2003: Starting with Foreign Trade

Chapter 927 "How many potential IPO companies does Boss Tan still have in his portfolio?"

"What do you mean? Aren't you two afraid of getting heatstroke, spending every day squatting here?"

Two reporters from Car & Driver magazine arrived in Ningbo the day after Weilai announced its plans. After their request to interview Chairman Tan Jincheng was rejected by Weilai's public relations department, they waited at the newly established Yuechi office location.

There's no other reason than that Boss Tan has been working here recently.

These are turbulent times, and Wei Laiben has many problems. In addition, Yuechi's independence is not as simple as holding a meeting; it is a complex and systematic matter, and he does not have the time to give any interviews.

Who would have thought that these two reporters would be so persistent, staying here for several days.

"Mr. Tan, please give us a chance. We'll only ask some routine questions and won't take up too much of your time. If there's anything you feel uncomfortable revealing, you don't have to answer a question."

Auto Friend is a magazine sponsored by the Society of Automotive Engineers. Founded in 1986, it covers new car reviews, technical analysis, industry news, and more. It is one of the largest circulation automotive magazines in China and has a high level of authority in the era of traditional media.

Although the Engineering Society is a social organization, it is a relatively high-level organization with close ties to various universities. In the past, thanks to the Engineering Society's background, it was very convenient for them to invite interviews.

However, times have changed. Fewer and fewer people read magazines these days, and the internet has become the main source of information for consumers. It is obviously more difficult to live as comfortably as before.

Furthermore, the status of entrepreneurs today is different from that of the past. Even a star entrepreneur like Tan Jincheng was quite uneasy during the few days they were waiting, for fear of displeasing this person.

Today, he actually stopped to greet them, but judging from his expression, he didn't seem to have any dissatisfaction, which reassured them and made them feel a little hopeful.

Tan Jincheng raised his hand to check the time: "It's too late today; how about this, you come over tomorrow morning, around nine o'clock, I'll have about 15 minutes then."

"Really, thank you so much! We will definitely be there on time tomorrow morning and will not delay your work, Mr. Tan."

This was a pleasant surprise. They only wanted to ask a few questions, write a report, and ride on this person's popularity, but they never expected to get an exclusive interview. All that scorching sun they've been under these past few days has finally paid off.

Although they were only given 15 minutes, it was more than enough.

It's not easy to book 15 minutes with Tan Jincheng, especially for interviews. He now focuses more on short videos when dealing with the media, regularly updating his videos on Douyin, much like a video blogger.

The boss, Tan, who rarely gives interviews now, is no longer the Tan Jincheng who was when Weilai was first established. If he wants to ask for help again, apart from his friends, ordinary people are not up to the task.

Zhejiang Province and Ningbo even have a tacit understanding to avoid disturbing Tan Jincheng and his companies' production as much as possible, and to refrain from conducting any research activities except for necessary needs, so as to allow the companies to develop healthily.

"Okay, then go back and rest early. It's quite hot here. Should I have someone arrange something for you?"

"No need, no need, Mr. Tan, you go about your business. We have a place to stay."

"Okay, see you tomorrow."

As Tan Jincheng left, the two reporters were filled with excitement: "Let's go back and write the copy, and try to ask more questions tomorrow."

"Haha, I thought he called us to get rid of us, but I didn't expect this pleasant surprise. He must be in a good mood today."

Tan Jincheng didn't agree to the interview just because he was in a good mood. Rather, he had a collaboration with their supervisory unit recently. The Engineering Society has a university equation competition, and Wei Lai is preparing to work with the competition on things like sponsorship.

"Besides allowing the Yuechi series to develop better, the independence of Yuechi is also to differentiate it from the existing new energy vehicle business. The integration of the Tank series into the new company is also based on this reason."

The new company is named Weilai Yuechi, completely separate from Weilai, and has its own independent R&D, production and sales system. The new Yuechi will take over Weilai's factories in Xiangcheng and some factories in Ningbo. The ownership of patents and technologies will also be divided to make the two companies clearer.

