2003: Starting with Foreign Trade

Chapter 993 "Little Deng, Middle Deng, Old Deng".

Cars are different from mobile phones, and Wei Lai didn't play the same trick as Lei Jun. He prepared 10,000 cars in stock, so he didn't have to worry about not having cars to sell.

Since today is the eighth day of the first lunar month, the first day back to work after the New Year, the data from the first day is not important at all. After giving a few instructions to the two teams, Tan Jincheng let them continue working.

He had more important things to deal with.

Zhang Yong officially resigned on New Year's Day this year. Although he still keeps in touch with the management of Weilai every week and is completing the handover tasks according to procedures, Weilai Group is currently in a state of having no CEO.

The specific work is all handled by Tan Jincheng himself. As of now, Weilai Group has not announced any new CEO, and Tan Jincheng's position has not changed.

Although there have been rumors that Lotus CEO Li Xiang will take over as CEO of Weilai, a month and a half has passed and there has been no announcement yet, which is obviously not normal.

"Ignore them. If it doesn't make sense, so be it. How's the contact with Robin going?"

In 2020, new energy vehicle companies were the darlings of the capital market. Tesla's market value exceeded 6000 billion US dollars, and Weilai's market value in the A-share market exceeded 8000 billion RMB. New energy vehicle companies such as Wenjie and Xiaopeng have seen their value multiply many times after their IPOs.

The capital market is more tolerant of losses rather than solely pursuing profits. It can be said that 2020 was the best year for new energy vehicle companies, bar none.

Lotus's IPO, launched in 2020, touted the concept of an electric supercar and told the story of an electric version of Porsche. With the backing of Li Wei and few competitors, it was very popular with the capital market.

Investors are now more focused on future growth than short-term profits, which is completely different from the capital environment a few years from now.

Looking at the emerging new brands, most of them successfully went public in or before 2020. Lotus's decision to IPO at this particular time is considered by the market to be the smartest choice.

From the perspectives of industry background, market valuation logic, and the popularity of the new energy sector, Lotus's strengths and weaknesses are very obvious.

On the positive side, Lotus maintains a gross profit margin between 20% and 25%, has a rich history, is a luxury sports car brand going electric, something Porsche is currently doing, and its parent company's supply chain and domestic market channels have brought considerable sales to Lotus, with the expectation of a sales surge.

In terms of competitors, there are currently only the Porsche Taycan series, which is just starting out, and the Lotus series, which is already approaching maturity in electrification, giving them a clear first-mover advantage.

As for weaknesses, they are also obvious: the scale is small, which cannot be compared with Porsche's annual sales of over 30 vehicles. The market is more dependent on sales in China and Europe, and profitability has not yet been proven.

Furthermore, the weakness still stems from the parent company. Although Lotus has benefited from the parent company's supply chain and channels, which has boosted its valuation, there are always downsides. The capital market has expressed concern about Lotus's lack of independence.

Regardless, Lotus's retained valuation reached $180 billion. When the market is in a frenzy, money really doesn't matter.

Among Lotus's potential competitors, Rivian is valued at over $250 billion and Lucid Motors SPAC is valued at $240 billion. One of them is not yet in mass production and the other has not yet been delivered.

Compared to them, Lotus electric sports cars have already delivered thousands of units, giving them a clear advantage.

Lotus has completed its global roadshow, and subscription rates are quite high. The conservative valuation is $180 billion, the neutral valuation is $200 billion, and the optimistic valuation could reach $300 billion.

Also on February 19, Lotus officially submitted its IPO filing to the U.S. Securities and Exchange Commission, planning to list on the New York Stock Exchange under the ticker symbol "LOT". Underwriters include Credit Suisse, JPMorgan Chase, and Bank of America Securities.

The IPO price range and the number of shares to be issued are yet to be determined, mainly because the amount of funds to be raised is still uncertain. The $100 million listed in the prospectus is merely a placeholder for routine disclosure and does not represent the actual amount of funds to be raised in this IPO.

However, based on both conservative and optimistic valuations, Lotus's latest funding round is estimated to be between $18 billion and $40 billion, with Wall Street analysts predicting a funding amount of $25 billion.

The corresponding valuation for Lotus is $250 billion; clearly, Wall Street is giving it a slightly higher-than-average valuation, which is relatively optimistic.

From annual sales of thousands of vehicles to tens of thousands, Lotus has differentiated itself through technological innovation and electric supercars. With its brand heritage and the story of its electrification transformation, Lotus has given the capital market what it wants and has chosen to believe that Lotus can tell this story well.

This certainly reflects optimism towards Weilai and Tan Jincheng. Weilai is already the new energy vehicle company that poses the greatest threat to Tesla worldwide. In the current hot market environment, the capital market is very optimistic about the more high-end Lotus.

