I asked you to save a bankrupt factory and you became the richest man in the world.

Chapter 403, Chapters 108-109: Hillhouse's next grand strategy! (4000 words)
Gao Huaijun showed a slightly surprised expression on his face.

The monthly sales volume of Hillhouse Song PLUS was 9.5 units, which is really a lot!

The best-selling car in 2014 was the Dazhong Lavida, with annual sales of around 38 units, while the second-placed Japanese Sylphy dropped to annual sales of 30 units.

In other words, the monthly sales of 9.5 units of Hillhouse Song PLUS can be said to have directly taken the biggest piece of the A-class car market!
You know, after Dazhong Auto was divided into North and South Dazhong, the best-selling cars were actually A-class cars.

Among the A-class cars, they are subdivided into six models, namely Lavida, Sagitar, Jetta, Santana, Bora, and Golf.

The combined annual sales volume is around 170 million units.

What’s even more exaggerated is that these six cars are ranked in the top fifteen of the A-class car market!
The strong rise of Hillhouse Song PLUS and its high monthly sales volume just prove that Hillhouse has already cut into the market share of these mainstream car companies in the A-class car market.

This is the core point of Gao Huaijun's surprise.

"Among the 9.5 units sold, pure electric vehicles account for about 40%, and among them, the 400KM ones, beyond our expectation, account for 40% of the 90% sales!"

"This shows that our customers actually recognize the strength of our products. For our pure electric vehicle products, 400km is the appropriate threshold for their recognition."

Then Wang Fengying on the side continued to add.

Gao Huaijun nodded.

This kind of pricing is actually intended to force most customers to take the 400km train.

For A-class cars, it seems that the mainstream market starting price is around 13 yuan, but in fact, the purchase price range for core customers after adding the purchase tax is between 16 and 18 yuan.

In other words, Hillhouse's 15 yuan 400km electric car is not difficult for most of its core customers to accept.

The only question is whether they think you are worth it!
If Hillhouse wants to sell a lot of trams, it must set a risky price, and cannot set a safe price of 20 like other trams!

No one would buy your A-class car for more than 20 yuan.

Wang Shichong, who was standing aside, took a deep breath.

Industrial batteries for automobiles and mobile phone batteries are completely different concepts.

After adding R&D costs, the cost of Hillhouse Battery's electric vehicle power batteries is still very high, and the cost per kilowatt-hour (kWh) is expected to reach US$200.

The key here is that the prices of raw materials for electric vehicles, such as lithium, nickel and cobalt, have always been high due to the low level of industrialization.

Only when the sales volume of Hillhouse's A-class car reaches the level of about 60,000 pure electric vehicles, can their production costs break even.

As for breaking even on R&D costs, it would require 100,000 units per year!

One hundred thousand pure electric vehicles sold per year?
No one in this world can do it yet!
Wang Shichong himself felt that he could only dream of this scene.

but now....

In the first month, the sales volume of Class A pure electric vehicles reached about 40,000 units. Now, let alone the production cost line of 60,000 units, even the R&D cost line of 100,000 units is within reach.

This made him feel like he was dreaming.

What the hell!

Such an amazing thing, which can even go down in the history of world batteries, was accomplished so easily by Hillhouse Capital?

Could it be more outrageous?
At the beginning, he thought that Hillhouse Battery would continue to suffer losses until he left the company. Now it seems that there is a good chance that it will turn losses into profits within three years.

"Although our sales volume is as high as 9.5, our core profit is still only about 12% after the production capacity is raised by one level. This is a big hidden danger for us," said Wang Fengying with a wry smile.

Other people’s 12% is a made-up 12%, while Hillhouse’s 12% is a helpless 12%.

For example, the low-end version of BYD's Seal in later generations has a 60-degree battery cost of 48000 yuan, a single motor cost of 5000 yuan, and other assemblies cost 5 yuan, with a total material cost of 10.3 yuan (under BYD's control of the entire industrial chain, its actual material cost can only be lower than this), but it sells it for a little over 20 yuan, and then the company promotes it to make 3000-10000 yuan per car. In the meantime, this has to be shared among research and development, labor, publicity and other expenses. As for whether those expenses are worth 8 to 9 yuan, it depends on one's opinion.

