2003: Starting with Foreign Trade

Chapter 896 The Benefits of Using a Cheat Code
"Sales are not bad, the new policy is favorable to us."

Holding the first quarter's sales report, Tan Jincheng grinned from ear to ear. You know, it's really great to be on a winning streak.

Starting this year, China's new energy vehicle policies have undergone many adjustments and significant changes.

The first change is in subsidies. Compared to last year, starting from January 1st, the overall subsidy amount for new energy vehicles has been reduced by 20%, and local government subsidies cannot exceed 50% of the central government's subsidy per vehicle.

Not only have subsidies decreased, but the technical threshold has also increased, with higher requirements for driving range and battery performance. For example, pure electric passenger vehicles must have a driving range of more than 100 kilometers to be eligible for subsidies.

All of these are chain reactions triggered by the subsidy fraud last year.

However, reducing subsidies and raising technical thresholds are not the most drastic changes. The most drastic change is the change in subsidy payment methods. Starting this year, subsidy funds will be settled after the fact instead of being disbursed in advance.

The change from paying first to paying later is a ruthless move that directly caused a significant drop in production and sales for some car companies in the first quarter, such as JAC and BYD, which is currently WooLong's biggest competitor in China.

As for companies like Lifan that are directly punished, there's no need to even mention them.

Last year, JAC Motors was very high-profile in promoting its new energy vehicles, and its performance in the A00-class new energy vehicle market was quite outstanding. However, with the policy changes this year, JAC Motors' performance in the new energy vehicle sector has declined significantly.

The production-to-sales ratio dropped by 100% in the first quarter, with some models even seeing zero sales, demonstrating how much of last year's figures were inflated.

Jianghuai is more than just a son to the entire Anhui province; it's treated like a father. However, it has consistently failed to perform well over the years, which is truly disappointing.

However, JAC is not alone in its struggles. Many other state-owned car companies performed similarly in the first quarter, all claiming to be new energy vehicles but actually relying on subsidies. Once the subsidy method was changed, they went out of business.

Currently, among state-owned car companies, only BAIC can be considered to have truly devoted itself to the new energy vehicle industry.

However, none of this should be important to JAC. The biggest thing for them in 2017 should be the progress of their joint venture project with Volkswagen, and Tan Jincheng has been keeping people paying attention to this matter.

In a state-owned enterprise as complex as a sieve, and within the Anhui province, it was quite easy for Tan Jincheng to inquire about some information.

"The progress on the Jianghuai side is going relatively smoothly, and if nothing unexpected happens, we should have a result by the end of this year."

Zhao Xinyi, who had served as the chairman of Meizu for half a year, returned to Weilai and resumed her role as Tan Jincheng's personal assistant. Under Tan Jincheng and her decisive management, Meizu no longer had the influence of the Huang family, and the supply chain was also reorganized.

Zhao Xinyi's task can be considered to have been completed to a certain extent.

For Meizu, Tan Jincheng's plan is to adopt a professional management system. The new CEO Chen Mingyong and Meizu's original management team, including Bai Yongxiang, Li Nan, and Li Yan, formed Meizu's board of directors.

The company is managed collectively by the board members, a model somewhat similar to Vanke's. Management holds shares and receives performance-based dividends, which allows Meizu to maintain its vitality for a long time, even if it were no longer listed.

After overturning Huang Zhang's design for the Pro 7, the design of the new flagship model is under construction with everyone working overtime. Six months later, Meizu can be said to have undergone a complete transformation, and the entire company has been revitalized.

The R&D department has been incredibly busy for the past six months, with some employees even sleeping in the office, but everyone is still highly motivated.

"Help them promote their products when necessary, but don't make it too obvious."

Rumors occasionally circulate in the market that Volkswagen is planning to establish a joint venture factory with JAC in Luzhou. In most cases, these rumors are actually released by JAC to test the reactions of higher authorities and other Volkswagen partners.

If necessary, Tan Jincheng would not mind lending a hand. With his father backing him up, Wei Lai would be under much less pressure.

