2003: Starting with Foreign Trade

Chapter 914 A Very Fruitful Spring Festival

"Today is Valentine's Day."

On the 29th day of the twelfth lunar month, Tan Jincheng woke up with a slightly hoarse voice, a lingering effect of talking too much the day before.

"So what if it's Valentine's Day? Do you even have time to spend it with your significant other?"

Handing over a glass of honey water, Gu Qingqing said with a smile that their youngest daughter was already over two years old, a fun age, but unfortunately the couple didn't have much time to spend with her.

Gu Qingqing, who is in charge of Orange Entertainment's business segment, also needs to travel frequently. However, on days when she is not traveling, her youngest daughter is always with her.

Just like her aunt back then, young Tan Jinqin often appears at her parents' workplaces.

"That still takes some time; I estimate it shouldn't take more than a few hours."

The conversation with Li Shufu was about the joint venture to build a battery factory. They only needed to discuss the joint venture ratio and where the factory would be located.

To date, many car companies have approached Weilai to discuss joint ventures to build battery factories. Domestic companies like Changan and BAIC have expressed interest in this, and even many foreign car brands have discussed the matter.

However, the only project that has been finalized is the battery joint venture with SAIC. In June of last year, Jinshidai officially signed an agreement with SAIC, and the two parties reached a final agreement on the cooperation of the battery project.

The two parties registered two companies in Liyang: SAIC Times and Times SAIC. The names of the two companies indicate that they are controlled by different entities. The former is 51% owned by SAIC and has a registered capital of 3 million yuan, while the latter is the opposite, with a registered capital of 20 billion yuan.

The two companies have different functions now. The focus is on SAIC-CATL, and the two companies will reach a series of cooperation agreements around this company regarding power batteries, energy storage, and related industrial chains.

Since betting on Horizon Robotics, SAIC has had a very pleasant cooperation with Tan Jincheng. Horizon Robotics has now entered the Series B financing stage, and SAIC's attitude is to continue to increase investment in order to protect its market share and interests.

To date, SAIC remains the largest shareholder of Horizon Robotics, apart from ByteDance and the founding team. SAIC and WILTECH are the two most steadfast investors in Horizon Robotics and the cornerstone for promoting the mass production and application of Horizon Robotics' chips in vehicles.

Tan Jincheng believes that SAIC's firm commitment to investing in Horizon Robotics stems from considerations for corporate development, but also does not rule out national strategic considerations.

It would be difficult for BYD to achieve mass production of domestically produced automotive chips if only one automaker like BYD were to do so. However, starting with its Series B funding round, BYD intends to increase its investment.

The main reason is that Horizon Robotics has done a good job in technological iteration. The Journey 1, applied to the L1, has performed well and has already reached the level of a low-end replacement.

According to the agreement, the two parties will jointly develop power battery products suitable for SAIC in the field of batteries, and innovative technologies such as Jinsheng New Era's Xuanwu battery will be given priority for application in SAIC models.

In addition, Jinshidai also needs to leverage its overseas advantages and resources to support SAIC's accelerated "going global" strategy by building an overseas after-sales service network and facilitating local supply from overseas production bases.

In return, SAIC has made Jinshidai its preferred partner for automotive power batteries, and has also transferred its controlling stake in SAIC Times, with a registered capital of up to 20 billion yuan, to Jinshidai.

"Actually, it would be more convenient for you to separate Jinshidai again, so that you can expand Jinshidai's business more quickly."

At 8:30 a.m., in the hotel's buffet restaurant, Tan Jincheng accompanied Li Shufu to have breakfast. At the table, Li Shufu gave Tan Jincheng a suggestion that surprised him.

"Why do you say that?"

Li Shufu smiled and said, "Although everyone has seen your attitude towards cooperation over the years, other host manufacturers would have some concerns if it were to cooperate with a wholly-owned subsidiary of Weilai Group."

"Don't mention SAIC to me either. Their situation is different. Otherwise, you wouldn't have only negotiated with SAIC after all these years. As far as I know, Changan and BAIC are also interested in cooperating with you, right?"

Tan Jincheng nodded: "That's true, but I don't have any plans in that regard yet, mainly because it's too troublesome."

In order to integrate resources and provide Jinshidai with a stronger backer for better development, the company chose to merge its power battery business with its automobile business. Most of the funds raised during the company's IPO were for the power battery project.

Because of the listed company platform, the power battery business has been able to develop rapidly. Since the listing, through convertible bonds, private placements and other means, Weilai has been able to obtain more financing to invest in construction. This is the benefit of being listed.

However, Li Shufu's point does have some merit. As a wholly-owned subsidiary of Weilai, Xiangjin New Era does have many customers who purchase power batteries, but from the perspective of joint ventures, OEMs do have certain concerns.