In addition, Tan Jincheng has always had a good reputation on Wall Street. From Orange Technology to Orange Live, as well as some of the companies he has invested in, all of which are listed on the US stock market have performed very well.

Even for Wenjie, despite a prolonged decline, last year's rebound allowed Wall Street investment institutions to make a fortune, and Xiaopeng Motors' successful IPO also brought substantial profits to investment institutions.

This is how reputation is built. Whether in China or abroad, a partner who can help all partners make money is always the best choice, regardless of national borders.

Of course, both Li Xiang and Tan Jincheng are very satisfied with this IPO. The minimum financing amount of US$18 billion has far exceeded the US$15 billion financing amount of Xiaopeng Motors, making it the largest financing of a domestic car company between 2020 and 2021.

The listing of Lotus also made the Jiangcheng government extremely happy. 2020 was a very special year for Jiangcheng. In fact, apart from this, as a traditional industrial powerhouse in the automotive industry, Jiangcheng has lost too much in the new energy vehicle industry in recent years.

In fact, before the official establishment of new energy vehicle brands such as Xiaopeng, Wenjie, and WM Motor, Jiangcheng had tried to attract them, but unfortunately missed the opportunity. As a result, Jiangcheng did not have a decent new energy company before Lotus officially settled in.

The gradual establishment of Xiaopeng in Guangzhou has brought vitality to the city's new energy vehicle industry. Not to mention Geely, BYD, and Weilai, even Seres, after cooperating with Chrysanthemum, has attracted a lot of investment opportunities to the mountain city.

The former king has now fallen behind, which is somewhat disappointing. However, Lotus has given Jiangcheng a good start this year, and barring any unforeseen circumstances, Lotus will officially list on the New York Stock Exchange at the end of February or the beginning of March.

This is also the first listed company that Weilai has contributed to Jiangcheng, and it is also the largest company in Jiangcheng and even the entire Hubei Province to date to be listed in the United States.

"The other candidates were ambiguous, but as you might expect, Robin's side responded more positively, after all, the compensation and working conditions we offered were very generous."

The capital market was concerned about Lotus's lack of independence, and Tan Jincheng's solution was simple: to strongly invite Robin Danholm, the current chairman of Tesla, to join as the CEO of Lotus.

This was originally part of the plan. When it comes to the ability to tell stories to foreigners, Tan Jincheng is no less capable. With an internationally renowned CEO who has a certain degree of strategic authority, there is absolutely no need to worry about this.

Robin Danholm was a key figure in Lotus's IPO process.

Surprisingly, foreigners actually quite like this approach.

"Okay, if the response is positive, then we can get the announcement done as soon as possible, so you can have some free time. I've been very busy since Lao Zhang ran away."

Zhang Yong's departure has had a significant impact on Weilai. Previously, Zhang Yong was responsible for some daily operations and liaison with B-end market clients. Now, these tasks have been handed over to Tan Jincheng. During the months since his departure, Tan Jincheng has been preoccupied with daily operations.

Many documents and decisions that previously only required Zhang Yong's signature now fall on his shoulders.

"Haha, boss, don't worry, it'll only take two months."

Lotus did not publicize its IPO filing submitted in the early hours of February 19th, but it did receive some publicity in Jiangcheng, as this was their most memorable overseas IPO to date.

On the first working day after the Spring Festival, Weilai Group not only launched pre-sales for two new models, but also had a subsidiary go public, which certainly attracted a lot of attention.

Today, A-share listed company Weilai Co., Ltd. surged 15.09%, breaking through 400 yuan and closing at 404.10 yuan, with its market value approaching 8800 billion yuan. Since the ChiNext board changed to a 20% daily price fluctuation limit, Weilai Co., Ltd.'s stock price has fluctuated significantly.

The boom in new energy vehicles continues. In addition to the positive outlook for new car launches and Lotus's IPO, another important reason is the optimism surrounding Welai's 2020 annual report.

Every year in February and March, although the market is generally not very active, there is always a surge in speculation about annual reports and first-quarter reports.

Jinshidai has already given a revenue forecast for 2020, which is around 500 billion yuan. Yuechi Auto and Weilai Auto have not yet announced their revenue forecasts, but the most conservative estimate is that Weilai Auto's revenue in 2020 will be at least 2000 billion yuan.

Because their annual reports have not yet been fully released, specific data cannot be compiled. However, in 2020, there were approximately 85 to 110 companies nationwide with annual revenue of 2000 billion yuan or more.

This includes industries such as energy and chemicals, electricity, finance, real estate, infrastructure, and technology, many of which are monopolistic enterprises. Weilai is actually one of the most competitive in China.

