2003: Starting with Foreign Trade

Chapter 968 The Sudden Opportunity for Flash Technology

That evening, Zhang Xupeng rushed over, and Tan Jincheng invited him to his home for dinner.

"Hehe, things might not be as you think. Come to think of it, you've been ignoring Flash for too long, so I can't really blame you."

Almost all offline stores across the country have been forced to close, and the entire industrial chain of manufacturing enterprises is at a standstill. Enterprises are unable to produce and sell normally, and a decline in sales in the first quarter is a foregone conclusion.

Global exports are hampered, which is consistent with Tan Jincheng's initial assessment, but the reality is somewhat different.

This is also a change that Zhang Xupeng has noticed recently. Although his main focus is on Jinpeng Industry, as the actual manager of Shanchi Group, he still pays close attention to the core enterprises of the group.

In addition, he was highly involved in the early preparations of Flash Technology and has a very high level of understanding of the electric vehicle industry.

"Tell me."

Tan Jincheng became interested. Zhang Xupeng was right. He was now almost completely hands-off with Flash Group and was focused on maintaining stability in the group's overall business. He wasn't particularly concerned about the business itself.

"Given the current situation, things may not return to normal until the end of March. However, the demand may be different from what we expected. Several food delivery websites have recently shown signs of increasing the number of orders we receive."

After saying that, Zhang Xupeng sighed and said, "To be honest, we've been out of touch with the grassroots for too long. We should have thought of this sooner."

In 2019, like the National VI emission standard, two-wheeled electric vehicles also implemented the new national standard. The new national standard eliminated many small and medium-sized workshops, making production capacity more concentrated in leading enterprises. In addition, the boom in the lower-tier market was accompanied by consumption upgrading.

Consumers' understanding of products has reached a new level, with higher requirements for the appearance, performance, and intelligence of two-wheeled electric vehicles. The demand for high-end electric vehicles, mainly driven by young people, is expanding.

After years of promotion, the growth of more high-end lithium-ion electric vehicles is significant. These are major changes in the two-wheeled electric vehicle market in 2019. Leading companies are gaining more and more weight, and among the leading companies, Flashcar's design has always been the most advanced. In addition, Flashcar is the most stable in its choice of brand ambassadors.

With Zhou Pangzi, Liu Yifei, and Chun Ge as the three brand ambassadors, there is a stable fan base that brings good sales to Flash Motors every year. The data shows that the spending power of these three fans is quite good, and they also have a demand for electric vehicles.

Besides Liu Yifei, Chun Ge and Zhou Pangzi are also honorary employees of FlashTech, and have been given corresponding stock rewards in exchange for seeking long-term cooperation.

"Meituan, Ele.me, and some small food delivery companies have recently been inquiring about our suppliers, and some have even called us directly, all asking about our inventory situation. The demand for our delivery business has increased significantly."

"Besides this, the demand for electric vehicles will definitely increase after all work resumes, and the landscape may be different then."

Tan Jincheng nodded. He had known for a long time that this incident had changed the way many people travel, but that was after the full resumption of work. The sales of two-wheeled electric vehicles would definitely see an explosive growth period.

As for the electric vehicles needed for food delivery services, there were signs of an increase in February, which was something he hadn't expected.

I expected the number of food delivery workers and ride-hailing drivers to increase after this, but I didn't expect it to happen so soon.

“There is some truth to that. We have indeed been out of touch with the grassroots for too long. I really didn’t expect that the number of delivery drivers would start to increase now.”

From February to now, the regions that have officially resumed work are mainly concentrated in economically developed areas such as the Yangtze River Delta, Zhejiang, Shanghai and the Pearl River Delta. Many provinces in the interior have not yet shown any signs of resuming work, and many people are still in a state of fear.

"Yeah, I didn't understand at first either, but I basically figured it out on the way here. When you're broke, you can't care about anything else. Of course, that's how we are. I heard that delivering food is quite lucrative right now."

