Extraordinary Genius - Chapter 401 – Small batteries, big business
Feng Yu wanted to collaborate with the Motor Factory to develop batteries was not because batteries will have lots of profits in the future. It was also because China’s giants in the batteries industry will be controlled by foreign MNC, due to a series of takeovers and investments, in the future.
Now, future China’s battery giant, Nanfu (Aka: Excell Batteries), was still starting. They had just successfully developed NiMH batteries, and this company had reached world-class standards.
Maybe Nanfu thought that they have no other competitors in China, but this technology was also developed successfully by the Motor Factory. Feng Yu had gotten some information on this technology and had asked the Motor Factory to research on it. Even the Motor Factory did not know that this technology was the most advanced in China.
The Motor Factory had thought that they were only one of the best in China. They could not see the potential in this technology.
Just the batteries used in remote controls and touch lights were a huge market in the future.
The home appliances now started to use remote controls. There were also some toys in the market that needs batteries. Also, the touch lights and wall clocks, which was a necessity in every home, uses batteries.
Feng Yu clearly remembers that in another 2 years, battery-powered toy cars will be selling like hotcakes. The high-performance batteries used in these toy cars were sold for more than 10 RMB. Some batteries were selling more than the toy cars.
But what was the cost of those batteries? The battery was selling from a few RMB to over 10 RMB a piece. The highest profits were over 300%. Also, the sales for pagers were increasing, and domestic produced pagers started to appear. In the following few years, pagers will be a huge industry, and a battery can only last a pager for one month. It uses batteries faster than remote controls. In Feng Yu’s previous life, Nanfu was successful because they just happened to meet this phase.
Furthermore, it will need about 1 year to set up a battery factory. It will take long periods just to settle the wastewater drainage systems. This was also because the equipment needed for the treatment of the wastewater got to be imported from overseas. Those machines used for wastewater treatment produced in China were only polluting the environment more.
If they start to build the factories now, then it should be ready for operation next year. At that time, VCD should be in the market, and the saloon cars should be produced. The timing was right for these new products to use the newly produced batteries.
If they set up the factories next year, the small batteries will be taken over by Nanfu batteries. Furthermore, Feng Yu does not only want to produce small batteries. He also wants to produce batteries for automobiles. He would be able to train a group of specialists in this field now, and he would not face a shortage of staffs when the new factories were set up.
Also, Feng Yu wants to get these batteries experts trained by the Motor Factory to the new factories was because he wants control over them. There can only be profits when they have the leading technology. Once these experts joined the new factories, Feng Yu would never let them return back to the Motor Factory!
“Feng Yu, yesterday we talked about setting up a branch factory together to manufacture batteries. Can we talk about the details?” Li Shiyou had asked Feng Yu to come to the Motor Factory. He wanted to make use of the advantage of having more people to negotiate with him. He needs to make sure that the Motor Factory will not be at a disadvantage.
“Director Li, yesterday I did not say about setting up a factory. I want to set up 5 branch factories. It will be the same as my automobile factories. It will be located all over China. This will be a huge investment. I intend to invest 200 million RMB. Oh, how much can the Motor Factory invest?” Feng Yu purposely asked.
From the way Li Shiyou set up this meeting, he knew Li Shiyou’s intentions. Li Shiyou will surely want to invest, but he does not want to take out any money.
Feng Yu also knew that if the Three Gorges project starts, even if the Motor Factory got the backup generator job, it will not be a small project. The factory will have to focus on that, and the factory will not have sufficient funds to invest in something else.
Li Shiyou wanted a more significant share in these new factories. But Feng Yu kept mentioning about money. No money, then stop thinking of owning more shares!
Feng Yu also did not intend to invest in 5 branch factories at once. One factory in Jinling will be sufficient for the market now. He could set up a few production lines to manufacture batteries in the Machinery Company’s factory here. He was not worried about the production of automobile batteries as the Motor Factory already had the production lines.
The people at the Motor factory were sitting up straight, but when money was mentioned, all of them shrink. The Motor Factory does have the funds, but they cannot use it!
“Manager Feng, why do you need to set up so many branch factories at once? Our factory can also manufacture batteries. Our factory can produce those small batteries that are used in touch lights and those batteries used by motorcycles and automobiles. If you think that the number of batteries produces is not enough, then with one more branch factory it should be able to meet your demand. How many cars and motorcycles can your factories produce in a year? Can your factory produce 1 million cars and motorcycles in a year? There is no need for so many branch factories.” The Deputy Factory Director who was in-charged of production said/
“Furthermore, you do not have experts in this field. We also cannot supply too many people in this field. If these people were to work in other regions, we still have to compensate them. We need to increase their salaries, and we will be taking on a bigger job soon. We will not be able to supply too many people.” The one in charge of the battery development said.
“If you invest so much money at once, it will also be a strain on your finance. What if the sales for this product does not do well? Manager Feng, I think one branch factory should be enough.”
The people at the Motor Factory took turns to persuade Feng Yu. But Feng Yu was not convinced. He acted like he insisted on his original plans. This gave the people from the Motor Factory a big headache.
Based on Feng Yu’s plan, how much shares could they get? Even 5% was considered a lot. What sort of joint venture was this? It was like the Motor Factory working for Feng Yu. Why can this be possible?!
“Manager Feng, we have a lot of battery factories in China. Although our battery technologies are better, our cost is higher too. The spending power in our country cannot be compared to other countries. When people buy batteries, they will choose the cheapest ones. Furthermore, all batteries look the same. Unless you’re the amount of electricity in your battery is higher, there is almost no difference between the rest of the batteries. We do not have any significant advantages over the competitors.” Li Shiyou persuaded.
Feng Yu showed a troubled expression and said: “Fine. Then we will build one branch factory. How much are you going to invest?”
“Manager Feng, didn’t you said that we will only supply manpower? Why are you asking us to invest?” Li Shiyou showed a surprised expression.
Feng Yu rolled his eyes. All of you only wanted to supply some people and then get a share of the profits. But I am also targeting these people too. Just like this Deputy Chief Engineer who was in-charged of developing the battery technologies.
“Fine. I will provide all the funds, and your Deputy Chief Engineer Li will lead the team of experts and technicians. There should not be less than 30 people on the team, and there should be at least 100 experienced workers. I will give you 7% shares.”
“Manager Feng, we are the ones that are in charge of the battery technologies, and we still need to supply so many workers. How come we are only getting 7% shares?” Li Shiyou replied loudly.
“Technology? I am the one who had given you the original technology. I am also the one paying for the R&D funds. The results from your research also belong to me. I still have the contract with me. Furthermore, am I not the one paying them? These people’s salaries will be paid by the new factory. The Machinery Company will not be responsible for them. Those that retired after one year of working at the factory will be taken care of by us. You think 7% is too little? I am going to invest 40 million RMB! Why not your side also invests some money, and I can let you have more shares.”
If it was only one branch factory, then the Motor Factory will not suffer any losses even if they just relied on the automobiles and motorcycles. With this new factory, the Machinery Company will not order any batteries from the Motor Factory, and the Motor Factory would lose out a lot of profits.
“We will invest 10 million RMB, and you only need to invest 30 million. We want 35% shares.” Li Shiyou gritted his teeth and said.
“Director Li, is your math not good? 30% is my baseline. You can get those engineers from other places. Anyway, I have the technologies.”
Li Shiyou looked at the rest and nodded: “Fine. 30% shares. But we can only take out the money in the second half of this year!
Feng Yu smiled: “No problems.”
You have no problems investing 10 million RMB now. But can you still increase your investment if I continue to invest next year?