"We're not in a rush, but it's better to announce it sooner rather than later. If we announce it sooner, the valuation might come out faster. We might as well make money off the Americans."

Lotus's minimum valuation of $180 billion is roughly equivalent to 1200 billion yuan. In Tan Jincheng's view, this valuation is clearly a huge bubble, and the valuations of other emerging electric vehicle companies are also particularly inflated.

Selling only a few thousand cars a year, or even tens of thousands, doesn't justify this valuation. But the capital market is just too overheated.

If we're talking about companies with the most severe bubble, Rivian stands out. Backed by Amazon and with Ford's intention to collaborate on electric vehicles, it's targeting the blue ocean market of electric pickup trucks. This differentiated market, coupled with its European and American origins, makes it a perfect fit.

This led the capital market to bet on the company as the next Tesla, and enabled this car company, founded in 2009 and still without mass production, to raise $100 billion in funding before this year.

Rivian is also planning to list on the US stock market this year, aiming for a market value of hundreds of billions of dollars. When it comes to being ruthless, they are the ones who can do it. Therefore, Tan Jincheng has no qualms about telling stories to fleece Wall Street.

If it were just announced that Robin was interested in becoming the CEO of Lotus, the funding amount would definitely increase. Compared to the benefits offered to her, it wouldn't be a loss at all.

“Okay, I’ll talk to Robin and have the roadshow team spread the word on Wall Street.”

Li Xiang does not reject such hype. He will also hold shares in Lotus once the IPO is successful, including personal purchases and equity incentives. After the IPO is successful, Li Xiang will hold approximately 1.5% of Lotus's shares.

This is a very substantial fortune, one that even someone who has already achieved financial freedom cannot refuse; that's the allure of going public.

"Alright, let's talk about Wei Lai's matter. You've been paying more attention to it lately, and you'll be taking over in a few months."

Based on Lotus's current progress, Li Xiang could take office as early as April of this year, which means that the delivery of the Exeed S01 and Zhidou Rainbow will fall on his shoulders.

"According to JD Power's research, consumers' concerns when buying new energy vehicles have shifted from range anxiety to charging convenience, which is a landmark event."

In the business market, a change in consumer attitudes can often drive an entire industry. For example, the shift from feature phones to smartphones seemed to cause traditional giants like Nokia and Motorola to disappear overnight.

The root cause is that we haven't paid enough attention to changing consumer attitudes in the market.

In January, the new energy vehicle market saw four models achieve monthly sales exceeding 10,000 units, ranging from low-end to high-end. Several models also achieved monthly sales exceeding 5000 units, and as many as 15 models achieved sales exceeding 2000 units.

The variety of car models is even more diverse, ranging from sedans to SUVs, with almost the entire market segment experiencing a surge.

In addition, in terms of market penetration, the penetration rate of new energy vehicles in January has risen from 5% last year to 8.6% currently, which also marks the market entering a period of accelerated popularization.

Seizing opportunities, focusing on self-improvement, and striving to increase sales of all vehicle models are the challenges that Li Xiang, the incoming CEO, must face.

"The market is maturing, which is a good thing."

A policy-driven market has its advantages; everyone competes based on their background, and small players without connections find it difficult to survive. In a truly market-driven market, real ability comes into play, although policy guidance will continue to influence the new energy vehicle market.

Li Xiang showed great enthusiasm for the upcoming challenges.

"Haha, don't be so happy yet. This year, Weilai's sales target is 150 million vehicles, which is a big challenge for you as the new boss."

The leap from CEO of a car company with sales of a few thousand vehicles to one with sales of a million is like a penniless man winning a huge lottery prize. The first thing to overcome is the psychological gap.

"But we still have you, boss, to keep things in order."

Although Li Xiang was confident, he didn't dare to make any boastful claims. In the past, at Lotus, selling a thousand or so units of a certain model a month was enough to make the company's sales and management happy. However, if a new model only sold a few hundred or a thousand units a month, then they would have to consider whether to cancel that model.

Even high-end models like the ES8, with an average price of over 40 yuan, had impressive monthly sales figures of over 2500 units last year.

“I’m not worried about the long-term sales of the Exeed S01, but there is an important issue in the short term that you need to consider.”

What was the new energy vehicle consumer market like in the second half of 2020 and January of this year?
Simply put, it's like a dumbbell, big at both ends and thin in the middle.

The A00 segment and the high-end market are selling very well. Tesla, the Wooye brand, and high-end models like the BYD Han are also very popular. Models under 50,000 yuan sell very well, and those over 200,000 yuan sell very well as well.

However, its market performance in the 5 to 20 yuan price range is generally mediocre.

There are many reasons for this. The biggest factor is that this consumer group faced great survival challenges during that special period last year, but this is not the main reason.