This profit margin is achieved after sales volume increases and material costs decrease.

As for the model of Hillhouse Song, its volume cannot be compared with the tens of millions of models of BYD in the future.

So now the 40 kWh battery and other assemblies combined are even higher than the Asia Pacific seal.

This is why in large-scale industrial production, sales volume is more important than profit.

Why are some automobile companies sales-oriented rather than profit-oriented? Making losses is the core reason for maintaining sales.

And the other side.

According to the original sales volume of Hillhouse Song, it will only be about 30% if it increases by about 6% based on the original Hillhouse Song.

What does 6% mean?
That is really selling an extended-range vehicle at the lowest price, with a profit of less than 10,000 yuan!
If Hillhouse cannot withstand the pressure brought by price cuts of other cars, it will be really dangerous.

But now we have a profit margin of 12% as a safety valve, and the secondary profit from the sale of auto repair parts can actually barely keep us going.

The logic is like selling printers.

Printers don’t make money, but the A4 paper that comes with the printer and the wear and tear of the ink cartridges are what make a living in the long run.

"A profit margin of 12% is still a bit dangerous."

"But at this stage, our profit requirement for this car is not the top priority."

"But don't change the price. Zhou Zhou, you should do more work as a distributor and do more systematic publicity."

“Let’s formulate a special policy for Hillhouse Song PLUS.”

“One policy for each city, or even one policy for each store.”

"During the continuous sales period, if the sales volume of the city or the store reaches a certain range, corresponding rewards will be given."

"Now is a critical period for us to expand our sales, and this is the best time to expand our sales network."

Gao Huaijun said leisurely while drinking tea.

Zhou Zhou, the marketing director of Hillhouse Vehicles, was stunned at first, and then he suddenly realized.

This move is really smart!
Hillhouse’s channel expansion has actually reached a bottleneck period.

Your plate is so small, which means that in a city, the number of your channel stores can basically only remain constant at a certain order of magnitude.

You can't expand aggressively.

Because once expansion begins, the newly opened stores will suffer losses.

This actually has a great impact on the reputation of later channel dealers.

Now, if we could take advantage of this wave of hot sales to expand the total market, that would be great!
Only when the total market size increases can sales volume increase steadily. This is actually the intention of Hillhouse Song PLUS's extreme pricing this time.

It’s already 2015, and there are still four years until 2019.

Gao Huaijun even had a question mark in his mind as to whether it would come sooner.

Hillhouse's sales in China have not yet been fully opened up, so it is naturally unable to focus on overseas markets, otherwise that would be going against its will.

"In this wave, other manufacturers will wait and see for a while, and their response will not be so fast."

"My idea is to add a new assembly line at the Shanghai factory to increase the production capacity of Gaoling Song PLUS."

"This car should sell well in the long run."

"The waiting period is six months now, so it shouldn't be any worse in the future."

Wang Fengying continued to speak.

The lowest price was reduced by 20,000 yuan all of a sudden. Ordinary joint venture companies would not dare to do this.

You know, even for a car like Corolla, which has very average qualifications, they are now selling it with a price increase of about 6,000 yuan.

You asked them not to increase the price, and continued to reduce the price by 20,000.

Not only will the original value system collapse directly, but the reflection on the used car market will definitely be a direct decrease in the value retention rate.

It is rumored that Fengtian and Bentian have one car that has been passed down for three generations, and the car will still be there even after the people are gone.

The used car market has collapsed, so who would sell this kind of faith car to?
This is basically the case for all automobile companies including Dazhong, Nichia, and Honten.

Without waiting for people from their headquarters to come and hold several rounds of consultations, they still couldn't come up with an effective solution.

After this period of time, their opportunity for counterattack will be over. After Hillhouse Song’s holdings increase, they will be able to consolidate their sales position.

