2003: Starting with Foreign Trade

Chapter 894 "The Pillow Deliveryman Has Arrived!"

"Wouldn't it be inappropriate to eat at home?"

As night falls, the Wanliu Academy residential area, which is very close to Zhongguancun, is one of the places where the bosses of major Internet companies like to live. Tan Jincheng's new home in Beijing is also located here.

Over the years, Tan Jincheng has also purchased properties all over the world, including in major Chinese cities such as Beijing, Shanghai, Guangzhou, and Shenzhen.

He mainly owns property in China for convenient accommodation when traveling for work. If he is away on business for an extended period of time, he usually stays in his own house.

"It's alright. Today's meeting isn't formal, and besides, it was his own request."

Foreigners seem to have a particular fondness for being able to visit someone's home. The CEO of BMW asked Tan Jincheng to meet with him tonight, and his request was to visit Tan Jincheng's home in Beijing.

"That's good too. It will make us more discreet, and we won't need to make too many preparations. We can just be casual."

According to the original strict regulations, foreign car brands can only establish a maximum of two joint ventures in China. For example, Mitsubishi Motors, which cooperates with Weilai, has another partner, Southeast Motor.

Although Southeast Motor is on the verge of collapse, it won't be easy for Mitsubishi to abandon its cooperation with them and find a new partner, let alone a third one.

With the new energy vehicle market booming, leading brands are no longer satisfied with just two joint venture sub-brands and are eager to find new partners.

Last year, the collaboration between JAC and Volkswagen, which was not stopped by the higher authorities, sent a signal of policy openness, prompting many first-tier brands to start making moves.

Mercedes-Benz indirectly reached a cooperation agreement with BYD through Daimler, while its old rival BMW, which is seeking a breakthrough in new energy vehicles, is also looking for a new partner.

Weilai, which has always cooperated with BMW and is a BMW battery supplier, is the best choice.

Around 7 p.m., Kruger arrived as promised, bringing a bottle of red wine as a gift.

"Welcome to our home, Harold."

"I'm sorry to bother you, Tan."

Kruger and Tan Jincheng were old acquaintances. After a high-five, he teased, "There shouldn't be any reporters camped out near your house, right? Tan, your popularity is just as good as any top star."

Indeed, the Two Sessions bring together celebrities from all walks of life to Beijing, including a large number of stars from the entertainment industry. From the moment Tan Jincheng boarded the plane, many people asked to take photos with him. His popularity is in no way inferior to that of a top star.

Tan Jincheng's handsome face, net worth of hundreds of billions, coupled with his consistently good reputation and high media exposure in the past two years, have led to a rapid rise in his popularity.

Tan Jincheng's current fame is comparable to that of the founders of BAT (Baidu, Alibaba, Tencent) and Lei Jun.

"Haha, probably not. This neighborhood is quite private, and besides, it's a bit cold at night. I don't think anyone would stake out me like they would a celebrity."

"But even if we get photographed, it doesn't matter. We can just say we're discussing a battery supply contract."

Kruger shrugged and grinned, "That's hard to say, but your reason is certainly valid. However, I must say, Tan, your popularity is really quite high right now."

During the Two Sessions, media from all over the world gathered here, and a lot of foreign media wanted to interview Tan Jincheng, especially since his recent cashing out of Nvidia and Tesla has caused quite a stir on Wall Street.

Foreigners are curious about what he plans to do with the money he cashed out, or whether he simply doesn't have a positive outlook on Nvidia, Tesla, or the US stock market.
"Modern enterprises face increasing operational pressures. As founders, we need to strike a balance between maintaining a low profile and attracting attention. Maintaining a low profile is a matter of personal cultivation, but in terms of business operations, we need to seize every opportunity to generate buzz so that our products can sell better."

Kruger nodded thoughtfully. Indeed, a good entrepreneur and manager must be a good "salesperson".

"Come on, I hope you'll enjoy the dinner I've prepared for you."

