2003: Starting with Foreign Trade

Chapter 932 "Listing or Merging? Zhu Pei and His Men's Choice".

On the first day of the new year, amid a generally sluggish domestic auto market, Weilai Auto brought warmth to the market with its practical actions.

According to Tan Jincheng, chairman of Weilai, at an event, their data system is already capable of publishing weekly rankings, and publishing the first sales of the month, including the cumulative sales of the previous month for the whole year, is not a difficult task.

Boss Tan revealed that the reason it wasn't published as a weekly ranking was simply to avoid the industry focusing too much on sales volume and neglecting product quality and service. When service can't keep up with sales, it's a disaster.

That's quite a boastful statement, but with sales reaching millions, it's normal for him to show off a bit. Besides, it's aimed at competitors and doesn't offend consumers, so it won't cause much dissatisfaction.

Although the annual growth rate was only 6.84%, given the overall unfavorable environment of the automotive market and the decline in sales of the Yuechi series, the fact that Weilai was able to achieve a growth rate far exceeding the market average and achieve sales of over one million units for two consecutive years is enough to demonstrate Weilai's excellence.

Two years of stable sales of one million vehicles have officially placed Weilai among the ranks of first-tier domestic brands, and this year's million-level sales are of extraordinary significance to Weilai.

Domestic brands are often jokingly referred to as "walking on one leg," meaning that only one model or series can sell well. This has been the case for Weilai over the past decade, with the Yuechi series supporting the company's sales.

Chery's QQ, BYD's F3, Geely's Emgrand, Great Wall's Haval and Yuechi series, as well as some other best-selling models from domestic brands, are all vital to the domestic brands.

Once these models stop selling, such as BYD's F3 series and Chery's QQ series in recent years, the car companies will be trapped in a long-term sales predicament. This is the case for Chery and BYD, which were extremely dominant a few years ago, and their sales have been struggling in the range of 40 to 50 units for a long time.

Following the release of Weilai Auto's sales figures, major automakers also announced their 2018 sales results within a few days. Geely, with a full-scale surge, secured its position as the top domestic automaker with sales exceeding 150 million vehicles and a growth rate of 20.3%.

Great Wall Motors, which once garnered attention due to the two news reports about Wei Lai, had a total sales volume 1.8 units less than Wei Lai, ranking third, which officially confirmed the rumors that it had been overtaken by its younger sibling.

Fortunately, Great Wall quickly followed up with its sales figures, which finally shifted the focus from Wang Fengying to a comparison with its competitor, Weilai Motors, over the past year. Compared to a comparison of sales figures, Great Wall clearly prefers to see a comparison based on the products themselves.

This way, the topic can be more focused. Although it was a negative growth of 1.6%, Great Wall Motors remained as stable as ever, and its sales exceeding one million units for three consecutive years proved its strength.

Great Wall's sales figures are basically the same as Weilai's. The only difference between these two highly similar companies is their performance in the transformation to new energy vehicles. Weilai's excellent performance in new energy vehicles, which started earlier, makes Great Wall's new energy business look somewhat inferior.

However, Great Wall Motors is not without its strengths; it holds an unshakeable 30.6% market share in the pickup truck market.

However, after establishing its industrial base in Chongqing, Yangzi Pickup's performance in the pickup truck segment was equally impressive, with annual sales of 5.1 units and a market share of 11.3%, only 1000 units behind Nissan, which ranked third.

This marks the third consecutive year that Yangzi Pickup has achieved the fourth-place ranking in the pickup truck market. Ten years ago, Yangzi Pickup, under the ownership of Changfeng, had almost disappeared from the market, and its brand awareness was nearly gone.

Tan Jincheng spent ten years making Yangzi Pickup known to the market again, giving the brand a second spring and greatly promoting the local economy.

Meanwhile, the acquisition of Yangzi Pickup is considered a classic case, and even regarded as the most successful acquisition in Tan Jincheng's entire entrepreneurial career, without exception.

