2003: Starting with Foreign Trade

Chapter 675 The Break-Even Point of Yuechi A1
With monthly sales exceeding 8000 units and sales surpassing 10,000 units in less than a month and a half, it surpassed the classic off-road model Cheetah Black King Kong to rank 12th in the annual sales list.

The popularity of the Yuechi A1 needs no further explanation.

Throughout the history of the automotive market, both domestically and internationally, December sales have consistently been lower than November sales, with the decline typically ranging from 20% to 30%, and the older the model, the greater the drop.

After the peak sales season of September and October, November marks the final sales peak of the year, accompanied by the last batch of auto shows of all sizes.

A typical replacement cycle for a gasoline-powered car is three to four years. Even with significant discounts offered at the end of the year, some rational consumers will choose to wait and see due to concerns about model updates.

Compared to new energy vehicles, which are updated three times a year, gasoline vehicles take three years to develop. To ensure that consumers can enjoy the pleasure of driving while maximizing the retention of vehicle value, gasoline vehicles are something we can really look forward to.

Moreover, with the end of the year approaching, there are many places where money needs to be spent, which has led some consumers to choose to continue to wait and see.

For various reasons, the rankings in November are almost certain to be the rankings for the whole year, especially the rankings at the top.

However, December presents a good opportunity for Yuechi. It was launched in October and is currently very popular. With positive market feedback, even if sales are not as good as in November, the overall sales outlook is still promising.

"Strive for 12 and aim for 11, not bad, not bad. The results after two and a half months on the market, haha, congratulations to President Tan for the instant success of Weilai Auto."

The cooperation negotiations between BMW Brilliance and Jinshidai, spearheaded by Wei Lan, have been ongoing for three days since they began on November 30.

Both sides kept a low profile during the negotiations, but the presence of the CEO of BMW Brilliance in Luzhou inevitably attracted attention. Following the joint venture between Daimler and BYD, BMW has now made a major move.

Although the main entity for cooperation is Jinxin Times, all of them—including Shanchi, Jinxin, and Weilai—are Tan Jincheng's companies and are essentially one entity.

The collaboration between BMW and Jinshidai is seen by outsiders as a collaboration with Weilai Motors.

The booming sales of the Yuechi A1 and the new major partnership have propelled Weilai Auto to the forefront of public opinion. As BMW's CEO in China, it's not difficult for Wei Lan to know the November car sales figures in advance.

They sold over 1 vehicles in just one and a half months, and over 8000 vehicles in their first month on the market – what amazing figures!

Speaking of the huge success of the Yuechi A1, the happiest people are the listed companies in the industry chain, led by Shuguang Auto. After the surge in early November, Shuguang Auto's stock price is now close to 14 yuan.

Since ByteDance first raised its stake in Shuguang Automotive when the price was around 5 yuan, Shuguang Automotive is the supply chain company that has benefited the most from the hot sales of Yuechi A1.

The management's shareholding ratio has increased from less than 15% to more than 20%, which has not only deepened their control over the company, but also caused the stock price to surge by nearly 2.8 times. From the low point, the stock price has increased by more than 3.5 times.

Shuguang Auto, which was once valued at less than 9 million yuan, now has a market value of over 30 billion yuan, benefiting shareholders, investors, and management alike.

After the stock price soared, no one questioned the transfer of Huanghai Automobile's bus business.

Even Jinma Shares, which tried to ride the coattails of the captain's car concept stock, saw its stock price rise rapidly from around 5 yuan to over 7 yuan in just over a month, an increase of more than 40%.

With its market value soaring by 7 million yuan, this is probably one of the few pieces of good news for Mr. Ying recently.

However, looking at the sales figures of Yuechi A1, which are closely following Zhongtai 2008, I can't really feel happy.
Both companies used SUVs as their entry point, so why did the other company do so much better?
"President Wei, please don't make fun of me. It's just one model, and we just happened to catch a good policy. Which car company isn't selling well this year?"

"Haha, there's no need for excessive modesty. Selling hundreds or even dozens of cars a year is not uncommon. Take Changfeng Motors, which your company acquired, for example; they only sold a little over 600 CS7s."

Wei Lan has already gone easy on them; the CS7 sells over 600 units a year, which is already quite good.

Another example I haven't mentioned is the Great Wall Safer, which ranked second in sales in November. It is also an SUV, but by November, it had sold less than 100 units throughout the year, making it a complete failure.

The market is indeed booming, and cars are selling like hotcakes, but even top-tier automakers have cars that they can't sell. Consumers aren't stupid.

Even their own BMW Brilliance models have many models that are not selling.

"Okay, sales are indeed pretty good, but it's too early to call it a success. At least we haven't broken even yet."

