Extraordinary Genius - Chapter 612
Chapter 612 – Having the same views (Part 2 of 2)
“Manager Li, are you interested in coming over to takecharge of our motorcycle division? After you bought the shares, I can arrangefor a position of Deputy General Manager, just to handle the motorcyclebusiness.” Feng Yu invited Li Dafu. He had shown that he had better foresightthan the Deputy who was in charge of the motorcycle division.
Li Dafu was stunned for a while and shook his head. “ManagerFeng, I still prefer cars. I hope I can handle the automobile division.”
Feng Yu nodded. Li Dafu would not look for him if he werenot interested in managing the automobile division.
“Then let’s talk about the cars. What suggestions do youhave for Songjiang Motors cars?”
“Other than the cargo vans, there are 3 models of cars.Small saloon car, off-road and business purpose car. Among the 3 models, thesales of the business purpose cars are not doing well. The off-roads maincustomer is the military. The small saloon cars are sold to the companies as thecompany’s vehicles. The sales of these two models should be doing well?”
“Your analysis is right. Continue.”
Li Dafu continued. “But the price of these 3 models areabove 100,000 RMB. Although 100,000 RMB is not considered a lot for cars now,the price tag will stop many people from thinking of buying cars. I feel thatwe should introduce a new budget model under a new brand. The price of this newmodel should be under 50,000 RMB or even 30,000 RMB.”
Feng Yu thought to himself. This Li Dafu still wants to usethe low-cost strategy. But luckily, he did not say he would use the SongjiangMotors brand. Budget cars will lower the value of the brand. It will influencetheir plans to continue selling mid to high tier cars.
Feng Yu had also thought about introducing low-cost cars.But in his previous life, low-cost cars entered the market after the year 2000.That was the time when China’s development increased rapidly, and the demandfor vehicles was high. People want to own a car for their transportation.
But now, people’s mode of transportation was still a motorcycle.Songjiang 100 was selling for about 10,000 RMB. People still do not need toworry about road conditions when they were riding bikes. The only issue was theweather.
“You think we should introduce budget cars now?” Feng Yuasked.
“Of course not. We should start to research and develop thistechnology now and introduce it when the time is right. I think we canintroduce this model in 3 to 4 years. Our technologies should be ready by then,and the Chinese’s income would have increased. They should be able to afford asmall car. Although motorcycles are good, most people will think that driving acar beats riding a motorcycle.”
“That means you think Songjiang Motors should start todevelop smaller capacity cars technologies now?”
“No. We should research both luxurious and budget cars atthe same time. The brand, Songjiang Motors should stick to be a luxury brand,and we will introduce another brand to target the mass market. Both of thisshould be ongoing at the same time.”
“Since we are going to develop technologies for both typesof cars, then how much more money should we invest into the R&D? With somuch capital invested, when will we recover our investments?” Feng Yu asked.
“Automobile manufacturing is a capital-intensive business.But technologies are critical in this business. If not, our China-made vehicleswill not need to collaborate with MNCs. The automobile manufacturers in othercountries rely on their technologies to earn profits. Our Songjiang Motorsmight have the best technologies in China, but compared to other overseasmanufacturers, we are still outdated. If our technologies cannot keep up withthe rest of the world, then we can only remain in China. Even the Europeanmarket will be taken over by other automobile companies.”
In Feng Yu’s previous life, Geely had a strong emphasis ontechnological developments. They had acquired Volvo, not only for their brand.They wanted Volvo’s technologies. This was why Geely paid such a high price fora declining brand.
Feng Yu had kept telling Li Mingde to focus on technologicaldevelopments. Without technical advantages, they could only exploit theirworkers. If this was the case, then what’s the use of manufacturing cars?
Feng Yu only knows about the development of the automobileindustry. He knows about future technologies in the industry. But he does notknow how these technologies were invented.
Luckily, Bing City Machinery Company had hired lots ofspecialists and experts. Many of them were engineers from the former SovietUnion. The company was also grooming Chinese engineers all this while.
Compared to the big automobile manufacturers overseas,Songjiang Motors’ developments were not considered fast. But they were not sloweither. Songjiang Motors technologies were much faster than those Joint venturefactories in China.
Songjiang Motors could develop in China was not because theywere more technologically advanced. It was mainly because of its exteriordesigns, performance, prices, etc. Most importantly, it was the procurementfrom the Government and military.
Since the military had bought Songjiang Motors vehicles, theChinese knew about this brand. Songjiang Motors vehicles were also exported toEurope. Many provinces’ government starts to make bulk purchases of SongjiangMotors cars.
In Feng Yu’s previous life, these local governments willonly purchase SAIC and FAW vehicles. They will use either Audi or Santana. Butfor the same price, Songjiang Motors were better looking and more comfortable.Most importantly, it was their domestic brand. The local governments wereconsidered supporting their domestic brands when they purchase Songjiangmotorcars. This was also an excuse for the agencies to buy cars without gettingscolded by their higher-ups.
These few years were the years where business purpose carsdeveloped the fastest. Almost all the local governments were buying vehicles inlarge volumes. There was someone in Feng Yu’s previous life that tabulated theexpenditure on cars by the government in 1995. The amount spent on cars by thegovernment was astronomical, and it still increases for the next few years.
The Chinese Government had to restrict the number ofvehicles bought by the local government. Feng Yu had only snatched the marketfrom the overseas manufacturers and used the profits from there to upgradeSongjiang Motors technologies.
Li Dafu had lots of ideas that were in line with Feng Yu.Feng Yu was impressed by Li Dafu and felt that it was not a bad idea to let himhandle the automobile division.
“Manager Li, I agree with your views. You are suitable towork in Bing City Machinery Company. Now you can tell me how much money youhave to buy the shares.” Feng Yu smiled and asked.
“If I sell away my company, I should have about 60 to 70million. With my savings, I should raise about 80 million. I would like to buy2% shares.” Li Dafu replied.
“Manager Li, your company is doing well. Don’t you think itis a waste to sell off your company? You might not get so many profits after tobuy our shares.”
“My company had reached its limits. Unless there is aninjection of funds, we will not make any breakthroughs in the materials. Also,I think highly of the future of the automobile industry. I feel that the valueof Bing City Machinery Company shares will multiply several folds in 3 to 5years later!”
“Good! For your trust in us, I will give you a personal loanof 2 million without interest. You will be able to purchase 2.5% of shares. Whatdo you think?”
Li Dafu was overjoyed. “Thank you very much. Manager Feng, Ipromise to put in my 100% to bring Songjiang Motors to a greater height!”
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