Although it was a family dinner, Tan Jincheng said to keep it casual, but the specific dishes were not casual either. The dinner dishes were a combination of Chinese and Western dishes, including Western dishes suitable for German palates as well as traditional Chinese dishes.

Among them, roast duck, which foreigners particularly love, was also placed on the table. In fact, Tan Jincheng didn't quite understand what was so delicious about it.

"It's very plentiful, thank you Tan for your hospitality."

After greeting Tan Jincheng's family, Kruger sat down opposite Tan Jincheng. It was just the two of them at the table. Although it was a family dinner, there were still things to discuss, and Kruger understood that.

BMW's CEO personally sought out the chairman, a captain, so it's impossible that the discussion was limited to such a trivial matter as battery supply.

Benefiting from BMW's trust and the provision of its own power battery standards, the power battery project found its way forward, and its development has been rapid ever since. BMW has also become one of Weilai's important customers.

However, due to its size, BMW's battery procurement business does not account for a very high percentage. The major customers of the Xuanwu series batteries, besides BMW itself, are Tesla and BAIC. In addition, Geely's procurement volume has also increased significantly.

Regardless, BMW, which is actively developing the new energy vehicle industry, is one of Weilai's most important customers. Both BMW Germany and BMW Brilliance are actively launching new energy vehicle models.

Kruger came to him about this very matter.

Due to changes in the economic environment, the National Development and Reform Commission has been discussing lowering investment thresholds in areas such as finance and new energy vehicles since last year in order to further attract foreign investment. In addition, leading brands are not satisfied with just two partners, so the two sides can be said to have hit it off immediately.

The fact that the collusion between Volkswagen and JAC is not being addressed is precisely because of this. Although the policy has not been officially announced, top-level entrepreneurs already knew that the decision was only a matter of time before it was passed.

However, some things cannot be done too obviously, otherwise it will look bad if you argue with those above and they don't care.

FAW, SAIC, JAC, Volkswagen and Audi have been embroiled in a bitter dispute over this matter. SAIC signed a memorandum of understanding with Volkswagen in Wolfsburg on November 11 last year to establish SAIC Audi, which aroused strong opposition from FAW.

These companies have turned a perfectly good collaboration into a palace intrigue drama.

"MINI localization?"

To avoid leaks and unnecessary trouble like the power struggles seen with Volkswagen, Kruger didn't reveal much before his public visit, citing the renewal of his BMW brand partnership with Brilliance Auto as the reason.

Tan Jincheng had only known about Kruger's desire to meet with him for a short time, and the two did not have much communication, only knowing that it was about in-depth cooperation in the field of new energy vehicles.

This is actually quite normal. New energy vehicles have become the hottest blue ocean market globally, and who wouldn't want a piece of the action?
Furthermore, with the support of the dual-credit policy, companies like Wynn and BYD, which are major contributors to credit points, are highly sought-after partners by many manufacturers.

Exploiting policy loopholes is something anyone can do; small businesses that don't have enough points can buy some to hedge their losses, which doesn't cost much.

For large enterprises that do not want to abandon their existing product portfolio, partnering with a major points-earning entity becomes their preferred option.

It's not just BMW; since the dual-credit policy was introduced, Tan Jincheng has received cooperation requests from many multinational automakers, including his current joint venture partner Mitsubishi, in the field of new energy vehicles.

The choice of who to choose or not to choose is entirely up to Tan Jincheng; even without cooperation, he can still make money by selling points.

Currently, in terms of both production capacity and sales volume, Weilai's complete vehicles and power batteries are far ahead of the rest of the world, and it has a large number of credits.

Kruger was well aware of this, so he offered the greatest sincerity BMW could offer: the localization and electrification of its subsidiary brand, BMW MINI.

Before becoming CEO, he had long been in charge of businesses including MINI, motorcycles, Rolls-Royce, and after-sales service, a role he held until 2013.

In addition, this person was responsible for core businesses such as human resources and production before becoming CEO, so he can be considered a pragmatist.

In addition to these specific business operations, he also served as the direct supervisor of Thomas, the current design director of Weilai.

