Rebirth 08: Rise from copycat phones

Chapter 349 Hailan Automobile's Overseas Expansion Strategy
On July 6, Xu Shenxue appeared at the headquarters of Hailan Automobile.

In the past six months, Xu Shenxue has come to Hailan Automobile less frequently. The main reason is that Hailan Automobile has been on the right track and everything is developing step by step. Xu Shenxue does not need to pay too much attention to it for the time being.

I've been pretty busy lately and haven't had much to do, so I came over to see what was going on.

Bao Yongyan was very happy about Xu Shenxue's arrival. After all, no one wants to be in charge of an industry that is not valued by the boss.

Even though HaiLian Automobile has developed very well, with annual revenue of several hundred billion US dollars, it would be considered a super large high-tech enterprise anywhere.

The problem is that HaiLan Auto's boss Xu Shenxue is too special. HaiLan Auto, with annual revenue of tens of billions of dollars, seems very ordinary among Xu Shenxue's many industries.

After all, the Zhiyun Group next door had a revenue of 360 billion US dollars last year, making it a world-class giant.

Compared with HaiLan Automobile and Zhiyun Group, whether it is revenue, profit, influence or other aspects, it is actually not very good.

The senior management team of HaiLan Automobile, headed by Bao Yongyan, still hopes to get more attention from Xu Shenxue.

After Xu Shen learned it, Bao Yongyan first introduced the development of Hailan Automobile this year.

"This year, our sales of various models of vehicles have increased significantly compared to last year, mainly due to the significant increase in the production and sales of the mid-size sedan Hailan SLMC."

"Since the launch of this model last year, our Hailan SLMC has been widely welcomed around the world. We have delivered 180,000 vehicles in the first half of this year. We expect the annual delivery volume to reach 400,000 vehicles this year, making it our company's best-selling model!"

"This car has better sales in our country, with a domestic market share of 65 percent and an overseas market share of 35 percent."

"Except for this mid-size sedan, the sales of several other models have declined to varying degrees after the initial launch!"

"Among them, the coupe model Hailan SEC has experienced the most severe decline. Although we launched a two-door version last year, it is still difficult to restore the sales of this car. After all, this coupe is positioned as a science fiction toy and is not suitable for family use. Therefore, its sales were relatively large in the early days, but began to decline sharply in the second year."

"In the first half of this year, we sold a total of 70,000 Hailan SECs, and we expect the annual sales volume to be only 150,000 units."

"The sales of the large SUV model Hailan SEV has also declined, but it can still maintain a relatively large sales volume. After all, this model is positioned for both family and business use, and its appearance design is more in line with the aesthetics of the domestic, West Asian and North American markets. In the first half of this year, 100,000 units were sold, and the annual sales volume is expected to reach 220,000 units."

"As for large luxury cars, sales are not very good. Seven thousand units were sold in the first half of the year, and the annual sales are expected to be around 15,000 units."

"We analyzed that the reason why the sales of our coupe and SUV models declined is due to our market positioning and people's enthusiasm for smart driving in the early stage. Most of the sales orders in the early stage were from the curiosity and impulse orders of high-net-worth users, and few people bought them just for the purpose of using the cars."

"For large luxury sedans and mid-size sedans, most users buy them for their comfort and practicality."

Xu Shenxue was naturally very clear about this. In fact, the sales of the Hailan SEC model were extremely popular when it was released in the first year, and it was widely discussed around the world. When the sedan was mass-produced in the second year, the sales volume suddenly exploded to more than 400,000 units.

But just like Bao Yongyan said, these are one-time deals. They are all made by wealthy people who place orders out of curiosity and want to experience black technology. Most of them are high-net-worth young male users, such as various second-generations, bosses or executives of high-tech startups!

However, the number of such people was limited, and basically those who were willing to spend money to buy it had already bought it, so in the second year, sales plummeted to more than 200,000.