Since submitting cooperation requests to the National Development and Reform Commission and the German government respectively, it has been impossible for Weilai and BMW to keep their joint venture project completely secret. Rumors have been circulating between the two countries from time to time, but neither of them has responded.

With the crackdown on numerous companies that fraudulently obtained subsidies and changes to subsidy policies, the environment for new energy vehicles is bound to change. In addition, with reduced foreign investment, policies will need to be more flexible and diverse.

There are no longer any major obstacles to opening up joint venture conditions.

Musk's influence is also involved in this matter. Troubled by production capacity, Musk began to seriously consider building a factory in China at the end of last year. However, this maverick did not want to take the joint venture route, but preferred to own the factory independently.

The threshold for joint ventures hasn't even been officially lowered yet, and the idea of ​​going so far as to establish a wholly-owned subsidiary is a huge leap. Although they are envious of Tesla's influence, the higher-ups are still unsure and dare not give it a direct answer.

During this year's Two Sessions, I even asked Tan Jincheng for his opinion on this matter. If you were to ask who in China understands Tesla the most among car companies, there would be no one else besides Tan Jincheng, the boss of Weilai, who has many collaborations with Tesla.

However, Tan Jincheng did not offer any opinions. He could not possibly make up his opinion on the implementation of such a policy; it involved a complex interplay of interests among multiple parties.

He wouldn't risk offending other interest groups just to speak up for Musk, since the factory manager hadn't given him any benefits.

Anyway, Tesla will eventually build a factory in the country, so let them figure it out themselves when it comes to it.

The policy fluctuations not only had a significant impact on companies like Jianghuai, but also on its competitor BYD.

Unlike Weilai, which focuses most of its efforts on pure electric vehicles, BYD, which has been involved in the new energy vehicle industry for a long time, focuses more on hybrid and plug-in hybrid vehicles. Currently, most of BYD's best-selling new energy models are hybrid models.

Another major policy change is that this year's subsidies are shifting from commercial vehicles to passenger vehicles. Last year, commercial vehicles were a major target for subsidy fraud, with more than half of the penalized car companies being commercial vehicle manufacturers.

BYD has a large sales volume in commercial vehicles. The reduction in subsidies and the increase in technical barriers have had a very serious short-term impact on them. According to the forecasts given by institutions, BYD's new energy vehicle sales in the first quarter will decline by more than 45% year-on-year, and its net profit will decline by more than 25% year-on-year.

Following the first quarter results, specific data has also been released. BYD's new energy vehicle sales plummeted by 47.6% year-on-year, and net profit decreased by 28.79% year-on-year. Sales of its main (hybrid) models, Qin, Tang, and E6, decreased by 76.8%, 69.6%, and 66.9% respectively, with some models even dropping out of the top ten global sales list.

Amidst a general rise and collective recovery in blue-chip stocks, and with WYD, also in the automotive manufacturing sector, having risen by over 30% from its low point, BYD is one of the few blue-chip stocks in the A-share market whose share price remains depressed.

These issues are related to BYD's business structure, which makes its profits overly reliant on subsidy policies. Any changes in these policies cause significant fluctuations in BYD's profits, especially this year.

However, this situation will not last long. BYD has realized this problem since last year and has increased its investment in pure electric vehicles. Its core brand Dynasty series has successively launched pure electric models.

Regardless, giving Wei Lai at least a quarter of his time was very important for him.

"Currently, we still have too few new energy vehicle models, and apart from the Aion series, none of them are high-volume sellers, so we are at a disadvantage to some extent."

The data is good, but Tan Jincheng still feels it's a bit of a pity. Most of the sales decline of BYD in the first quarter was taken by BAIC. Apart from BAIC, the fastest growing new energy vehicle company in the first quarter was Geely, and the Emgrand EV series sold very well.

"That depends on whether the Y3 series can sell well after its launch."

The Y3 series is the internal code name for Weilai. Referring to the Maodou Y, an SUV model priced below 30 yuan, there is still some internal debate about whether it will be named ES3 or ES5 after its launch.