"That's a great idea."

Tan Jincheng was indeed somewhat tempted. The joint venture would allow BMW MINI to be produced domestically and electrified, and with Mitsubishi declining, it would be a good opportunity to take over the mantle from Weilai in the joint venture field and enhance the company's influence.

Kruger smiled, thinking that Thomas was right. There was no need to waste words with this young chairman; it was best to get straight to the point.

If the offer is attractive enough to entice him, negotiating a partnership is relatively easy.

The young chairman was not so concerned about some minor details, and was even willing to offer concessions to partner manufacturers.

"Yes, we would like to seek a new partner in your country to localize the MINI brand, and also to strengthen our cooperation in the field of new energy."

"Joint venture to build a factory?"

"Yes, that's right."

BMW has done a thorough job in localization. Currently, more than 60% of BMWs produced in China are localized. After the Tiexi engine plant is completed, the localization rate of engines will reach 40%, which is the highest among all joint venture brands.

The large-scale localization of parts production brought BMW to a profit threshold, but they also encountered some difficulties in sales, being overtaken by Mercedes-Benz in China and by Lexus in the United States.

The BMW 1 Series with its three-cylinder engine is often ridiculed, which is quite detrimental to the reputation of a luxury brand.

The headquarters also analyzed that there was no problem with the large-scale localization of parts in China, and the sales volume of each model was also fine. The fact that the total sales volume in China exceeded 50 units in 2016 is proof of this.

So where does the problem lie?

marketing!

Which car company in China has the best marketing? Weilai! After comprehensive analysis, Weilai has almost become BMW's only choice.

"What's Brilliance Auto's opinion?"

Although Tan Jincheng was tempted, he didn't want to get caught up in the power struggles like those involving SAIC, FAW, and Volkswagen. In this era of rapid development, there was no need to waste such energy. "That's why I came here secretly this time. We don't want those Volkswagen farces to happen to us. But don't worry, Tan, there won't be any problems with Brilliance Auto. We'll handle everything."

"Of course, we still need to take some confidentiality measures at this stage, and we should try not to let too many people know about our cooperation; of course, if possible, I hope that you, Tan, can personally participate in the negotiations."

"Of course there's no problem with that."

Kruger's request was entirely reasonable and aligned with Wei Lai's interests. The fact that the other party was willing to bring up the MINI brand showed their sincerity in seeking cooperation, so Tan Jincheng had nothing to complain about.

The MINI brand also originated in Britain and flourished after BMW took over. Go-kart-like handling, short wheelbase, and precise steering are the biggest driving pleasures of MINI. With the support of the BMW brand, it has become very popular.

To be honest, although this car has a rather feminine name, it is not actually suitable for women to drive because the driving comfort is not very good. However, the biggest problem for MINI is to get rid of the reputation of being a "mistress car".

After all, this product is primarily targeted at women. 70% of MINI's users are women, with a relatively low average age, and 85% of them choose the high-end models.

The label of "small three cars" can easily affect its sales.

MINI's core model is the MINI Cooper. If it can improve handling and driving comfort, and then launch a pure electric version, then MINI might have a chance to succeed.

Most importantly, MINI is also a BMW brand. Partnering with two major foreign brands, BMW and Mitsubishi, even if it's just by using their names, can enhance MINI's brand image.

For Wei Lai, who has always been committed to building brand influence, this was like a godsend.

"That's great! I wish us a pleasant collaboration!"

Kruger happily raised his glass, and Tan Jincheng smiled and clinked glasses with him.

Since tonight's discussion was only about expressing a cooperation intention and did not involve any specific cooperation matters, both parties kept it brief and the conversation continued quite pleasantly.

"Weilai's 2016 financial report must have been very impressive, right?"

It's earnings season again, and both Wynn and Flash have a tradition of releasing their annual reports in early March. This year is no exception; the official annual reports will be released on March 3, the day the Two Sessions begin, at the close of trading.

"It's alright. BMW has also done well this year. In a way, we've all benefited from this market."

