2003: Starting with Foreign Trade

Chapter 937 "Selling too well isn't good either"

Before we knew it, it was time for the Shanghai Auto Show again. This year, the Shanghai International Auto Show has been moved up to April 16th.

The 16th and 17th are media days, the 18th and 19th are professional visitor days, and the 20th to 25th are public days. Compared with previous auto shows, the Weilai exhibition area has undergone significant changes this year and is a major highlight of this year's Shanghai Auto Show.

The newly established Yuechi Auto made its debut as an independent entity at an international auto show. This was also Yuechi's first official appearance since its establishment, and the first public appearance of Yuechi's General Manager, Wang Fengying, since joining the company.

Wang Fengying's official appearance alone brought Wei Lai a great deal of attention at this year's auto show.

If we were to select the biggest events in the automotive industry in 2018, Wang Fengying's departure would definitely be one of them. What surprised everyone even more was that she did not join a leading new energy vehicle company as many expected, but instead went to Weilai.

Almost no professionals or media reporters expected this, because Wei Lai kept it so well covered up, and Tan Jincheng personally handled the entire process of inviting Wang Fengying to join.

Not only the outside world, but everyone in Weilai was shocked. There were also some smart people, such as the two reporters from Car Friends, who roughly guessed some of the truth, but they did not have any concrete information to confirm it.

Tan Jincheng gave them an interview opportunity because he saw this as an opportunity. The two were quite smart; after the interview, they never expressed any speculation or rumors about Wang Fengying joining Weilai.

Wang Fengying, who had officially joined the company more than four months ago and had actually worked for almost half a year, still accomplished a considerable amount of work after taking office.

In conjunction with Tan Jincheng's remarkable reform of Weilai's overall supply chain system, the reform greatly stimulated Weilai's vitality in the field of parts and components enterprises. The restructuring over four months has given Weilai's supply chain system a fresh new look.

Based on the performance over the past four months, Weilai's cost of vehicle parts supply can be reduced by at least 5% to 10%, which is something that Tan Jincheng would find difficult to achieve.

Although he focused his work on Wei Lai and kept control of the overall procurement of the supply chain, with so many people in the company and a focus on the entire industry chain, it was indeed difficult for Tan Jincheng to notice if the price of one or a few components was higher than expected without anyone mentioning it to him.

Wang Fengying, on the other hand, possesses professional expertise and years of management experience, which makes it easy for her to spot some of the shady dealings. In addition, this approach of spinning off the parts subsidiary and introducing external suppliers also brings a competitive advantage.

According to Wang Fengying's plan, Weilai's previous supply chain system was considered relatively good among domestic automobiles, but there was also a lot of room for cost improvement. Her plan is to save 15% on the cost of parts procurement for Weilai vehicles within three to five years, while ensuring stable quality and supply.

Yuechi Auto participated independently at the exhibition, and its other subsidiaries were not to be outdone. Huanghai Bus went to the commercial vehicle exhibition area, while Jinxin New Era and other advantageous parts companies under the Jinxin Group also went to the parts exhibition area.

Therefore, the Weilai Pavilion at this year's exhibition was quite large, featuring Weilai Auto, Yuechi Auto, Huanghai Bus, Jinxin Group parts companies, and Lotus, which has been exhibiting independently since its domestic production line officially went into operation.

The exhibition area in Weilai is divided into passenger cars, commercial vehicles, future mobility and auto parts exhibition areas. Lotus is even mixed in with the luxury brand exhibition area. Lotus was quite successful in 2018.

In 2018, the 70th anniversary of Lotus's founding, with the support of its major shareholders, the Lotus brand, which has two major bases in Heysel and Jiangcheng, achieved an excellent sales performance of 3630 vehicles worldwide, a 15% increase compared to 2017. The sales of 3630 vehicles also marked Lotus's best sales performance in nearly seven years.

Sales growth was significant in Sweden, Australia, and Greater China, with Sweden showing the highest growth rate at 87%. Sales growth was also very noticeable in other regions such as the Middle East and Italy.

The Heysel plant focuses on traditional gasoline-powered vehicles, while the Jiangcheng plant focuses on electrification. The two complement each other. Currently, their main customer base is in Europe, but in the future, they will focus more on developing Asian users.

"I quite like Lotus models, but electrification seems to be a bit difficult for them. On the other hand, Middle Eastern tycoons and domestic users seem to prefer the Lotus series of electric vehicles."

With the Shanghai branch, Tan Jincheng's work became more flexible. For example, during the auto show, he needed to stay in Shanghai and had his own office space. It was also much more convenient for him to report to other subsidiaries and branches.