In addition, although the two companies currently share the same procurement platform, Yuechi will gradually establish its own supply chain system in the future.

New energy vehicles are new energy vehicles. The Weilai and Aion series will not produce any gasoline-powered models. Although Yuechi will also design new energy models in the future, it will still retain gasoline-powered models. Separating the two will allow management to have a clearer product positioning.

Currently, Weilai's significant investment in new energy vehicles, including but not limited to the research and development of new models, charging stations, batteries, and so on, is clearly higher than its investment in gasoline vehicles.

In terms of the proportion of R&D expenditure for enterprises, new energy accounts for the vast majority.

However, current sales rely on the gasoline-powered vehicle system led by Yuechi, with the vast majority of the company's revenue in the complete vehicle business segment coming from gasoline-powered vehicles.

The top salesperson in a company doesn't get the best resources, so it's no wonder that people in the gasoline car department are resentful. On the other hand, the new energy vehicle department, thanks to the boss's attention and the large amount of resources invested in it, is developing rapidly and doesn't seem to care much about the people in the gasoline car department either.

Similar to ordinary consumers, those who drive gasoline cars look down on those who drive electric cars, and those who drive electric cars don't really look down on those who drive gasoline cars. After ten years of development, the market has essentially become divided into factions.

Tan Jincheng can guarantee his control over the company, but he cannot guarantee that if this factional struggle is allowed to develop, it will not become the next Chery, after all, you cannot control people's thoughts.

Let's just separate and let both sides develop independently.

"Yuechi remains a wholly-owned subsidiary of the listed company Weilai Shares after its independence. As for whether it will be spun off and listed in the future, that depends on the specific circumstances."

The two reporters were the ones who noticed something unusual about Tan Jincheng's appointment as general manager of Xinyuechi. Today's interview focused on the future development of Xinyuechi, and the questions they asked were quite professional.

You can tell from their eyes that they probably didn't sleep well last night.

"Mr. Tan, do you think that if Xinyuechi is spun off and listed, it will harm the interests of the existing shareholders of Weilai? Also, does the fact that Weilai Auto has completely divested its fuel vehicle business mean that Weilai is going to go down the pure electric road? I see that currently, apart from one range-extended electric vehicle, all the other vehicles under your company are pure electric."

Like BYD, WAI is a complete listing (excluding BYD Electronics), which packages its power battery, vehicle and parts businesses together, including both profitable and unprofitable ones, like a package deal.

After being listed for many years, Weilai Group can be roughly divided into three main entities and two major businesses after this split: Jinxin Times + Weilai Auto + Yuechi Auto, as well as Dexian Electronics, which mainly produces mobile phone batteries and 3C small home appliances, and Weilai Auto parts business.

Dexian Electronics belongs to Jinshidai, both of which are engaged in battery-related businesses. In terms of affiliation, Dexian Electronics is now a subsidiary of Weilai Shares. With its main businesses including mobile phone battery manufacturing, power banks, data cables, charging heads, and smart hardware, Dexian Electronics currently maintains a revenue of between 15 billion and 20 billion yuan, making it a very good company.

According to industry comparison, Dexian Electronics can be compared to Anker Innovations. Anker Innovations was valued at 30 billion yuan in 2016. According to industry practice, Anker's current valuation is roughly between 60 billion and 80 billion yuan.

Desheng Electronics has a smaller market share, but because it has a mobile phone battery OEM business, the industry's overall valuation is also around 40 billion yuan.

When Tan Jincheng acquired Dexian Electronics from its founder Zhao Wu, he didn't spend much money. At the time, Zhao Wu only kept 10% of the shares as a memento. Through multiple rounds of capital increases and share expansions, Zhao Wu's original 10% share was diluted to 3%.

He didn't care. He only received a small dividend each year and didn't need to manage anything. In Zhao Wu's opinion, Tan Jincheng was a fairly decent person. Although he had diluted most of his shares, he didn't cut back on dividends.