Take Tesla, the largest customer, for example. At present, it is mainly a pure purchase. Tesla even wants to build its own battery factory in North America, but it seems that the progress is slow so far.

Many automakers share Tesla's attitude, aiming to gain control over the parts supply chain. While pure procurement costs are higher than joint ventures, it offers much more flexibility before production capacity is fully realized.

"Why? Wouldn't this lead to faster development? Although you have a high market share now, you can't ignore other competitors, such as BYD, Guoxuan, and Ningde, which are all very strong."

Mergers and splits between companies are very common. Merging and splitting are not a big deal. Splitting existing businesses for listing is also a common practice for listed companies. He didn't quite understand what Tan Jincheng meant by this so-called trouble.

"It is indeed a bit troublesome. Think about it, we have to divest all the power battery business. This is not the size we had when we merged. In addition, there are many projects under construction and contracts. If we split it up, it will take a long time to process."

Li Shufu stared in disbelief: "You can't be telling the truth, can you?"

Tan Jincheng didn't seem to be lying.

"There's no need to lie to you. It is indeed a bit troublesome. First of all, convincing the board of directors is quite a troublesome matter. Besides, the two businesses will not be greatly affected by being together. Our cooperation method has always been open."

Tan Jincheng wasn't lying. It wasn't that no one had mentioned this to him before. He himself knew some of the drawbacks of merging the two major businesses, but after thinking about it for a long time, he still decided not to split them up.

Splitting it up is indeed feasible, but it's incredibly troublesome. This trouble isn't about the process, but about the interests involved.

Since its listing more than three years ago, the number of shareholders and the shareholding of major and minor shareholders of Weilai have changed significantly. Some institutions have withdrawn, while new institutions have joined. There are now hundreds of investment institutions of all sizes, including the national team, Hong Kong Central Clearing and Settlement, and E Fund.

Each institution represents a certain interest. To divest such a profitable business as power batteries, it is necessary to balance the interests of all parties and come up with a solution that satisfies most institutions, especially state-owned enterprises.

When Proton was acquired, a share issuance brought Weilai's total share capital to 21.76 billion shares. The total share capital has not changed for more than three years, but the number of convertible bonds is quite large. When the convertible bonds mature, if any institution holding convertible bonds implements debt-to-equity conversion, Tan Jincheng's current shareholding ratio will definitely be diluted to a certain extent.

Moreover, there's no need to overthink it; large institutions will definitely implement debt-to-equity swaps, and equity dilution is almost inevitable.

Moreover, Weilai's financing will certainly not be limited to this. There will be more financing this year, at which point Tan Jincheng's shareholding ratio will drop to around 33%, like most actual controllers, or even lower.

"In a time of global economic downturn, it's better to stick together and weather the storm than to break up our businesses one by one."

Li Shufu nodded. He could accept this reason. Although the so-called fear of trouble seemed to be true, he still couldn't quite believe it.

"To put it bluntly, there are actually very few car companies that are qualified to cooperate with us. Besides, in the end, large manufacturers will definitely build their own battery production lines."

Geely and Weilai have reached a preliminary cooperation agreement. The cooperation model with SAIC can be regarded as a model for other OEMs that want to cooperate. Therefore, the conversation with Li Shufu was not complicated.

The specific details will be determined based on the resources available to each party. Geely has numerous resources overseas, and through Volvo's channels, it can help Jinshidai build a factory in Europe. Therefore, Li Shufu hopes that the shareholding ratio can be split 50/50, rather than one party maintaining a controlling stake.

"That's no problem. Let's follow the cooperation model with BMW. We're about to build a factory in Europe, and we'll need Mr. Li's help in some aspects."

After a moment's consideration, Tan Jincheng agreed to this shareholding arrangement. Although the two parties might disagree on the issue at crucial moments, if the cooperation between leading manufacturers had to be decided by that 1% controlling stake, then there would be no need for them to continue cooperating.

"They're building a factory in Europe so soon? Is this what Kruger came for?"

"Yes, BMW placed an order with us, worth approximately 40 billion euros."

At the current exchange rate, this order is worth a staggering 312 billion yuan, making it a super-large order. Kruger and Tan Jincheng have already initialed a memorandum of understanding, and it can be implemented immediately once the relevant departments approve the investment application.

"Wow, this is a huge order! This is going to be a breakout year for 2018."

Even Li Shufu was moved by the 40 billion euro deal: "Speaking of which, your cooperative relationship with BMW is really quite solid."

Everyone knows how Weilai's power battery business achieved technological breakthroughs and outperformed its peers; it was thanks to the standards and orders provided by BMW Brilliance.