"You're exaggerating. We didn't have to go through that much back then. We were just a little tired."

After understanding the situation, Tan Jincheng felt relieved. The industry consolidation brought about by the new national standard and the market space freed up, in this special period, was indeed a great opportunity for the industry.

Although they haven't resumed work yet, Flash has made ample preparations, just like Weilai.

“We have enough inventory, which is a great opportunity for us. We need to seize this opportunity. If offline stores are hampered, then we should increase investment in online sales.”

Maintaining stability is what Flash Group strives for, but when faced with such a rare opportunity, it has to be seized.

Zhang Xupeng nodded: "We have already increased our investment in this area. We have also arranged live streaming for our flagship store on Tmall, and we have also increased our traffic on the JD.com platform. Let's see if online sales can pick up."

Although online sales of two-wheeled electric vehicles are not mainstream, with the current increase in personal travel demand and offline stores unable to open for sales, the internet has become the only option, which will inevitably change some consumption patterns.

"Hehe, in this situation, our employees can't support you. You might even need to support us, since you're not selling many cars anyway."

Tan Jincheng was momentarily speechless.

He anticipated changes in the structure of his consumer products after resuming work, and also considered changes in personal travel needs. He had stocked up on inventory beforehand, but he never expected that the market would react first to two-wheeled electric vehicles.

“The people from Weilai can’t support you anymore. Don’t be fooled by the fact that we can’t sell many cars now. Once we fully resume work, the situation will be different, and the demand for cars will explode.”

"Actually, these two have something in common. You see, public transportation is facing great challenges now, and for personal travel, the demand for two-wheeled electric vehicles is the same as that for four-wheeled vehicles."

Even the demand for tricycles is the same; the rural market also has a great demand for personal transportation, as does the European and American markets.

This is the benefit of a complete industry chain. From two-wheeled to four-wheeled vehicles, Weilai, Shanchi, and Leichi all have complete production lines, and certain technologies can be transferred. For example, in the current high-end lithium battery electric vehicle sector, only Shanchi and Yadi have an advantage.

Yadi's lithium battery technology benefited from their initial investment in Jinxin Times with Tan Jincheng. At that time, Tan Jincheng didn't have that much money, so he persuaded Yadi to invest some money, and Yadi also obtained the initial 20% of Jinxin Times' shares.

Although Jinshidai subsequently repurchased the shares through various means, this investment brought Yadi not only substantial financial returns but also valuable experience in lithium battery technology.

Dong Jinggui was quite pleased with Tan Jincheng for getting him to invest in Jinxin Times. What seemed like a losing proposition at the time turned into a rich return ten years later.

Throughout February, the automotive market suffered a dismal sales performance due to the impact of this incident. Just as Tan Jincheng had predicted, no model in the entire market achieved monthly sales exceeding 10,000 units. The best-selling model was the Nissan Sylphy, with 6519 units sold in a single month.

In Weilai, the best-selling model is the Yuechi A1 from Yuechi Auto, with monthly sales barely exceeding 5000 units. In the new energy vehicle sector, the best-selling model is Tesla's Model 3, with a remarkable 3900 units delivered in a single month.

The best-selling vehicle here is still the Aion S, with 2433 units delivered in a single month, making it the top-selling domestic new energy vehicle.

"It's really terrible. Only three new energy vehicle models sold more than 1,000 units in the whole month, and only three models sold more than 4000 units. If you include Tesla's Model 3, that's barely four."

The data on national car sales in February released by the China Passenger Car Association is simply appalling. In February, the total sales volume of cars nationwide was only 31 units, a year-on-year drop of 80%. This sales volume is less than the sales volume of some car companies in a single month last year.

"It was truly a terrible situation; we suffered huge losses in February."

"There's nothing we can do about it. The first quarter's financial report is definitely not going to be good, but fortunately our cash flow has remained relatively healthy, so it's still okay."

February will definitely be a loss, but the overall first quarter should not be a loss. The resumption rate in March is still acceptable, and the sales in January are also quite good. In addition, with the power battery business, overall, Weilai should still be able to maintain a profitable state in the first quarter.

