2003: Starting with Foreign Trade

Chapter 952 Sub-brand Image

On July 11, Mpilot Parking, an autonomous parking solution developed by Mpilot Technology Co., Ltd., was unveiled in Suzhou.

This tech company, founded in Beijing in September 2016 and subsequently moved its headquarters to Suzhou in 2018, is growing at an astonishing pace. In less than three years, it has already made significant breakthroughs in intelligent vehicle solutions.

"Congratulations, Mr. Cao! I heard your L4 autonomous driving technology is almost complete?"

"A little progress is nothing to brag about. As long as we haven't let the shareholders down, that's enough. I've heard that Wei Lai will also have some new moves this month?"

Tan Jincheng nodded and smiled. Wei Lai did indeed have some big plans this month.

Momenta, a technology company engaged in autonomous driving-related businesses, received investment from Shunwei Capital, also known as Lei Jun's CEO, in less than four months after its establishment.

Shunwei Capital led its Series A funding round, and later, after Cao Xudong decided to move the company to Suzhou, it introduced him to Tan Jincheng, which led to their acquaintance.

The capital market is truly amazing. Some companies struggle their entire lives and still struggle to achieve a significant increase in market value, while Momenta achieved a valuation of over $10 billion in just over two years, transforming into a unicorn.

At the end of last year, the Series B funding round for Initial Speed ​​was led by Weilai Capital, which invested $4.6 million and acquired a 4600% stake in Initial Speed, becoming a major shareholder.

Traveling against the current, retreating if not advancing.

While independently developing intelligent assisted driving and autonomous driving solutions, Weilai is also actively seeking cooperation and investment opportunities. If Weilai's technology fails to keep up with market changes one day, partners will be a new solution.

"The landscape of domestic autonomous driving solutions is about to change again, which puts a lot of pressure on us."

Cao Xudong is from the Qingmu Group and previously worked at Microsoft and SenseTime. He has over ten years of R&D and management experience in the field of artificial intelligence. In addition to the strong technical team he built, the network of contacts is also a very important key factor in the rapid development of Chusu.

"Let's make progress together, but what we're releasing isn't technology related to autonomous driving."

WILI has had autonomous parking solutions for a while now, and they've already been applied in advanced intelligent driving solutions for high-end vehicles. However, WILI hasn't really done much in terms of L4 level autonomous driving solutions.

The main reason is that Weilai has focused its research and development on L3, that is, conditional autonomous driving, and has not invested enough in L4 level research and development.

Unlike companies like Baidu and Momenta that specialize in developing a specific project, Weilai is essentially a car sales company. Everything must be based on practical considerations. While L4 is still a long way off, L3, once a breakthrough is achieved, can indeed be applied to automobiles.

The new energy vehicle market in July was not as good as in the first half of the year. The official reduction of subsidies has greatly reduced consumers' enthusiasm for choosing new energy vehicles, and some consumers have even reconsidered gasoline vehicles.

According to data collected internally by Weilai over the past 11 days, the sales of new energy vehicles by the three leading domestic new energy vehicle manufacturers, Weilai, BYD, and BAIC, have all been affected to varying degrees. The impact is particularly noticeable on higher-priced models such as the BYD Yuan EV and Weilai ES8.

Consumers' decision to hold off on spending or switch to gasoline-powered vehicles presents a significant challenge for both WYD and BYD.

After Yuechi Auto officially became independent, Weilai, like BYD, became a pure new energy vehicle company, even less so than BYD. Although BYD has devoted all its energy to new energy, it still has some gasoline vehicle business.

According to the statistics and data released so far, there are no gasoline-powered vehicles in Weilai. In a sense, Weilai's current vehicle model structure is the same as Tesla's.

"Oh? What aspect is it? Could you tell me?"

After returning from the capital, Tan Jincheng began to appear frequently in various industrial parks. Sometimes he was even photographed eating late-night snacks at roadside stalls in some industrial parks. According to some actions by some departments since the beginning of July and some media reports, it is clear that this new energy company will make some significant moves in the near future.