At that time, Jinshidai overcame various challenges posed by BMW and found a way forward for its power battery business. Before that, no one was optimistic about this newly emerging power battery company.

Meeting BMW's stringent standards is the result of the hard work of everyone at Jinxin New Era, but it must also be said that this is an opportunity for Jinxin New Era.

Since then, Weilai has maintained a close cooperative relationship with BMW. Last year, they even established the first joint venture after the opening up of foreign investment, further strengthening their cooperative relationship.

This €40 billion deal was a natural progression.

"Yes, we are somewhat lucky. This is the benefit of working with top companies; it can bring us significant improvements."

Back when they first started building cars, he bought several of the most common BBA (BMW, Mercedes-Benz, Audi) models on the market and had the engineers disassemble them one by one to analyze their details and strengths and weaknesses. At first, the engineers were a little hesitant to disassemble them.

Most companies are frugal with their R&D spending; they'd never seen anything like this before. The boss bought several cars at once and had them disassemble them, throwing in millions without them doing anything. The boss was encouraging them; now he's personally funding the purchase of foreign brand cars for them to disassemble and study, hoping that one day foreign brands will also buy imported cars for their own research.

These words were very inspiring, making the engineers feel excited and putting their concerns at ease.

Nowadays, purchasing excellent competing products from the market for disassembly and board assembly has become a tradition at Weilai Research Institute, except that the boss no longer has to pay out of his own pocket.

In the disassembly lab, Tan Jincheng's original words of encouragement were designed as a slogan and hung in a prominent position to motivate the R&D staff.

"That's true. Partnering with excellent companies is a great way to improve your business, and we are a prime example of that."

Li Shufu also agreed with this point, saying that Geely's sales have achieved a qualitative leap this year, and that the company has been able to design excellent models like the Boyue, all thanks to their assimilation of Volvo's technology.

For a long time, Geely was actually a car company that was always on the verge of bankruptcy. It relied solely on the sales of the Emgrand model to keep the company moving forward. The Emgrand was like a father to all of Geely's brands, raising a bunch of rebellious children.

Now that they've absorbed Volvo's technology, these rebellious kids can finally support their Geely "father."

"Okay, that's easy. Just tell me what you need when the time comes."

Feeling Tan Jincheng's sincerity, Li Shufu readily agreed. Geely still holds a certain position in Europe through its relationship with Volvo.

"Okay, then it's settled."

"Okay, let's settle on this for now. We can discuss the rest after the New Year. I have to go back now."

I'm sorry to have interrupted your work.

"I can't say for sure, then I'll be going now."

Li Shufu stood up, and Tan Jincheng waved to Li Yaohui, who was sitting not far away. Upon seeing this, Li Yaohui picked up a gift bag and quickly came over to hand it to Tan Jincheng.

"Let me share some local specialties from Ningbo with you and your family."

"Haha, you're too kind."

"Well, we made it just in time."

The press conference was scheduled for the 28th day of the twelfth lunar month. Since it was close to the Chinese New Year, according to traditional cultural customs, the proper etiquette had to be observed. Wei Lai prepared gifts for the suppliers and distributors, one for each person.

They even prepared a red envelope for the media who came to visit as a travel expense; personal relationships are also part of the business.

"Alright, I'll accept it then. Let's arrange a time to meet again after the New Year. Please give my regards to your wife and family. This time was too rushed, but I will definitely visit you next time."

"Okay, I'll definitely bring it. Next time you come to my house, I'll cook."

After seeing Li Shufu off, Tan Jincheng stood at the hotel entrance for a moment, then waved to Li Yaohui and said, "You should go back too. I'll drive back myself."

Li Shufu was picked up directly by his entourage, so he didn't need to worry about it.

"Don't you want me to see you off?"

"No need, just take a taxi home. You've been busy all year, and it's rare that you don't have any events today and tomorrow, so you can relax."

"Haha, I'm fine."

"Stop talking nonsense, go ahead, there's no need for formalities between us."

In a way, scheduling this dealer conference on the 28th of the twelfth lunar month wasn't entirely without its advantages. At least from this afternoon until the third day of the Lunar New Year, he has no scheduled activities and can enjoy a peaceful Spring Festival.

Oh, not entirely. In the latter half of New Year's Eve, he still has to visit the staff on duty at the workshops of several major companies. This is a tradition that has been established since Flash Motors started.

"Okay, I'll be going now. There are two bouquets of flowers in the trunk, the ones you mentioned before. I've bought them for you."

"I see."

Today is Valentine's Day. Tan Jincheng was driving his car slowly through the streets of Beicang. There were many young couples on both sides of the road. While enjoying the scenery, Tan Jincheng was also thinking about what he had gained this time.

The gains were indeed significant.

