Chapter 962 - Building low-cost cars
Chapter 962 – Building low-cost cars
Feng Yu threw some peanuts into his mouth and washed it down with beer.
“Old Li, we don’t need to argue or be mad at them under such circumstances. They had started automobile manufacturing earlier than us, but how many years have you been working? They received lots of assistance from the government but still lose to us. In terms of individual abilities, they are nowhere close to you. How many businesses is SAIC doing? Our Bing City Machinery Company is dealing with three businesses at the same time. Which other company is as good as us?”
Li Mingde felt better after Feng Yu’s consolation. That’s right. Why should I be angry? It’s only a meeting venue and just some criticisms. It’s the results that matter.
“I was feeling angry because, without us, SAIC will not get the deal for Audi’s new model! Without us, our China Automobile industry will not develop so fast! We are already exporting our vehicles. What about them?”
“That’s right. You should be facing them like a winner. You should be the one looking down on them, no matter what they say. No one is stupid, and everyone can tell he is trying to make himself look good. That is what weaklings do.”
“Hmph! He is only thinking of getting promoted. If I am ten years younger, he will not stand a chance! Even Manager Sun from FAW is better than him!” Li Mingde replied. You can step on others to climb up, but you want to step on me?! Dream on!
Li Mingde’s words are a bit extreme. SAIC is not only producing small cars. They are also producing other vehicles like agricultural trucks, buses, etc. Their total sales are more than Bing City Machinery. Bing City Machinery Company is only producing three models of saloon cars and a van.
“Old Li, if we don’t export our vehicles, can you guarantee we can sell all our cars in China?” In the past, Feng Yu was the one settling all the sales channels. But now, he had handled these to Li Mingde and his team.
“Our production for Songjiang Olympics is above 60,000 units, and it is the same for Off-road and Oriental Deer models. The production for Red Star is around 30,000 units. China’s total automobile sales last year were over 400,000 units, and we estimate this year will be around 500,000 units. Our total production for last year is 120,000 units, and 80,000 of them were sold in China, and this is about 20% of the market share. The rest is exported to East Europe, Hong Kong, and other regions. I am confident that our China sales can reach 100,000 units this year.”
Li Mingde starts to think if Songjiang Motors’ sales had stimulated those automobile companies to develop so quickly and get better terms from their overseas partners. If those joint-ventured companies had not gotten the contracts for new models, Songjiang Motors would get at least 25% of the market share this year!
But why is Manager Feng asking about this? Does he want to stop exporting our cars? It cannot be… Could it be Manager Feng who had fallen out with that Russian businessman?
Since Songjiang Motors can only sell 100,000 units in China, then it will be hard to implement the proposal to build a joint-venture factory in Russia. Unless, Songjiang Motors can open up new markets in the Southeast Asian countries, or let Bing City Machinery Company produce a new model.
Feng Yu suddenly remembered that Li Dafu had mentioned starting a new brand for low-cost vehicles. This brand of low-cost cars will cater to the lower-income segment. This brand of car will be used as transport instead of a luxury item!
“Old Li, Li Dafu had suggested about producing low-cost vehicles last year. What is the outcome? Have we looked into it?”
“The low-cost car proposal is approved, and we will be using a new brand for it. We are still working on the brand. As for the car’s model, theoretically, it will work, and the cost can be lowered to around 20,000 RMB, and sold for less than 30,000 RMB. Li Dafu felt that the retail price should not be over 25,000 RMB. The most suitable price should be below 20,000 RMB! How can a car be sold at that price?!
Low-cost vehicles have been around in China. Bing City Aviation Factory’s mini-vans and Tianjin’s Xiali are low-cost vehicles, but they cost at least 40,000 RMB. Do you want to sell a car below 20,000?! Even an imported motorcycle costs more than that!
“Old Li, what is the purpose of a car? It is for transportation. Didn’t you notice that more people are buying cars now? In the past, it is the companies or government agencies that are buying cars. But now, people’s lives are improving. Didn’t you buy a car for yourself, and you also bought one for your son and nephew? Your son is living near his workplace, and it’s only two bus stops away. You explain that having a car is more convenient. You can afford a 120,000 RMB car, but what about the rest? Can they afford it? Don’t they want convenience too?”
For someone who is driving a 120,000 RMB car, a 20,000 to 30,000 car is a joke. But for someone riding a bicycle or motorcycle to work, a 20,000 to 30,000 car is a considerable upgrade. After all, a vehicle can shelter them from the sun and rain.
No matter what, a small car is still more convenient than a bicycle or motorcycles. It is more comfortable and easier to ferry people.
“But it still cannot be sold at such low prices. Li Dafu wants to lower the selling price below 20,000 RMB!” Li Mingde retorts.
Feng Yu remembered that Chery had sold their cars below 20,000 RMB in his previous life, and World-renowned Tata Motors had produced a car, costing less than 2,000 USD.
To be honest, these cars’ bodies are thinner, lighter, but the cheap price tag is at the expense of safety. Nevertheless, these cars are still safer than motorcycles, as the driver still has a seatbelt, and is moving on four wheels. In Feng Yu’s previous life, Chery’s sales of their budget cars had shocked everyone.
“I feel that Li Dafu is not joking. Cars can be manufactured below 20,000 RMB. But the price you all set now is still alright. When can we start production?” The sales should be good if a car is being sold below 30,000 RMB.
“Manager Feng, are we going to produce this type of low-cost cars? We will not earn much and might as well focus on motorcycles.”
“Are our profits from other cars higher than motorcycles now? Even after lowering our motorcycles’ prices, our earnings are still very high, right? What is essential is the market share. We can open a new customer segment, the low-end customer segment. No… we should target young adults with these low-cost cars. They are the ones who want to own a car but had just started working and do not have savings.
In Feng Yu’s previous life, most of the owners of these low-cost cars are young adults, and the sales of these cars are excellent. These cars are small, and women would prefer to drive them, as it is easier to park.
“Then we must buy new production lines. Our factories will also need to be expanded.”
“No. We will use our current production lines and lower our Songjiang Off-road production.”
“Ah?! That is our main model for exportation to East Europe. If we lower this model’s production, how are we going to export them? Did something happen to our overseas business?” Li Mingde panicked.