"It's a press conference about the new 400V architecture and the new brand."

The new sub-brand launch event, Weilai will officially kick off its full-scale promotion this weekend. Tan Jincheng didn't take the sales decline in July too seriously; such a short-term slump after a large subsidy is inevitable.

Just like the ride-hailing war and the food delivery war, after the subsidy policies ended, consumers' expectations were different from before, and it definitely took a process to ease the situation.

While the sales of the main brand's high-priced models have been somewhat affected, the sales of the Aion series are quite good. This month, the Aion S should be able to sell more than 3000 units, which is a pretty good performance.

Although he didn't care much about short-term sales fluctuations, it did serve as a reminder to Tan Jincheng that cars shouldn't be sold at too high a price.

Even luxury brands like BBA (BMW, Mercedes-Benz, Audi) need cars to boost sales volume. Currently, the models that Weilai can use to boost sales volume are the Weilai L1 and ET5, but the prices are still too high. We must enter the market below 15 yuan as soon as possible.

The new brand that was already in the planning stages had to be brought forward.

"Oh? A sub-brand? I've never heard of it before. When did this happen?"

Cao Xudong was genuinely surprised. The launch of a new brand certainly couldn't be prepared in just a day or two. Judging from Wei Lai's actions, preparations should have started at the beginning of the month. Ten days had passed, yet there was still no news from the market.

Judging from these points alone, it's enough to show that Wei Lai has a strong team. Some companies are like sieves; whenever a company makes a big move, the media is the first to break the news.

"It's about this month. If Mr. Cao is free then, he can come to Ningbo. Our press conference is scheduled for the 28th of this month."

"No problem, I'll definitely go when I have time."

Cao Xudong was quite satisfied with this shareholder who was strongly recommended by Lei. In addition to leading the Series B financing and providing financial support to Momenta, he also provided a lot of resources.

To develop autonomous driving, it's impossible without partnering with car companies. Looking at domestic car companies, besides BYD, only WILER can provide support for autonomous driving technology. BYD has a wide range of models, while WILER's models are high-end enough.

In addition, just as Lei Jun said, this investor, who is rumored to be very domineering, is not actually like that. His domineering attitude is only directed at the company's strategy. The only time he showed ruthlessness with Meizu did shock many people, but it was mostly to provide support for Weilai Auto in the mobile phone field.

It can be said that he was determined to acquire Meizu. Even without Meizu, he would have acquired other mobile phone manufacturers, which is why he acted this way.

The actions taken with Inco Medical in the past few months have also proven that he is not actually as rumored; of course, as an investor, it is impossible not to be greedy, and everyone wants more shares, which is understandable.

Cao Xudong, who has worked at both Microsoft and SenseTime, understands the reasoning behind this.

"Alright, I'll be going now. If I ever have the chance to see Mr. Lei, please pass on a message for me: it's been a long time since we last met."

"Haha, Mr. Lei is too busy to attend this press conference, right? I think that makes sense."

Xiaomi went public, but it's better not to have gone public at all. This has been Lei Jun's troubles over the past year. The Hong Kong stock market's attitude towards Xiaomi remains unchanged. As of now, Xiaomi's stock price has fallen to around HK$9, and its market value has shrunk to the range of US$30 billion.

Since January of this year, when more than 30 billion Xiaomi shares were released from lock-up, the stock price has been declining all the way down. ByteDance's stock price and some of Tan Jincheng's shares are also currently subject to lock-up. The market has shown extreme concern about the major shareholders' sell-off.

As expected, the major shareholders also sold off 4.26% of their shares in one go through a fund managed by the wealthy businessman, while a mysterious shareholder sold 2.31 million shares at a discount off-exchange, involving a total of HK$21.8 billion.

In January, Xiaomi's stock price began to plummet. The intensive share buybacks and the promises made by Lei Jun and Zhou Shouzi not to reduce their holdings within a year had no effect.