Then it continued to fall until now... This year, Hailan Automobile tried to launch the two-door version of Hailan SEC Coupe. It is called a coupe, but in fact it is considered a sports car. The starting price in China is about 600,000 yuan, but it did not cause much waves in the market. So far, the order volume is less than 20,000 units.

At this time, Bao Yongyan said: "According to our estimates, if the sales of the Hailan SEC model, the two-door and four-door versions combined, can be maintained at over 100,000 units in the future, it will be considered a success!"

"Our SUV models actually have a wider audience. Many potential consumers are very interested in our SUV models, but they are deterred by the high prices. Therefore, sales are also limited. Even if we sell them worldwide, it is difficult to break through the 300,000 mark!"

"After all, the price of our car is not low. The low-end version is priced at more than 600,000 yuan, while the high-end version is priced at 800,000 to 900,000 yuan."

"We are considering whether to launch a mid-size SUV with a price range of 350,000 yuan for the lowest configuration and 500,000 yuan for the highest configuration."

"This will form a good match with our mid-size sedan."

Xu Shenxue said: "This idea is feasible. At present, the price of power batteries is continuing to decline, the cost of batteries is continuing to decline, and intelligent driving technology is relatively mature. There is no need to invest too much additional cost. The cost of other spare parts has also been reduced after being diluted by the previous models!"

“It’s time to consider launching a mid-size SUV.”

"Although we were the first to launch smart driving and created a sensation with our black technology, which brought global attention and stimulated the sales of our high-priced models, this situation cannot last long."

"If we want to sell cars in large quantities, we still need to rely on the mainstream price of around 300,000 yuan. The success of our Hailan SLMC is due to its good control of performance configuration and price. However, this price is still a bit high. If we want to further stimulate sales, we still need to lower the price of this mid-size sedan to a level where it can be purchased for more than 300,000 yuan!"

"For coupes, large SUVs and luxury sedans, we need to maintain our brand and price structure, so we can keep them unchanged. For mid-size models, whether SUVs or sedans, we need to try to lower their prices. It would be best if we could reduce the price to less than RMB 300,000 within two to three years, such as around RMB 280,000 or 290,000!"

"This price range is the mainstream of the automobile market. Only in this way can more people abandon gasoline cars and switch to our smart electric cars!"

"Otherwise if the price is too expensive, it will always be just a toy!"

"We can still rely on the global market to maintain a certain sales volume, but the global market will not be open to us for a long time. I have received news that the low tariffs in the US and European markets will not last long. By then, there will probably be high tariffs against our Hailan Automobile, so it will be more difficult to do business in the overseas market!"

"I have arranged for people to negotiate in Europe to invest in building an assembly plant there and explore the feasibility of exchanging market for technology, but this also takes time."

Market for technology, or market for employment, market for shares, etc. In fact, many overseas countries want to do this.

In fact, many countries are looking forward to investing in and building factories in HaiLian Automobile, an automobile company that represents the future direction of high-tech development.

The automobile industry is also a very special, even relatively closed market. In most countries’ automobile markets, you cannot sell your car just because it is good.

Because in order to protect their own automobile industries, most countries often impose various restrictions such as high tariffs on imported cars.

Previously, markets such as the United States, Europe, and even Japan almost opened their markets to Hailan Automobile... That's because China's automobile market is larger and they also want to come in.

At the same time, HaiLan Automobile has just emerged and its sales volume is too small, so it does not have much impact on the local automobile market.

Although HaiLan Automobile sells hundreds of thousands of vehicles a year, these are accumulated data from markets around the world. In addition, domestic sales actually account for the majority. If we break it down to overseas countries, the sales volume in each country is actually not large.

How to say it, HaiLan cars are classified as luxury cars in China, and they are also classified as luxury cars overseas.

Therefore, in the early days, Hailan Automobile was not targeted too much in the overseas market. As long as you abide by local laws and regulations, the other party will not block your imports... Of course, you still have to pay the tariffs.

However, this situation has changed after Hailan Automobile launched the Hailan SLMC model...

