2003: Starting with Foreign Trade

Chapter 890 The Dark Horse of the Automotive Market: Industry Power
PS: As mentioned in the previous chapter, employee stock ownership plans usually come in three forms: additional share issuance, shareholder transfer, and additional share issuance or share repurchase (for listed companies).

If the major shareholder transfers the shares, the other shareholders must also contribute in the same proportion. I didn't mention too many specific rules because I was afraid people would say I was using popular science to pad my post. I'll be more careful next time.

Zhao Xinyi and the team assembled by ByteDance's advertising platform took a month to get Meizu back on track.

Although the Huang family still has a lot of influence at Meizu, Tan Jincheng is quite satisfied with the current situation. Time will heal everything, and after all, Huang is not a local tycoon from Zhuhai.

The subsequent research and development, production and sales were beyond Tan Jincheng's control and did not fall within his job scope. The development of Meizu's mobile phone business was entirely up to them.

"I spent more than a month on Meizu, and 2016 is over now."

In truth, every major acquisition is an exhausting process, both physically and mentally. The negotiations may seem simple, but the behind-the-scenes operations never stop.

Although he spent most of his time in the hotel during his time in Zhuhai, he never stopped contacting organizations and analyzing opponents.

"The impact of public opinion has basically been eliminated. Meizu may be in a period of calm for a while. In addition, sales this year have been affected to some extent, but Meizu Blue is still selling well."

Zhao Xinyi stayed in Zhushi, and Zeng Jixiang temporarily took over her work.

"It's okay, let it have an impact. When the new phone comes out next year with more sincerity, those fans will probably come back."

Every mobile phone brand has its own loyal fan base. In the era of smartphones, the intense marketing competition has made the issue of fandom particularly prominent. In the case of Meizu, it is necessary to distinguish between "Meizu fans" and "Huang Zhang fans".

Many Huang Zhang fans on the forum said they would never use the Meizu brand again, which is no different from Tan Jincheng's almost ruthless way of driving Huang Zhang out of Meizu.

To be honest, from the perspective of the company founder, Tan Jincheng's approach was somewhat unfair to Huang Zhang, and this was the biggest point of contention among fans on the forum. However, after seeing the design drawings of the Pro 7, Tan Jincheng felt that he had done the right thing.

Although he doesn't understand mobile phone technology or even cost structure, he can still tell at a glance which mobile phones have been best-selling over the years.

If Huang Zhang were to continue in charge, he would definitely follow his design plan to launch next year's new phone, which alone would make him unsuitable for Meizu now.

As for the impact on sales and inventory, Tan Jincheng is not worried. With pre-sale mechanisms and on-demand production becoming the industry mainstream, the risk of large-scale stockpiling has been significantly reduced.

There are many ways to clear out the inventory of phones, and Meizu's management can handle that perfectly well.

"Keep a close eye on Meizu. If there's anything you don't understand, you can contact Xiaomi. Xiaomi has improved a lot since Lei Jun took over the supply chain. We can learn more from him."

Before Lei Jun took over, Xiaomi's supply chain was a complete mess, with several major incidents and an unstable product line. Some of these issues were not actually user complaints about Xiaomi.

For a long time, Xiaomi's sales and reputation were actually at opposite extremes. However, almost all domestic mobile phone brands have this problem now: Android phones can only be used for one or two years before becoming unbearably slow.

However, their supply chain performance did improve significantly after the takeover, which is something we can learn from.

"I know, but speaking of Meizu's declining popularity, it's because of our own performance this year. We've been so strong that it's gone viral."

Zeng Jixiang looked excited when he talked about this.

The 2016 car market saw many popular models and amusing moments, such as the "Porsche-like" car from Zhongtai, which was launched in mid-October and sold more than 10,000 units in just two and a half months.

With sales of 6700 vehicles in December alone, it resembles the sales of a blockbuster model.

However, if we're talking about the most awesome and hottest car of the year, it's definitely the Yuechi A1. Its record-breaking monthly sales of over 12 SUVs in December and its total annual sales of 58.07 units have consistently fueled the popularity of the Yuechi series.

In addition, the A3, another pillar model of the Yuechi series, has maintained good sales despite the competitive pressure from competing products launched by major domestic automakers. It has achieved differentiation through rebadging and promotions.

The total sales of 197,200 units represent a significant increase compared to the 144,500 units sold last year. The sales of the A9, another model positioned at a higher level, are also very stable, with over 10,000 units sold annually.

"The entire Yuechi series has been absolutely outstanding this year, truly holding up the sky for us."

The total sales volume of the entire Yuechi series was 78.98 units. This single series alone was able to achieve the previously set sales target for the entire year of 2016, which is truly remarkable.

Meizu's popularity has declined simply because the China Passenger Car Association released the sales figures for all car companies and models in 2016, and the focus on car companies overshadowed some of the overall buzz.

