What's wrong with me being a rich man?

Chapter 503 Leveraging
The carbon silicon group in Lingang has a patent cooperation with BYD in Pengcheng.

Aside from Yu Xing's visit and exchange, the two companies have had several exchanges of executives and employees over the past year. Sometimes, when automotive industry conferences or events are held in the two cities or nearby areas, they would go and visit each other.

However, what impressed BYD executives and employees the most was the huge die-casting machine on the silicon carbon production line.

Many people have doubts: will it actually work?
Later, as the silicon carbon group continued to advance its car manufacturing efforts, the question became whether it could succeed in the market.

High price, six seats, extended range, plus a leader from the internet industry.

Although Silicon Carbon Group has gradually gained a reputation in the industry for its low-key and pragmatic approach, not only gasoline car manufacturers, but also new energy vehicle companies like BYD have many doubts about its future.

The two automakers seem to have very different directions in their attempts to explore new energy vehicles. For example, the upcoming Tang uses the powertrain system that has been tested for three years by the S6 and then modified and optimized. The interior parts are also carefully considered before being used. On the other hand, the Carbon Silicon Group seems to be taking a more aggressive approach.

Before today, at least Luo Hongbin from BYD's Engineering Research Institute didn't quite believe that Yu Xing could make the car a success. But after taking a test drive and exchanging ideas with him, he took the initiative to pour the drinks that evening.

It's a bit of an exaggeration to say that President Yu could offer valuable suggestions just by touching the object, but he only just visited Tang today, so the exaggeration can't be too far off.

Luo Hongbin and many of his colleagues had a question about the Silicon Carbon Group in recent years. They thought it would quickly produce cars and launch them to the market, but they didn't expect it to just stand there for several years without any sense of urgency.

What is Silicon Carbon Group struggling with?
He poured himself a drink that night, feeling that he was probably reflecting on what President Yu had revealed during the day. Apart from the shortcomings in the actual experience pointed out after the test drive, his cost estimate after understanding the Tang's system and architecture was also pretty much correct.

These are all things that require dedicated study and careful consideration.

Yu Xing clinked glasses with Luo Hongbin. Seeing that the other had finished his drink, Yu Xing also finished his. He shook his head and said, "I didn't come here to nitpick. During the day, I was just evaluating Tang from the perspective of a car owner with a relatively large budget. The actual user group considering this positioning in the market may not have studied it as much as I have."

Whether in Lingang or at BYD today, he always starts from the needs of car owners. However, the target groups of the two cars are very different, and he himself is not short of money, so it is inevitable that there will be some distortion.

“Mr. Yu, what you say makes sense.” Luo Hongbin couldn’t help but say after hearing Mr. Yu’s statement. “I’m not flattering you, Mr. Yu, but I think you are more… how should I put it, more knowledgeable than I thought.”

He wouldn't have said that before he drank. After a few drinks, he became more straightforward. Thinking back to what happened during the day, President Yu had already been very careful with his manners.

"When I was younger, I was quite sharp in my dealings with people," Yu Xing said with a smile. "Now, I've probably met more people and I'm more inclined to put myself in their shoes. I know that many of the options for the Tang model weren't things you hadn't considered, but rather things that were cost-conscious."

Luo Hongbin stood up and poured himself a glass of wine, feeling a little excited: "President Yu, you're being very kind of you."

Seeing that President Luo was slightly drunk, Wang Chuanfu chuckled, picked up his glass, and said, "President Yu, don't be polite, please say 'but'."

"I really don't have any 'buts'." After clinking glasses, Yu Xing suddenly couldn't help but say, "But..."

Seeing this, Wang Chuanfu downed the "but wine".

"However, problems that surface before a model is even launched are generally good, in my opinion," Yu Xing said, putting down his glass. "While there are cost considerations, take the Tang's infotainment system for example. It uses Microsoft's CE system, which is definitely due to considerations of the performance and stability of the hardware you're already using. The reason it doesn't use Android is because of its hardware requirements and the optimization work required for the system, which all require more investment." Luo Hongbin nodded, agreeing with Yu's summary.

Yu Xing pondered for a moment and said, "The problem is that your G5, which was launched this year, uses an Android-based car infotainment system. The technological maturity and cost issues that need to be considered when choosing a car infotainment system can be evaluated together with your models. If we start researching and overcoming the problems of the Tang's car infotainment system together with the G5 last year, the Tang that is in front of me today may be better."

"I'm not clear about your project approval process, cost considerations, or any changes in positioning. But judging from the price of the Tang, it offers something better at the current stage."

"As for whether this higher-quality Tang can gain more market recognition..."

Wang Chuanfu, Luo Hongbin, and the others waited intently for Yu Xing's judgment.

Yu Xing paused here, then smiled and said, "That's something Mr. Wang needs to weigh and consider. I won't make a fool of myself. I need to think about how to sell my cars well first."

Wang Chuanfu took off his glasses and rubbed his face.

After a moment, he said, "President Yu, you have guts. The subsidies for new energy are indeed a good opportunity to leverage this."

Seeing that the boatman had suddenly shifted to a higher level, Yu Xing thought for a moment and said, "The domestic support is substantial, which has a great stimulating effect on the high quality requirements and profit margins of cars, as well as the operation of car companies."

After his test drive today, he talked about the cost and profit of the Tang. Before achieving economies of scale, the cost of a single Tang vehicle is around 22 yuan. Although the final guide price has not yet been determined, the profit is basically from subsidies.

The Tang uses a 2.0T hybrid system, which can share some parts with contemporary gasoline vehicles. In addition, it has advantages in battery and other aspects, but the cost is still very high.

But this doesn't mean that Tang can only earn money from subsidies. The quality of the car can be leveraged through subsidies to achieve a larger scale.

Simply put, if the Tang is sold for 21 yuan and subsidized by 6 yuan, it can attract 100 customers and ultimately convert 10 into paying customers. However, without the subsidy, if the Tang is sold for 27 yuan, it may only attract 10 customers and ultimately convert 1 into paying customer.

If the former can ultimately bring in 5 customers within a year, the cost of Tang can be reduced to 17, which will bring more profit than simple subsidies. The key lies in how the quality of the car can gain recognition among the potential customer group attracted by subsidies.

70分的车获得100个客户里的10个，90分的车可能就是获得100个客户里的30个，后者提升品质所需要的成本通过规模效应反而能获得更多的利润。

The idea behind the Silicon Carbon Group is to leverage subsidies to attract users, thereby achieving economies of scale in vehicle models to rapidly reduce costs and ultimately create profit margins.

For automakers, subsidies can serve as a safety net to maintain a portion of their profits, or they can be leveraged to increase sales by lowering the barriers to car purchases, ultimately amplifying profit margins.

Yu Xing only needed to hear Wang Chuanfu's one sentence to understand his considerations, which was because the Silicon Carbon Group had chosen the latter.

(End of this chapter)