Before this car, the models sold overseas by HaiLian Automobile were very expensive. For example, the two models of HaiLian SEC and HaiLian SEV were high-end models sold overseas and were equipped with advanced driver assistance modules by default. The prices were very high.

Unlike the domestic market, where you can still buy a low-end version of the Hailan SEC for around RMB 500,000, in overseas markets, such as the US market, the Hailan SEC sold costs basically 700,000 to 800,000 in Chinese yuan.

However, as for the mid-size sedan Hailan SLMC, this car is mainly sold in large quantities, so its price is relatively low both at home and abroad.

In the early days, the domestic launch price started at 400,000 yuan. Later, some discounts were offered and the price was slightly reduced. Now, with various discounts, the starting price in China is about 360,000 to 370,000 yuan.

In foreign countries, this low-end version is also sold, and its price is often added with local tariffs. After some additional fees, it is sold directly. It is not like the previous models, which only sell high-end versions.

This leads to a problem. In some overseas countries, the Hailan SLMC can be obtained for about RMB 400,000. Even in countries with higher tariffs, it can basically be obtained for RMB 500,000.

For the Hailan smart electric vehicle, which has always been high-end in the overseas market, this can be said to be a bargain price... which makes many foreign consumers unable to resist placing orders.

After all, I've known from hearing people bragging and reading the news that the Hailan car is a high-tech car and its autonomous driving is awesome...but I've never been able to experience it.

Because overseas Hailan cars are too expensive, often costing hundreds of thousands or even millions, middle-class families in developed countries can't afford to buy them...

Now Hailan Automobile has launched a Hailan SLMC, which only costs 450,000 yuan. This price may be relatively expensive in China, but it is considered relatively "cheap" abroad.

Especially since we see Hailan cars that cost eight hundred thousand, nine hundred thousand or even millions of yuan every day, many people are tempted by a Hailan car that costs four or five hundred thousand yuan, not to mention that this car is positioned as a family car, with a large interior space and a comfortable driving and riding experience.

They also want to experience black technology...

However, this has also aroused the vigilance of the local automobile industry.

Hailan Automobile sells luxury models worth 700,000, 800,000 or even 1 million yuan in the local market, but they don’t really care…the total sales volume is not that high anyway, so the impact is not significant. However, Hailan Automobile that sells for 400,000 or 500,000 yuan, or even may further reduce its price to 300,000 yuan in the future, is enough to threaten the survival of the local automobile industry.

This is also the main reason why some overseas countries became wary and began to plan to impose tariffs on Hailan Automobile or take other preventive measures after Hailan Automobile launched the Hailan SLMC last year.

Xu Shenxue also learned about this situation...The European cooperating consortiums have complained to him several times: Mr. Xu, you can't do this recklessly!
If you make a luxury car, no one will care, but now you make a mass-market car, it will affect us.

Since there is an impact, the problem must be solved.

Either the other party imposes tariffs to keep HaiLan Automobile out, or HaiLan Automobile builds a factory locally and exchanges the market for technology/employment/shares/profits.

In short, HaiLan Automobile should not expect to continue exporting complete vehicles directly to other countries at low tariffs as it does now.

Especially for some countries that already have their own automobile industry...this is a huge particularity of the automobile industry.

This industry cannot be viewed simply as a consumer market. Behind it is often competition between conglomerates. If you don't handle the interests well, others will simply block you out.

The automotive industry is more difficult than smart terminals and semiconductors... because the latter two are actually too difficult.

Consumer electronics and semiconductors actually have extremely high requirements for the industrial chain. Not only do they require a large number of industrial workers, but they also require top-level technology. Ordinary countries simply cannot handle this, not even the whole of Europe combined.

Not to mention the semiconductor industry, there are hardly any semiconductor companies in Europe. STMicroelectronics has been half-dead and has long been unable to keep up with the times.

As for other countries, forget it… For example, India has been trying to develop the semiconductor industry, but no one is paying attention to it.