Tan Jincheng was aware of the specific data. Weilai's 2016 financial report showed that it was the most impressive year since its establishment, with a significant increase in revenue and profit. The two core businesses, especially the power battery business, performed exceptionally well.

The investment in the power battery business is huge, but the revenue growth is also very impressive. In 2015, the revenue of power batteries was only 57.03 billion yuan, and the net profit was only 9.3 million yuan.

This year, Weilai's power battery business has soared to 149 billion yuan, with a net profit of 31 billion yuan.

The significant increase in these two figures has greatly improved the industrial structure of Weilai.

The automotive and auto parts business also performed exceptionally well, thanks to the strong sales of the Yuechi series.

"The total revenue of the automotive sector was 540.69 billion yuan, and the profit was 81.158 billion yuan. The average net profit per vehicle has declined."

3月3日下午五点钟，尉来准时公布了2016年全年度财报以及2017年一季度财报，总营收689.69亿元，整体利润112.158亿元。

Compared to 2015, the two figures represent year-on-year growth of 54.05% and 88.926% respectively!

At today's market close, Weilai Co., Ltd. closed at 124.17 yuan, up 5.76% for the day, with a market value of over 2700 billion yuan, ranking 18th in the A-share market. It surpassed BYD by a narrow margin to become the listed car company with the highest market value in China.

In the first quarter of 2017, the trend of institutional investors flocking to speculate on blue-chip stocks had already begun to emerge, with the share prices of blue-chip stocks, including those in the banking, liquor, energy, home appliance, and automobile sectors, rising for several consecutive months.

Moutai has risen for six consecutive quarters, with an increase of up to 103%, while Weilai Shares, as the first blue-chip stock on the ChiNext board, has also seen a 35.12% increase in its share price since its lowest point of 91.89 yuan in January 2016.

Since its listing on November 3, 2014, Weilai Co., Ltd., with an issue price of 25.14 yuan, has achieved a net profit of nearly four times in 28 months. Although there was a drop of more than 11% during the period, that was due to the stock market crash.

Judging from the stock price trend, Weilai Co., Ltd., a leading stock on the ChiNext board, is definitely a safe haven during the two years of significant stock market fluctuations.

With its significant performance growth last year, Weilai, with a market value of over 2700 billion yuan, is still seen as a "potential stock" by institutions, which maintain an overall valuation of 4000 billion yuan for Weilai.

However, behind Wei Lai's impressive financial report data, there are not no problems at all.

Compared to 2015, Weilai's average net profit per vehicle has declined, mainly due to price wars. Weilai participated in and even initiated price wars several times, which greatly affected its net profit per vehicle.

In addition, after each round of price wars, WILAY will provide certain compensation to existing car owners, which has effectively maintained WILAY's reputation among its existing user base. However, while pleasing consumers, this also increases WILAY's sales costs.

"It doesn't matter. Wei Lai can afford this amount of money. We definitely have to participate in the price war to maintain sales, but we can't neglect our old customers, so this subsidy policy will continue."

During the earnings call, Tan Jincheng appeared quite assertive when answering this question.

He doesn't care what investors think. Wei Lai has always claimed to value consumers, so how could he let these investment institutions, who only care about money after buying stocks, sway him?

However, it would be best to participate in price wars less often in the future. Weilai has already established a certain position in the industry, and it is not good to always take the initiative to initiate or participate in price wars.

This year, we still need to focus on the entire industry chain, just like Great Wall Motors.

Speaking of Great Wall Motors, their net profit per vehicle is truly enviable. Great Wall Motors, which also focuses on SUVs and doesn't have a sedan business, has an enviable net profit per vehicle. No wonder Wei Yonghao dared to say confidently that if Great Wall Motors doesn't make money, then no other car company in the country will make money.

Great Wall Motors' high net profit is mainly due to its comprehensive industry chain strategy, in addition to its outstanding performance in the SUV and pickup truck markets.

The whole vehicle is our own, and most of the core components are our own. How can we not make money?

