air conditioning compressors and chargers can be sourced from low-cost suppliers.

As for indirect costs such as R&D, marketing, and logistics, these can be spread out by sharing the company's own channels in the early stages.

Unlike ByteDance's acquisition of a controlling stake, the restructuring of Zhidou and Lifan was led by Weilai Group.

As the controlling shareholder, we have both the obligation and the need to help our subsidiaries get back on track as soon as possible.

Besides Weilai, another major shareholder of Zhidou Auto, Shanchi Technology, can also leverage its offline channels to help Zhidou quickly expand across the country.

From the very beginning, Zhidou's target was Wuling, the dominant player in the microcar market. Only by setting its sights on Wuling could it have a clear plan.

In 2020, the microcar market was mainly dominated by Wuling, Chery and Great Wall, with Wuling alone accounting for nearly 30% of the market share.

"Let's speed up production. The Weilai Research Institute has already developed your model, and the head office and Shanchi will do their best to help you open up the market."

The prototype design drawings for Rainbow Bean are available. The task assigned to the Weilai Research Institute after taking over is actually quite simple: to make some optimizations based on the original design and design a product that conforms to current aesthetics and can match the Weilai industrial chain.

With several months of overtime work, producing a microcar is not difficult. As for safety performance, Tan Jincheng is not worried. Zhidou, as a company that entered the new energy vehicle market earlier than Weilai, has had its glory days and has some experience in production processes and other aspects.

Bao Wenguang is also an experienced manager. The operational problems he encountered were more due to policy changes and a lack of strategic vision in the company. Tan Jincheng was not worried about letting him be a manager.

"Okay, I will arrange it as soon as possible." In the past few months, Bao Wenguang has been traveling back and forth between Gansu Province, Nanjing and Ningbo. He has reported to Tan Jincheng many times. Through exchanges and visits to various bases in Weilai, he has also gained a certain understanding of Weilai's model.

At the same time, we have a clear understanding of Zhidou's positioning.

In the future, Zhidou will not have any plans to produce models priced above 100,000 yuan. In the current market where there is a price range of 50,000 yuan, Zhidou will compete with leading brands and regain its foothold in the market before choosing to produce some models priced between 50,000 and 100,000 yuan.

In addition, the Ningbo Ninghai production base is still an unfinished project. Weilai will also work with the local government to restart the construction of the Ninghai production base as soon as possible through capital investment, and put it into production as quickly as possible while ensuring production.

Ningbo is Tan Jincheng's stronghold. Although the Zhidou unfinished project is a legacy issue, now that he has taken over, he cannot let the unfinished project continue.

With a production capacity of 400,000 vehicles, Zhidou certainly doesn't need to meet its target, but that's okay. The headquarters can delegate some of the production tasks for certain models to Zhidou, such as the upcoming Exeed S01.

Zhidou can be responsible for part of the production tasks of Qiweilai, which can also support some of Zhidou's workers and ensure the normal operation of the factory.

At the end of December 2020, major media outlets and industry peers received invitations from Wei Lai for a press conference scheduled for New Year's Day.

The press conference was held at Weilai's branch in Shanghai.

This branch has now become an important foothold for Weilai, radiating outwards to the world through the Shanghai branch. Tan Jincheng spends at least one month a year working here, and other senior executives of Weilai also frequently appear at the Shanghai branch.

The combination of cars and anime style was somewhat hard to understand a few years ago. People just thought it was a whimsical act by the young boss Tan. In any case, given Tan Jincheng's age, everyone just assumed that he liked anime culture like some other young people.

However, in recent years, the development of the ACG (Anime, Comics, and Games) market has been so rapid that it cannot be ignored. In 2016, the ACG market was only worth 189 billion yuan, but by 2020, it had reached the level of hundreds of billions of yuan.

Anime-style games already account for 10% of the entire game market.

“I remember in April, Weibo conducted a survey that showed their number of ACG (Anime, Comics, and Games) users was close to 300 million, with 38.8% of them living in first- and second-tier cities and the number of users in third-tier cities growing rapidly. Is this data accurate?”

Cai Haoyu nodded with a smile: "Pretty much. The user base is indeed quite large, mostly concentrated in the under-25 age group. Although they are young, their spending power is very strong."

Games, anime, merchandise, etc. are all keywords in ACG (Anime, Comics, and Games) culture. More than 60% of users are willing to pay for merchandise, and the willingness to pay for consumer goods such as figurines and models is also over 40%.

"Everyone in our company says that President Tan has a good eye. He started to lay out this industry a few years ago. Now, not only is Tianmei doing very well, but Weilai has also gained a lot of goodwill among this user group."

Old Cai is an old acquaintance, and he speaks quite casually. Today, he is here to support Wei Lai's press conference. As a neighbor, he was probably one of the first people to know that Tan Jincheng has a deep understanding of anime culture.

"Each generation has its own Moutai."

Stamp collecting, antique collecting, and the foreign merchandise popular among those born in the 80s and 90s, such as Ultraman merchandise, as well as sneaker reselling, are all essentially the same model as the current anime and manga figurines.

Consumption is not static, but consumption patterns and consumer goods can change. Understanding consumption patterns is essentially about seizing opportunities in the consumer market.

Companies like miHoYo and Pop Mart, for example, Pop Mart, a company founded in 2016, has grown to the point of being listed on the Hong Kong Stock Exchange in just a few years through business models such as purchasing figurines on behalf of customers. On the 11th of this month, Pop Mart officially listed on the Hong Kong Stock Exchange.