The price of less than 30 yuan marks the beginning of Weilai's sales push and is also a preparation for the transition from the Yuechi A1 of the gasoline era to the "Weilai A1" of the new energy era.

The interior design of this car was given great attention. Tan Jincheng gave the research institute and the R&D team enough patience, hoping that it would maintain sufficient competitiveness after its launch.

"Hopefully, with Wei coming to L1 to boost sales this year, the sales shouldn't be too bad."

Since its delivery began at the end of March, the Weilai L1 has received positive market feedback despite not being widely advertised. Despite jokes about it being a refrigerator, a TV, and a large sofa, sales have steadily increased, making it quite popular among families.

Especially in first-tier cities like Beijing with its restrictions, the Weilai L1, with its spacious interior, reasonable price, and exceptional comfort, is very popular. Based on current order volume, the delivery volume of Weilai L1 in April should exceed 3000 units.

Currently, the production capacity of the Weilai L1 has been increased to 5000 vehicles per month, which can basically guarantee normal delivery with guaranteed quality and quantity. Timely delivery is one of the reasons for the Weilai L1's popularity.

At present, Weilai's biggest guarantee is that, apart from quality and service, no other company has its delivery capability.

The two major production bases in Luzhou and Ningbo have been continuously expanding over the years, growing larger and larger. The largest enterprise on Meishan Island is Weilai, whose biggest advantage is its annual production capacity of 20 new energy vehicles.

At least until 2018, Weilai had no need to worry about production capacity issues.

"We sold a total of 1.79 vehicles in the first quarter. With the addition of L1 in the second quarter, we should be able to meet our sales expectations for this year. It would be a bit embarrassing if we failed to meet our sales expectations for two consecutive years."

Most importantly, L1's market performance far exceeded expectations. With pure electric technology not yet widely accepted by the market and hybrid technology offering a poor experience, range extenders have truly solved the range anxiety of many new energy vehicle enthusiasts.

That's just how times change. Even though the new energy vehicle market has been developed, what consumers discuss most right now is not technology or intelligent driving, but range anxiety.

Range-extended electric vehicles effectively address consumer pain points. If all goes as expected, the WELAY L1 alone should contribute approximately 30,000 units to WELAY's sales this year, making the 100,000-unit sales target virtually guaranteed. As a global leader in new energy vehicles, WELAY needs to be the first to break the 100,000-unit annual sales mark to solidify its market position.

The ES6 and ES8 each sell over 10,000 units annually, and the ET7 will be launched this year. With the addition of the L1, the entire Weilai series now has three pure electric models and one range-extended electric model, which is basically enough to meet demand.

In addition, the two models in the Aion series still hold a dominant position in the ride-hailing market.

After two major battles in the ride-hailing market, the market experienced a period of rapid and disorderly development. Under the dominance of Didi and the constraints of legislation, it has begun to enter a phase of orderly development and rapid expansion.

According to authoritative predictions, the market size of ride-hailing users in China will exceed 2 million this year, with an overall transaction volume of 300 billion US dollars. Didi, with more than 1300 million daily active users, holds an absolute advantage.

Rumors of making money by driving for ride-hailing services have fueled a surge in the number of drivers joining the industry, driven by various forces. In addition, under policy constraints, ride-hailing platforms of all sizes have begun to pay attention to the number of their own vehicles.

In early January, Didi signed a procurement contract with Weilai, under which Didi will purchase a total of 10,000 new energy vehicles from Weilai in 2017, including the Aion S and Aion Y models.

Other companies, such as Cao Cao Travel and Shenzhou Zhuanche, also have procurement contracts with Weilai.

While the traditional C2C model (private car access) still holds a huge advantage, the B2C model (platform self-operation) will gradually become the mainstream under the impetus of policies, and Didi has even come up with the idea of ​​manufacturing its own cars.

B-end customers remain the main customer group for the Aion series, and the Aion series can be seen in ride-hailing and taxi services across the country.