This is quite different from the attitude of many major shareholders who are stingy. Zhao Wu's biggest wish now is that Dexian Electronics can be listed as an independent entity, so that he can earn more money for his retirement.

Once Dexian Electronics is listed on the A-share market, given the speculative power of the A-share market, it should be able to reach a market value of at least 10 billion yuan, at which point he will be able to cash out a significant amount of his shares.

The management of Dexian Electronics also intends to push forward with the company's listing plan. Listing means having an employee stock ownership plan, and the boss has always been generous with employee stock ownership plans. In the end, they will all be able to achieve financial freedom.

"There will be some impact, but I think the impact will be more positive. If Xinyuechi is spun off and listed, its valuation will definitely rise significantly, and as the largest shareholder of Xinyuechi, one will have a substantial return on investment."

Tan Jincheng did not shy away from this question. From brand splitting up to mixed-ownership reform financing, then to share issuance, and finally to IPO, a brand with annual vehicle sales of 700,000 to 800,000 units is fully capable of doing so.

In a sense, Tan Jincheng's decision to separate the gasoline vehicle system, led by Yuechi, has been interpreted in the capital market as a plan for Tan Jincheng to list Yuechi independently. As a result, this announcement has caused a certain decline in the stock price of Weilai Shares.

According to financial accounting standards, whether a subsidiary's revenue will still be consolidated into the parent company's financial statements after it is spun off and listed depends on both equity control and actual control.

The simplest and most intuitive manifestation is in the equity ratio. Going public means financing, and the simplest way is to give 25% of the shares to public shareholders. In other words, once listed, Weilai's shareholding in Yuechi will drop to at least 75%.

Maintaining 75% ownership is clearly impossible; it's not feasible to not bring in any strategic shareholders, otherwise you can forget about going public.

Here are a few simple examples. For instance, when a company attempted to spin off Digital China, its stake decreased to below 50%, so Digital China's revenue was no longer included in the company's financial statements. Similarly, with the spin-off and listing of WuXi Biologics, which switched to the equity method of accounting, WuXi Biologics' revenue was not included in WuXi AppTec's financial statements. Likewise, there are also cases where financial statements are consolidated, such as JD.com's JD Health. Although it was also a spin-off, JD.com Group holds a 68% stake in JD Health, so JD Health's revenue is still consolidated into JD.com Group's financial statements.

Currently, the majority of Weilai's revenue and vehicle sales come from gasoline-powered vehicles, with Yuechi being the leading brand. If the vehicle is spun off and listed separately and Weilai loses absolute control, its revenue will inevitably be greatly affected.

To put it simply, if we don't include the sales of gasoline-powered vehicles, led by the Yuechi series, in 2018, then the overall sales volume of Weilai Auto would only be in the range of two to three hundred thousand vehicles, which is obviously what investors are most worried about.

From an investor's perspective, what does it matter if they have the same boss? He's not a shareholder of other companies. Just like with Weilai Shares and Shanchi Technology, Shanchi Technology's stock price doesn't hold up as well as Weilai's once it encounters any trouble.

These past few days, the two reporters haven't just been waiting passively; they've been recording several of the most pressing questions in the market and are taking advantage of this rare opportunity to bring them up all at once, hoping to write an in-depth interview.

Tan Jincheng did not answer whether Yuechi's hypothetical spin-off listing would be consolidated with the parent company's financial statements, because that was all speculation. For him to give a definitive answer now would obviously be nonsense.

However, in his plan, he does not have any plans to take Yuechi public for the time being. Firstly, there is no need for it. With Yuechi's own ability to generate revenue, it does not need financing in the short term. He also does not want so many executives watching him.

Secondly, the sales figures for Weilai Auto still rely on the merger with Yuechi to look better, at least until the sales of new energy vehicles fully take off.

