Chapter 612 – Having the same views Part 2 of 2
“Manager Li, are you interested in coming over to take charge of our motorcycle division? After you bought the shares, I can arrange for a position of Deputy General Manager, just to handle the motorcycle business.” Feng Yu invited Li Dafu. He had shown that he had better foresight than the Deputy who was in charge of the motorcycle division.
Li Dafu was stunned for a while and shook his head. “Manager Feng, I still prefer cars. I hope I can handle the automobile division.”
Feng Yu nodded. Li Dafu would not look for him if he were not interested in managing the automobile division.
“Then let’s talk about the cars. What suggestions do you have 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, the sales of the business purpose cars are not doing well. The off-roads main customer is the military. The small saloon cars are sold to the companies as the company’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 are above 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 that we should introduce a new budget model under a new brand. The price of this new model should be under 50,000 RMB or even 30,000 RMB.”
Feng Yu thought to himself. This Li Dafu still wants to use the low-cost strategy. But luckily, he did not say he would use the Songjiang Motors brand. Budget cars will lower the value of the brand. It will influence their 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 demand for 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 to worry about road conditions when they were riding bikes. The only issue was the weather.
“You think we should introduce budget cars now?” Feng Yu asked.
“Of course not. We should start to research and develop this technology now and introduce it when the time is right. I think we can introduce 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 a small car. Although motorcycles are good, most people will think that driving a car beats riding a motorcycle.”
“That means you think Songjiang Motors should start to develop smaller capacity cars technologies now?”
“No. We should research both luxurious and budget cars at the 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 this should be ongoing at the same time.”
“Since we are going to develop technologies for both types of cars, then how much more money should we invest into the R&D? With so much 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 vehicles will not need to collaborate with MNCs. The automobile manufacturers in other countries rely on their technologies to earn profits. Our Songjiang Motors might have the best technologies in China, but compared to other overseas manufacturers, we are still outdated. If our technologies cannot keep up with the rest of the world, then we can only remain in China. Even the European market will be taken over by other automobile companies.”
In Feng Yu’s previous life, Geely had a strong emphasis on technological developments. They had acquired Volvo, not only for their brand. They wanted Volvo’s technologies. This was why Geely paid such a high price for a declining brand.
Feng Yu had kept telling Li Mingde to focus on technological developments. Without technical advantages, they could only exploit their workers. If this was the case, then what’s the use of manufacturing cars?
Feng Yu only knows about the development of the automobile industry. He knows about future technologies in the industry. But he does not know how these technologies were invented.
Luckily, Bing City Machinery Company had hired lots of specialists and experts. Many of them were engineers from the former Soviet Union. 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 slow either. Songjiang Motors technologies were much faster than those Joint venture factories in China.
Songjiang Motors could develop in China was not because they were more technologically advanced. It was mainly because of its exterior designs, performance, prices, etc. Most importantly, it was the procurement from the Government and military.
Since the military had bought Songjiang Motors vehicles, the Chinese knew about this brand. Songjiang Motors vehicles were also exported to Europe. Many provinces’ government starts to make bulk purchases of Songjiang Motors cars.
In Feng Yu’s previous life, these local governments will only purchase SAIC and FAW vehicles. They will use either Audi or Santana. But for the same price, Songjiang Motors were better looking and more comfortable. Most importantly, it was their domestic brand. The local governments were considered supporting their domestic brands when they purchase Songjiang motorcars. This was also an excuse for the agencies to buy cars without getting scolded by their higher-ups.
These few years were the years where business purpose cars developed the fastest. Almost all the local governments were buying vehicles in large volumes. There was someone in Feng Yu’s previous life that tabulated the expenditure on cars by the government in 1995. The amount spent on cars by the government was astronomical, and it still increases for the next few years.
The Chinese Government had to restrict the number of vehicles bought by the local government. Feng Yu had only snatched the market from the overseas manufacturers and used the profits from there to upgrade Songjiang 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 him handle the automobile division.
“Manager Li, I agree with your views. You are suitable to work in Bing City Machinery Company. Now you can tell me how much money you have to buy the shares.” Feng Yu smiled and asked.
“If I sell away my company, I should have about 60 to 70 million. With my savings, I should raise about 80 million. I would like to buy 2% shares.” Li Dafu replied.
“Manager Li, your company is doing well. Don’t you think it is a waste to sell off your company? You might not get so many profits after to buy our shares.”
“My company had reached its limits. Unless there is an injection 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 value of Bing City Machinery Company shares will multiply several folds in 3 to 5 years later!”
“Good! For your trust in us, I will give you a personal loan of 2 million without interest. You will be able to purchase 2.5% of shares. What do you think?”
Li Dafu was overjoyed. “Thank you very much. Manager Feng, I promise to put in my 100% to bring Songjiang Motors to a greater height!”