2003: Starting with Foreign Trade

Chapter 369 The Mysterious Massive Engine

Hangxin New Energy has been prepared for long-term losses since its establishment.

As is well known, lithium ore, as a commodity, inherently possesses typical cyclical characteristics.

You don't need to know much about economics; anyone who has been to the A-share market for a few years knows that cyclical commodities and stocks are a classic example of "three years without business, then three years of profit."

The same applies to lithium mining. Hangxin New Energy cannot maintain profitability like Flash Technology, especially in the early stages of a startup, where losses are inevitable.

Where does the money used to maintain business operations, or to cover losses, come from?

Tan Jincheng had three ideas. First, he could make money by trading lithium-related stocks, just like Ning Wang did in the early days. This would serve two purposes: to develop the industry and to generate profits through stock appreciation to maintain the company's daily operations.

Secondly, and quite simply, is financing. Running a business is not a one-person job, especially for companies that require huge capital investments. Financing is something that almost every large company must go through in its development process.

Whether it's a physical business or an internet company, financing is essential for their development. Wahaha even received investment from Danone in the past, but it seems they've recently fallen out.

After Danone acquired Robust, AD Calcium Milk's most direct competitor, and Huiyuan's equity this year, it demanded to acquire 51% of Wahaha's non-joint venture equity for 40 billion yuan in net assets, which was met with strong resistance from Wahaha.

It makes sense. No company would agree to a fully acquired, well-run enterprise with the highest market share, at the price of its net assets. This applies to Tan Jincheng as well.

However, it is undeniable that without financing and the funds and resources brought by investors, development would certainly not have been so rapid. This is true for Wahaha, and it is also true for Flashpoint.

If it hadn't accepted investment from Beicang City Investment and hadn't received strong support from the Beicang government, Flash would never have grown to its current size; at best, it would have been a small electric vehicle assembly company with an annual production capacity of 10 to 20 vehicles.

Industrial layout and industrial upgrading are out of the question.

Thirdly, it's about expanding the business. The mobile phone battery business is what Hangxin Energy most urgently wants to acquire right now, because this stuff is really profitable, whether in the 2G era or the future 3G and 4G eras.

For at least the next 10 years, mobile phone production capacity will be in a period of explosive growth, with shipments increasing year by year and various records being constantly broken. The demand for mobile phone batteries will form a very strong industry.

Once you've successfully manufactured a mobile phone battery, even if the quality is only average, you won't have to worry about finding a market, and you can enter the market quickly.

The first step has already been taken. Among all the subsidiaries of Flash Group, Star Engine is the most low-profile. Even many people within the group are unaware of its existence.

As for what their business entails, that remains unknown.

The office area of ​​ByteDance Engine is on the 29th floor of the Flashpoint Building. The 31st floor belongs to Tan Jincheng, and the 30th floor was given to Zhang Xupeng. The highest floor for actual business operations is the 29th floor, and under normal circumstances, unauthorized personnel are not allowed to enter.

Currently, ByteDance's business mainly consists of two parts. The first part is the equity of some real-world companies that Tan Jincheng previously invested in, such as Mingcheng Industry, Shengshi Shanchi, Boneng Environmental Protection, and Zhongtai (Beicang) Automobile.

Managing equity investment businesses mainly involves checking accounts, monitoring the company's financial situation on a daily basis, and distributing dividends at the end of the year—it's relatively easy.

Although the number of companies invested in may seem small, the returns are actually quite good. These companies, especially Shengshi Shanchi, which serves as the general distributor, have seen their business volume surge with the explosive growth in electric vehicle sales, resulting in outstanding performance.

Another business was equity investment in the secondary market. Tan Jincheng poached a manager from a securities firm, along with several analysts and traders, and asked him to build a team.

A fund-based asset management product named Giant No. 1 was established for stock investment, primarily targeting domestic and international lithium-related stocks.

Of course, Tan Jincheng also gave fund managers certain rights to invest in other areas.

The investment returns of fund managers are based on a commission model. The higher the fund's returns, the more they earn. Within the scope of the fund manager's authority, as long as it can make money, Tan Jincheng doesn't care what the fund buys; he lets you do whatever you want.

However, Tan Jincheng has relatively strict requirements regarding the investment share of lithium-related stocks. He remembers quite a few lithium-related stocks currently listed on the A-share market.

The company that you'll remember in 2023 must be one of the most amazing companies.

With the mentality of being a "leek" (a term for someone who is easily taken advantage of), even if I am trapped in a short period of time, as long as I don't sell, it's not a loss, and I will always make a profit by 2023.

