Rebirth 08: Rise from copycat phones

Chapter 425 Sanctions and Retaliation
Mid-September, Hailan Automobile Headquarters.

Xu Shenxue personally presided over a strategic meeting of Hailan Auto to discuss how to deal with tariff issues in the US market.

Hailan Automobile CEO Bao Yongyan calmly explained the situation to everyone: "They have been planning to increase tariffs for a long time. In fact, they had a related proposal last year!"

"Our Hailan SLMC mid-size sedan has been selling well since last year, as its relatively cheap price has begun to impact the mid-range car market."

"So from that time on, the United States, Europe, Japan, France and other countries with good automobile manufacturing industries have already begun to impose various restrictions on us!"

"Since last year, in order to avoid tariffs from various countries, we have started to plan overseas assembly plants, and have successively planned to build overseas plants in Thailand, Spain, and Brazil!"

"This year, the Thai and Brazilian factories have started operations, which has stabilized the ASEAN and South American markets. We then reached a settlement with Europe and started to build a factory in Spain, which has also started construction with a designed annual production capacity of 200,000 vehicles."

"At the same time, we have also reached several strategic cooperation agreements on smart electric vehicles with European automobile companies such as Volkswagen, BMW, Mercedes-Benz, and Peugeot, providing them with Ningdai's advanced batteries, Zhiyun Semiconductor's EYEQ comprehensive intelligent assisted driving solutions, PX computing platform, and various sensors such as laser radar under Xiannvshan Holdings."

"At the same time, we at Hailan Technology have also opened up some of our patent paid licenses to several of these companies, allowing them to pay to use some of our patented technologies in the field of smart electric vehicles!"
“The multi-party agreement has helped us solve the problem in the European market.”

Xu Shenxue is naturally very clear about the exchange of interests between his own company and the European consortium. This is essentially a transaction of technology for market.

The other party cannot accept that their cars are directly exported to Europe on a large scale, and the tariffs are so low...

At the beginning, the other party asked Xu Shenxue to set up factories and R&D centers for core technology components in Europe, such as vehicle assembly plants, batteries, motors and other core component factories, and required that the proportion of components should reach 50% within the next three years and 80% within five years.

The other party even hoped that Xu Shenxue could go to Europe to set up a semiconductor factory and directly produce automotive-grade chips...

Then HaiLan Automobile was required to transfer numerous technical patents to these factories.

At the same time, it is also required to hold more than 51% of the shares in these factories.

To put it bluntly, they want technology, patents, shares...and then they want jobs and taxes.

It was something so good that they couldn't even dream of it, yet they dared to think about it.

Later, Xu Shenxue didn't even bother to talk to them and directly rejected them.

Then the two sides had a big fight for a while. The other side threatened to increase the import tariffs on Hailan Automobile in the EU. Upon hearing this, Xu Shenxue directly threatened to increase tariffs on automobile imports from the EU, and then threatened to cut off the supply of automotive-grade computing chips... I will make sure that you can't even do L2 level assisted driving!
In the end, you threatened me and I threatened you, and after much discussion we finally reached an agreement.

Both sides took a step back.

Finally, it was agreed that Hailan Automobile would invest wholly in the Spanish factory, assemble the car locally, and produce some non-core parts in Europe, while the core parts would continue to be imported.

HaiLan Automobile opened up some of its conventional electric vehicle patents to European car companies, allowing them to manufacture their own electric vehicles. Of course, they have to pay, and the patent fee is not small... The companies under Xu Shenxue have always been very shady in collecting patent fees.

Then, in terms of cooperation in the field of intelligent assisted driving, Zhiyun Group promised to provide a stable supply of various automotive-grade chips and sensors, and it cannot cut off supply at will or raise prices for the European market alone.

Xu Shenxue promised a stable supply of advanced power batteries, including the most advanced semi-solid-state batteries, and also not to raise prices for the European market alone.

Then Xu Shenxue had to promise privately that he would not rely on his influence to secretly suppress the operations of their joint venture automobiles in China.

After many exchanges of interests, the EU market finally opened its doors to Hailan Automobile... Of course, this open door is only limited to Hailan Automobiles assembled and produced in Hailan Automobile's Spanish factory.

If Hailan produced by factories in other regions wants to enter the country, it still needs to bear a considerable tariff.

However, the impact on Hailan Automobile is not significant. In the early stage, the other party gave Hailan Automobile a certain low-tariff quota for automobile imports, and after the Spanish factory is completed and put into production, it goes without saying.

Because the Spanish factory is a wholly-owned factory and is also just an assembly plant, all core components are produced in China and then transported to the Spanish factory for assembly.

In terms of automobile costs, about 85% of the spare parts are directly exported...mainly because power batteries are too expensive. The battery alone accounts for about 50% of the vehicle cost.

