Return to 1958 and build a century-old giant

Chapter 948 Automotive Terminal Sales Layout
Post said, "The current planned production capacity is 20,000 vehicles per year."

"Twenty thousand vehicles? With the current CKD (Completely Knocked Down) model, that production capacity is impossible, isn't it?" Yang Wendong countered.
The CKD model is indeed simple, but the key is that it requires a large amount of foreign exchange to be used in mainland China, which is absolutely unacceptable to the mainland. Therefore, localization is of paramount importance.

A year later, another company, BAIC Jeep, will have a very strained relationship with the mainland because of this issue. Although the problem was eventually resolved, it also cut off the possibility of Chrysler, one of the Big Three American automakers, investing in the mainland. This is why there were very few Chrysler cars in the mainland in the previous life.

Historically, Volkswagen was more proactive in localization than Chrysler, but the process was quite arduous. It wasn't until the 90s that some of the problems were truly resolved. After that, as foreign exchange became more readily available, the company paid less attention to this issue.

Therefore, this period is also an opportunity for Yang Wendong to quickly seize the market share of existing domestic and foreign-funded car brands, so as to stabilize the situation.

At the same time, the orders from Volkswagen and future Audi will further improve their automotive supply chain layout.

After other major car manufacturers entered China in the 90s, I became their best choice.

Although the entire auto parts industry is too large to be monopolized, as long as preparations are made early, at least a larger share of the pie can be obtained in the future.

Post replied, "Yes, according to our agreement with the mainland, a certain degree of localization is necessary to achieve this."

Director Lin, who was standing next to him, also said, "Mr. Yang, please feel free to share your thoughts. Volkswagen, SAIC, and our government all hope that we can work together to finalize this matter as soon as possible. As you know, CKD has extremely high costs. As long as the price can be reduced in the future, there will definitely be more potential customers."

Yang Wendong thought for a moment and asked, "What's the price of a Santana now?"

Director Lin said, "It costs about 8 RMB. The biggest expense here is the CKD parts and our immature internal assembly technology, which leads to a lot of rework and scrap."
We've been trying our best to improve the latter, but CKD parts are very time-consuming, so to solve this problem, we still need to go back to the issue of localization.

"8, that's not cheap," Yang Wendong nodded.

There were some rumors on the mainland internet in my previous life, saying that the price was not high in Germany but it was priced at 18 in China. That was nonsense. The Santana was only priced at 95 at its peak around 18, not now.
Besides, the main customers of Santana in this era were government departments. If SAIC sets a high price, wouldn't they be taking money out of their own pocket and giving it to the Germans?
However, the price of 80,000 is not cheap. You should know that all of this is based on the official exchange rate, which is about 30,000 to 40,000 US dollars. At this price, you can buy a luxury car such as a Mercedes-Benz or BMW in Europe and America.
The reasons for this are the high tariff costs, long processing time, and wasteful costs associated with local assembly in the CKD (Completely Knocked Down) model.
Director Lin said, "Yes, so we need to localize the products before we can lower the prices. This will lead to higher sales and also help the country reduce foreign exchange reserves."
"If Mr. Yang is willing to relocate the relevant automotive industry chain from Yanjing here, there might be some losses in the early stages, but in the later stages, it will definitely be profitable."

Yang Wendong said, "But I think it's better to produce in Yanjing in the early stages. Once the production capacity in Shanghai comes up, I will naturally move here. What do you think?"
This isn't just my problem; much of my business in Yanjing is also joint ventures with local companies. I doubt Yanjing would agree to this arrangement, not to mention the initial losses.

This naturally requires extreme stretching, and this isn't just about one company, but many.
He certainly knew the future of SAIC Volkswagen, but others didn't, and even Volkswagen itself didn't know. Under these circumstances, he naturally wanted to maximize his own interests. Volkswagen Germany was making a fortune in the mainland for the next few decades, and he had to find a way to steal some of it.

Director Lin thought for a moment and said, "Mr. Yang, I know this is difficult. In order to protect employment, Yanjing City will definitely not agree, but we also need employment here."
As you've probably seen these past few days, there are a lot of people going to Shanghai. The authorities also hope that you can build as many factories as possible in Shanghai to increase employment.