In essence, both businesses are designed to support Hangxin Energy. Although they are called independent investment companies, they currently function more like an investment department within Hangxin Energy. The reason for establishing them as separate subsidiaries is primarily for future planning. Once Hangxin Energy can reliably resolve its own issues, ByteDance's investment arm can then undertake other investment projects, both to expand its own profitability and to prepare for the future of new energy vehicles.
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The lithium battery electric vehicle launched by Flash Motors has attracted widespread attention from the market and its peers.

It weighs two-thirds less than a typical lead-acid battery, at only 3.6 to 3.8 kilograms, or less than 8 pounds. Its platform voltage is more than three times higher than that of a lead-acid battery, giving it a significant advantage in terms of power, discharge performance, and lifespan.

In addition, the organic solvent electrolyte used in the battery allows the electric vehicle to operate normally in cold winters, solving the problem of vehicle use in northern regions during winter.

These are all evaluation opinions given by professional institutions. The electric vehicle equipped with such a high-performance battery has an entry-level price of only 3399 yuan, which is considered somewhat outrageous by its peers.

Any competitor with a modicum of ambition has bought several lithium-ion battery electric vehicles that have already entered the market for testing and research. The results are somewhat exaggerated, but overall they do not constitute false advertising.

But the price he's selling it for is outrageous; he's going to lose money.

“We all understand that you want to cultivate the market, but this isn’t the way to do it, is it? You’re going to lose money completely. Doesn’t your company have plans to go public? If you lose money and it affects the company’s profits, how will you go public?” Zhang Congxun asked as soon as he came up.

Zhang Congxun and Dong Jinggui, who had just visited on New Year's Day, rushed over anxiously after disassembling the lithium battery launched by FlashPower.

Their company actually has plans to go public, and they care a lot about the profit margins of their products.

Not only that, even Ni Jie, who has been embroiled in lawsuits recently, came over this time. Ni Jie is very dissatisfied with Flash's entry-level price. In his opinion, Flash is using a loss-making approach to grab market share, which is unethical!

To put it bluntly, these three people were there to demand an explanation. The older generation of entrepreneurs didn't experience the days of the internet industry where people burned through cash to grab market share, so they still follow certain established methods in doing business.

"Your battery costs around 3000 yuan, right? Is this price reasonable for your entry-level model? This kind of loss-leader strategy to grab market share is wrong," Ni Jie said, frowning.

While price collusion among competitors can't be openly discussed, leading companies often have this tacit understanding. Apart from the low-end models that disrupt market pricing and act as a disruptor, Tan Jincheng's pricing is actually quite normal.

Everyone's doing the same thing: boosting sales volume in the low-end market and making money in the high-end market. The lowest price of 1999 yuan for FlashCheer doesn't really affect top or even mid-tier manufacturers. What does affect are those no-name brands that produce substandard products.

Therefore, Flash's early development went relatively smoothly and did not attract much fierce resistance from its competitors.

But if FlashPower does this, then the big players won't be so easy to talk to, because once FlashPower uses lithium battery technology to dominate the market, the impact will not only be on leading assembly plants, but also on battery manufacturers like AWC and Tianneng.

If Flash Motors were to produce these entry-level lithium-ion battery electric vehicles without regard to losses, the choices consumers would make would be obvious. While it might not change the industry landscape, it would certainly cause significant disruption to the industry.

Tan Jincheng quickly reassured them, "Brothers, don't get agitated. To promote the market, we're bound to lose money on the entry-level products, that's for sure, but it's not as exaggerated as you think."

The electric two-wheeler market is booming, with annual sales experiencing explosive growth. Various new models are constantly being launched, resulting in a wide variety of new vehicles on the market.

How much performance has improved? Yes, there has been, and quite a bit. In the early 2000s, consumers felt the performance improvement was acceptable, but by the time the industry matured, the performance improvement was no longer noticeable.

In essence, this is the same principle as the later stages of smartphone development: software developers upgrade memory, apps become increasingly bloated, and a bunch of useless features are introduced, while hardware manufacturers follow suit and sell hardware.

It's basically just them working together to sell leeks.

Lithium batteries appeared a few years later, while lead-acid batteries had low costs and mature processes and technologies. This allowed for the development of new designs and various ways to make money by exploiting consumers, without requiring much technological investment.

Of the three, only Dong Jinggui remained silent, which actually represented his attitude. Yadi was more inclined to promote lithium batteries. He genuinely wanted to find out the exact cost of the lithium batteries produced by Flash, and if possible, he might even cooperate with Flash.

But he also knew that Flash would never tell them about costs, so he remained silent.

However, if there is a chance for cooperation, Dong Jinggui hopes to work with FlashChe to promote the development of lithium battery electric vehicles, because their company also has this direction, and it's real, not just a gimmick.

However, due to insufficient technology, it was much later than Flash.

(End of this chapter)