Chip factories often require investments of billions of dollars. How can they invest casually?
Even if they were to invest, it would not be a matter between companies. Large-scale foreign investment of this level and in this industry would definitely make the headlines in the social news section.

If Zhiyun Microelectronics wants to go overseas and invest in building a 12-inch chip factory with 14-nanometer technology in an overseas country, for example, in India... Zhiyun Microelectronics itself has no say, not even Xu Shenxue himself.

It has to be submitted for approval at every level... Of course, you know the result without submitting it. It will be 100% rejected, so don't even think about it.

The semiconductor industry has extremely high barriers to entry, and many countries can't even dream of getting involved in this. Under such circumstances, they naturally won't set any barriers to entry for chips.

For countries that don't have smart terminals or semiconductor industries, they simply don't stop overseas products from entering their markets. Of course... they still have to collect protection fees, and they'll impose fines on you from time to time.

But for cars, the threshold is much lower... If I can't make a high-end smart electric car like Hailan Automobile, why can't I make an ordinary gasoline car? If I can't make an ordinary gasoline car, why can't I make a three-wheeled motorcycle?
Therefore, any country with a certain amount of strength will have some automobile industry in its country and will be very concerned about protecting its own automobile industry.

We can refer to this point. Our import tariffs are not high, but other taxes are high... Why? It is to force overseas car companies to set up joint ventures with us, increase employment, increase tax revenue, and build an automotive industry chain.

This is a typical market-for-technology route.

We are not an exception. In fact, most countries with some industrial base do this. Very few industrial countries have completely failed in the automotive industry.

After analysis, Xu Shenxue's research team believed that the automotive industry was too special to replicate the two major industries of smart terminals and chips, and to follow a pure export model. If it wanted to expand the global market, it would have to go the route of building factories locally.

To build a wholly-owned factory overseas, or to build a joint venture factory...it depends on the specific automobile protection policies of the local country.

Of course, we still have to keep our hands on core technologies, especially some core parts and components, the production lines cannot be moved away, such as batteries and motors.

So this year Xu Shenxue has sent some of his subordinates to Europe, ASEAN and South America to contact local consortiums, conduct field investigations and explore various options for building factories locally.

Bao Yongyan was also looking forward to this, but the level involved was quite high... and he couldn't get involved. It was the boss Xu Shenxue who directly contacted some local financial groups.

After all, HaiLan Automobile is not an ordinary automobile company...If it were just an ordinary automobile company, it would just invest and build a factory.

HaiLan Automobile is Xu Shenxue's industry. At the same time, HaiLan Automobile is too special... It produces smart electric cars and represents the direction of the future... At least many people think it represents the direction of the future.

So it is a bit special. If you want to build a factory overseas, you can't just go there foolishly to build a factory. Otherwise, it is easy to lose all your money.

If Xu Shenxue talks directly with the local consortium, then no matter what the outcome of the negotiations is, he will be able to obtain certain guarantees.

Because apart from a few American consortiums that are quite powerful and dare to argue and fight with Xu Shenxue every other day... consortiums from other places still "respect" Xu Shenxue!

Once the deal is done, if the other party wants to go back on his word or play things outside the rules, Xu Shenxue will let him know what the rocket warhead looks like.

Therefore, for HaiLan Automobile's strategy of building factories overseas, Xu Shenxue still needs to negotiate with local consortiums first, clarify the division of interests, set rules, and then everyone can play by the rules and make money together in harmony.

Bao Yongyan and other senior executives just need to wait for news. Once Xu Shenxue and the other consortium have reached an agreement, they can go there to build a factory, assemble and produce the cars locally, and sell mid-range models on a large scale.

Before that, overseas markets continue to sell high-priced models, and the sales of high-volume models still mainly rely on the domestic market.

Bao Yongyan is very optimistic about the domestic market: "In recent years, the construction of charging piles in China has continued to accelerate. The construction of a large number of charging piles has also greatly promoted the convenience of using electric vehicles!"