Those young people are constantly clamoring to get jobs in factories, and they're even unwilling to accept our city government's expansion of recruitment for clerks and police officers. So we hope Mr. Yang can help us out.”

"Not to be an official, but to be a worker?" Yang Wendong was taken aback for a moment, then realized that this seemed to be the case in this era.

Civil servants were highly sought after in the mainland in the past, but in this era, they are not as popular as workers.
Many government officials, teachers, and even doctors want to work in factories, and many people even go to great lengths to pull strings and use connections to get in.

Because workers currently enjoy the highest welfare and social status. The logic is simple: in this era, only factories generate profits and can export to earn foreign exchange. As one of them, workers naturally have a high status and good treatment.
Decades later, with too many factories, market competition reduced profits, and with too many people, workers naturally returned to their normal status.
The increased benefits for civil servants are also due to the government's huge revenue from land sales, which naturally brings civil servants more stable and higher incomes.
Of course, a few monopolistic state-owned enterprises are an exception.

The changes in the status of different professions throughout the era are essentially a redistribution of social wealth.

Director Lin said, "That's right. So the municipal party committee is also having a headache over this matter. Baosteel and SAIC Volkswagen are currently the two most important projects in Shanghai. Only when they are launched as soon as possible can the social situation improve."

Yang Wendong thought for a moment and said, "Okay, I will go to Yanjing in a few days and discuss this matter with the person in charge of the automotive business there. But if you want me to take the risk of losses to invest in Shanghai, Shanghai and Volkswagen must agree to a few conditions first."

Director Lin said, "Mr. Yang, please speak."

Yang Wendong said, "Firstly, if I make a large investment in Shanghai, I need a certain commitment from Volkswagen. That is, as long as my products do not have major quality problems and can meet Volkswagen's requirements, then Volkswagen must make us their exclusive supplier."

“That won’t do. An exclusive supplier is absolutely out of the question.” After listening to the translation, Post quickly said, “Mr. Yang, you also own a car factory and other factories. An exclusive supplier is extremely risky. We can’t take that risk.”

Yang Wendong said, "I can't just make a large-scale investment in Shanghai and risk losses in the early stages to help you get through this, only to look for other suppliers later when your OEM has grown in scale."

"You see, if other new suppliers don't incur early losses, their costs will definitely be lower than ours, which is extremely unfair to us."

Post thought it made sense, and then whispered to the people around him for a while in German before saying, "How about this, we discuss a timeframe, say five or ten years. During this time, you can be the exclusive supplier. After that, it will be a normal market free choice."

"Ten years is too short; it should be at least 15 years," Yang Wendong said.

From now until the beginning of the 21st century, 15 years from now, Volkswagen was extremely popular in the 90s. It would be quite good if I could enjoy the benefits of this period.
As for the 21st century and beyond, it will depend on fair competition. As long as you have the scale, you will have an advantage. If you still can't develop even with plenty of scale, funds, and customer relationships, then it can only be said that it is not suitable for you.
In these industries, Yang Wendong's foresight alone cannot offer much help; in the future, competition will truly depend on solid strength. Post said, "The timing still needs negotiation. We can reach an agreement today: a period of exclusive supply in exchange for your group's supply chain to invest in and build a factory in Shanghai, provided there are no quality issues. What do you say?"

"Okay, we can discuss the timing later." Yang Wendong knew that these kinds of things couldn't be decided immediately.
There is a lot of work to be done in Yanjing alone, and there is also the government involved.

Director Lin then asked, "Does Mr. Yang have any other requests?"

Yang Wendong said, "The second point is another collaboration. I plan to build car sales centers and after-sales maintenance centers in different cities across the country, and I hope to obtain exclusive authorization from Volkswagen."

"A 4S store? You're planning to invest heavily in it in the country?" Post asked in surprise.

Yang Wendong shook his head and said, "It's not certain yet whether it will be a 4S store model. The initial strategy will be like in the United States, where one store sells all kinds of cars. I will make corresponding changes after the national policy is released."