This time, Gao Huaijun nodded and agreed with Wang Fengying's opinion, "I didn't expect Gao Lingsong to be so popular this time."

"Now Hillhouse has five production plants, including the first and second Xicheng plants, the Shanghai plant, the Beijing plant, and the Guangzhou plant." "But the current volume is far from meeting our production needs."

"Then what we have to do is to expand our production capacity!"

"I plan to build a western factory in Yuzhou, and a new factory will also be built in Shanghai."

"In addition to the special status of the imperial capital, our factories in the future will mainly be located in core cities that rely on Yangtze River water and sea transportation. We will not build new factories in cities with ordinary qualifications!"

“This is my opinion on the next step, the construction of the new Gaoling Vehicle Plant.”

Gao Huaijun's opinion was beyond everyone's expectations.

They didn't expect that Wang Fengying's casual remark would lead to such a major decision!
Gao Huaijun has always been reluctant to allow Hillhouse Vehicle's factory to expand on a large scale.

Because once the production capacity is idle, his already tight funds will be directly wasted!

Now that Hillhouse Songxin’s new products have been put into production, they are naturally new products with new ideas.

He wanted to locate the core manufacturing plants along the Yangtze River.

In addition to the Yuzhou factory that he wants to build now to serve the southwest region, Jiangcheng and Jiangjiu in the lower reaches of the Yangtze River will be core layout cities.

The production capacity for export overseas is mainly located in Shanghai, especially near the Yangshan Port and Xiaoyangshan Port, to facilitate direct transportation.

A very important point is that water transportation costs in the middle reaches of the Yangtze River are actually cheaper than transportation along the coast.

There are actually three reasons:

The first is that the cost of inland vessels is very low. Since there is no need to consider seawater corrosion, a truck-horsepower engine can deliver the transport capacity of hundreds of trucks.

The second is that the shipping routes are very dense, and Hillhouse can communicate with all key cities in the south through the Yangtze River waterway.

The third is that the Yangtze River has small winds and waves, which makes some protective measures completely unnecessary and the unit price of transportation is low.

Therefore, by deploying domestic production capacity along the Yangtze River, deploying foreign production capacity in Shanghai, and supplemented by the production capacity of the two core cities of Beijing and Guangzhou, Hillhouse can basically form a closed loop of production capacity.

"Mr. Gao, building so many factories, whether we can digest the production capacity is an important issue." Ning Yuan whispered tactfully.

It’s great to build more factories.

KPI has completed XXX and increased XXX.

Who doesn’t like to hear that?

However, as the executive president at the company level, Ning Yuan certainly does not want too much idle production capacity due to his desire for quick success and instant benefits.

So he spoke up in the hope of reminding Gao Huaijun.

"Hillhouse Vehicle's current strategy is not to squeeze out as much profit as possible. In fact, with such a small volume, we don't actually make much profit." Gao Huaijun did not directly respond to Ning Yuan's words, but said lightly from the side.

Not much quantity produced?
The executives present watched Gao Huaijun show off in silence.

In 2014, Hillhouse sold hundreds of thousands of cars, which makes it no longer a small automobile company.

Apart from a few large-scale joint ventures, the remaining Chinese automobile companies that can produce vehicles of this scale can be counted on one hand.

such.

Gao Huaijun is still not satisfied with this?

Could you please tell me some basic (river crab) methods?

"The next stage of our goal is to gradually expand the sales of Hillhouse vehicles!"

"Now our quantity is not more, but less!"

"We basically don't see our cars in third-tier and lower cities, which is very problematic in terms of coverage."

"Because small cities such as county towns are the most suitable places for tram use."

"Many families have their own doors and cars can even drive directly to their doorsteps."

"After China's infrastructure was improved, especially after the village-to-village road project, most roads are paved, and there are very few roads that would damage trams."

"Our thinking must undergo a fundamental change."

"This is a blue ocean. Gaoling Song and the A0-class models under Gaoling Song will be the focus of your work in the next stage."

Gao Huaijun looked at the group of executives in front of him and said in a deep voice.