This means that Hailan Automobile can still retain most of its profits, while also keeping a large number of jobs and tax revenues in the country.

Knowing this, you will understand why Xu Shengxue prohibits its companies from investing in foreign countries to build power battery factories... Power batteries are the core industry in the electric vehicle industry, and they are absolutely high-proportion, high-value-added, and high-cost core components.

With the power battery in hand, even if the other party can make other parts of electric vehicles, as long as they purchase your power battery, you can still occupy about 30% to 60% of the cost of an electric car and bite off a large piece of fat meat.

Based on this perspective, any attempt to transfer advanced power battery technology overseas, or even to build power battery factories overseas, will be severely cracked down by Xu Shenxue.

Then motors, various automotive-grade chips, and sensors are also high value-added products.

Of course there are spare parts purchased locally from Europe, but not many!

What’s quite funny is that many of Hailan Auto’s spare parts are actually purchased from auto parts companies in Germany, the United States and other countries, but they are purchased from these companies’ Chinese factories.

For example, Hailan Automobile ordered the ABS braking system from Bosch of Germany. After Bosch produced the product in its Chinese factory, it was handed over to Hailan Automobile, which then exported it to Spain in Europe...

Hailan Automobile doesn't care about anything else. All core parts are purchased from the China headquarters and then directly packaged and shipped to various overseas factories.

But then again, it’s not that HaiLan Automotive likes to mess around...it’s because purchasing products from factories of multinational companies in China and then transporting them overseas for assembly is cheaper than purchasing directly overseas.

It’s no joke that China is the world’s factory!
Xu Shenxue personally does not reject cooperation with multinational companies. As long as the products are good, he can also purchase their parts in large quantities... provided that they place their factories in China.

From the perspective of enterprises, it is beneficial to reduce procurement costs and better integrate and control the supply chain system... From the perspective of social responsibility, it can provide a large number of jobs and tax revenue.

This is true in the smart terminal industry, the robotics industry, and the smart electric vehicle industry is no exception!
Even in the semiconductor industry, Xu Shenxue made the same request... If you want my super large order, that's fine. As long as you set up a factory here, everything will be fine.

In the early stage, I can even give you order support and price support!
So in recent years, many companies in the field of semiconductor consumables have successively set up factories in China to supply various consumables to Zhiyun Microelectronics, the world's largest semiconductor manufacturer.

Relying on the giant Zhiyun Group and through the super large customer Zhiyun Microelectronics, China has unknowingly established a complete semiconductor consumables supply chain system through internal support and the introduction of joint ventures. Only a few consumables still need to be imported!
Xiannvshan Holdings has a number of joint venture factories with foreign companies.

The factories set up by these foreign-funded enterprises in China are also part of China's supply chain, and an important part of it.

The smart electric vehicle industry is no exception!
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The problem in the EU market has been initially solved through exchange of interests, but the problem in the US market is not so easy to solve.

Previously, Xu Shenxue reached an agreement with the American consortium behind Tesla, but this agreement did not involve direct exports to the US market.

The agreement between the two parties is that Tesla will build a factory in China, HaiLan Automobile will hold a portion of the shares of the factory and open its supply chain to Tesla. The Tesla factory will need to achieve a 100% localization ratio within a certain period of time.

Hailan Automotive has built a factory in Mexico, in which Tesla holds a certain stake. Some of the cars produced by this Mexican assembly plant are sold in Mexico, Central America and other regions, while some are directly exported to the United States based on the tariff-free agreement among the three North American countries.

However, if Hailan Automobile wants to export cars directly to the United States, it will still be subject to certain restrictions... The restrictions were not serious before, but they are different now.

The other side directly imposed a 100% tariff.

This has little to do with Tesla and the consortium behind it, but is mainly due to the efforts of the consortiums behind the two traditional car manufacturers, General Motors and Ford.

There are many financial groups in the United States. They are not a whole and there is even competition and conflict among them.

The fact that Consortium A reached a cooperation agreement with Xu Shenxue does not mean that Consortium B has also reached a cooperation agreement with Xu Shenxue.

Especially when Group A and Group B are also fighting each other.

Regarding the tariff increase, Bao Yongyan of Hailan Automobile said: "There is no way out for the time being. The other party's bill has been implemented and there is no room for reversal."

"GM and Ford put too much pressure on them internally. This matter is irreversible!"

Xu Shenxue said: "If that's the case, then don't bother with it. The American market is like this. Just ignore them!"

"But we must also take necessary countermeasures, such as raising the price of automotive-grade chips for the US market, and cutting off the supply of the most advanced chip products, leaving only products that are one generation behind!"

"I will contact them later and impose tariffs on their imported cars!"