Of course, if the sales figures for new energy vehicles are impressive in the future, then Yuechi could follow Volvo's example and become completely independent from Geely.

Volvo belongs to Mr. Li, but it is not Geely's Volvo. There is no subordinate relationship between the two. It is more like a combination of Weilai and Shanchi.

"I am well aware of what investor relations are, and I would like to ask you two to convey that Weilai is a reputable company and will not do anything to harm the interests of minority shareholders."

"The independence of the Yuechi Group is for the better development of the brand and the company, and also to make some changes and efforts to create more benefits for our minority shareholders. After all, it is an indisputable fact that our sales have declined this year, and we need this change."

"As for whether Yuechi will be spun off and listed independently in the future, let's leave that to time. Even if it is spun off and no longer has any relationship with the parent company, both should have reached a point where they are fully capable of independent development."

After a pause, Tan Jincheng laughed and said, "A few years ago, if we sold 10,000 or 20,000 new energy vehicles, we car company bosses would be laughing all the way to the bank. But now, how many companies are announcing sales targets of 100,000 or more?"

"None of us can guarantee the future. Maybe one day, the sales of our new energy vehicles will surpass those of our gasoline-powered vehicles? In the gasoline-powered vehicle market, we can achieve a certain market position as a rising star."

"In the new energy sector, we currently maintain an advantage and do not want to lose to our predecessors. We will continue to work hard to maintain our leading market position."

"As for whether Weilai Motors will become a pure electric vehicle company, and the issue of range-extended electric vehicles, I don't think these are problems. Pure electric and hybrid vehicles are not contradictory."

Back in the day, someone was vehemently criticizing range extenders, calling them completely useless. But in the end, it turned out they were very popular in the market, proving the adage "it's actually good."

"In our field, everything revolves around consumer preferences. We produce products that consumers like, regardless of their type."

The biggest taboo for companies is to position themselves in a certain market segment, as this is very detrimental to their development. Take Gree and Midea in the home appliance industry as examples; they are very typical cases.

Gree positioned its air conditioners too rigidly, making it difficult for its other products to achieve a breakthrough and hindering its transformation. In contrast, Midea was much smarter. They did not deliberately tie themselves to any particular product, so their entire smart home sector performed very well.

To some extent, the so-called ecosystem that internet companies are building is actually the same idea: by not positioning themselves in a particular product or a particular market segment, they can better cope with complex market changes.

The main reason why Xiaomi is currently unpopular in the capital market is that, despite having developed an ecosystem, it is still essentially a mobile phone hardware manufacturer with low profit margins.

It's strange that Xiaomi is so popular in the capital market when there's no revenue to be seen in other sectors. On the 16th, Xiaomi's stock price hit a new low of HK$15.52 since its listing, and closed below the issue price again. Lei Jun must be in a real mess.

In 2018, the mobile phone industry officially entered a market of negative growth and entered an era of zero-sum game. The bold statement made by Da Zui that "there will only be three brands left in the mobile phone market in the future" was not an exaggeration.

If this hadn't happened, Huawei's market share would have continued to grow stronger. With its technological reserves, Huawei is simply incomparable to "assembly plants" like Xiaomi and Meizu.

To be honest, if he hadn't known things would turn out this way, he probably wouldn't have bought Meizu, because even if he had, it wouldn't have made much of a difference. In a zero-sum market, the survival space for small players will only get smaller and smaller.

Meizu has done very well this year. With no issues with design, improved tuning, and good configuration, even minor flaws are acceptable to consumers, and can be gradually addressed through system upgrades.

Of course, the most important thing is that Meizu has undergone a very thorough change compared to the Huang Zhang era. Tan Jincheng, who focuses on users and the market, has completely abandoned Huang Zhang's "pseudo-intellectual" business approach.

Tech geeks simply don't understand the changing rules of business. Consumers only pay for themselves, not for other people's sentiments; what they want is value for money.

