Rebirth of Hong Kong Island, leading the technology war

Chapter 632 Young Master Hu Predicts Lithium Price Crash, Tesla Orders Revealed! Board Members Kneel in Awe: This纨绔 (playboy) Has Opened His Heavenly Eye!

This is indeed a detail that many people tend to overlook when conducting analysis.

They focus more on the company's own operations and the market, and are not as sensitive to fluctuations in the commodity futures market.

Immediately, several people instinctively picked up their phones and began quickly checking the recent futures price trends of lithium ore.

Upon investigation, many people showed expressions of astonishment.

"My God! Lithium prices... have really started to fall recently!"

"Indeed! I didn't expect it. Prices were still high not long ago, how could they suddenly drop so much? This drop... must be at least 20%?"

"That's right! If lithium ore prices drop by 20%, then the production cost of power batteries will definitely decrease significantly as well."

"But that's not all! Look at this chart of lithium price declines; it seems this drop hasn't bottomed out yet and it's very likely to continue falling. Market analysts predict the final drop could reach 50%!"

"My God! If lithium prices really could drop by half, the effect on cost optimization for power batteries would be amazing! This would be a godsend!"

"This is incredible, truly incredible... I never imagined that Mr. Hu would pay attention to such a relatively specialized field as lithium ore prices..."

As the directors discussed the information they had found in hushed tones, they couldn't help but glance at Hu Jiangshan again, their eyes filled with surprise and inquiry. Then, they subconsciously looked at Hu Wenxin, who was sitting in the main seat.

Many people began to have doubts.

Was this conclusion reached by Hu Jiangshan through his own research, or was it a standard answer prepared for him by Hu Wenxin in advance, so that he could recite it verbatim and promote the investment case of Yute Technology?

However, a close look at Hu Jiangshan's expression and demeanor reveals a calm, confident, and articulate manner. He doesn't seem to be reciting a script at all; rather, it appears to be a natural expression of his insights after deep reflection on the issue.

Tian Ziyi put down her phone and looked sharply at Hu Jiangshan: "Mr. Hu, according to your logic, the continued decline in lithium ore prices will directly lead to a reduction in the production cost of power batteries. And a reduction in costs will naturally increase the gross profit margin of Yute Technology's products, thereby enhancing its profitability, is that right?"

"President Tian's summary is spot on; that's basically the logic." Hu Jiangshan first affirmed Tian Ziyi's summary, but then changed the subject, "However, that's not the whole reason."

"Oh? What other more important factors are there?" Tian Ziyi's interest was completely piqued.

"Another factor is the assessment of a market breakout trend."

Hu Jiangshan raised his voice slightly to make sure everyone could hear him: "Based on all the current signs, I can say with certainty that the mainland electric vehicle market will experience a real surge in demand in the next year or two."

Upon hearing this, everyone's hearts tightened again, and they couldn't help but look at each other in bewilderment once more.

This judgment is much bolder than simply saying that costs have decreased.

Hu Jiangshan seemed to have anticipated everyone's doubts, and he took the initiative to put forward the key argument supporting this judgment: "Everyone may ask, what is the reason for my judgment? The biggest and most direct signal is the official completion and production of the Tesla Gigafactory located in Shanghu City."

Tesla Gigafactory!
These words were like a bombshell, causing quite a stir in the conference room.

Those present were all well-informed business elites who were more or less aware of Tesla's plans to build a megafactory in Shanghai.

They also knew that Tesla's CEO, Aaron Malak, was extremely interested in the project, and there were even rumors that he would be stationed in Shanghai and sleep on the floor of the factory to oversee the mass production progress of the Model 3 electric car.

Looking at the changing expressions on everyone's faces, Hu Jiangshan casually dropped the most crucial information: "As far as I know, one of the core suppliers of the power batteries used in Tesla's electric vehicles produced at the Merchant Super Factory is Yute Technology. If any of you have the means, you can verify this immediately."

"What!?"

"Tesla uses batteries from UTE Technology!?"

This news was like a boulder thrown into a calm lake, instantly creating huge ripples.