There is no standard answer to how many vehicles a traditional automaker needs to sell to break even after developing a model. Larger R&D projects need to sell tens of thousands of vehicles to break even, while some smaller R&D projects only need to sell a dozen or so vehicles to break even.

For example, Tan Jincheng knew about the Zhongtai 2008. As Zhongtai's first model, although it was copied, a considerable amount of money was invested in other aspects such as marketing planning and publicity.

The low price and high investment meant that the company only broke even after selling more than 3 vehicles. Compared to the investment in the Zhongtai 2008, the investment in the Yuechi A1 was on a completely different level, including a newly built factory, production line, training and recruitment of new employees, and Tan Jincheng's large-scale marketing efforts.

These are just the costs; not even mentioning the costs of acquiring other companies. The current sales volume of just over 10,000 vehicles is far from enough to break even, let alone make a profit.

Based on current profit and loss costs, the Yuechi A1 needs to sell at least 5 units to break even.

"Take it slow. A good start is already quite good. It will only take a few months to break even."

To be honest, Wei Lan was a little envious. Based on the expected sales of the Yuechi A1, it would only take a year at most to break even.

It takes only one year for a new car company to become profitable and enter the mainstream car industry. That's incredibly fast. Looking at domestic brands, leading companies like Chery, Geely, and BYD have all gone through years of hard work.

Which company isn't facing the risk of going bankrupt?
Through capital acquisitions, integration, and independent development, this young man has built a new automotive company in just a few years.

Although Weilai is not yet profitable this year, its sales are expected to reach 2 billion yuan. If this momentum continues, Weilai Automobile's total output value next year can almost be estimated at 10 billion yuan.

Beicang District really struck gold! No wonder the Luzhou government started taking action less than an hour after he arrived in Luzhou City and met with the top executives of Jinshidai.

Formal negotiations don't require him and Tan Jincheng to be present. Their role is more to act as a mediator and mediator. Once both sides have reached an agreement, the contract can be signed.

Wei Lan came to Jinxindai headquarters today not to negotiate with Tan Jincheng, nor to praise him, but to discuss the attitude of the Luzhou government.

To be honest, although Wei Lan wanted to promote the cooperation between BMW and Jinshidai, she only considered it from the perspective of car manufacturers and suppliers.

BMW ordered several hundred sets of power battery components from Jinshidai. Since Jinshidai couldn't manufacture them, BMW helped them manufacture them, essentially supporting a supplier that was part of BMW's new energy vehicle research direction.

The supplier's parent company also has plans to research new energy vehicles, and these plans are already underway. This will allow them to focus more intently on their work, making the collaboration mutually beneficial and giving BMW greater peace of mind.

However, if Luzhou gets involved, the significance will be different. It's not like they're making a big fuss just by buying a few hundred battery modules, is it?
I was just asking someone to buy some things, and it wasn't necessary to go through with the government. But since we were on their turf, and our partner, Jinxin, was a local company in Luzhou, Wei Lan couldn't just refuse outright.

"What's your opinion on Luzhou's intentions, Mr. Tan? They must have contacted you about it, right?"

After chatting for a while, Wei Lan finally got down to business. He knew about this matter; he was the one who picked Wei Lan up in Luzhou, and he also contacted Wei Lan while looking for him.

The people in Luzhou thought it was another factory to be set up, which made them very excited. As his popularity grew, it became increasingly difficult to keep Tan Jincheng's itinerary a secret. Every time he appeared in a city, he would attract the attention of the local government.

It's a good thing, but also a bit of a headache. Tan Jincheng said with a wry smile, "They thought we were going to set up a new joint venture like BYD, and that we were going to build a factory."

"Haha, I can understand their attitude. It also shows that President Tan's current status has reached a point where the local government cannot ignore him. That's quite remarkable."

"But how does President Tan plan to resolve this?"

"I'm sorry to have troubled you, Mr. Wei. This matter will be handled properly and will not affect our established cooperation plan."

Jinshidai's main entity is different from BYD. Compared to BYD's approach of establishing a joint venture and creating its own high-end new energy brand, even if BMW were willing, Tan Jincheng would not be.

If a joint venture is to be established, it can only be with Wei Lai as the main entity, not Jin New Era.

Jinsheng New Era's goal is to become an independent battery supplier, rather than being dependent on a particular automaker.

It's not impossible for Luzhou to get more involved in Jinshidai's investment; they could raise some more funds from them through shares, but it certainly wouldn't be in cooperation on specific business areas.

This is something no investor can do, and as for whether there are any plans to build a car factory in Luzhou in the future, Tan Jincheng cannot guarantee that either.

In theory, Luzhou is indeed a good partner, second only to the Beicang government in Tan Jincheng's mind.

In some periods, Luzhou even has a significant advantage over Beicang. At least industrial land in Luzhou is really cheap now. In 2009, Luzhou could only be considered a third-tier city at best.

(End of this chapter)