2003: Starting with Foreign Trade

Chapter 542 The Acquisition Opportunity Has Emerged
Wednesday, November 2008, 3.

At the headquarters building of Foton Motor in Changping District, Beijing, Foton Motor, Cummins Engine Co., Ltd., and Yongcheng Weilai Automobile Co., Ltd. jointly signed an engine cooperation project agreement.

With an investment of 5000 million yuan from Cummins, 3500 million yuan from Foton, and 1500 million yuan from Weilai Automobile, Foton Cummins Weilai Engine Co., Ltd., with a registered capital of 1 million yuan, was officially established.

In terms of shareholding, Cummins holds 50%, Foton Motor holds 48%, and Weilai Motor holds 2%. Weilai Motor, holding 2% of the shares, has signed a concerted action agreement with Foton Motor, and Foton Motor will exercise the shareholder voting rights.

The signing ceremony was quite grand. In addition to the main leaders of Futian District and the head of Cummins in China, the main leaders of the National Development and Reform Commission and Changping District also attended the signing ceremony.

The cooperation between Foton and Cummins began in 2006, and the negotiations to jointly set up a factory were rumored last year, so it's not anything new. However, I'm a little curious about Weilai Motors, which seems to have suddenly appeared.

Not all media reporters are from the automotive sector. When most reporters hear about Weilai Auto, their first reaction is: "Which company is Weilai Auto?"

I didn't see Tan Jincheng until I saw him at the press conference.

Tan Jincheng, who was originally a supporting character, also got a lot of opportunities to ask questions because of this.

"Mr. Tan, is Weilai Auto primarily owned by your company, Flash Motors Group? What prompted this collaboration?"

"You could say that the main body of Weilai Auto is Shanchi Group, but it operates independently. As for the reasons that led to this cooperation, we have to thank the leaders of Foton for giving us, the younger generation, an opportunity to realize our dream of building cars."

Similar to Zhongtai, which is a subsidiary of Tieniu Group, Weilai Automobile is also a subsidiary of Shanchi Group for financial reasons. If it needs to be listed separately in the future, it can be spun off.

"Does this mean your company has officially started manufacturing cars? Will your first model be a commercial vehicle or a passenger vehicle?"

"Of course it's passenger cars. We don't have the guts to enter the commercial vehicle market. Our cooperation with Foton and Cummins is just a learning experience."

康明斯国内生产的发动机计划今年年底试产，2009年6月份iSF3.8发动机正式投产，2010年6月份ISF2.8发动机正式投产，工程建设方面福田设计得非常快。

The engines in the Changfeng Cheetah series range from 2.2 liters to 3.0 liters. Except for the Black King Kong series, which is used for government procurement and can be used in off-road vehicles and carriages, the engines in other models used in the civilian market have been downgraded.

The lack of horsepower in off-road vehicles makes it impossible for them to sell in an already niche market. In addition, with the new National III emission standards, most of Changfeng Group's models do not meet the emission standards, so a sharp drop in stock price is inevitable.

"Isn't Flashspeed Group's entry into car manufacturing at this time a case of buying at rock-bottom prices?"

Last year, ByteDance's stock trading platform successfully bought up shares at the bottom of the A-share market and then exited smoothly. Many people still remember this vividly. Journalists who have been badly burned by the stock market can't help but think of this year's car market.

Speaking of which, the car market this year has been quite bleak. After the Two Sessions concluded, the new vehicle emission standards, also known as the national standards, were officially released and will be implemented on July 1, 2008.

This is a major blow to major car manufacturers, dealers, and 4S stores, but it is actually a good thing for new entrants. The official announcement of the new regulations allows them to start with less burden.

Flash Motors' entry into the market at this time is like a player buying at the bottom of the market, able to seek cooperation with major car companies with more favorable policies and prices, and design models that meet the latest standards.

"You can't say that. Actually, we started laying the groundwork for car manufacturing two years ago. Those who know about the automotive industry should know that we sold Zhongtai's car manufacturing qualifications to them. Our cooperation with Zhongtai started a long time ago."

The new China III emission standard is equivalent to the Euro III emission standard. The difference is that new cars must be equipped with an OBD system, also known as an on-board diagnostic system, which monitors emissions in real time to ensure compliance. If emissions fail to meet the standards, a warning will be issued.

Starting July 1, all vehicles produced and sold, including light vehicles and diesel vehicles, must comply with this standard.

Environmental protection is a hot topic these days, and most companies use it to sell their products. This applies to cars as well as electric two-wheelers. The new version of lithium battery electric vehicles is marketed as environmentally friendly.

In reality, lead-acid batteries are superior to lithium batteries in many ways. First, they are cheaper, and second, they are much safer than lithium batteries.

According to the regulations of the environmental protection department, vehicles that have been purchased and meet the National II emission standard must complete the new vehicle registration procedures before July 1st; otherwise, they will not be able to complete the new vehicle registration procedures after July 1st.