Several quick-thinking directors, disregarding the occasion, immediately picked up their phones and began sending messages to well-informed individuals in the industry or media circles, eager to verify the authenticity of the information.

If this news is true, then Yute Technology is truly an extraordinary company!

Being able to enter Tesla's supply chain means that its technological strength and quality system have been recognized by the world's top electric vehicle companies.

With the influence of the Tesla brand and huge order demand, it would be difficult for Yute Technology's performance not to take off!
This is almost beyond doubt!
At this moment, even Hu Wenxin, who was sitting in the main seat, felt extremely shocked and incredulous.

He knew that his son had changed a lot recently and his abilities had improved rapidly, but he never expected that Hu Jiangshan would be able to answer such a professional question so clearly, with sufficient evidence and rigorous logic, almost to the point of being impeccable, when he was suddenly asked such a professional question without any preparation!
This has completely exceeded his best expectations.

He looked at his son, who was speaking eloquently and calmly, and his eyes were filled with indescribable complex emotions. There was surprise, relief, and a deep sense of admiration that he had changed a lot in just three days.

In truth, while Hu Jiangshan was speaking eloquently, he also felt a faint sense of relief deep down. Just moments before, when Dong Jianming suddenly asked him a question, the complete logical chain of thought regarding the future development of Yute Technology in his mind hadn't yet been fully clarified.

As he spoke, he rapidly thought and organized his thoughts. Many deeper arguments and analyses emerged in his mind as the words unfolded, like lights being gradually lit.

In particular, his key judgment on the future trend of lithium prices was a clear trajectory that suddenly jumped out from the depths of his memory when he talked about the cost structure.

Hu Jiangshan tried hard to recall the historical context of the world before he traveled through time. If he remembered correctly, around this point in time, the global market price of lithium ore should have already begun a significant downward trend.

Of course, as a time traveler who knew part of the future, Hu Jiangshan also maintained a clear sense of vigilance.

He couldn't be 100% sure whether the history he had experienced would be changed because of him, the butterfly that had unexpectedly entered the scene.

Just in the unlikely event that, due to some unknown chain reaction, lithium prices at this point in time do not fall as expected, his optimistic prediction based on cost reduction will be greatly diminished in persuasiveness and may even become a vulnerability for his opponents to exploit.

Fortunately, judging from the astonished expressions on the faces of the directors present after quickly checking their phones, reality seemed to be unfolding along the trajectory he remembered.

This put some relief on his mind.

Having finished his explanation, Hu Jiangshan felt that the time was almost right, and the desired impact and persuasive effect had been largely achieved.

Therefore, he summarized: "In conclusion, considering the above points, YuTe Technology's future profitability is not a concern at all. As long as the price of lithium ore, the core raw material, enters a downward cycle, the production cost of power batteries will be significantly optimized. In addition, YuTe Technology's early-stage factory construction, production line investment, and the most costly core technology R&D phase are now basically complete, and the peak period of huge capital expenditure is about to pass. Next, as production capacity ramps up and economies of scale emerge, the gross profit margin will increase rapidly. Therefore, I can say with certainty that YuTe Technology will not only achieve profitability soon, but its profitability will also be released very quickly, and the profit scale will be quite considerable."

Despite Hu Jiangshan presenting facts, reasoning, and analyzing the situation logically and seemingly with a complete chain of logic, Dong Jianming's competitive spirit was still stirred up.

He pondered for a moment, then couldn't help but raise another question, this time more specific and clearly challenging: "Mr. Hu, your analysis of the general direction seems to make some sense. However, investment is about timeliness and quantification. When do you think Yute Technology will be able to turn a profit? At least at this point in time, looking at its latest financial statement, the data is not good at all, it can even be described as quite dismal. Do you think it is confident of achieving profitability within the next two years? If so, what is the preliminary estimate of the profit scale?"