The price-to-book ratio once dropped to as low as 2.5 times, even lower than that of a certain group. Is this the performance expected of a company that claims to be a technology company? This is clearly the price-to-book ratio of a manufacturing company. However, it is no wonder that investors in Hong Kong are questioning it.

Throughout 2018, Xiaomi's R&D investment accounted for only 3.3% of its revenue, resulting in low gross and net profit margins. While the profit margin is understandable, it is quite unacceptable for a listed company that claims to be a technology company to have R&D investment accounting for less than 5% of its revenue.

Let's not even compare it to Huawei. Huawei's R&D expenditure ratio is 14.1%. Even without talking about patriotic marketing, it's no wonder that its products sell so well. Meizu's R&D investment ratio is over 5%.

All of Tan Jincheng's companies, even those like Leichi Auto, which are essentially low-speed electric vehicles, invest heavily in research and development. All of his companies have consistently maintained a minimum R&D expenditure of 5%.

The standard is that R&D investment should not be less than 5%, and Weilai's current R&D investment has exceeded 8% and is heading towards 10%.

Since we're in the tech industry, we can't skimp on this money. Such a large company can't afford to be stingy with its resources. There's no need to cut corners on R&D. Even if we don't develop anything worthwhile, at least our financial statements will look better.

Without increasing investment in research and development, you have no right to call yourself a technology company.

"I'm busy, he's had a headache for half a year, and we haven't seen each other in a long time; alright, I'll be going now."

Interestingly, both Lei Jun and Zhou Shouzi have pledged not to reduce their holdings within a year, but so far, Lin Bing, Xiaomi's most important co-founder, has not made a similar pledge, which has drawn considerable skepticism from the market.

Neither ByteDance's advertising platform nor Tan Jincheng himself has made any commitment not to reduce their holdings. However, to date, Tan Jincheng has not made any reduction in his holdings and remains Xiaomi's second-largest shareholder.

With 41.17 billion shares, representing a 17.19% stake, and less than two months until all shares are released from lock-up, Tan Jincheng's attitude is putting pressure on Xiaomi's stock price.

"I reckon it won't be long before Lao Lei comes looking for me."

After leaving from the initial speed, Tan Jincheng smiled and said to Zhao Xinyi that the reason he hadn't made any statement was actually to put some pressure on Xiaomi and Lei Jun. Hong Kong investors don't think much of Xiaomi now, but Tan Jincheng knows Xiaomi's value.

Xiaomi's intensive share buyback program in January was all talk and no action, costing only HK$200 million in total. To stabilize its share price, Xiaomi would need to conduct another round of intensive buybacks, which would put significant pressure on its cash flow, especially given the company's difficult year. Moreover, the market pressure will be even greater after the second-largest shareholder's shares are fully released from lock-up. Unless Tan Jincheng publicly states he will not reduce his holdings, Xiaomi's share price will not improve.

No matter how many times you repurchase, it won't make a difference.

As an internet company, Xiaomi has good cash flow, but no one can withstand the more than $50 billion in market sell-off by its second-largest shareholder.

"Boss, you're too greedy. You've already made a lot from Xiaomi, and you still want more?"

Since the angel round, Tan Jincheng and ByteDance's total investment in Xiaomi has been around $1.5 million. Even with the stock price falling to this level, they have still earned more than $50 billion.

This single investment is enough for ByteDance to boast about and live off for a lifetime.

"If we can eat more, we should definitely eat more. Besides, Mr. Lei has to show some attitude, right?"

In 2017, Lei Jun invested in autonomous driving companies like Momenta. Shunwei Capital has also made significant investments in automotive-related fields. To say that Lei Jun was forced into car manufacturing is something he would never believe.

From the perspective of the company's business alone, car manufacturing is an important breakthrough for Xiaomi. After being suppressed, Huawei needs to find new business breakthroughs, and so does Xiaomi.