March and April are the season for first-quarter reports and annual reports for the previous year. The release time varies depending on the major market. Lotus is not a publicly traded company, so its financial reports do not need to be released to the public.

However, CEO Li Xiang still wants to announce that although Lotus sold less than 4000 vehicles, its revenue in 2018 was not low, with an average selling price between 45 and 90 yuan.

With total revenue of nearly £2.6 million, which, based on the average exchange rate in 2018, is roughly between 22 billion and 23 billion yuan, it is insignificant compared to the Weilai Group. However, this is Lotus's highest revenue year since 1994.

On average, the price of each car is around 62 yuan. Following this trend, it is possible for Lotus to transform from a niche brand to a mass-market brand.

"This is indeed a good result. It seems that we may have achieved our annual sales target of 5000 vehicles ahead of schedule."

Tan Jincheng was quite satisfied with Li Xiang's work. An excellent product manager as CEO could indeed increase sales. In his previous life, his own new brand was the most criticized.

The complaints about refrigerators, color TVs, and large sofas originated from him. He uses range-extending technology that is looked down upon in the market. At first glance, Li Xiang's cars do seem to lack any technology. However, in terms of user experience and understanding consumer psychology, Li Xiang has done an excellent job.

It is this kind of range-extended electric vehicle that seems to have little technology that can sell so well in his hands. And now, the Weibu L1 is basically a copy of Li Xiang's concept from his previous life. In fact, Li Xiang was involved in a lot of the design and development process.

Currently, the Weilai L1 is about to replace the ES8 and become the top-selling high-priced new energy vehicle. Unlike pure electric vehicles, the subsidies for range-extended electric vehicles are much lower. Weilai has not deliberately lowered its prices to boost sales, but people are still buying them.

In the first quarter, sales of new energy vehicles declined sharply, but for L1 vehicles, the monthly delivery volume was all above 1000 units, with 1500 units delivered in March, which is still a pretty good result.

If sales of new energy vehicles can recover in the second half of the year, the delivery volume of this one model alone could reach 20,000 to 30,000 units this year. Like the ES6 and ES8, the L1 is also an important model for boosting production value.

"Yes, currently, domestic users are not very accepting of electric sports cars. However, we have attracted a lot of fans through various live broadcasts. Lotus's official account now has hundreds of thousands of fans on Douyin."

"As time goes by, I believe that these fans who watch the live stream will eventually take action."

"Price is also a major factor, but boss, the series of live battery puncture tests you did are really useful."

On April 15, the day before the Shanghai Auto Show began, Weilai announced its massive battery safety awareness campaign through various social media platforms and Tan Laoban's personal account.

From May 1st to December 31st, 2019, Weilai will use live streaming to educate users about automotive power battery safety in nine major industrial parks, including Ningbo, Shanghai, Luzhou, Chuzhou, Jiangcheng, and Zhangjiagang.

From the Yangtze River Delta to Wuhan and Hunan in central China, and then to the mountainous cities in the southwest, each industrial park will arrange live broadcasts and on-site visits to projects, among which the most eye-catching is the lithium battery puncture test.

Puncture tests, which simulate whether a battery will experience thermal runaway under extreme conditions (such as a metal foreign object puncturing the battery in a traffic accident), leading to fire or explosion, are one of the key tests for assessing battery safety.

In the past, some automotive media outlets would publish experimental data on the battery performance of various companies in the form of test videos, but they were not recognized for their professionalism. This is partly because these media outlets tend to be biased, and the public perception of car reviewers is that they are paid to do their jobs.

It's not that there aren't fair and impartial car reviewers, but they are indeed very rare. Even though Wei Lai himself collaborates with many car reviewers, they wouldn't be able to criticize a particular aspect of Wei Lai's technology.

Regarding this point, it wasn't until the era of short videos that these traditional car companies realized how cunning Tan Jincheng was. Tan Jincheng was one of the key contributors to Yiche's listing, and later he also played a leading role in facilitating the merger of Yiche and Autohome.

The team responsible for the merger of Yiche and Autohome was one of the best in the world at the time, having led well-known merger projects including the merger of Youku Tudou, Kuaiche and Didi.

From a financial return perspective, investing in Bitauto is definitely a disgrace to Tan Jincheng's investment career. He hasn't made a penny over the years and has even lost a lot of money, while also investing in Li Bing, a bottomless pit.

However, from a strategic perspective, Tan Jincheng has made a huge profit. He not only gained absolute influence in the professional automotive media field, but also brought most of the former Autohome executives, including Li Xiang and Qin Zhi, under his wing.

