2003: Starting with Foreign Trade

Chapter 370 Ya Di's Cooperation Intent

We definitely can't tell them the cost, but the market's estimated cost of 3000 yuan is definitely not there.

The battery market for two-wheeled electric vehicles is actually quite complex, even more so than that for new energy vehicles, because its prices will not be transparent even 10 years from now.

The prices of pouch batteries and large single-cell batteries in square aluminum boxes are extremely chaotic, ranging from unbelievably low to unacceptably high.

The reason for this is simply that the operating conditions of two-wheeled electric vehicles are less demanding than those of new energy vehicles, and the requirements for batteries are not as high as those for cars.

If the internal resistance, voltage, and capacitance are properly matched, it can work normally.

Therefore, there are almost no Grade A lithium batteries used in two-wheeled electric vehicles on the market; Grade B is sufficient. Why pay a higher price for Grade A batteries?

This is why, more than a decade later, the lithium batteries produced by lead-acid giants like Chaowei and Tianneng give people the impression of being of poor quality. It's not because they lack technology or funds.

It's because the lithium batteries they produce are designed for use in two-wheeled electric vehicles, and there's no need to make them as advanced as those used in cars.

If a function can be accomplished with second-best materials, there's no need to spend a lot of money on the best materials. Businesses aren't charities; all costs will ultimately be passed on to consumers. Consumers simply can't afford to use the best materials.

The same applies to Flash's batteries. If they all use Grade A batteries, then based on the current price per kilowatt-hour of lithium iron phosphate batteries, the battery alone would cost 3000 yuan. The entry-level price of 2999 yuan is really a huge loss.

Generally speaking, the cost of an electric vehicle battery accounts for about 40% of the total cost of the vehicle, while the cost of lithium batteries can be up to three times that of lead-acid batteries.

Thanks to the investment from FlashPower and the technical assistance from the research institute, the procurement cost of the Feiyi series of lead-acid batteries, which are comparable to entry-level batteries, can now be controlled to around 600 yuan.

Of course, this price is not fixed, and the price of lead-acid batteries will also rise and fall, but in general, there are some figures to refer to.

Therefore, the cost of a FlashCycle lithium battery electric vehicle is around 4500 yuan, which means that for every entry-level model sold, at least 1500 yuan will be lost.

Losing that much is obviously impossible. If we continue like this, forget about cultivating the market. We'll go bankrupt after selling Flashcart for a year or two. So we can only focus on the next level of materials.

By substituting B-grade products for A-grade products, and by manipulating internal resistance, voltage, and capacity, as well as compressing the cost of other components, Flash has managed to reduce costs for its core components. Fortunately, Flash currently has its own supply chain for these core components, so there is still room for cost reduction.

In 2006, Flashcar shipped 47.22 vehicles. At the dealer conference, Flashcar announced its sales target for 2007 as a minimum of 80 vehicles and a target of 100 million vehicles!

This target does not include lithium battery products!

Such a large shipment volume not only stimulated dealers, but also suppliers. Under the premise of ensuring the profit margin of lead-acid battery components, suppliers did not mind cooperating with Flash to make concessions on component profits for lithium battery models with limited shipment volume.

Feiyi sold its two lithium battery products at a loss, while Guaneng could break even or make a slight loss at 4099, and a small profit at 4599. Then Feiyi controlled the production capacity of the two products and guided insiders to buy Guaneng, which led to its demise.

On the one hand, it's about cultivating the high-end brand Guanneng, and on the other hand, it's about reducing the losses of Shanchi and holding on for a year or two so that the market can accept lithium batteries more readily. Then, they can launch an upgraded version and justifiably raise the price.

It is acceptable to exchange short-term losses for market share. As technology iterates and Hangxin New Energy acquires more and more resources in the future, the battery cost of two-wheeled electric vehicles will definitely be controlled within a manageable range.

Tan Jincheng has reason to believe that even at a price of over 3000 yuan, there is still room for profit.

Technology is really just a thin layer of paper; once you break through it, it becomes very simple. In addition to gaining more patents and a first-mover advantage, technological advancements also allow you to reduce costs ahead of others.

Hangxin New Energy currently possesses advanced domestic technology in the field of lithium batteries for two-wheeled electric vehicles.

Tan Jincheng didn't directly mention the costs, but he assured Zhang Congxun and Ni Jie that the unprofitable models would have a controlled sales rate and wouldn't be pushed to the market in a disorderly manner, which relieved both of them.

There was no other way. If it were an older entrepreneur, the two of them certainly wouldn't have rushed to negotiate. But the young Tan Jincheng always had unexpected tricks up his sleeve. They really weren't sure that the other party wouldn't pull a big stunt and turn the hard-won booming market upside down.

Youth often means impulsiveness and uncontrollability; although Tan Jincheng has always performed maturely, they cannot guarantee that Tan Jincheng, who has won several honors this year, will not become arrogant and focus solely on smashing lithium batteries.