In the past, in order to improve its own tone, Hillhouse proactively avoided small cities at the 18th tier. However, now it wants to take the initiative and become a company that covers all customer groups. Naturally, it cannot ignore the most critical small cities at the county level.

One purpose is to sell more cars and increase Hillhouse’s car ownership.

Another key factor is that Gao Huaijun hopes that Hillhouse Vehicle will adjust its thinking and shift the focus of making money from pre-sales to after-sales.

Now China's new car market is still in an incremental market, and every company can make a living in this market.

But after a few years, the incremental growth will compete with the existing growth.

The gross profit margin of new cars keeps decreasing, and selling a car may even result in a loss.

Some 4S stores lost hundreds of thousands of dollars in sales after only one month of operation.

But the boss still forces the salesperson to keep selling cars, increase sales, and meet targets.

The reason is that after the new car returns to the factory, the after-sales department starts to make money.

In the after-sales system, making money is divided into three parts.

The most profitable ones are accident cars, which account for about 60% of the after-sales profit. If the after-sales profit is 100 million, two-thirds of it must be contributed by accident cars.

The better the relationship with the insurance company and the more cars are sent for repair, the more money the 4S store will make from after-sales service. Of course, it still needs to ensure that there are enough base customers.

In the accident car segment, repairing a car from a luxury brand will cost tens of thousands of yuan. If it is a D-class car, a single headlight will cost 7.8 yuan, which is all huge profits.

The second is maintenance. In later generations of 4S stores, they no longer do proper car repairs, but mostly replace parts. Replacing parts is equivalent to selling goods. They make money from replacing parts and from selling goods.

So there is an old saying that goes, you can afford to buy a car but you can't afford to repair it.

The last thing is maintenance, which is also the least profitable item in after-sales service. For example, the labor cost and engine oil of a fuel vehicle, the profit of a set is only about one thousand or eight hundred yuan, which is a small amount of money for some luxury brand 4S stores.

So when you go for maintenance, the service consultant will recommend you engine oil upgrades, air conditioning maintenance packages and other additional items, with the purpose of making a little extra money.

When the per capita consumption reaches 3000-4000 yuan, the performance of the service consultant will be maximized.

Like the most disappointing Mercedes-Benz among BBA, the "parts-to-whole ratio" (the ratio of the sum of the accessories prices of the model to the sales price of the whole vehicle) of the C-class is as high as 8 times!
In other words, if you buy all the parts of Mercedes-Benz C-Class, you can buy 8 Mercedes-Benz C-Class cars. This is calculated according to the guidance. There are discounts for buying Mercedes-Benz C-Class, so it is estimated that the total amount can reach 1000%.

How could Gao Huaijun not be envious of such a market?
The production of spare parts can be done without any brains, but the research and development of a complete vehicle requires a lot of effort.

Now has come to the stage of pursuing volume, not just profit.

The right way is to increase the number of cars you own and then reap the benefits from consumers after sales!
In 2015, when joint venture brands across the country did not pay much attention to the sinking market, it was really easy to achieve growth by relying on the two models, Hillhouse Song and Hillhouse Dolphin, and putting some effort into the sinking market.

"Okay, Mr. Gao!"

"I understand what you mean."

"The focus of our work in the next stage is to carry out a targeted expansion in the sinking market while maintaining the sales and tone of models such as Hillhouse Tang."

"Even if we have to give up a little profit for this expansion, I don't think it's a big problem."

"I'll ask Director Zhou Zhou to go to the market to get a feel for it, and then come up with an overall plan."

"We divide prefecture-level cities and urban units below the prefecture-level cities into four levels."

"Then we will negotiate with channel partners based on city exclusivity or city segmentation."

"We will come up with a special plan this time."

Wang Fengying immediately understood the intention of Gao Huaijun's strategy of sinking into the market, and spoke out.

She was eager to try it.

Many joint ventures now do not pay attention to this area.

Most of the points have only sunk to the prefecture-level cities, and she feels that Hillhouse can do a lot of things.

(End of this chapter)