In a sense, sentimentality is actually the beginning of a company's decline. When a company starts playing the sentimentality card, it means that its market share has been gradually eroded by its competitors.

Of course, the most important thing is the family-style management model. When Tan Jincheng took over, Bai Yongxiang had essentially been sidelined, and Li Nan was also criticized internally for not being able to make money. The reason was simply that although Meizu's sales volume was high, there was no profit.

Don't you even look at the companies you've chosen for your supply chain? The BOM costs for your products are so high, it would be a miracle if you could make a profit.

The reason why the three musketeers were able to collectively surrender to Tan Jincheng was not only because they were offered good treatment, but more importantly because Tan Jincheng shared the same business philosophy as them. In their previous life, Meilan was ultimately shut down, which was considered a self-destructive act.

It's hard to imagine that a brand with annual sales of nearly 20 million would be shut down simply because it wasn't profitable. This is unthinkable in modern business, considering that represents tens of millions of users every year.

After Tan Jincheng took over, his attitude towards Li Nan changed drastically. He not only did not ask Li Nan to make money, but also expressed that he would give Meizu more resources and support, and asked Li Nan to produce more affordable phones.

The number of users is far more important than making money.

Aside from asking him to make some changes in his marketing methods and not to mess with everyone else, he almost gave his full support.

Without the reliance on a family-owned supply chain, Meizu's overall BOM costs have decreased significantly this year. At the same time, the addition of some built-in apps has also brought Meizu considerable revenue.

Although the price seems cheaper, Meizu's overall gross profit margin has actually increased significantly. The phenomenon of losing money on every unit sold by Huang Zhang is gone, and the entire company has been completely revitalized.

"Today's questions mainly focus on the independence of Yuechi. However, in responding to investors' concerns, a new topic has emerged. I wonder if Mr. Tan would be interested in answering our questions?"

As for why Tan Jincheng himself was appointed as the general manager of Yuechi, the two of them just asked, but didn't get any answers.

Tan Jincheng's answer was that Yuechi's equity and board members were controlled by the parent company, and in order to maintain independence, it was more appropriate for him to serve as the general manager.

They couldn't find fault with the answer, but it was clearly not the answer they were satisfied with. However, they couldn't continue asking questions. Since they still had some time, they might as well ask some questions outside the interview plan and add a little something extra to the interview.

The question, which was unrelated to the proposal, made Tan Jincheng pause for a moment. However, he still generously allowed the other party to ask questions. Professional reporters always like to create some surprises to show that their abilities are different, which is understandable.

"We all know that Mr. Tan, you have numerous businesses under your umbrella. Some of these businesses are pursuing IPOs, while others do not yet have such plans. We would like to know what specific plans Mr. Tan has for the companies under your umbrella that are not yet listed."

"Or, which of your companies currently have plans to go public? This includes Xinyuechi and Meizu."

The so-called "IPO push" refers to Bafang Electric, a subsidiary of Flash Group. After completing its shareholding reform and changing its name to Bafang Shares, Bafang Electric has officially announced the launch of its IPO plan. This is the second company in Flash Group to attempt an IPO.

Unlike the overall listing of Weilai Group, the parent company of Shanchi Group is not listed as a whole, which gives its various subsidiaries plenty of room for speculation about listing. Bafang Electric is the first, but it is unknown whether it will be the last.

"Hmm? That's a good question."

Tan Jincheng hadn't expected the other party to ask such a question that didn't belong to the automotive industry; sure enough, no matter how professional a person is, they will gossip about this issue. The listing of CATL, Xiaomi and Pinduoduo, as well as the subsequent Wenjie, all affected Tan Jincheng's personal wealth.

This is also a hot topic of discussion right now: when will Tan Jincheng become the richest man in the country? The possibility of him becoming the richest man will be directly affected by the fact that he has a high percentage of shares in listed companies and the listing of companies under his actual control.

As is customary, the Forbes China Rich List is usually released in early or late October, and that time is fast approaching.

(End of this chapter)