Pop Mart's costs are essentially influenced by factors such as anime culture and new consumption trends.

"Does each generation have its own Moutai? This is an interesting saying, but it does explain the essence of the consumer market very well."

There are often discussions on the internet about things like stamp collecting disappearing and young people no longer liking to drink baijiu (Chinese liquor). Business owners think this is a problem with the consumer market, but in reality, it's just that people have other consumption preferences.

Or, to put it another way, young people can avoid being exploited by the old guard. If you go into stamp collecting, can you compete with the old guard? You'll be completely exploited. The liquor market is the same; resources are all controlled by the old guard.

However, new consumption is different. New consumption is a completely new model. Take anime and manga as an example. Most people don't even understand it, so there's no way to talk about it.

Just as the internet has impacted traditional markets, what business operators need to do is not complain, but change. In this regard, Tan Jincheng, who has lived two lives, has a more open-minded perspective than most business operators.

"Could Zhidou and Xingtu also do some collaborations with us?"

Lao Cai already knows the content of today's press conference. Weilai, which did not release any new cars throughout 2020, will launch five models in one go during the New Year's Day holiday. In addition to the newly revamped ET5, ES3 and L1 2021 model, the rest are the first products of the two major sub-brands.

Compared to the main brand, the two sub-brands are more in line with the aesthetic designs of young people.

In the past few years, miHoYo has collaborated with Wynn, Flash, and TiMi Studio multiple times, such as co-branded products, which sold very well. Unlike miHoYo, which develops large-scale games, TiMi Studio mainly focuses on small games in the field of anime-style games.

Paper games like Love and Producer were developed by the original Happy Games team. Making small games is their forte, and these small games with short development cycles and low costs sell very well in niche markets.

Although the lifespan is short, the money they make is substantial. In addition, the Happy team has taken a unique approach to overseas game development, focusing on the Middle East. The white-hat gaming market there is almost non-existent, but entering it is very difficult.

The main reason is cultural differences. However, the Happy Games team has long had experience in exporting mini-games. They chose to introduce some domestic web games to the Middle Eastern market through modifications, optimizations, and other means.

At first, it was rather rough, just a trial run, but the response was unexpectedly good and it sold very well. This caught the company's attention, and they tried it a few more times, and it still sold very well.

Since then, the Happy Games team has found its soul, developing more exquisite games by focusing on Arabic culture, allowing wealthy players to have a better gaming experience.

Although competition has intensified in the past two years, games that entered the market early and bear the "KAIXI" logo are synonymous with high quality in the Middle Eastern market and still occupy a large market share.

The reason for not using "KAIXIN" is actually intentional; a logo always needs to have some personality.

Tan Jincheng spent a lot of time tinkering, but didn't sell many cars in the Middle East. However, the Happy Games team caught up and helped him reap the benefits from the wealthy. This was truly an unexpected surprise.

However, this also opened up a new avenue for Tan Jincheng: live streaming.

Live streaming is incredibly popular in China right now. Orange Live could totally do some live streaming in the Middle East targeting wealthy viewers. Imagine the streamers battling it out while a tycoon like Kuku showers them with gifts – it sounds like such a fun scene.

“No problem. I think Xingtu and Zhidou can cooperate, especially Zhidou.”

Zhidou Auto has a certain reputation in the Yangtze River Delta region. This time, the Zhidou Rainbow, priced between 2.79 and 3.99 yuan, has been redesigned and is mainly aimed at young people.

Don't bite off more than you can chew. A "new brand" can expand its user base, but in the initial stage, it's best to target a specific user group. Only after you've opened up the market can you consider other options.

In terms of design concept, Zhidou takes trendy skins as its main selling point, offering a variety of skins that look colorful and vibrant, but also allowing for greater personalization in terms of selection. In addition, a customization strategy can also be adopted for the interior design.

The only difference is that it's a bit more expensive than the mass-produced version, but that's not a problem for young people who pursue individuality. As long as it doesn't exceed their expectations, they are willing to pay for this kind of personalization.

Zhidou's colorful skin and compact appearance do indeed fit the aesthetics of the anime/manga community, and collaborating with the largest anime/manga company in China is certainly a good choice.

"Okay, it's settled then. I'll have my company's team contact Wei Lai to see what's the best way to cooperate."

Currently, Zhidou's operations are still in Wei Lai's hands. After all, it would be a bit difficult for Bao Wenguang to ask Zhidou, which has just completed its restructuring and is still in the process of resuming production, to build a new team and open up the market on its own.

Marketing together with Exeed doesn't conflict with their price points or target audiences, and it offers certain advantages in terms of both cost and brand positioning.

"Okay, let's talk later. Let's head to the venue first."

The press conference is about to begin, and Tan Jincheng will be the main speaker again today.

"Speaking of which, it's been a long time since Wei Lai held a press conference. I hope it doesn't go wrong today."

"Haha, speaking of Wei, it's been a long time since he's held a large-scale press conference. I'm really looking forward to President Tan's performance today."

Want to see me fail?

"That's not the case."

Cai Haoyu just thought Tan Jincheng was quite interesting. He knew all the internet slang in private and sometimes even came up with some words that Cai Haoyu had never heard of before but were very vivid. He also had a very deep understanding of anime and manga culture.

You have to understand that you can't succeed in the world of anime and manga if you don't understand it. It's not as simple as just seeing the potential in the market and investing some money.

Mihoyo's collaborative projects with companies under Tan Jincheng often require Tan Jincheng's guidance. In addition, he has offered many suggestions on organizing comic conventions. He is truly an amazing person.

(End of this chapter)