The mobile phone market is already saturated, and continuing down this path won't lead to any significant breakthroughs. Car manufacturing is undoubtedly Xiaomi's lifeline in terms of market value. If they succeed, they'll be set for life; if they fail, it won't matter.

When it comes to stock trading, what matters is having expectations. Without expectations, how can anyone trade?

Xiaomi's current net profit margin is less than 5%. Even if it were raised to 10%, what difference would it make? It would just mean making a little more money. Does the capital market lack those few percentage points of return? Not at all. What they want is the expectation.

If Xiaomi hadn't gone public, there might have been a chance it wouldn't be making cars. But now that it's listed, making cars is almost a certainty.

In a sense, this is also driven by capital. Just like how Weilai is constantly expanding, benefiting from financing after its listing, it is precisely this pressure that makes Weilai unable to stop.

If this is the case for companies like Wei Lai, which are absolutely controlled by Tan Jincheng, then it's even more true for companies like Xiaomi, which are deeply involved in capital.

"So, if they find us, how should we respond?"

"We'll see. Our premise is not to reduce our holdings. As for whether to increase our holdings, that depends on what Mr. Lei thinks."

With a 17.19% stake, although his voting rights are limited and he has never attended a Xiaomi board meeting, even handing over his voting rights to Lei Jun, it still puts pressure on Xiaomi's management, Lei Jun, and investors.

What if Tan Jincheng takes back the voting rights one day? Given his personal influence, should we consider his opinions if he appears at Xiaomi's board meetings?

After Xiaomi's stock price fell below its initial offering price, He Xiaopeng personally invested $100 million to buy it at the bottom, which can be seen as him standing up for Lei Jun. There was He Xiaopeng's personal friendship involved, but Lei Jun's help was definitely also involved.

Lei Jun didn't contact him, presumably because he had concerns about that, since he's much richer than He Xiaopeng.

Based on the current exchange rate and Xiaomi's stock price, one hundred million US dollars could buy approximately 8000 million shares of Xiaomi, representing nearly 0.3% of the company's shares. Last time we met, He Xiaopeng joked that he had lost a lot of money on Xiaomi.

He started buying after the price dropped below the initial offering price, and it has since fallen by about 30%.

"Okay, I got it. If Mr. Lei's assistant contacts me, I'll know how to answer."

If shareholders don't sell their shares, the listed company and its actual controller have no other options besides continuously issuing new shares to dilute their shareholding ratio. However, Tan Jincheng doesn't care about the dilution of his shareholding ratio.

For Xiaomi, ByteDance's investment platform has shifted from a strategic investor to a financial investor. It only wants to buy at the bottom, wait for a new expectation, and then reduce its holdings to make a profit.

Tan Jincheng's trip to Suzhou wasn't just for the Momenta launch event; he had other matters to attend to as well.

That is Bafang Electric, which has been striving for listing for many years. They have finally made it to the Shanghai Stock Exchange and will be listed on November 11 this year. Tan Jincheng came here to sign some documents.

"Boss, have you decided on the name and logo for the sub-brand? I think I saw the application."

After 17 years, Wang Qinghua finally got Bafang Electric listed on the stock exchange. This time, Bafang Electric plans to issue 3000 million shares and raise about 12 billion yuan, which will bring new development opportunities to Bafang Electric.

The 12 billion yuan raised is a considerable sum for a parts company mainly engaged in the business of two-wheeled electric vehicles. Wang Qinghua can be considered to have finally made a name for himself in the Gu Industrial Zone.

Of course, what pleased him most was the decision of the parent company, Flash Group, to sign a concerted action agreement with him, which brought control of the company back into his hands. Tan Jincheng came here this time to sign the concerted action agreement.

"Yes, it's decided. The name is Star Path."

Referring to iFlytek's equity structure, iFlytek's founder Liu Qingfeng is not the largest shareholder, and his shareholding ratio is even very small. The largest shareholders of iFlytek are China Mobile and iFlytek, but because they signed a concerted action agreement with Dr. Liu, Dr. Liu has control over iFlytek.