These internet people may not understand technology, but they are very strong in terms of management and product capabilities. Back then, Autohome was always one step ahead of Bitauto. If Bitauto hadn't gone public first, there would be no doubt who would have acquired whom.

The current founder and former CEO of Autohome are both in charge of different areas for Tan Jincheng, and they are important assistants in his career.

In addition to these, Tan Jincheng is also the second largest shareholder of the currently popular Douyin (TikTok). He has considerable influence over important media channels such as Douyin, Toutiao, Xigua Video, Yiche, and Autohome.

The positive reputation of the Weilai series of products and the influence of Tan Jincheng's personal brand are inseparable from these media resources.

This live broadcast of the puncture experiment was led by Jinshidai, a subsidiary of Weilai. As a globally leading professional battery manufacturer, Jinshidai's experimental data and experimental conditions are far superior to those of self-media.

"Although the puncture test is still somewhat controversial and cannot guarantee that a product that passes the puncture test will not catch fire in a traffic accident, it will at least give consumers a deeper understanding."

The lack of uniformity in testing standards and the complexity of actual accidents are points of contention in puncture experiments. Mr. Tan cannot convince everyone on the latter point, but he still has some ambitions in terms of testing standards.

In any industry, leading companies set the standards. Only those who control the standard-setting process can be considered true leaders. Currently, the battery industry is rife with conflicting opinions, with everyone debating whether lithium iron phosphate or ternary lithium batteries are better, each with their own agenda. This live stream, besides educating users about battery safety, also aims to demonstrate Weilai's commitment to participating in battery standard-setting, even setting standards based on its own technology in certain areas. This is what true industry leadership looks like.

This time, Weilai is preparing to bring out a brand-new blade battery based on lithium iron phosphate technology, as well as traditional round lithium iron phosphate and ternary lithium batteries for the experiment. These are the mainstream battery forms currently available on the market and the future battery forms.

"There will likely be a lot of controversy by then, but right now it's mainly a live stream format. Will it bore the audience? Do you have any good solutions?"

The entire puncture experiment is quite lengthy. In addition to the time required for the experiment itself, it also requires an hour of observation to confirm whether thermal runaway has occurred. So, a live broadcast would take at least two hours.

If it were just a pure demonstration of experiments, it would be quite boring. This is different from a live stream of a car factory. A live stream of a car factory doesn't require users to stay in the live stream room. They can get a general understanding of the car factory by just watching for a while.

Users watching live streams will prioritize the viewing experience; if it's too boring, they'll lose interest.

After thinking for a moment, Li Xiang replied, "We can find some reputable car reviewers to collaborate with and get them involved. I believe they would be willing. These people are quite good at creating content, especially some relatively professional female car reviewers, who have quite a few fans."

Luxury cars and beautiful women have always been linked; in terms of visual stimulation, nothing is more alluring than the combination of the two.

"If the boss needs it, I can introduce you to some reputable ones."

As the founder of Autohome, Li Xiang's knowledge of car reviewers is undoubtedly among the best in China. Yiche and Autohome have many car reviewers under their umbrella, but after the rise of self-media, most of these people chose to go solo.

The entry of new players and the rise of self-media have made these automotive self-media outlets popular. Some car reviewers quickly gained fans by criticizing car companies, such as Car Review No. 38, which focuses on criticizing Li Bing. These people are usually more professional.

There are also some humorous and entertaining car reviewers, a typical example being "Zoo Talks Cars." There are also crossover figures and some controversial individuals, all of whom have a very large number of fans.

“That’s definitely a good idea. We can also invite car reviewers who are more entertaining. Give Zhou Ao a list and let him contact them.”

"Of course, we need to have a better reputation. We don't want to do things like the zoo that talk nonsense and try to trick fans into buying any junk car. We're doing a safety experiment, so the live stream needs to be entertaining, but it can't be too frivolous."

Popularizing safety and setting industry standards are the two main objectives of this live broadcast. After Wei Lai announced the massive live broadcast plan, all the car companies are watching closely. Everyone in the battery industry knows what Tan Jincheng is planning.

CATL, in particular, which focuses on the research and development of ternary lithium batteries, paid close attention to Wei Lai’s puncture test, because the test results showed that lithium iron phosphate batteries do indeed have a much lower probability of catching fire.

Both technologies have very obvious advantages and disadvantages, and lithium iron phosphate batteries, which have better thermal stability, will obviously perform better in the puncture test, which is very disadvantageous for CATL.

While the two forms may not achieve the same level of differentiation as lead-acid batteries and lithium batteries, ternary lithium batteries are superior in terms of range, and are therefore more commonly used in high-end vehicles.