Weilai is also pursuing a full-industry chain strategy, but it is based on new energy vehicles. The layout is not yet complete, and it has not yet reached its peak.

"It seems like it's time to find Zhang Li and see if we can poach his wife."

Thinking of the bet he made with Wang Fengying back then, Tan Jincheng felt it was time to talk to her again. In 2016, Weilai's overall revenue was still far behind Great Wall, and there was also a significant gap in the whole vehicle business.

However, Tan Jincheng felt that Wei Lai still had a great chance of fulfilling the three-year agreement.

Another issue that investors questioned about Weilai was its cash flow; Weilai's cash flow declined significantly throughout 2016.

There's not much to say about this. Last year, Wei Lai made huge investments in power battery factories, automobile factories, and parts factories, earning a lot and spending a lot, just like his massive engine, throwing money around.

The questions raised by investors during the conference call were somewhat nitpicking for Weilai's 2016, but they were indeed things that Weilai needed to pay attention to.

When the Yuechi series can no longer achieve the same significant growth as in 2016, thus increasing the net profit per vehicle, Weilai needs to find ways to improve the profitability per vehicle of other models.

As for cash flow, it certainly needs to be taken seriously.

Wei Lai's financial report and Tan Jincheng's appearance in a formal suit outside the venue for an interview with reporters both appeared on the internet, especially on the increasingly popular short video app Douyin, where Tan Jincheng's posts dominated the screen.

Since its launch last September, Douyin has been in a cold start phase. After a period of slow user growth, it has gradually gotten on track. Although its daily active users cannot compare with Kuaishou, its potential is huge.

On Douyin, Tan Jincheng, who joined from the very beginning, can definitely be considered Douyin's "number one internet celebrity." Zhang Yiming has attracted a lot of users thanks to this investor.

Xiao Zhang didn't even promote the Douyin app much in the early stages; he really tries to save money wherever possible.

Despite the immense prestige he enjoyed during the Two Sessions, Mr. Tan has not stopped communicating with BMW behind the scenes. The two sides have already reached some agreements on cooperation in the development of pure electric vehicles and traditional fuel vehicles.

In addition, the feasibility of a collaboration with the MINI brand is being actively explored.

The entire process was kept secret. Kluge, who appeared in Liaoning Province, was very satisfied with the progress of negotiations with Wei Lai while maintaining his inspection of BMW Brilliance. Tan Jincheng felt the same way.

On March 15 and March 17, Tan Jincheng, who remained in Beijing after the Two Sessions, secretly signed two agreements with BMW: "Confidential Agreement on Exploring and Developing the Feasibility of Pure Electric Vehicles and Traditional Power Vehicles" and "Agreement on Exploring and Evaluating the Feasibility of Cooperation on MINI Brand Vehicles".

At this point, the two parties, who were both interested in each other, formally reached a preliminary agreement on cooperation.

According to the agreement, the two parties will jointly establish a new automobile company. The new company will focus entirely on the field of new energy vehicles, integrating and utilizing the technological, resource, and management advantages of both shareholders to develop a new generation of pure electric vehicles for the global market.

In layman's terms, it is committed to the localization and electrification of MINI. The new company is jointly owned by both parties with a 50:50 shareholding ratio. The chairman will be appointed by Wei, while the vice chairman will be appointed by BMW.

BMW's decision to relinquish the chairmanship was based not only on tradition, but also largely on its high regard for Wei Lai's marketing abilities.

They have no problem building cars, but they still struggle with marketing in the Chinese market, often leading to public relations crises.

"Is the first step to get rid of MINI's reputation as a 'small three-car'?"

After the cooperation agreement was signed, Kruger was eager to hear Tan Jincheng's opinion on the rebranding of MINI.

"Haha, we'll talk about that once the joint venture is finalized. Right now, I have some other things to do and need to rush to Shanghai, so there's no time for that."

Damn, the joint venture hasn't even been officially established yet, and you think you can just get something for free?

(End of this chapter)