"At the same time, domestic subsidies for electric vehicles are still increasing. In addition, new energy license plates are also being promoted. By the end of the year, special new energy vehicle license plates will appear!"

"At that time, it will further stimulate the development of domestic electric vehicles, especially promote the rapid popularization of mid-range models. We expect that the sales of new energy vehicles, including pure electric, plug-in hybrid and extended-range models, will increase significantly next year!"

“In the passenger car sector, it is possible to reach a market level of one million vehicles!”

"And we at Hailan Automobile will continue to increase our production capacity to meet the continued growth of the domestic market!"

"At present, our automobile factory in Shanghai has been completed and put into production. It is expected to reach its peak production capacity next year, with an annual production capacity of 500,000 vehicles!"

"At the same time, the automobile factory we invested in in Sichuan City is also under construction and is expected to be put into production the year after next. The designed production capacity of the factory is 300,000 vehicles, mainly used to cover the southwest region!"

"And the Ancheng production base we launched last year has also started up smoothly. The designed production capacity of the plant has reached 300,000 vehicles, mainly used to cover the central and northern regions!"

"Add to that the 500,000-vehicle production capacity of our Shenzhen headquarters base, and our four domestic factories combined will have a total production capacity of 1.6 million vehicles!"

"In addition to these four factories, we are also conducting continuous investigations in China and are preparing to select two more cities to invest in and build factories. We are also planning a production capacity of approximately 400,000 vehicles, bringing the total domestic production capacity to 2 million vehicles!"

"As for overseas factories, we will have to wait and see what happens next. However, the initial planned production capacity will not be too large, and the total production capacity will be around 500,000 vehicles. The mid-term plan will depend on market changes!"

"Such a large production capacity plan cannot be absorbed by existing high-end models. This is why we plan to continue to reduce the price of Hailan SLMC and prepare to launch a mid-size SUV. In addition, we also plan to launch a sedan next year to target mature markets."

"The design elements of our Hailan SLMC are still relatively fashionable and youthful, and the buyers are still mainly young and middle-aged people. We are also trying to develop the middle-aged customer group and make our mid-size sedans into a series to cover more types of customers!"

Xu Shenxue listened and read the production capacity planning report: "So, the preliminary planned total production capacity is 2.5 million vehicles, which is enough for the next few years!"

"The plan is good. We are not reckless and are taking steady steps. When the debt is under control, it is right to continue to focus on the mid-range market when launching new models. The high-end market is just like that now and it is impossible to gain too much growth. If we want to become bigger and stronger in the future, we still have to rely on the mid-range market!"

“But we must also pay attention to maintaining the brand value, and don’t enter the market that is too low-priced!”

After listening to these reports, Xu Shenxue also went to the design department to see the research and development of some new models and saw the mid-size SUV models that were still under design.

This is a heavyweight model that Hailan Automobile is preparing to launch next year. It is preparing to enter the core mid-range market in the SUV field, with a main price range of 350,000 to 450,000 yuan.

Bao Yongyan said: "In order to control costs as much as possible and to further enhance the features of our intelligent driving, we plan to comprehensively upgrade the standard assisted driving versions of all our models next year, equip them with greater computing power, and then adopt low-cost vision plus early lidar solutions, so that standard models can also have L2+ level assisted driving!"

"The high-performance laser radar and advanced driver assistance functions with higher computing power are still optional, and the price remains at 100,000 yuan!"

"The main reason is that we have made considerable progress in the development of lidar, and the cost of early low-performance lidar has been greatly reduced!"

"In addition, the cost of our power batteries has also dropped significantly. The energy density has increased by 1.5 times, but the price has dropped by 60%. This has given us huge room for price reduction. We have transferred this part of the price reduction space to adding standard intelligent driving!"

"After all, we can't just cut the price by 100,000 or 200,000 yuan. This would be a huge blow to old users and the brand!"

(End of this chapter)