Faced with this pressing question demanding specific figures, Hu Jiangshan remained calm and composed. He replied, "President Dong, regarding the timing of profitability, I've already mentioned some signs. Tesla's Gigafactory is complete and operational. If my assessment is correct, they should have already placed their first substantial order for power batteries with Yute Technology. However, there's a time lag between signing the order, production, delivery, and final revenue recognition for such large orders, which isn't yet reflected in the latest quarterly financial report. But I believe that by the next quarter at the latest, or by the middle of next year at the latest, Yute Technology's performance will show a significant improvement. Moreover, this positive trend will become increasingly stronger as orders continue to increase."

Dong Jianming shook his head, clearly not entirely satisfied with the answer. He pressed on, "Relying solely on orders from Tesla is probably not enough to support a company as large as Yute Technology, is it? No matter how high Tesla's sales are, its battery demand is limited. It's impossible for just one company to prop up Yute Technology's performance to the heavens."

Hu Jiangshan nodded, partially agreeing with Dong Jianming's point: "Mr. Dong is right on this point. Relying solely on Tesla as a customer is indeed insufficient to support Yute Technology's long-term high-speed growth. However, Mr. Dong, and all the directors, have you all considered this question deeply: Why did the central government and the Shanghai Stock Exchange, for the first time, allow Tesla to establish a factory in mainland China as a wholly-owned subsidiary? And why did they grant it so many extraordinary preferential policies?"

Everyone was stunned.

They do have some understanding of this.

For example, the land for Tesla's factory was provided at a virtually symbolic price, accompanied by huge low-interest loans, and even the core engineering team for building the factory was arranged with the assistance of the local government.

In a sense, Aaron Malak practically moved in with his bags and completed the construction of the megafactory without much trouble.

Tung Kin-ming was taken aback by the question and was speechless for a moment.

The other directors exchanged glances, realizing that the question was indeed crucial, and that they had discussed it privately as well.

In fact, when the news of Tesla building a wholly-owned factory first broke, it sparked considerable discussion within the Hong Kong business community.

According to the past policy practices of the mainland towards foreign investment, especially in the automotive industry, vehicle manufacturers like Tesla must establish joint ventures with mainland companies, and the Chinese side must hold a certain percentage of shares.

However, Tesla successfully broke this convention, obtaining sole ownership status, and the accompanying preferential policies were astonishingly generous.

At the time, many people privately speculated that Musk might have used some extraordinary public relations tactics or persuaded a highly influential figure to obtain this privileged pass.

Dong Jianming couldn't help but follow up on Hu Jiangshan's words and ask, "So, in your opinion, Mr. Hu, what do you think is the real reason behind this?"

Hu Jiangshan did not answer directly, but instead asked, "President Dong, everyone, do we all acknowledge that Tesla, at least at this stage, is the best electric vehicle company in the world? In terms of brand influence, technological innovation capabilities, and product experience, there are currently almost no other manufacturers that can match it. There should be no doubt about that, right?"

Dong Jianming nodded: "That is indeed true. At least in the high-end electric vehicle sector, Tesla is currently in a class of its own."

At this moment, a knowing glint flashed in Tian Ziyi's eyes. She seemed to have grasped the core of what Hu Jiangshan wanted to express and tentatively continued, "Does Mr. Hu mean that the reason why the mainland side gave Tesla such favorable conditions is to treat it as a catfish in a school of sardines? The purpose is to use this strongest catfish to activate and stimulate the mainland's local new energy vehicle industry, prompting them to accelerate their catch-up and competition?"

Hu Jiangshan cast an approving glance at Tian Ziyi and said affirmatively, "President Tian's summary is very accurate! That's exactly the point. Although there are quite a few new energy vehicle companies in mainland China, before this, the entire industry lacked a sufficiently strong and clear benchmark and target to catch up with, and the driving force for development and competitive pressure were relatively dispersed."

"Bringing in Tesla, the world's strongest disruptor, and giving it enough space to perform, is to create a top-level arena in the mainland market."

"All domestic companies aspiring to develop in the electric vehicle sector must learn from Tesla and strive to improve their technology, products, and cost control capabilities in order to survive. Only in this way can the overall competitiveness of the entire Chinese new energy vehicle industry chain be fundamentally enhanced."

(End of this chapter)