He was named one of the Top Ten Economic Figures of the Year and one of the Top Ten Outstanding Youths of Ningbo City. In addition, his hometown of Anhui Province and Yicheng City also bestowed upon him some honors.

However, they still believed in Tan Jincheng's promise. Although this guy didn't follow the conventional path in business, he was a man of his word. He had many underhanded tricks, but he had never done anything truly malicious that directly damaged the reputation of other companies.

Thinking of this, Zhang Congxun and Dong Jinggui couldn't help but glance at Ni Jie. This guy was even less ethical than Xiao Tan, directly blaming his competitors on the official website. Didn't he get sued for it?

"Don't worry, brothers. I'm still thinking about taking the company public. How could I possibly ruin a profitable business for him? However, lithium batteries are the future trend, and at least they solve the problem of normal use in winter. I suggest you all get started as soon as possible. If you fall behind, you'll be beaten."

Although lead-acid batteries have various disadvantages, their low price alone makes them irreplaceable by the market. Even in 2023, many leading companies, including Hermès, were still using lead-acid batteries in their low-end models.

FlashPower could not possibly abandon its lead-acid battery business entirely, as that would be tantamount to turning away money.

Dong Jinggui nodded and said, "We also have this idea, but we won't be as fast as you. If possible, we would like to ask you for your technical assistance later."

"No problem at all. If possible, our companies can actually cooperate," Tan Jincheng replied readily.

Without policy support, the market has to be cultivated by everyone. Currently, the cost of batteries is controlled by the giants of lead-acid batteries, which is quite difficult for assembly plants.

Lead-acid batteries will not be phased out, but they certainly won't be invincible in the market; a decent competitor needs to be introduced.

Zhang Congxun and Ni Jie nodded rather perfunctorily. They would definitely develop lithium battery electric vehicles; if others had them, they had to too, there was no way around it. But they still trusted lead-acid batteries more.

It's not that they don't understand the benefits of lithium batteries; it has nothing to do with vision, but rather it's determined by the company's development plan.

Even when opening new factories, Lvyuan is very conservative, and Ni Jie is stirring up trouble everywhere. It is clear that his focus is not on dominating the country, but rather on becoming an industry opinion leader, or rather, the "leader of the martial arts world."

As for Zhang Congxun, Xinri ranked first in sales for two consecutive years in 2005 and 2006, but the gap with Shanchi was already very small in 2006. Zhang Congxun also felt the crisis. Shanchi's sales target for 2007 was 80 to 100 million vehicles.

To maintain its position as the top-selling brand, Chipday's total sales for 2007 must exceed 100 million units. Therefore, Chipday's focus in 2007 was to boost sales and retain its number one position.

Once ChipSun loses its top sales position in 2007, it will be extremely difficult for it to regain it in 2008, the Olympic year, thanks to the momentum of the Olympics.

Dong Jinggui is different. He is still far from being the industry leader. Their marketing is only slightly better than Luyuan's. Therefore, Yadi's focus in 2007 was to concentrate on research and development and improve the quality and reputation of its products.

As for sales, just like in 2006, maintaining third place is enough. Therefore, Dong Jinggui is still somewhat looking forward to the cooperation with Flash, but it is not convenient to talk about it now. They will find some free time to chat about it privately.

Tan Jincheng observed the attitudes of the three entrepreneurs. He didn't care what they thought; Flash was happy to cooperate, but it was fine if they didn't.

If you don't cooperate now, and one day it becomes clear that lithium batteries are essential, while Flashpower has the latest technology, don't blame me for making a quick buck off you from batteries.

Isn't this just a smaller version of BYD? They sell their own batteries to competitors and make a profit from them. How smug!

"By the way, selling at a loss will definitely affect the company's profits. How do you plan to resolve this?" Zhang Congxun asked again, remembering the previous question.

Because of Orange Technology, among these people, Tan Jincheng has the deepest contact with investment institutions and the most up-to-date financial knowledge. He was able to get $400 million from investment institutions and cooperate with internet upstarts.

Zhang Congxun was eager to hear how Tan Jincheng handled the losses without affecting the company's listing plans.

Everyone knows how difficult it is to list domestically. Flash has publicly stated that it aims to go public within five years. Now that it's making a loss-making deal, how can it possibly go public?

"The problem is simple. I have Jiahang New Energy, which develops lithium batteries. We can just shift the losses to that end," Tan Jincheng laughed.

Hangxin New Energy has no plans to go public within the next 10 years. It is a high-tech enterprise that can receive certain subsidies, so it doesn't matter how much it loses.

Zhang Congxun immediately understood: "Holy crap, you can do it like that? As expected, everyone in finance is ruthless."

The logic is actually quite simple. People who haven't been exposed to it won't think in that direction. If the entire group were to go public, it would indeed be a bit troublesome, but if only Flash Technology were to go public, it wouldn't be that complicated.

(End of this chapter)