The industry practice is to use lithium iron phosphate in low-end models, such as the Aion series and ET5 from WIL, Tesla's Model 3, and most BYD models, while ternary lithium is usually the main choice for high-end models, such as the WIL ES6, ES8, and BMW ix3, etc.

Ultimately, it all comes down to cost. Lithium iron phosphate batteries have lower costs because the supply chain and technology are primarily controlled by our own people.

This is similar to how, despite the widespread adoption of lithium batteries in two-wheeled electric vehicles for so many years, lead-acid batteries are still being used. Most companies only consider actual costs.

"Okay, I'll give President Zhou a list later. There will definitely be no excessive entertainment."

To be an industry leader, one must be more serious, even if it means sacrificing some of the livestream's impact. Li Xiang was well aware of his boss's ambitions, and he needed to reconsider his choice of personnel.

"Alright, if you want to release Lotus's financial report to the public, then release it. You don't need to ask me about it."

Unlike Yuechi Auto, Lotus definitely has plans to go public in the future. Developing towards mass market is just a strategy. If this strategy doesn't work out, it will obviously be difficult for such a niche brand to make a living.

Going public is the best option.

"One more thing, you don't need to lower the price too much. After all, Lotus is a high-performance sports car. If the price is too low, it will not only lower the brand image, but also easily cause some negative social impacts."

"Haha, is the boss worried that it will sell too well? We've considered that too, and we can raise the price if necessary."

Sports cars all have excellent performance, but the best performance is the one that can be tamed. Lotus doesn't need to worry about this, but the boss is right to have one concern: selling them too cheaply is not necessarily a good thing.

In China, the price of a Tesla all-electric model is around 50 yuan. However, this is only the lowest configuration. To get a Lotus Lotus, you need to manipulate the optional features. This is a common business practice of most high-end brands, which is why the final price will be higher.

Luxury cars are all about being unique and personalized, and that's what their target audience appreciates.

Very few people actually buy the base model.

Li Xiang had considered lowering the price of the Lotus electric model once sales reached a certain level, but after communicating with his boss, he decided to temporarily abandon this plan.

It's not that Tan Jincheng has any user discrimination, but this kind of high-performance sports car, especially the pure electric version which starts quickly, is not something that everyone can drive. If the price were really brought down to below 50 yuan, there is absolutely reason to believe that Lotus's sales would at least double.

But what happens after you sell a lot?
With changes in consumer groups and the social environment, today's young people are not the same generation as their elders who were very careful with their money. If the price is really brought down, there will definitely be a large number of young users interested in buying the Lotus series.

"We also need to be careful with car loans. Please don't offer me any zero down payment options. Otherwise, if there's a car accident and the injured party can't afford to pay compensation, it will be a problem for us."

Which man doesn't want to own a sports car? If it were offered with zero down payment, a large number of people with average financial means would be interested in buying it. But if someone were to drive recklessly and cause an accident, and the insurance company refused to pay, that would be a real problem.

Turning such high-end tools into mass-produced vehicles and selling them to ordinary consumers could be a disaster for the traffic environment, and the transportation authorities might have to take special measures against them.

“Okay, we will pay special attention to this. We will make the review standards for car loans and down payments as strict as possible.”

These factors will have a significant impact on Lotus's sales, but Li Xiang still thinks the boss's considerations are sound; sometimes you should never challenge human nature.

"Of course, you can handle the situation in markets outside of China, especially in the Middle East, where this thing is basically a toy for them, so you can be more flexible in your sales policies."

He doesn't care about anything outside of China, and besides, foreigners don't have this idea in their culture; they've never heard the rumor that car accidents are mostly caused by cheap cars.

This is a cultural difference.

"Alright, go ahead and get busy. You still need to keep an eye on the publicity. I know your publicity skills. Actually, my ultimate sales target for the domestic market is only around 5000 vehicles, and at most, it can't exceed 10,000 vehicles."

He had experienced the Lotus series with its pure electric performance, and those things were really too powerful; they were really only suitable as toys or for playing on professional racetracks.

It was after experiencing it that he abandoned the plan for large-scale domestic production. However, if 5000 vehicles could be sold in a year, that would be a very good result, with an average price of 50 yuan and a production value of 25 billion yuan.

It sells well worldwide, no problem; domestically, we need to consider the impact of accidents during traffic.

"Okay, I'll head out now. Should I call Mr. Wang?"

Having worked together for many years, Li Xiang could feel the growth of this young boss. Back when he acquired Lotus, the boss passionately declared that he wanted to produce domestically made sports cars that everyone could afford, but now he was already considering social impact.

The boss has the vision of a great entrepreneur, both in terms of corporate strength and mindset.

"Okay, please call it for me."

(End of this chapter)