The prevalence of Aion series ride-hailing and taxi vehicles has negatively impacted the reputation of the Aion series, leading to numerous online jokes. For example, it's said that owning a BMW, Mercedes-Benz, or Audi might not guarantee a beautiful woman will get into your car, but owning an Aion certainly will.

This kind of abstract banter is quite common after 2020, as the internet ecosystem has changed significantly since the post-00s generation grew up. However, it seems somewhat awkward in an era when the post-80s and post-90s generations were still the mainstream internet users.

The Aion series sells very well, but it often becomes the target of ridicule and even sarcasm when Tan Jincheng attends various industry events. In their words, Aion has always wanted to create a high-end image, but it has two such low-end models.

However, Tan Jincheng didn't care about these things. Most of the people who joked about the Aion series on the Internet were not Aion series users. It is true that many people buy cars for the sake of face, but more people buy them for practicality, especially the Aion group.

Tan Jincheng did respond when facing the camera, and although he still couldn't avoid the teasing, he didn't seem to care much.

"The Aion series carries the burden of many families' living expenses. In the future, our goal is to control the cost of the Aion series and further reduce the starting price of the Aion series so that more and more families can afford to buy cars."

"Although it is considered a synonym for 'low' by netizens, the Aion series is a success as a work vehicle. The hard work of the drivers and the performance of the Aion have supported their families, which is something we at Weilai can be proud of."

If one day, even without subsidies, the Aion series can be purchased for less than 10 yuan, and people could buy one to drive for ride-hailing services, it would certainly be a contribution to society.

Most importantly, intelligent driving requires sufficient user samples for training data. Without enough user samples, claiming that one's intelligent driving is excellent is just boasting, including companies like WooLan and Tesla.

The reason why Tesla's Autopilot is so excellent in the later stages is that the user data generated by their huge sales volume can provide training samples.

The reason why Weilai is able to maintain its leading advantage in intelligent driving is because it sells a lot of cars. In order to maintain this advantage in the future, the seemingly low-end Aion series is of utmost importance.

Imagine the shock of when Wynn accumulates millions, or even tens of millions, of user data through Aion and the Wynn series, trains its own intelligent driving model, and then launches L2 intelligent driving on all models at all price points.

For Wei Lai, the incredibly low-end Aion series is definitely not that simple.

After reviewing the first quarter's financial statements, Tan Jincheng calmed himself down and said to Zhao Xinyi, "Let's make some arrangements and go to Meishan Island."

"Okay, Nagasawa Yu just called to ask when you're coming over."

"Haha, this old rascal is getting impatient."

After changing its partner from Changfeng Motor to Weilai Motor, Mitsubishi gradually made some progress in the domestic market after several years of development and, after listening to Tan Jincheng's advice, introduced its flagship model, the Outlander.

Aside from a few unlucky years in the early stages, when the timing coincided with the unexpected scandals involving Japanese cars that impacted sales, Mitsubishi gradually enjoyed a few good years after 2015.

The Outlander has become the core pillar of Mitsubishi's sales in China, becoming the main driver of sales. In 2016, Mitsubishi sold 12 vehicles in China, most of which were contributed by the Outlander. However, the limited product line and insufficient layout in the domestic new energy vehicle sector have also constrained Mitsubishi's sales breakthrough.

According to Yu Nagasawa, he actually wanted to continue cooperating with Weilai on new energy vehicles. Over the years, the cooperation between the two parties has been quite pleasant. Weilai's own business has developed so rapidly that Mitsubishi, which is associated with Weilai, has also benefited to some extent.

However, things are different now. Wei Lai has long since looked down on Mitsubishi. Nagasawa Yuya was aware of this, and after mentioning it a few times, Tan Jincheng gave up because he didn't get a response.

That's how business cooperation works. With the roles reversed, Mitsubishi could no longer bring any qualitative improvement to Wei, and Tan Jincheng could not continue to tie his future core business to the other party.

Nagasawa Yu had nothing to say; after all, the other party had become arrogant.

"You want to introduce PHEVs to China? Will your headquarters agree?"