Although it has consistently ranked fourth and is jokingly referred to by truck enthusiasts as the Arsenal of the pickup truck world, there are still differences in the details. Yangzi Pickup's market share has been increasing year by year, and now it is almost neck and neck with Nissan, and it is only three percentage points less than Jiangling, which ranks second.

However, overall, without fully lifting various restrictions, the overall market size for pickup trucks is probably around 50 vehicles, with Great Wall Motors holding a 30% market share and other automakers sharing the remaining 70%.

The market size is at most between 5 and 7 vehicles. Compared with leading manufacturers such as Great Wall, Jiangling and Nissan, Yangzi Automobile's current size would warrant a reasonable valuation of between 30 billion and 60 billion yuan.

Tan Jincheng has done his best to bring a company on the verge of bankruptcy to this point in a niche market. Now it remains to be seen how the management of Yangzi Motors will stabilize the current situation.

Zhu Pei, the actual manager of Yangzi Automobile, also realized this problem. To put it bluntly, the market is only so big no matter how much you play around with it.

Driven by policy, new competitors such as Changan, SAIC Maxus, and even companies like BYD and Geely have also ventured into this market. It remains to be seen whether Yangzi Pickup can maintain its current advantages in the future.

After returning to Chuzhou from the meeting at the parent company, Zhu Pei convened a meeting with the management of Yangzi Automobile.

"According to the original plan, we wanted to acquire the Tank car business of our parent company to increase our market share in the off-road vehicle market. However, now that the Tank series has been incorporated into the new Yuechi, it is obviously impossible to separate it again."

Speaking of this, Zhu Pei still feels a little regretful.

Compared to top domestic off-road vehicles like the Toyota Prada, Jeep Wrangler, and Mitsubishi Pajero, the Tank 300, priced at only half the cost of these models, has garnered widespread market attention since its release.

With its rugged off-road performance and high cost-effectiveness with top-of-the-line features, the Tank 300 breaks the stereotype that off-roading equals roughness. At the same time, its differentiated design makes the Tank 300 both classic and fashionable, truly appealing to both men and women.

In the boss's words, who says women only like small cars? Just like men, women also like big cars and big headlights.

Compared to traditional off-road vehicles, the Tank 300 offers unparalleled comfort, making it suitable even for daily commuting. Aside from slightly higher fuel consumption, it has virtually no other major drawbacks.

In addition, the Tank series has also gone to great lengths in marketing, collaborating with off-road clubs and modification brands to create an ecosystem for Tanks, strengthening users' sense of belonging. After the short videos went viral, it also generated a lot of buzz on social media platforms such as Douyin and Xiaohongshu, creating the image of a popular and sought-after vehicle.

In the hearts of off-road enthusiasts, National Highway 318 has always been a classic road. Through a series of collaborations and marketing efforts, Tank series has generated buzz for this model on National Highway 318 through short video apps.

Nowadays, when people are scrolling through short videos, they often see scenes of the bright red Tank 300 appearing on National Highway 318. This kind of influence will continue to penetrate people's hearts, and the longer it goes on, the better the effect will be.

Furthermore, the boss also resorted to the "order scarcity marketing" tactic, initially controlling production capacity to create a situation where supply could not meet demand, thus maintaining the premium status of the Tank 300 in the used car market.

When evaluating a car's quality, its resale value is also a very important factor.

"We were too late. This kind of niche track could have been a perfect match for our pickup truck. It's a pity."

In the past few years, the boss often talked about "small but beautiful". One by one, the parts companies were spun off to maintain a "small" status and enhance core competitiveness. Yangzi's management must have been influenced by the boss's core idea.

In the pickup truck market, Yangzi's pickup series has basically reached its limit, and there won't be much growth going forward. Reaching sales of 100,000 units is too difficult for Yangzi Pickup, which currently has a single business focus.