"Yes, the sales of the entire Yuechi series have exceeded Geely's total sales this year."

Speaking of this, Zeng Jixiang was also very proud. In the words of the public relations department, this year's proposal was too easy to write, and it was no exaggeration to say that Geely's overall sales this year reached 77.73 vehicles, ranking 11th.

Thanks to the explosive growth of the Yuechi series, Weilai also squeezed into the tenth place in total car sales for the first time, with a sales volume of 95.48 vehicles, only 2700 vehicles less than Changan Ford, which ranked ninth.

Great Wall Motors remains the leader among domestic brands, with sales of 107.45 million vehicles. Its SUVs are experiencing rapid growth, and it maintains an unshakeable position in the pickup truck market. Great Wall has also ventured into the sedan market, but it still focuses on gasoline-powered vehicles.

Sales were not good, and Great Wall Motors reacted quickly by discontinuing the project. This made Tan Jincheng realize that there was no need to continue producing sedans in the gasoline vehicle sector.

He had originally been thinking about bringing in Proton's new Hanjia next year to give it a try, but now it seems he should wait and see.

"There will be an interview in a bit, mainly about our 2017 annual plan and our thoughts on becoming the top-selling independent brand. Here is an interview outline, boss, please take a look."

This was an interview officially organized by the China Passenger Car Association, and any car company would have to give them some face, so Tan Jincheng couldn't refuse.

Although the domestic car market in 2016 was still dominated by joint venture brands, it was a year of comprehensive rise for domestic independent brands, which seized market share in the low-to-mid-end market through their cost-effectiveness advantage.

The attempts to move towards the mid-to-high-end market have begun to show results. The Weilai ES8 has performed well in the high-end electric vehicle market, as well as Geely's B-class car Boyue and GAC's large SUV GS8.

Geely and Weile are the two most outstanding domestic brands this year. Geely's total sales increased from 51 vehicles last year to 77 vehicles, while Weile's sales increased from 67 vehicles last year to 95 vehicles.

Compared to BYD, Chery and BYD have both maintained sales of less than 40 vehicles, making the performance of these two Zhejiang-based automakers extremely outstanding.

"That's not how it works. BYD's layout in the new energy sector is outstanding. The proportion of new energy models such as Tang and Qin is increasing very rapidly. This is BYD's advantage. If any domestic brand's sales surpass those of BYD in the future, I think it will definitely be BYD."

"Chery is also an excellent company with a very prominent overseas presence. These are all companies we should learn from."

"Of course, other car companies are also very good, and each has its own advantages."

The reporter who conducted the interview clearly didn't know much about Tan Jincheng. Although Tan Jincheng likes to talk about competition with his peers, those are all real data, technology, sales, quality, after-sales service, and other tangible things.

He has the confidence to say these things. For example, he won't fall for the reporter's attempt to use the topic to lead him to criticize his peers.

BYD's sales of less than 400,000 vehicles were due to the significant reduction in the number of gasoline-powered vehicles sold. This year, they sold more than 80,000 new energy vehicles, which accounted for over 22% of their total sales, a very impressive figure.

The Qin Dynasty series has already sold very well. Once the entire Dynasty system is fully established, that will be the time for BYD to truly explode in popularity. If they criticize others now, they will be humiliated in the future.

Although Chery's domestic sales are average, they began to develop overseas markets in 1999. In terms of export business, they are similar to Great Wall Motors in the pickup truck market among domestic brands.

"What are Na Weilai's targets for next year? Have you considered breaking the million-vehicle mark?"

Seeing that Tan Jincheng wasn't fooled, the reporter had no choice but to change the subject and ask Tan Jincheng about his plans for next year, following the normal procedure.

Tan Jincheng shook his head: "Weilai does not have a sales plan of one million vehicles for the time being. The explosive sales this year were actually beyond our expectations, which is due to the overall market."

"As Lei Jun said, we are just standing at the right place at the right time."

If next year's sales can maintain this year's level, that would be good. Since January, oil prices have started to rise again. Tan Jincheng knows that oil prices are rising year by year. Although there will be a boost from electric vehicles, this will take time.

Furthermore, it's unlikely that Weilai will be able to produce another blockbuster like the Yuechi A1. Even the planned Weilai version, "Maodou Y," is unlikely to achieve the same sales success as the Yuechi A1.

A sales target of 100 million vehicles is unlikely to be achieved within the next three or four years. We should focus on improving our internal capabilities first.

"In the hearts of us at Weilai, we are still just a medium-sized car company. We naturally hope to achieve our goal of one million sales as soon as possible, but we must also be realistic."

Currently, there are only eight car companies in China with sales exceeding one million vehicles, and among domestic brands, only Great Wall Motors has achieved this.