"Also, although the Mexican factory has not been affected yet, we must prepare for a rainy day and speed up the construction of the local factory. I hope to see the factory go into production by the middle of next year. Time is limited, so we must strive to recoup our investment within the next few years. At the same time, we must also do a good job in developing the local Mexican, Central American, and Canadian markets to cope with possible future crises in the US market!"

According to Xu Shenxue's understanding of the Americans, there won't be any problems with the Mexican factory now, and it should be fine in the next few years. But in a few years, when things change, I'm afraid the Mexican factory will also be targeted!"

Therefore, the initial significance of the Mexican factory is to make a quick buck in the US market. When the US market changes, it will turn to the Mexican market, the Central American market, and the Canadian market. Therefore, the production capacity cannot be planned too much, otherwise once the US market is lost, the huge production capacity investment will be wasted.

Of course, this is not certain... because Xu Shenxue has certain interests tied to Tesla's boss, Musk, and the consortium behind him.

HaiLan Automobile holds a portion of the shares in Tesla's China factory.

Tesla also holds a stake in the Aguascalientes Mexicana factory.

The two parties hold cross-shareholdings and have certain interest binding, which helps to prevent market shocks outside the rules.

Of course, this method can only be said to be somewhat useful, but it still cannot be guaranteed.

Xu Shenxue was in charge of HaiLan Automobile and held this strategic meeting.

He then returned to Zhiyun Group headquarters to hold a meeting.

Just as Xu Shenxue was holding a meeting to discuss how to deal with the situation and fight back, the outside world was also in an uproar because of this incident.

There are a lot of extreme opinions on the Internet, but the domestic automobile industry is relatively calm... because they do not have the business of exporting cars to the United States on a large scale.

Not to mention exports to the United States, even exports to other regions are not much.

At present, the scale of domestic automobile exports overseas is not large. In the first half of this year, a total of about 800,000 vehicles were exported, among which Hailan Automobile accounted for a relatively large share, with an export volume of about 250,000 vehicles.

The remaining export volume is mainly contributed by the joint venture factories of overseas automobile brands in China. Except for Hailan Automobile, the export volume of other domestic brands of automobiles is very small.

Except for Hailan Automobile, other domestic automobile exports, including those from joint venture factories, are mainly exported to Iran, Mexico, Chile, Russia and other regions. Excluding Hailan Automobile, the total number of cars exported to the United States by other automobile factories is only 10,000.

Therefore, domestic automobile manufacturers, especially independent automobile brands, were hardly affected.

The only one that was greatly affected was Hailan Automobile!

In the first half of this year, HaiLan Automobile exported more than 30,000 HaiLan cars to the United States. The annual export volume was expected to exceed 70,000 vehicles, making the US market the third largest market for HaiLan Automobile, second only to China and the European Union.

However, it is these 70,000 estimated exports that have put the US auto industry under tremendous pressure...Although this number is still small, what about next year? What about the year after?
Relying on Hailan Automobile's advanced intelligent assisted driving technology, the technical advantages of semi-solid-state batteries, and the low cost of the supply chain system, the two models of Hailan SLMC and Hailan MEV are finally produced with very good cost-effectiveness... They are enough to scare any automobile manufacturer.

If the United States
If left alone, Hailan Automobile's annual sales in the United States may reach more than 150,000 units, which is difficult for GM, Ford and even Tesla to accept.

So the 100% auto tariff is coming.

Hailan Automobile has suffered a targeted blow in the U.S. market, with sales expected to lose more than 95%. In the future, only a very small number of wealthy people may continue to buy Hailan Automobile's luxury models, such as the Hailan SLC luxury sedan, the Hailan SEV large SUV and the Hailan SEC coupe, despite the 100% tariff.

But the sales of these luxury models are so low that they are no longer of any practical use.

In response to this situation, Hailan Automobile quickly held a press conference and announced that it would adjust its market strategy and focus on the development of the domestic market and other overseas markets.

At the same time, not long after, China also announced a reciprocal increase in tariffs on imported models from the United States.

These are all public...but what is not public is that GM, Ford and even Tesla have received email notifications from some companies under Xu Shenxue, headed by Zhiyun Group Semiconductor. Due to the production capacity constraints of the factories, the supply of some auto parts products such as EYEQ chips, PX chips, some semiconductor sensors, lidar, power batteries, etc. will be restricted, and the prices will increase by 50% to 150%.

Not only do they limit supply and raise prices, but they also refuse to supply advanced generation products.

These are all part of the reciprocal sanctions...Xu Shenxue would never let someone slap him in the face and then obediently try to be beaten, but would slap him back.

Xu Shenxue's counterattack came extremely quickly, which had a significant impact on GM and Ford's smart electric vehicle plans...forcing them to look for other overseas suppliers.

But these days, there are only a few suppliers who can make these core components... We are the only one in the world that can provide automotive-grade computing chips, and you can't just change the supplier if you want to.