With Bafang Electric being spun off and listed, there definitely needs to be a person in charge. Zhang Xupeng doesn't have the energy to manage Bafang Electric, so Wang Qinghua, the founder and the second largest shareholder, is the best candidate.

Over the years, the two companies have cooperated very well, and Bafang Electric has brought considerable profits to its parent company. It is right for him to bring the company back under his control.

This can be seen as an attitude that Tan Jincheng indirectly conveyed to Liu Fangyi.

"Star Path? What a great name."

Wang Qinghua said thoughtfully, "The reason I know that people are paying attention to this matter is because I went to Ningbo several times for the listing issue, and once I happened to hear Tan Jincheng and his family talking about this topic at Tan Jincheng's house."

NIO Stellar.

The Chinese name, Xingtu, echoes the theme of Weilai, while Tu signifies an exploration journey, conveying the vision of technology leading the future (Weilai) travel. The English name also seamlessly connects with the Weilai brand.

It's a name that Tan Jincheng is quite satisfied with. The sub-brand is positioned to target young technology enthusiasts and small families, focusing on intelligent driving and space aesthetic design.

The logo for the sub-brand Exeed has also been designed. It's very simple: a star paired with the rounded curves of the main brand, Weilai. It's simple and direct.

"Whether it's good or not is up to the consumers to decide, but this thing can still be changed."

To penetrate the market below 15 yuan, it must gain the recognition of more young users. Whether it's the design of the car logo or the appearance of the vehicle, it must satisfy the vast majority of people.

The sub-brand has a different positioning than the main brand. The sub-brand is more aimed at first-time car buyers born in the 90s and even the 00s. In addition to being cheaper, it also needs to be fashionable.

Mr. Tan has seen the post-00s consumer group before, but they are not as easily fooled as the post-70s and post-80s who have not seen much of the world.

To be honest, the main characteristic of the post-00s generation is that they are frugal when they should be and generous when they should be. They are very willing to spend money on their hobbies, but they won't spend a penny on anything outside of their hobbies.

In 2019, Tan Jinyue was already 15 years old, one of the first batch of children who were ready to start working.

A new group of car consumers is emerging, and Weilai needs to seize this market opportunity.

"Alright, it's signed. Congratulations, Mr. Wang, and congratulations to myself as well."

With the documents signed, control of Bafang was officially transferred; of course, he remained Bafang's largest shareholder, and there was no real change. Based on the IPO fundraising and total share capital, Bafang's valuation at the time of the IPO was 50 billion yuan.

In Tan Jincheng's view, the initial IPO valuation of 50 billion yuan was a bit high. Bafang Electric is just a company engaged in the business of two-wheeled electric vehicle parts. However, this is also good, as the stock price will not be greatly speculated after listing, which is conducive to the company's stability.

After issuing 3000 million shares, Bafang Electric's total share capital increased to 1.2 million yuan. Tan Jincheng, through Shanchi Group, held 4590 million shares of Bafang Electric, reducing his shareholding ratio to 38.25%.

Because Wang Qinghua cashed out a portion of his shares during the IPO process, his shareholding decreased to 3000 million shares, which is exactly the same as the issued shares, at 25%. Through the concerted action agreement, Wang Qinghua has absolute control over Bafang Electric.

"Yes, congratulations to us. I also want to thank the boss again."

Having regained control of the company, Wang Qinghua felt somewhat emotional. Although Tan Jincheng hadn't been involved in Bafang Electric's affairs much over the years, and his shareholding was still quite high, things were still somewhat different.

If everything returns to the starting point, both Bafang and he himself will have a higher starting point.

He is now worth billions, but the one who has made the most money is the boss, whose shareholding at the time of the IPO was close to 20 billion yuan, which is much more than the initial investment.

20 billion. Based on last year's net profit, it would take ten years to earn that much.

(End of this chapter)