This year's sales figures for Weilai can only be considered a dark horse. 60% of all sales were provided by the Yuechi A1. This is both a good thing and a bad thing. The good thing is that as the main model, the explosive sales have led to the reduction of costs.

Despite its low price, the Yuechi A1 boasts a high profit margin per vehicle. The 2016 Yuechi A1 achieved a record-breaking profit of 3.5 yuan per unit, significantly boosting the profit ratio per vehicle in Weilai. At the beginning of January, Changan, under the guise of welcoming 1500 million users, launched a major price reduction promotion on nine of its best-selling models, ranging from 4000 yuan to 18000 yuan.

Following this, JAC Motors further reduced the prices of three of its models by 4000 to 10000 yuan.

Six of these SUV models are competitors of the Yuechi A1. The two major state-owned enterprises have been offering significant price reductions and promotions in this market since New Year's Day, clearly because they are envious of the Yuechi A1's strong sales.

There's no need to overthink it; more and more competitors in the same market will follow suit with price cuts. If Yuechi A1 wants to maintain its advantage, it must come up with a solution.

There is no better solution than lowering the price.

Weilai's initial internal plan is to reduce the price of the new Yuechi A1 model by up to 10,000 yuan. The profit per vehicle is high enough that even a price reduction of 10,000 yuan will still generate considerable profits.

The interview had an outline, but the reporter had no idea how Tan Jincheng would answer the questions.

Listening to Tan Jincheng's answer, the reporter seemed to be deep in thought. It seems that this young CEO is still very clear-headed. Weilai's overall sales have increased by 41.10% this year. It is rare for him to be so calm when facing the threshold of breaking through one million sales.

Many companies would find it difficult to remain so calm when facing critical junctures, and they are very humble in positioning themselves as dark horse companies.

"Could you please share some information about Wei Lai's sales plan for 2017, Mr. Tan?"

"85 vehicles, which is a bit higher than this year. We hope to improve year by year. In addition, we still plan to sell 10 new energy vehicles. If we don't reach our target this year, we will try harder next year."

Some car companies, eager to get started, even announced their 2017 sales forecasts as early as December, but Weilai, whose sales have surged this year, has not released its forecast.

"85 vehicles? That's less than this year's sales!"

The reporter was somewhat surprised: "Damn, you sold 95 vehicles this year, and now you're saying your sales forecast for next year is 85?"

Aren't you afraid of the stock price plummeting if you say that? Or are you saying you're not optimistic about the car market this year?
"Is Mr. Tan pessimistic about the car market in 2017?"

"It's not that I'm pessimistic, but there have been many policy changes this year, so it's always good for businesses to be cautious."

With rising oil prices, subsidies will only decrease year by year, which will inevitably affect sales. In addition, the biggest change for automakers this year is that they will start to release and gradually implement the dual-credit policy.

The so-called dual-credit policy mainly includes average fuel consumption credits and new energy vehicle credits. The credit system aims to incentivize companies to improve fuel efficiency and promote the use of new energy vehicles.

In layman's terms, whoever consumes less fuel gets positive credits, and whoever produces and sells more new energy vehicles gets positive credits, and whoever produces and sells more new energy vehicles gets negative credits.

The dual-credit policy has a significant impact on automakers. If a company's credits turn negative and it fails to offset them on time, it may be penalized, such as having its application for and production of high-fuel-consumption products suspended.

Besides technologically reducing fuel consumption dramatically, vigorously developing new energy vehicles is essential.

This so-called dual-credit policy is not only available in the domestic market, but also in overseas markets, including Europe. In recent years, those Europeans have been obsessed with environmental protection, and they even came up with some kind of time plan to ban the sale of gasoline-powered vehicles, which sounds very abstract.

In his previous life, Dizi went all in on new energy and could be considered the biggest beneficiary of the dual-credit policy. He had also read reports that, based on Tesla's revenue share (carbon credit revenue accounted for 3%), Dizi's revenue from credits in the European market alone was about 10 billion yuan, and his total credit revenue was likely between 30 billion and 50 billion yuan.

It depends on the strength of policy implementation and the progress of cooperation with car companies.

Of course, the most important thing is not the billions of yuan in revenue, but the significant strengthening of industry influence through credit trading. For example, in tariff negotiations, European automakers can be persuaded to make concessions by relying on credit redemption.

Today, as a leader in the global new energy industry, with the support of the credit policy, Weilai is also able to strengthen its voice in the industry through the credit policy.

Tan Jincheng wholeheartedly supports this points-based policy. He can't wait for the dual-points policy to be officially implemented so that Weilai will have a greater say in the industry.

Despite its current strong sales, Weilai's actual standing in the automotive industry is only average. There's a reason why Tan Jincheng was so low-key during his interview with official media. There are plenty of companies with high revenue, but industry standing depends on those with more seniority.