With orders from BMW and cooperation with Geely, the pre-launch promotion for the ES3 has officially begun. In addition, this conference also served as a formal announcement of Weilai's business strategy in the field of new energy vehicles.

Driven by technology, focusing on intelligent driving and fast charging will be a key selling point for Weilai New Energy Vehicles this year. Of course, the biggest gain should be the trade-in policy announced at the press conference, which will not only win over Weilai car owners but also boost new car sales.

Moreover, he believes that the trade-in program and price reduction policies for the two ES models will definitely be able to influence market changes to some extent.

According to the information already released, in 2018, models priced above 30 yuan in the new energy vehicle sector included the BMW i3, Jaguar I-PACE, Roewe MARVEL X, as well as high-end joint venture models such as the Volkswagen e-Golf and Denza.

In addition, there are the Lynk & Co 01 launched by Geely at the end of last year and put into mass production this year, as well as the Outlander plug-in hybrid version that Mitsubishi plans to introduce to China. All these models are targeting the high-end market of new energy vehicles.

With so many models, whether sedans or SUVs, the prices are generally around 300,000 yuan, with some slightly lower.

Several models are targeting the market that originally belonged to the ES6 and ES8, making the competition much fiercer than it was a few years ago. Proactive price reductions are a good way to cope with market competition.

Besides these, Wey's two VV series models are also strong competitors, as these two models are priced lower. However, Tan Jincheng has also prepared two models, namely the ES3 and ET5.

Wei Lai has made ample preparations to face increasing competition.

Of course, the biggest competitor is still the Model 3. In addition to these traditional powerhouses, the new players should not be underestimated. Judging from their performance in 2017, due to factors such as the tightening of vehicle qualifications, financing, and the threat of Tesla's localization, the new players brands should be facing a "year of bankruptcies".

The dual challenges of capital and the market, supply chain and technological barriers, and the divergence between OEM and self-built factories will make it difficult for some emerging companies to move forward, but at the same time, they will also drive the emergence of leading companies among the emerging forces.

Xiaopeng, Wenjie, and WM Motor are the leading companies among the new energy vehicle startups. Xiaopeng was the first to move from PowerPoint presentations to actual delivery, while Li Bing, which focuses on battery swapping, is about to go public and should also be able to deliver new cars this year.

These two companies follow the OEM route, while WM Motor, which builds its own factories, has a significant advantage in financing and has also resolved the issue of automobile production qualifications. Once their cars are mass-produced, with the cash in hand and the marketing advantages of the internet, they can pose a certain challenge to traditional enterprises in a short period of time.

New forces can no longer be ignored as they were a few years ago.

Why do you look so preoccupied? Is something wrong?

Gu Qingqing was initially quite happy to receive the flowers from her husband, but noticing that Tan Jincheng's expression was a bit off, she couldn't help but ask him a question.

"Oh, no, no, the conversation went very smoothly. I was just lost in thought on the way here."

Once he came to his senses, Tan Jincheng quickly said...

Damn it, we really can't be careless. Weilai does have a considerable advantage at the moment, but all advantages must be built on sales. Once the cars don't sell, no matter how much we boast about our technology, it's all useless.

Take WM Motor for example. They are now the undisputed leader among new energy vehicle startups. With plenty of money, they are still pursuing the self-built factory route. Their car manufacturing seems professional enough, right? The car designs are also good, but what's the catch?
The fact that a company can go bankrupt so easily shows how ruthless the market can be.

"Is it really okay?"

"It's really nothing. Let's go. Leave the two little ones at home and go out for a walk. It's rare that we're both free today. We can talk about everything after the New Year."

Steal the floating life for half a day.

Meanwhile, Li Shufu, who was driving back to Taizhou on the highway, was also thinking about these issues. Wei Lai's initiative to lower the prices of two best-selling high-end SUVs clearly showed that he had realized that market competition was beginning to intensify.

This year, Geely will also focus on the new energy vehicle sector. The Lynk & Co brand, established in 2015, was born for new energy vehicles, and will invest a lot of resources in Lynk & Co this year. The Lynk & Co 01 is one of its models.

According to information from the Ministry of Industry and Information Technology, the Lynk & Co 01 series is very likely to compete with the yet-to-be-released ET5. Speaking of which, spy photos of the ET5 undergoing road tests have been appearing on the Internet one after another.

Clearly, the widespread appearance of these road test photos is a prelude to Wei Lai's promotion. The only question is what price range this car will be priced at.
"This kid really knows how to play."

The ES3 has been unveiled and its official price announced, while the ET5 has been kept under wraps. Now, all car manufacturers must be wondering how to price their ET5 when faced with similar competitors.
I just don't know how much the ET5 will be priced.

(End of this chapter)