Based on the financial reports for January and February, the power battery business is expected to generate approximately 400 million yuan in profit for the quarter. Overall, the company's profit for the first quarter should be between 500 million and 700 million yuan.

Regarding revenue, the specific situation in March is still uncertain, but overall, Weilai's revenue in the single quarter of 2020 can still be guaranteed to be good, although a sharp drop year-on-year is a foregone conclusion.

The situation in March remained unfavorable. The previously anticipated improvement did not materialize; instead, the virus spread rapidly across the globe, with Europe and North America becoming new epicenters.

Compared to the policies they criticized before, our policies are now showing their advantages. Compared to the disorder in Europe and the United States, the resumption rate of work here is gradually changing. Except for the Jiangcheng area, the situation in other places has improved sporadically.

In February, Inco Medical's stock price surged 94.75% throughout the month, closing at 45.98 yuan. In the first half of March, Inco's stock price continued its strong performance, reaching a record high of 51.48 yuan on March 9.

"With the US market collapsing, the surge in Inco's stock price was almost inevitable."

In the financial markets, US stocks experienced their first circuit breaker of the year on the 9th, with the three major Dow Jones indices plummeting. The fundamental reason was that the situation on their end was out of control. Inco, on the other hand, performed very strongly at the opening.

The Federal Reserve's two consecutive interest rate cuts this month have failed to salvage the US stock market, and the global economic order is facing restructuring; of course, the old man's questionable actions are also one of the reasons.

"At this critical moment, everyone should stay home and avoid going out if possible. It's better to stay at your posts."

By early March, all of Tan Jincheng's industries in Zhejiang Province had resumed operations, but the labor shortage was still quite severe. Recently, Mr. Tan has been visiting various factories to reassure his employees.

Another measure is to persuade employees who are still unwilling to return to work to return to their posts as soon as possible, at least to their posts in Zhejiang Province.

"The treatment was too good, now it's giving me a headache."

At the FlashCar North Warehouse factory, Zhang Xupeng said with a bitter face that the demand for two-wheeled electric vehicles showed signs of picking up in February, but by March, the situation had changed drastically, and the usual inventory was almost insufficient. FlashCar implements the same employee benefits as Weilai, paying its employees their full salaries. This is where human nature comes into play; some employees, with their full salaries and no worries about making a living, are unwilling to return to work.

At this point, it's clear that Flashpoint can't fire them, and these employees know this, so they ignore the company's calls. Although the company has taken some measures, they haven't been very effective.

The sudden surge in electric vehicle sales has led to a severe labor shortage for Flash Motors.

"Based on the current order volume from distributors and B-end customers, our sales will experience explosive growth after March. If there are any changes in exports, we will need to increase production lines."

Wu Zhenping, who was stationed at headquarters, was both happy and worried.

To his delight, on his 15th anniversary with the company, he once again saw an opportunity for rapid growth. Flash had not expanded its production lines for many years, and sales had remained very stable. He had originally thought that was all there was to it.

No one expected that a sudden change would give rise to a new opportunity, but this opportunity was not only bloody, but also thorny.

"We should increase production where necessary, and boost output where needed. If we don't have enough people, we should try our best to recruit more. If all else fails, we can acquire Leichi. When we merge them, we can better coordinate the allocation of our own employees."

Although Weilai still has room for maneuver in terms of production capacity, as mentioned before, Tan Jincheng will not allow Weilai's employees to work at Shanchi, even if he has to keep them on the payroll.

Compared to two-wheeled electric vehicles, Wei Lai is the most important part of his entire business.

"Hmm? Acquire Leichi? That's a good idea."

Zhang Xupeng's eyes lit up. Although Leichi's company was not well-known and its business in China was extremely low-end, often being looked down upon by traffic management departments, its overseas development was quite good.