This applies to domestic brands like Didi, Geely, Chery, and Great Wall; they simply lack standing.

A company's revenue and profits are all built on its industry position. If its industry position is not good, no matter how much revenue it has, it will only be a castle in the air. The company will be particularly vulnerable when unexpected events occur.

Apple has industry influence, and their competitive advantage is exceptionally strong. We must also build our own competitive advantage.

After finishing today's interview, Tan Jincheng called Cheng Linfeng over.

How is Nvidia's share reduction plan progressing?

With less than two weeks until that person takes the stage for the inauguration ceremony, Tan Jincheng's opportunities for large-scale cash-out are dwindling.

The worst period in terms of relationship, as far as I can remember, was 2018. But as the saying goes, ducks are the first to know when the river warms in spring, so the deterioration in the relationship must have occurred before 2018. Tan Jincheng must reduce his shareholding as quickly as possible.

US stocks are reduced every three months. It has been three months since ByteDance first reduced its holdings, and Tan Jincheng wanted to know the progress of the reduction.

"Based on the changes in Nvidia's total share capital, we have reduced our holdings by a total of 1074 million shares in two separate transactions, cashing out US$9.522 million. The remaining 5047.91 million shares will be reduced in due course, depending on the specific share capital and trading volume. The next reduction plan is scheduled for the end of March."

Cheng Linfeng answered fluently, explaining that the money from these two share reductions and cash-outs flowed into Ali's account through overseas channels and was used to purchase Ali's shares in Meizu.

Tan Jincheng tapped the table as he listened to Cheng Linfeng's report, inwardly sighing that he had been too greedy and had acted too late.

According to this plan, there are still four more reductions this year, which would amount to approximately 2200 million shares. Based on the current price of around $110, that's about $24 billion, which is a huge fortune.

Even with this reduction in holdings, ByteDance still holds a large number of Nvidia shares. If they completely turn against each other next year, it will be very dangerous. They still need to think of other solutions.

"Let's start by reducing our holdings like this. I'll think of other ways later. Also, let's begin the reduction plan for Tesla as well."

Tesla did not have a good year in 2016. The Model 3 was very popular, but it could not be mass-produced. Several major accidents occurred throughout the year, including spontaneous combustion and autopilot accidents.

No car model is immune to accidents, but when it comes to Elon Musk, the global internet celebrity known as Iron Man, and his Tesla, it becomes particularly noteworthy.

In fact, Tesla's stock performance has been poor since the third quarter of last year. After falling for five consecutive quarters, it barely stabilized in the fourth quarter of this year. In 2016, Tesla's stock price fell by 10.97%, closing at $213.69.

Currently, ByteDance's holdings in Nvidia are worth around $55 billion, and Tesla's are worth $19 billion, totaling $74 billion. These are all publicly known figures, which is quite a headache.

As for his $6 million worth of Apple shares and other US tech stocks, Tan Jincheng has moved them to the shadows.

"Okay, but selling a Tesla now feels like a bad deal. Are you sure you shouldn't wait a bit longer?"

According to Cheng Linfeng, although Tesla had a rough year in 2016, the Model 3 was selling so well that the total delivery of its various models exceeded 76,000 vehicles throughout the year. Once the production capacity issue was resolved, Tesla's stock was bound to take off.

Stock trading is all about trading on expectations, and Tesla has such clear expectations that it's definitely worth keeping it for a while longer.

Tan Jincheng sighed and said, "How could I not know? But they changed personnel. The person who came up was a businessman, not a traditional Z-customer. Do you think we don't know what kind of person a businessman is?"

If it weren't for this unstable factor, would I have sold it? I wouldn't sell a single share.

74 billion US dollars, which is more than 500 billion RMB. Although money is just a number to Tan Jincheng now, this number is still too big. Who can resist such a number?

You, someone who has no leverage over them, possess such a large fortune; who knows, this old man might not like you.

"Okay, then I'll go back and get ready."

Cheng Linfeng also sighed. Although he felt that his boss was too sensitive, his boss had always been very astute in the secondary market. If his boss said he would sell, he would definitely sell, even though his two reductions in Nvidia shares were ridiculed by shareholders.

Cheng Linfeng's regretful expression amused Tan Jincheng: "Don't feel sorry. After being in the secondary market for so long, don't you understand that unrealized profits are just unrealized profits, and only money in your pocket counts as real money?"

"Look at our acquisition of Meizu this time, if it weren't for those two share reductions that brought in such a large sum of money, would it have gone so smoothly?"

Cheng Linfeng thought about it and agreed, then laughed and said, "I was too narrow-minded. Indeed, money only counts when it's in your pocket. I understand what to do now."

"Right, we not only need to reduce our holdings, but we also need to find a way to sell them as quickly as possible. Besides, after reducing them, we need to get the money back or put it somewhere else."

(End of this chapter)