However, if the Tank series is acquired, then Yangzi Motors' dream of selling 100,000 vehicles will no longer be a problem. The Tank 300 is now selling better than Mitsubishi's Pajero, with an average annual sales volume of over 20,000 vehicles, and has firmly secured a market share among the top five single off-road vehicle models.

In addition, this year (2019) is also a major opportunity for the Tank series. According to the plan, Prado and other models will be gradually phased out after this year, leaving a market gap for the Tank series.

According to the Tank series plan, the continuous launch of subsequent models will shift the marketing focus of hardcore off-road vehicles from "tool attributes" to "toy attributes," attracting more young users and ultimately breaking into the mainstream.

In that case, annual sales of the entire tank series exceeding 100,000 units would no longer be a dream.

"Yes, what's done is done. There's nothing we can do now but explore some possibilities within the trend of electrification."

With increasing pressure from traditional competition, Yangzi can only learn from its parent company's new energy strategy to adapt to the market. It needs to develop fuel, hybrid and pure electric vehicles, but now there is a problem.

That is because their previous business strategy was focused on traditional fuel, and their technology and platform reserves in new energy were significantly behind those of the parent company.

Now that large-scale investment in research and development is needed, almost all the foundation that Yangzi has laid over the years will have to be sacrificed.

It's even a very risky thing. Whether consumers can accept hybrid and pure electric pickup trucks is unknown. BYD has been rumored to be doing research and development in this area, but this thing is still too new, and not many companies dare to try it, including Great Wall.

"We can only ask the head office for help with the technology, otherwise we can only continue to live in this situation until we are eventually overtaken by other competitors."

2018 was a year of many challenges for Yangzi Motors, but it was also its most glorious year ever, with a record-breaking sales volume of 5.1 vehicles, as well as new records for revenue and net profit.

These people have all experienced the company's rise from glory to near bankruptcy, and they have a special affection for Yangzi Automobile. Now that it has been able to rise again and reach its peak, they cherish it all the more.

The glory brought by the peak made Zhu Pei and others feel extremely good, but judging from the big boss's attitude, they should indeed have a sense of vigilance even in times of peace, after all, the last experience was too profound for them.

"It's a bit difficult. Even if we ask the parent company for help, the resources we can get are limited. In the end, we still have to invest ourselves."

The parent company and the subsidiary are subordinate to each other, but in terms of business model and other aspects, they are actually relatively independent. Wei Lai will not interfere too much with Yangzi, and he generally does not care about any new business plans that Zhu Pei and others have.

Similarly, the differences in the two companies' business systems mean that they need to cooperate or exchange resources to obtain more.

To paraphrase the boss at the expanded meeting, after the division of the family business, the father is no longer obligated to provide his son with free support. Apart from being able to consolidate its financial statements with the parent company, Yangzi Automobile seems to have nothing of note to entice the parent company.

Cash flow and profitability are their only advantages. Once they make large-scale investments, Yangzi Automobile may fall back into a loss-making state. In that case, for its already listed parent company, Yangzi Automobile will not be a highlight, but a burden.

For listed companies that prioritize profit and want attractive financial statements, what is the most common way to handle loss-making subsidiaries?
To sell or divest.

If large-scale investment leads to losses, then Yangzi Motors will face this situation. Ten years ago, Yangzi Motors was extremely important to Weilai Motors; ten years later, it is just a small to medium-sized business segment. For Weilai Motors, Yangzi Motors' pickup truck business has filled a gap in the automotive industry, but that's all. This major reform by the boss is clearly aimed at a new model.

As for Yangzi Motors, without the backing of Weilai Group, its fate is uncertain.

"Transformation and increased investment mean that the company has the opportunity to break through, but at the same time the risks are also very high; if we do not transform and maintain the current situation, delve deeper into the existing business, aim for fourth place and strive for third place, it is unknown how many years this situation can be maintained, but the risks are very small."