The main reason is that consumers in the price range of 5 to 20 yuan, especially in the range of 10 to 15 yuan, still prefer gasoline cars and are not interested in new energy vehicles, and have little desire to change their cars.

For car manufacturers, there is another hidden competitive advantage: insurance.

Insurance company actuaries are the most cunning. If we look at the car market through their lens, they can categorize consumers under 25 as young consumers, those between 25 and 40 as middle-aged consumers, and those over 40 as older consumers.

Little Deng, Middle Deng, Old Deng.

Younger drivers are less stable and prone to accidents, making them less desirable to insurance companies and resulting in higher premiums the following year. Older drivers are similar; aside from those with drivers, older drivers also tend to have lower energy levels and are more prone to accidents.

Those who drive steadily and have a low accident rate are the most popular consumer group for insurance companies. This allows them to earn more premiums. Most people with zero accidents throughout the year fall into this category.

The middle class is clearly one of the main consumers in the 10 to 20 yuan price range. They don't want to change their cars and their preference for gasoline cars is hard to change.

Li Xiang's task was to stimulate their demand for new cars and make the Exeed S01 a hot seller as soon as possible.

"You got into China at 25? Boss, that's quite an exaggeration."

"This isn't my opinion; it's the classification made by the actuaries at the insurance company. It has nothing to do with me."

In reality, although the Exeed S01 targets the young user market, it is actually aimed at white-collar workers, tech enthusiasts, and first-time car buyers aged 25 to 35, who are also the "middle class" in the eyes of insurance companies.

Tan Jincheng told the Exeed S01 team not to pay too much attention to the data on the first day, actually because he was afraid of discouraging them, as this segment of consumers tends to be quite rational.

"I'm giving you a task: write a delivery and subsequent marketing plan for the Exeed S01. Consider this your first task since taking office."

"Ah, I haven't even started my new job yet, and you've already assigned me tasks."

Li Xiang was helpless. Although Lotus's IPO had entered a phase after the filing of documents, it did not mean that there were no follow-up matters to deal with. He did not have much time to devote to the work of becoming the CEO.

"Hehe, you're an excellent product manager too, this is no problem for you, let's just leave it at that."

As for marketing, the CEO doesn't necessarily need to be in charge personally, but how could Tan Jincheng let such an excellent product manager go to waste? Besides, this is also to build momentum for Li Xiang. If he does well, he can take credit for the appointment, which will also make the entire Wei Lai team more convinced.

The 40-year-old CEO of a leading automaker, who has no prior experience as a senior executive in a large, leading manufacturing company, will undoubtedly face considerable scrutiny.

"What if the marketing approach doesn't work?"

"If it doesn't work out, I'll just reject it for you. Besides, I'm here for you."

"That's good, then I'm not afraid anymore."

With his boss overseeing things for him and even taking the blame, Li Xiang felt even more confident. He was also touched, as this was a sign of full support for his rise to power.

For the next week, Li Xiang stayed at the Weilai headquarters to handle the follow-up matters of Lotus's listing, and also to supplement the marketing plan for the launch and delivery of Exeed S01. He was extremely busy.

During this week, rumors circulated on Wall Street that Tesla President Robin Danholm would join Lotus as the new CEO, and Danholm himself expressed his willingness to join the company.

Musk's attitude was also very generous after communicating with Tan Jincheng, saying that this was a memorable event for the electric vehicle industry and wishing Robin well.

With multiple parties expressing their support, it's basically confirmed that Robin has joined Lotus as CEO. Although the specific details of the negotiations between Lotus and Robin are unknown to outsiders, it has generally alleviated the capital market's doubts about Lotus's independence.

In addition, Tan Jincheng responded to some public questions regarding Lotus's IPO, clearly stating the independence of Lotus and even Proton, which gave the capital market a lot of confidence.

Lotus, positioned to transform into a luxury electric sports car brand, will officially release its pricing a week later, while maintaining the gasoline-powered sports cars produced at its Heysel factory and leveraging the advantages of the Jiangcheng Industrial Park and its unique domestic supply chain.

Lotus, which adopts an AB share structure and has a total share capital of 10 billion shares, saw its shareholding in Lotus diluted to 45.46% by ByteDance and Tan Jincheng through a series of companies after the IPO, but still maintains control.

As predicted by Wall Street analysts, Lotus raised a total of $25 billion in this round of financing, although there were some differences in the specific valuation. Before the IPO, Lotus's overall valuation reached $205 billion.

"That's fine, I'm satisfied with this number."

Sure enough, money is easy to get during periods of capital frenzy. I seem to recall that Lotus's valuation wasn't this high when rumors of its IPO first surfaced in my previous life.

(End of this chapter)