There are no restrictions or impacts on the use of existing vehicles, but the impact will be huge on vehicles currently on the market, as well as vehicles that have not yet come off the production line and are yet to be shipped.

This is equivalent to cutting it off in one stroke.

The first quarter of 2008 was already very difficult for car companies. The snow disaster in January caused many car companies and parts suppliers to suspend production and operations. Although the situation improved somewhat in February after the New Year, the impact of the snow disaster on the entire industry was still very obvious.

Firstly, the snowstorm has led to persistently high CPI, and the central bank has maintained a tight monetary policy, with concerns about an overheated economy only increasing. Currently, the RMB reserve requirement ratio is continuously rising, significantly restricting the development of some enterprises. Meanwhile, the sharp decline in the stock market, especially the recent collective plunge in the automotive sector, has also had a considerable impact.

Secondly, what worries automakers even more is that steel prices have continued to rise in recent years, and iron ore prices have nearly doubled, which will inevitably lead to a significant increase in automobile manufacturing costs, severely restricting the profits of automakers.

In addition, international oil prices have remained high, and oil prices affect not only the price of refueling, but also have a significant impact on the manufacturing of a cup.

January was hit by a snowstorm, February saw production resume, and March finally saw a slight recovery in sales data, only to be met with the release of new policies.

Even if dealers and 4S stores offer crazy discounts, consumers aren't stupid. Wouldn't it be better to buy a new car that meets the National III emission standard?

There's no need to overthink it; the overall vehicle sales figures for April weren't much better, and May was further impacted by special events. It goes without saying what the situation was.

The first quarter was a disaster, and the second quarter is likely to be the same. There will definitely be a lot of car companies going bankrupt this year.

The new policy has the greatest impact on diesel vehicles. According to Tan Jincheng, almost all of Changfeng's models do not meet the new emission standards, especially their flagship product, the Cheetah Black King Kong series.

If the Black King Kong can't be sold, the Cheetah series is essentially finished, creating an opportunity for Changfeng Group to acquire it.

The reporter's statement about buying at the bottom wasn't entirely wrong, but Mr. Tan obviously wouldn't admit it.

"Since it's not about buying at the bottom, then may I ask Mr. Tan why he entered the automotive industry when the car market is so difficult this year?"

This is a question from a professional journalist.

"Everything happened naturally. A few years ago, when I went back to my hometown and got a car production license, I had a dream of building cars. A car factory is extremely tempting for any man."

"Then why didn't you admit that Flashcar was going to make cars when we interviewed you before?"

"I didn't deny it. There's no need to brag before you've done anything. Our goal is to be an entrepreneur, not just a businessman."

The reporters were also taken aback, as it seemed that the previous reports had not been publicly denied. This kid is really shrewd.
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By partnering with well-known automakers, Weilai Auto has built its brand awareness without selling any vehicles, which is one of the purposes of this collaboration.

Meanwhile, Orange Technology's latest updated prospectus has been submitted to Nasdaq and is awaiting final review.

The latest prospectus also revealed the last equity change of Orange Technology before its IPO, with founders Tan Jincheng and Gu Qingqing holding 27.71% and 4.25% of the shares, respectively.

Among the management, Sun Tongyu's shareholding ratio decreased to 8.5%, Cheng Hao's shareholding ratio decreased to 2.04%, and the biggest change was at Qiming Venture Partners.

Qiming Venture Partners, which held a 13% stake after its Series C funding round, reduced its stake to 8% during the IPO process. Apart from the diluted portion, Qiming Venture Partners was the institution that cashed out the most.

Surprisingly, Sequoia Capital and Tencent Investment did not choose to dilute or cash out their shares, maintaining their 10% stake and becoming the second-largest shareholders of Orange Technology.

According to publicly available data from the prospectus, the Tan Jincheng family (including Gu Qingqing) holds a 32.66% stake in Orange Technology, maintaining firm control over the entire company.

Even at the final stage of listing, the Tan Jincheng family still holds such a high percentage of shares in an internet company, which makes many entrepreneurs envious.

Judging from the subscription situation during the roadshow, the market is quite optimistic about Orange Technology's stock price after its listing.

According to preliminary forecasts from professional forecasting agencies, Orange Technology's market capitalization on its first day of listing should be around US$12 billion, or about RMB 84 billion. The probability of its market capitalization exceeding RMB 10 billion in the future is still very high.

According to market predictions, the Tan Jincheng family's shares after the IPO will be worth nearly 4 million US dollars, and Orange Technology alone will give the Tan Jincheng family a net worth of nearly 28 billion yuan.

Why is it referred to as the Tan Jincheng family? In the prospectus, in response to Nasdaq's inquiry about the relationship between Tan Jincheng and Gu Qingqing, it was mentioned that the two would get married on National Day this year.

All of Gu Qingqing's future shareholdings will be included in the Tan Jincheng family.

(End of this chapter)