"Everyone, let's discuss what we should do."

After sharing his observations and analysis from the head office, Zhu Pei brought up the future of Yangzi Automobile at the senior management meeting, where everyone had a frank exchange.

“Going public is a good idea. After going public, we can raise more funds, and with the parent company providing some technical support, we can carry out electric vehicle research and development with sufficient funds.”

Electrification is definitely something we have to do. Businesses can't just look at the immediate future, unless they really want to fail. Even if they lose money, they have to give it a try.

The problem is that while Yangtze Motors has indeed had a good year, those good days only lasted a few years. They have accumulated some wealth, but not much. They can manage to make some small investments and run some small businesses.

With such long-term investments that often amount to hundreds of millions or even billions of yuan, their profits from selling 5 pickup trucks annually are clearly insufficient to support them.

The investment in new energy is not something that can be easily discussed. Just look at Weilai's financial statements to see that the annual investment is a massive figure. Without a large-scale market, the profits mainly come from subsidies and the dual-credit policy implemented this year.

You don't actually make much money selling cars.

While being small and beautiful has its advantages, being too small can indeed limit development opportunities. Meizu's acquisition by Tan Jincheng was due to an excessive pursuit of being small and beautiful, even to the point of being somewhat obsessive.

In Tan Jincheng's mindset, the key to "small and beautiful" is not small, but beautiful. If you take beauty to the extreme, then small can transform into large at any time. Otherwise, Orange would not have launched its vertical e-commerce business in the first place.

Yangzi Automobile is currently facing a situation where it is beautiful, but too small, making it very difficult to make any changes based on its own strength, even in its main business.

Going public independently to seek more funding is clearly a good approach.

"This is indeed a good way to raise more funds to enrich our main business, and we may even be able to acquire other companies to diversify our business."

Zhu Pei nodded. Going public was indeed part of his plan, and it would be extremely beneficial for both Chuzhou and individuals like them.

Although there are countless listed companies nowadays, and listing is no longer a very important measure of local government performance, it is certainly beneficial for a city or district to have an additional listed company.

In addition, it is also a huge benefit for these managers. Once the company goes public, they will definitely implement employee stock ownership, and these managers will be the first to benefit, with their net worth increasing exponentially.

However, we can't just look at the advantages of going public and ignore the disadvantages.

Firstly, once an IPO plan is launched, it means that even if nothing is done, tens of millions of yuan will have to be put out, and if it fails, the money will be thrown in. Given the singular nature of Yangzi Automobile's business, whether a spin-off listing will be favored by the capital market is a big question.

If a company cannot rank among the top three in the country in its main business and does not have any other businesses besides investment income, its attempt to go public is likely to fail.

Another issue is the dispersion of equity after the IPO. Putting aside whether the boss and the parent company are willing or not, they are not as free as they are now in implementing business strategies.

Zhu Pei was well aware that he was not a big boss, nor did he have the same opportunities as big bosses, and Yangzi Automobile did not have the same market expectations as its parent company.

To put it bluntly, the reason why they are willing to invest in the parent company is simply because they value the boss's strength and the prospects in the new energy sector, which can be seen from this year's impressive sales figures.

The fact that the sales share of new energy vehicles increased from 12.08% last year to 24.15% this year, maintaining its position as the world's number one in sales, already proves the success of the parent company's transformation.

Globally, only Wynn and BYD can achieve such a market share, and they easily reach the sales volume of 20 new energy vehicles.

Admittedly, gasoline-powered vehicles are very important to the parent company now, and the boss is actively working to increase sales of gasoline-powered vehicles, but Zhu Pei is very clear that this is only to cope with the current complex situation.

Weilai's future lies in new energy, which has been the company's strategy from the beginning. Perhaps in a few years, even if the sales of Yuechi gasoline vehicles continue to decline, the boss may not care so much.