The 4S dealership model is currently the mainstream in Europe, while in Asia and the Americas, car sales are still mixed.

Both models have their advantages and disadvantages. It's not a matter of which is better or worse; it depends on the local laws and regulations.

In the future, the mainland will also choose the 4S model, but this has not been confirmed yet, so the cars will naturally adopt the model of the Americas and Asia.

Yang Wendong also plans to follow the example of cinema chains and establish a presence in the domestic automotive sales and after-sales industry as early as possible. Although he may suffer some losses in the early stages, such heavy asset investment takes too much time. If he waits until the automotive industry takes off before entering the market, he doesn’t know how many other investors will join in.
Only by investing and planning ahead can one achieve a certain degree of monopoly when car sales explode in the future.
Besides, the returns from real estate alone would make it impossible for them to lose money;
Post immediately became interested. He also needed after-sales service stores to sell his cars, which was lacking in China and was a headache for them, especially after-sales service. So he asked, "Mr. Yang, are you planning to invest all over the country?"

Yang Wendong said: "Naturally, it won't be the whole country, but we will first select the provincial capitals of each province, or some economically strong cities, and invest there first, which can also radiate to a radius of hundreds of miles."

In this way, just one hundred stores would be enough to cover most of the country, and then we can gradually expand to other cities later.

Although he won't lose money by relying on real estate, he will follow the most basic economic logic: first invest in big cities, and then gradually expand.

Post thought for a moment and said, "I need to discuss this matter with other people and with the German side. Personally, I still agree with this cooperation."
But exclusive rights are too great, and they involve so many important cities; we need to assess the risks internally.

“Okay, no problem,” Yang Wendong knew that he was asking for too much. If he wanted to secure the exclusive sales rights for Volkswagen in the top 100 cities across the country, he could control Volkswagen in the future.

However, it would be good to be able to secure some of them, and in the future, it might even be possible to secure some of the sales outlets of companies such as GM, Toyota, Mercedes-Benz, and BMW.
In this way, it wouldn't be too difficult to create the largest car dealership nationwide;

Compared to manufacturing cars and making auto parts, terminal retail only requires sufficient funds, which is a suitable approach for someone with his strong capital.

At the same time, as automobiles are a necessity of daily life in the future, their terminal 4S stores can also be considered part of the infrastructure. Stabilizing this industry will ensure that, for the next few decades, at least the Yang family can obtain long-term and stable income, just like collecting rent.
The industry will only change when domestic electric vehicles rise and the sales model changes. But by then, not only will he be old, but even his son will be too old to worry about such things.

In the evening, the group went to the Peace Hotel and had a sumptuous dinner together.

After everyone left, Yang Wendong sat on the balcony outside the suite with his son, looking at the Huangpu River in the distance and the various landscapes of Shanghai.

Yang Wendong asked, "Zhiwen, what do you think of today's two collaborations?"

Yang Zhiwen said, "I think it's pretty good. Whether it's Baosteel or SAIC Volkswagen, their cooperation with us is mutually beneficial and in line with our group's intention to further develop the mainland market in the future."

"Yes, actually I also need to cooperate with them, but since they brought it up first, I naturally took the opportunity to make some other requests." Yang Wendong smiled and said, "But you should remember in the future that when negotiating with the domestic authorities, we can take advantage, but while taking advantage, we also need to consider the situation on the domestic side."
Regardless of who you partner with, for long-term cooperation to be sustainable, both sides must benefit. This is especially true for partnerships with the national government and major cities like Shanghai.

"Understood, Daddy," Yang Zhiwen replied.

Yang Wendong continued, "We will stay in Shanghai for a few more days. I have a task for you: investigate the employment situation of young people in Shanghai. We will also need to conduct investigations in other cities later."

This data will be one of our bargaining chips when we invest in these cities in the future. Although we can't say it outright, it's always best to have a clear understanding of it.

"Yes, Daddy, I'll investigate tomorrow," Yang Zhiwen said.

Yang Wendong continued, "Okay, also, let's consider making some charitable investments in Shanghai. That would be a way to give the Shanghai municipal government some face."

PS: Please give me a monthly ticket
(End of this chapter)