Chang Zeyu, who had long given up on in-depth cooperation in the new energy vehicle business, sought out Tan Jincheng mainly to ask for his opinion on expanding the production line. Weilai, which has always focused on pure electric vehicles, unexpectedly launched a range-extended electric vehicle last year, which surprised the market.

However, in terms of order volume, delivery volume, and market reputation, the WILAI L1 has greatly exceeded the expectations of its competitors. Range-extended electric vehicles are so popular.

"Let's give it a shot. Tan, do you think if we introduce the PHEV, it can achieve the same level of popularity as the L1?"

Changze Yu was somewhat looking forward to Tan Jincheng's opinion. The Outlander PHEV was still very popular in the domestic and European markets, with its practicality and plug-in hybrid technology perfectly combined to meet consumers' needs for space and off-road performance.

Most importantly, this car also has a range extender mode. When acceleration or going uphill is needed, the engine will start and be used as a range extender to charge the battery, and then the electric motor will drive the vehicle.

Hybrid, range-extended, and pure electric – the Mitsubishi Outlander PHEV has it all, isn't that perfect?

Nagasawa Yu had already figured it out. If headquarters agreed to introduce it, he could steal Wei's marketing plan and directly use solving users' mileage anxiety pain points as a marketing tool.

"Mitsubishi's product line in China is indeed a bit limited right now. Bringing it over isn't out of the question, provided you can convince your headquarters."

Tan Jincheng stroked his chin thoughtfully, "The Outlander PHEV is quite popular in China and Europe, so why not try the L1? It seems we need to find a way to sell the L1 in Europe and give it a shot."

As for whether Mitsubishi's introduction of PHEV will compete with L1 and become a rival product, Tan Jincheng doesn't care at all. If he's afraid of Mitsubishi, which sells 12 vehicles a year, then what kind of business is he?

Besides, if domestic production can be introduced, it will also benefit Wei Lai, as he can learn some technology.

"You think it's feasible? Then I'll try to get it from headquarters; also, if I do manage to get it, there might be some overlap with Wei Lai in terms of marketing and promotion."

Speaking of which, Nagasawa Yu was quite grateful to Tan Jincheng. The joint venture factories were basically led by the Chinese side. Although Tan Jincheng himself held the title of chairman of Mitsubishi in Weilai, he hardly cared about this side, which gave Nagasawa Yu a lot of room to implement his business strategies.

After being transferred from North America to help with the crisis, Mitsubishi is doing better and better in China every year, and Yutaka Nagasawa's position in the group has also improved a lot.

Tan Jincheng couldn't help but chuckle: "Go ahead and use it, as long as you don't copy it exactly. Anyway, I'll get half of Mitsubishi's profits, and I hope Mitsubishi gets better and better."

The troubles won't last much longer. Starting with Takata's bankruptcy scandal at the beginning of the year, the craftsmanship spirit of our humble life will completely collapse this year. Life will only get harder and harder this year. If Mitsubishi headquarters is more open-minded and not stingy, they can make more money by agreeing to Yutaka Nagasawa's idea.

Disagreeing will only lead to further decline; the new energy vehicle market and Xiaosheng have clearly "chosen the wrong" technological path.

Nagasawa Yu was very happy: "Thank you so much, Tan. Since you agree, I will try to get it from headquarters."

It's one thing if Tan Jincheng and Wei Lai don't manage things, but if the joint venture wants to add new production lines and introduce new models, he still has to get Tan Jincheng's approval.

"Okay, then I wish you success."

Having resolved his concerns, Nagasawa Yu seemed to remember something and asked Tan Jincheng, "By the way, Tan, is the market rumor about Wei Lai's cooperation with BMW true?"

Actually, this news came to China from Germany.

"Haha, what do you think?"

The National Development and Reform Commission (NDRC) certainly attaches great importance to and strongly supports the joint venture between Weilai and BMW. Now it depends on the attitude of the German side. The news coming back to China from Germany is also a kind of test.

(End of this chapter)