There is another reason why Feng Yu had come to Shanghai. Li Mingde is attending a meeting here. China’s Automobile industry’s development forum.
Shanghai Automotive Industry Corporation (SAIC) had become the host of this forum, and this made Li Mingde mad.
How can SAIC compete with Bing City Machinery Company? Our branding, sales, profits are all higher than SAIC, and just because we are also manufacturing agricultural machinery and motorcycles, we are overlooked?
Another reason for not letting Bing City Machinery Company host this forum is because of fierce competition with First Automobile Works (FAW).
At night, Li Mingde and Feng Yu are in Feng Yu’s hotel suite drinking.
“Hmph! Does SAIC dare to say us?! They are also joint ventures too. Although we are a joint venture company, we are using Hong Kong’s funds, and our management and employees own the company’s shares. We should be the ones that represent a collective enterprise!” Li Mingde grumbled.
During the meeting, SAIC’s Chairman said Bing City Machinery Company’s structure is a serious problem. The state is not the main shareholder, and he used this reason to make fun of Li Mingde.
SAIC’s Chairman even said that it is a mistake to let Li Mingde owns the company’s share.
What’s wrong with me holding on to the company’s shares? The shares are a reward from the company for my contributions. Bing City Machinery Company had grown from a small local factory to a country-wide renowned factory, and I had made significant contributions. If not, why would the board of directors reward me with the company’s shares?
SAIC’s Chairman, Manager Niu, is being jealous!
“Old Li, why are you angry with them? They had surpassed us in terms of sales because they lowered the prices of Volkswagen Santana last year. What’s there to be proud of? If we include our overseas sales, we are still number one.”
There are seven automobile manufacturers in China, and Bing City Machinery Company is still the strongest. The production sales for the smaller cars category last year is more than 100,000 units, and SAIC is only around 80,000 units.
Also, you can ask the people on the streets, which automobile brand they prefer, Songjiang Motors or SAIC?
“This year, the other automobile manufacturer will be bringing new models and had gotten better terms from their overseas partners. How cant they get such lucrative terms if we did not exceed them with our technologies?”
Because of the appearance of Songjiang Motors, China’s automobile industry had grown bigger, and the other automobile manufacturers started developing their technologies, making breakthroughs.
But China’s overall automobile technology is still behind overseas companies, Bing City Machinery Company is also the same. There is still a gap compared to the manufacturers in Japan and the Western countries.
For example, the engine, chassis, etc. technologies newly developed by Bing City Machinery Companies are equivalent to overseas manufacturers’ old technologies.
The gap between both sides is closing, and this is because of the rise of Bing City Machinery Company.
Initially, when those overseas automobile companies got into a joint venture with China’s state-owned automobile companies, the overseas company did not share most of their advanced technologies with China.
In a way, the overseas companies’ are holding back China’s development and controlling their growth. These joint venture companies ended up as spare parts manufacturers for them.
But it is different now. The overseas automobile companies’ brands are being threatened in China. They thought they had controlled the Chinese automobile market, but the most popular automobile brand now is China’s domestic brand, Songjiang Motors!
All automobile manufacturers in China are developing much faster than expected. Their progress is already one year ahead of the overseas manufacturers’ expectations.
China had set the automobile manufacturing industry as one of its core industries and will invest money to build it. At the same time, the government will impose high tariffs and limitations on the importation of cars.
The overseas automobile manufacturers can only continue to work with China’s manufacturers and share their newer models and technologies to secure the market.
But during the negotiations, the overseas manufacturers noticed the Chinese companies’ change of attitude.
In the past, the overseas companies will have the upper hand during the negotiations, and the other party will agree to their harsh terms for their technologies.
But now, the Chinese companies rejected all their conditions for cooperation!
The Chinese companies had agreed to enter into a joint venture with overseas manufacturers is because they needed new technologies. But since then, Chinese companies had gotten the technologies and developed their own. Although the newer technologies from overseas are better than Songjiang Motors, they are only slightly better.
Songjiang Motors will also be introducing a newer model of cars, and what if their technologies are better than the technologies given by overseas manufacturers?
Paying the overseas companies a large amount of money for new models, but the new cars are not better than Songjiang Motors? They will suffer massive losses. Even the State-owned manufacturers will not agree, let alone the leaders above them.
So, the Chinese automobile companies changed their attitude towards their overseas partners. We had given you 49% of the company’s shares previously. But now, we will only let you own 30% at most, and you all must pay a premium for the shares.
That’s right. Your technologies might worth a lot, but those are not the most advanced technologies. If you all don’t agree, we will work with Songjiang Motors. After all, they are also Chinese, and we can get better deals from them.
This is the Chinese companies’ trump card. We have technologies slightly behind you all in China now. But who knows if Songjiang Motors have developed more advanced technologies?
Those overseas companies realized that the Chinese automobile industry had changed, and it was not the same as before. SAIC told their overseas partners. Look, this A6 model is similar to Songjiang Olympics model. Although the specs of A6 are slightly better than Songjiang Olympics, others might think we are imitating them.
Audi had not expected to hear such comments about a two-year-old model, and they panicked when they saw SAIC speaking to other overseas automobile companies. Audi immediately lowers their requirement. In the end, they can only get 25% of the new model’s profits and had to pay double what they expected.
Initially, Audi had wanted 49% shares and even tried to get 50%. But in the end, they were forced to lower it to 25%!
After Audi signed the contract with SAIC, the rest of the Chinese manufacturers used this deal as the benchmark against their partners.
The highest percentage gotten by overseas companies for new joint-ventured vehicles is only 30%. This is a vast difference, and it symbolized China’s automobile industry had reached another phase!