To be fair, the company with the largest export volume under Tan Jincheng is not Weilai Auto, but Shanchi Technology and Leichi New Energy. Their "old man's cars" specially customized for the European and American markets, while complying with regulations, have basically occupied nearly half of the market share in France and Italy due to their cost-effectiveness.

In addition, the Golf car is also a major production highlight. Although both have suffered heavy losses this year, this special situation will eventually come to an end.

Unlike other types of vehicles, the "old man's car" doesn't have the conditions to be legally driven on the road, nor does it have much technology to speak of. To use a netizen's joke, the core technology of the "old man's car" is that it actually has an old man inside.

Apart from that, there really isn't much else to offer. If Leichi wants to achieve sustainable development, increasing the development of export models is of paramount importance. Compared to other companies like Leiding, which focus on new energy vehicles in the domestic market, Leichi has chosen a different path.

"If we can acquire Leichi, it will not only solve the problem of employee needs, but also be a great supplement to Flash's business."

Zhang Xupeng is neither good at nor fond of investing, but having been influenced by Tan Jincheng for a long time, it would be a lie to say that he doesn't understand investing at all.

Shanchi currently focuses on two-wheeled electric vehicles, with some spare parts, tricycles, and four-wheeled vehicles as supplementary businesses. Leichi's business of electric vehicles for the elderly does not conflict with Shanchi's, but Leichi also produces tricycles and two-wheeled vehicles.

No large company can have a single business.

By acquiring Lexus, the tricycle and two-wheeled vehicle businesses can be merged, which not only increases sales but also unifies the brand. Most importantly, Lexus's export channels in Europe are also very beneficial to Lexus.

Even if the elderly people's electric vehicles are banned in the future, this business will still be worthwhile, at least strategically.

"Leichi's factory and land are also a considerable asset."

Wu Zhenping nodded repeatedly. Besides overseas channels, he was most optimistic about Leichi's land. Leichi's existing factory was located near Xiapu Metro Station, which is northeast of Phoenix Mountain.

When Leichi first acquired that piece of land, it was practically a desolate wasteland. Even small factories didn't want to build factories there. Besides being remote, the main reason was that there were no industrial chain companies in the area.

However, with the development of Beicang District, the subway station has already been built there, and that piece of land is adjacent to Xiapu subway station, so the location is already quite good.

"Haha, right? I'm just providing a direction; how you actually do it is up to you."

Leichi's overall business can be described as a treasure trove. In addition to the significant appreciation of its factory buildings and land, its overall gross profit is also quite considerable. With large-scale production and a complete industrial chain, the gross profit margin of its elderly-friendly vehicles is very good.

Currently, for a car with a market price of 15,000 yuan, the ex-factory price is basically around 10,000 yuan. Manufacturers can achieve a gross profit margin of 17.6%, while the gross profit margin of terminal retailers is roughly between 20% and 33%.

Due to varying costs, off-brand manufacturers can achieve a gross profit margin of up to 50%, while reputable manufacturers like Leichi have to compress their gross profit margin due to higher standards and labor costs.

However, high specifications also mean high prices, and the gross profit margin of the Golf is also quite high.

Currently, Leichi's business can be broadly divided into three parts: traditional elderly electric vehicles, compliant elderly electric vehicles, and golf carts. In 2019, the gross profit margins of these three were 19.85%, 13.5%, and 30.59%, respectively.

The gross profit margin of the Golf car exceeds 30%, and there are not many competitors, so there is even room for further improvement in the gross profit margin.

In 2020, the manufacturing industry had such high gross profit margins, which is unbelievable. Just look at the gross profit margins of FlashTech and Weilai Auto to see the difference. FlashTech's gross profit margin in 2019 was 15.79%, while Weilai Auto's gross profit margin in 2019 was 18.5%.

In terms of gross profit margin alone, among Tan Jincheng's manufacturing companies, only Jinpeng Industry, with the GXG brand at its core, can be compared. The overall average gross profit margin of apparel brands is not high, but the gross profit margin of different brands varies greatly.