Capital's optimism about Weilai's new energy vehicle market does not necessarily mean that it is optimistic about its subsidiary Yangzi Automobile's new energy vehicle market.

"The advantages of going public are obvious, but the disadvantages are also there. I won't go into them, everyone knows them."

"But our listing will definitely not be as easy as we imagine. To put it bluntly, no matter how well we do, we can only get to the second place at best. If there is any expectation, it is probably the complete relaxation of policies."

Surpassing Great Wall Pickup's business? Zhu Pei and Tan Jincheng both know the truth. They can boast, but they shouldn't fool themselves.

Great Wall has a huge advantage in this area. Just like how they can't do well in the new energy vehicle market, it's not too difficult for other companies to beat them in the pickup truck market.

Besides, they went public to raise funds to invest in the research and development of new energy pickup trucks. Today's capitalists are not as easily fooled as before.

Of course, the most crucial thing is to see the attitude of the big boss; that's the most important thing.

During Zhu Pei's time in Ningbo, he also made some attempts to probe the big boss when reporting on his work. The big boss's attitude towards the listing of Yangzi Automobile was ambiguous, which is not like the big boss's personality.

According to his understanding of the big boss, if it's okay, it's okay; if it's not okay, it's not okay.

Based on the information the boss revealed in a previous media interview regarding the spin-off of Yuechi, Zhu Pei believes that the boss's attitude towards going public has changed significantly.

Ningbo.

"My attitude toward going public has indeed changed quite a bit."

On the top floor of the Flashpoint Building, Boss Tan chatted with Wang Fengying, Zhang Yong, and others about Zhu Pei's probing during his last work report, clearly expressing his attitude.

Through some tacit understanding with Great Wall Motors, both parties released their sales figures one after the other, creating a comparison and successfully downplaying the impact of Wang Fengying joining Wei Lai on both companies.

The sales difference between the two companies is less than 20,000 vehicles. Comparison is fine, and controlling the public opinion will not have a significant impact on Great Wall. Weilai, which is in a period of transformation, does not want to completely fall out with Great Wall due to the public opinion caused by Wang Fengying's joining.

In business, there's no need to turn competitors into mortal enemies. Great Wall Motors' attitude is similar; by deliberately downplaying the rivalry, they won't give other competitors more opportunities.

"Does the boss mean you don't value going public that much anymore?"

In the few months since arriving in Ningbo, Wang Fengying, who has a strong ability to adapt, has officially integrated into Wei Lai's team. Like other senior executives, she has made a noticeable change in how she addresses Tan Jincheng.

Those executives familiar with Tan Jincheng know that he prefers his subordinates to call him "boss" rather than "President Tan," which is a more formal title.

"Pretty much. For some companies, going public isn't necessarily a good thing."

Having control of multiple listed companies, his attitude towards listing has indeed changed significantly, from actively seeking to go public to being indifferent now.

To put it bluntly, it's not that he's begging for capital to help him anymore; it's that capital wants to hitch a ride on his coattails.

A change in status will definitely affect one's attitude toward certain matters. Contrary to what Zhu Pei and others imagined, he still values ​​Yangzi Automobile quite a bit and also has feelings for it.

Even if he incurs losses due to increased investment in new energy, he would never sell Yangzi Automobile.

However, like Wei Lai, if Yangzi Motors wants to continue to grow healthier, transformation is also necessary. He certainly won't bother to give direct guidance on how to transform; it's up to Zhu Pei to decide.

This is also why his attitude is ambiguous. Going public is not impossible, but we can't go public for every problem. Is there a better way?
What Tan Jincheng didn't know was that Zhu Pei and his group, far away in Chuzhou, were also discussing this issue.

While everyone is still debating whether or not to go public, Yang Zhijie, the technical director of Yangzi Automobile, who has always been focused on technology, has a different opinion.

"I do have an idea besides going public, but I don't know if you, Lao Zhu, would be interested."

(End of this chapter)