Although there are suppliers of power batteries in Japan and South Korea, their technology lags far behind that of Ningbo, not to mention the semi-solid-state batteries that will be supplied on a large scale next year.

By then, other automobile manufacturers, even Japanese, Korean and European car manufacturers will be able to get semi-solid-state batteries, but your American car manufacturers will not be able to get semi-solid-state batteries. Wow, that would be a pretty good scene.

There is also the EYEQ integrated assisted driving platform. Don't underestimate it. It can only provide L2 and L2+ level assisted driving. However, it is the only full-solution supplier in the world, providing a full set of hardware and algorithms. Car companies only need to adjust and adapt them themselves and install them.

Most of the so-called assisted driving developed by car companies around the world, whether they are gasoline or electric vehicles, actually use this system...and there is no way to change it.

Although the PX computing power platform is just a chip, it is the only one in the world that is publicly sold.

Other semiconductor companies do not have corresponding products and development ecological platforms... In the field of computing chips, Zhiyun Group has an extremely high monopoly.

Except for Tesla, which continues to develop its own automotive-grade computing chips and is progressing relatively smoothly, other car companies basically do not have this capability.

If you want to sanction HaiLan Automobile under Xu Shenxue, you naturally have to pay a certain price.

But trade protectionism is a lose-lose situation!

After this battle, Hailan Automobile lost the American market, and General Motors and Ford lost their competitive advantage in the field of smart electric vehicles!
American car companies cannot buy the most advanced EYEQ platform and PX platform, semi-solid-state batteries, but Japanese car companies, European car companies and even Korean car companies can... and then their cars are exported to the US market, which can still bring great competitive pressure to these American car companies.

This is the importance of mastering core technologies.

If you hit me, I will slap you twice in the face, let’s see whose health bar is thicker!
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Amidst the external turmoil, HaiLian Automobile continues its globalization strategy. Major overseas factories are under construction, while domestic factories are also expanding at an accelerated pace.

HaiLian Automobile needs to continue expanding its production capacity, and even expand it to more than two million vehicles next year. This is not an easy task.

The loss of the US market has an impact, but it is not significant and will not cause a fatal blow to Hailan Automobile.

After Xu Shenxue made a series of adjustments, he no longer paid attention to this matter... It would have been useless even if he paid attention to it.

On September 20, Xu Shenxue appeared at the Nanmen Aerospace Company on Qiongzhou Island.

He was here to watch the launch of the Heavy Rocket VI!

This time, the No. 6 heavy rocket will use a disposable mode to launch the No. 2 experimental module of the second 60-ton space station.

In the past few months, Nanmen Aerospace has cooperated with space agencies to carry out many major tests, all of which have been a perfect success.

The space agency successfully sent astronauts to the core module of the space station through their manned spacecraft and rockets.

According to the contract, Nanmen Aerospace launched the No. 5 rocket three times, carrying cargo spacecraft to transport supplies to the space station three times.

Some of them are various supplies to sustain the survival of astronauts, as well as a large number of tools, equipment, spare parts, etc. to maintain the operation of the space station.

Among them are six "space operation artificial intelligence robots" provided by Zhiyun Group.

These space operation robots can carry out extravehicular activities and perform various inspections on the space station under remote control and with the cooperation of artificial intelligence. They are convenient, easy to use and safe.

With these artificial intelligence space operation robots, even if there are no personnel stationed in the space station, they are enough to maintain the normal operation of the space station.

After all the previous tests were successful, the launch mission of the second space station cabin was also arrived.

After all, the current space station only has a lonely core module... Although this core module is quite large, weighing a full sixty tons, it is still not enough to carry out various scientific experiments. This core module is used for personnel living and at the same time provides docking and system support for the entire space station.

The experimental cabin launched now is used to conduct various scientific experiments.

The 60-ton test site was successfully launched under the surging power of the No. 6 heavy rocket, and then headed straight for the space station hundreds of kilometers high. During the entire launch process, except for some minor accidents during the controlled crash of the second-stage rocket, many people saw the wreckage of the second-stage rocket burning in the air ahead of time, creating a very spectacular scene similar to a large-scale meteor attack on the earth.

There were no other surprises.

After watching the rocket launch, Xu Shenxue did not stay for long. After listening to the next development plan, he left in a hurry.

But he did not return to Shenzhen directly, but went to Beijing to attend the opening ceremony of Hailan Automobile's Beijing factory!
The HaiLan Beijing factory, which has been under construction for nearly a year, is about to be officially put into production. The commissioning of the factory will increase HaiLan Automobile's annual production capacity by another 300,000 vehicles!
This is great news for Hailan Automobile!
Because it is during the current period when the domestic electric vehicle industry is booming, for Hailan Automobile, the new cars are not unsellable, but the production capacity is insufficient!

(End of this chapter)