奢侈品牌的毛利率超过了60%，高端品牌的毛利率也是在50%至70%之间，定位中高端的GXG在2019年度的毛利率为53.7%。

"It's a treasure trove of a company, but it will be very difficult for you to acquire it. Let's see if you can come up with a deal."

First of all, Leichi New Energy's valuation is definitely not high. The PE ratio of the manufacturing industry is not high to begin with, not to mention that the old man's car is an unstable factor, so the acquisition cost is definitely not high. But the problem is that Leichi is not short of money.

Leichi doesn't have a large number of employees, and the boss's style leans towards automation. Over the years, Leichi has invested heavily in its production lines, aiming for a high degree of automation and strictly controlling the total number of workers.

Currently, Leichi New Energy is already in a state similar to all-employee profit-sharing, so it would be quite difficult to acquire and change the existing situation.

"It is very difficult, but we will try our best to achieve it."

Zhang Xupeng and Wu Zhenping were both tempted, but they also knew how difficult it would be to acquire such a company. It was extremely difficult to acquire a company that was well-funded, had a strong background, and a healthy business.

However, it would be better to first acquire the 10% stake in Leichi that Zhongtai still holds. Like Lifan, Zhongtai is facing the risk of bankruptcy. Boss Ying has lost the spirit to run a business and has already cashed out and left.

Acquiring the 10% stake held by Zhongtai should not be a problem.

"Ha, sure, but you need to communicate well with Leichi's management and Beicang City Investment. They're also eyeing that 10% stake. Don't let your own people drive up the price for each other."

When Zhang Xupeng brought up his idea, Tan Jincheng almost burst out laughing.

Sure enough, that's how it is in the business world. There are never any true friends. Zhongtai has been making money off Leichi for so many years, which has already made the management and Beicang City Investment a little unhappy. They have long wanted to kick Zhongtai out of the game.

The management is alright, but Beicang City Investment has been eyeing these shares for a long time. With investment becoming increasingly difficult and real estate growth entering a bottleneck period, the annual dividends from Leichi can provide City Investment with a decent cash flow.

Of course, the main reason is that Zhongtai itself is not competitive. Although Porsche has a bad reputation, it was indeed a good opportunity for Zhongtai to transform itself. This thing is a serious copy of Porsche in appearance and was once very popular.

However, quality and after-sales service remain major issues that are difficult or undesirable for most small and medium-sized car manufacturers to resolve. If they could improve quality and after-sales service, consumers would not mind the appearance.

From another perspective, spending a third of the price to enjoy the same appearance as a Porsche, with acceptable quality and service, isn't that a selling point?
In March, FlashDrive Technology, a company specializing in two-wheeled electric vehicles, was among the first to recover due to the surge in orders from the food delivery market and the increase in personal travel demand after the resumption of work. This was reflected in its stock price, with FlashDrive Technology's A-shares showing an overall increase of over 30% in the first quarter, while Xinri Shares also stopped its decline.

FlashTech's market capitalization has rebounded to over 200 billion yuan, and Yadi's market capitalization is approaching 190 billion Hong Kong dollars.

"Damn, this kid is incredibly lucky. He's in a mess in the car market, but the electric scooter market is making him a fortune."

According to market expectations, sales of two-wheeled electric vehicles will not only be unaffected by this incident from January to May this year, but will actually see an increase of more than 50%. Aima Technology, which is currently rushing to go public, also released a report at the end of March stating that they expect sales to grow by 60% this year.

"That's right. Flash Motors' early recovery has greatly alleviated its cash flow problems."

Tan Jincheng is known as the "Cash King" of Zhejiang Province, but facing the restructuring of several major enterprises in the industrial chain, if this situation continues, he, with his several major real industries, will also be unable to hold on.

No matter how much money you have, it will eventually be spent. Only increasing revenue is the key. With no more worries on Flash, he can focus more on Weilai Auto.

Moreover, the automotive industry showed signs of recovery in March.

(End of this chapter)