Teslahao gambles "Chinese factory"

"Can you sell more cars?"

“Can you sell more cars?” Alon Musk asked the question to a Tesla executive in China, almost every time he reported his work. .

For the electric car company, which is struggling with money, sales are almost everything. Whether it's developing a new model, expanding the charging network, or boosting the stock price, you need the sales volume behind the order volume and delivery volume. Unlike selling funds through public fundraising or issuing convertible bonds, selling cars is the real “hematopoietic”.

Now, with the completion and commissioning of the Tesla China factory, the Chinese market has completely turned to bear the weight of the car company's sales.

Shanghai Pudong Airport is about 40 minutes southwest along the city, and Chinese construction workers are working day and night to build a modern automobile manufacturing plant. It is reported that Tesla's "body-in-white" from the US headquarters was off the assembly line at the end of September. If nothing else, the Shanghai plant will also enter the key phase of automotive production – the mass production (SOP) phase.

More than half a year ago, it was still a farmland; but today, as Tesla's only overseas factory, the factory determines the lifeblood of this California high-end new energy vehicle manufacturer on the other side of the ocean.

Unlike the previous construction speed of a car factory with the same capacity, the Tesla Super Factory will compress the 1-2 year period to 8 months. Musk, using "shock" to express everything in front of him. This kind of high speed is also defined by the Shanghai official as "Tesla speed", calling on everyone to learn.

Shanghai’s “look and see” to Tesla does not stop there. Unlike the usual car joint ventures, Tesla is allowed to set up wholly-owned companies – and other companies need to strictly comply with the relevant proportions of Chinese and foreign capital. In addition, Shanghai provides a large amount of cheap land, nearly 10 billion bank loans, and even for the Tesla factory, and canceled another Chinese new car company, Weilai Automobile, to build a factory in the local area.

In 2019, when trade between China and the United States was frequently rubbed, Musk and Tesla seemed to have become a different kind, enjoying unusual privileges in China. However, under these appearances, Tesla China still hides another picture.

Tesla's radical management style and unpredictable working attitude, the sales of China's electric vehicle market tend to be weak and the behavior of closing stores, whether the purchasing power of Chinese consumers can grow as the factory is put into production, and Shanghai's for Tesla Looking forward to... all kinds of factors, it indicates that the Chinese factory is a gamble of Musk and Tesla.

However, winning and losing is unpredictable.

01 Radical China District Independent China

In the Sahara Desert, a group of workers are trying to escape the unbearable working environment. The managers of these workers did not panic because of the escape of the laborers, and kept a certain distance to follow. When the laborers were fully exhausted and dying, the managers took out the dry food and bottled water prepared in advance. As a "bait", it lures laborers back to the construction site.

Zhu Xiaoyu, head of Tesla Greater China, often tells his subordinates about his personal experience in Libya and Sudan, whether in public or private. Similarly, Zhu Xiaotong also brought this style of work to Tesla. Zhu Xiaotong once told his subordinates that all employees of Tesla China must work 24/7 to get on call. Of course, these employees often receive calls from the Chinese executives in the middle of the night.

"He basically only sleeps 3-4 hours a day, no matter when it is e-mail and WeChat, it is basically a second." A middle-level of Tesla China told the story of Zhu Xiaotong to Tencent News "Plough". Musk asked everyone to return the mail within 15 minutes. I asked each department leader to return the mail within 5 minutes."

For the dissatisfaction of the subordinates, Zhu Xiaotong will also behave unusually. As Musk will not hesitate to leave every executive, Zhu Xiaoyu often gives instructions at the internal meeting that "*** is useful, you can leave." In most cases, the employee who was “cared for” will disappear in Tesla soon. Because he often provided Zhu Xiaotong with a prohibition proposal, he even issued a "SAY NO Professional Household" nameplate to Tesla China's Legal Department to ironically.

Within Tesla China, many people regard this as a common management style that Zhu Xiaotong and Musk have similar backgrounds. Musk spent his childhood in African countries in South Africa. Of course, Zhu Xiaotong is also regarded by employees as a determined performer of Musk.

Since the finalization of the Tesla Shanghai factory, Zhu Xiaotong has led Tesla's senior manager of public charging pile construction, Wang Xiaotong, to Shanghai, and has supervised the construction progress of the factory. Wang Xiaotong is also regarded as Zhu Xiaotong's "Heart". Both of them served in Zibo Engineering Group Holdings Co., Ltd. for several years before Tesla, Zhu Xiaoyu was the vice president, and Wang Xiaotong was the engineering director.

With regard to the control of the Shanghai factory, with the changes of several executives in China, some internal employees are still a mystery.

For the landing and financing of the Chinese factory, Tesla was appointed by the Chinese CFO at the end of May 2018. Former Ingersoll Rand Asia Pacific and Indian CFO James Zhou became the CFO of Tesla China in April 2018. Just after signing a memorandum of cooperation with Lingang on July 10, Zhou Jian disappeared from the vision of Tesla's Chinese staff.

An unconfirmable rumor is that Zhou Jian was reflected to Musk by Ren Yuxiang, then CEO of Asia Pacific, because of possible problems in the financing process. As everyone knows, Ren Yuxiang quickly sat on the role of "defendant", this time reflecting the situation is Zhu Xiaotong. In the end, Zhu Xiaoyu won the control of the Shanghai factory project as a winner.

In fact, the structure of Tesla China at that time was Tesla China’s report to Tesla Asia Pacific, that is, Zhu Xiaoyu reported to Ren Yuxiang. By the end of 2018, Zhu Xiaoyu, who is only responsible for China's business, was promoted to Vice President of Tesla Asia Pacific. That is, at that time, Ren Yuxiang gradually returned to the US headquarters and rarely managed the affairs of China.

Ren Yuxiang is a student of Musk Stanford. He became the President of Tesla Asia Pacific in June 2015 and became the Vice President of Global Sales of Tesla in April 2018.

With the adjustment of Tesla's personnel structure in June 2019, Ren Yuxiang was completely marginalized. At that time, Tesla reorganized the Asia-Pacific region – withdrawing the Asia-Pacific region and newly establishing Greater China. Zhu Xiaoyu, formerly the general manager of Tesla China, is responsible for the Greater China region and reports directly to Musk.

If the adjustment in June is to “open” the regulation in the Asia-Pacific region, then the appointment in August will give Tesla Greater China a complete concentration of power from global regulation.

According to the official news of Tesla, Zhu Xiaoyu, former general manager of Tesla China, was promoted to Tesla's global vice president and president of Greater China; Tao Lin rose from the general manager of public affairs in China to Vice President Tesla Wang Wei was promoted to the general manager of Tesla China by the deputy general manager of China.

On the surface, this is just a simple appointment for personnel promotion, but it is not.

The change is that before the establishment of Greater China, the functional departments including sales, marketing, communication, engineering and after-sales service will report to the responsible person in the headquarters, and the dotted line will report to Zhu Xiaoyu. Zhu is more between various functional departments. Play the role of matchmaking. Today, all functional departments in Greater China must report directly to Zhu Xiaoyu.

During Zhu Xiaotong's appointment as General Manager of Tesla China, Tesla China's various functional leaders appeared in large numbers. According to incomplete statistics of Tencent News "Peeping", Gao Xiang, head of public charging business, Zhong Yang, person in charge of after-sales service, Liu Qiuwen, head of marketing department, and Duan Qi, head of public relations department, have resigned. At present, only Wang Wenjia, head of engineering department, is left. Still on the job.

Tencent News "Plough" has learned through different channels that most of the reasons for leaving the company are dissatisfaction with the existing management team. "Tesla China has formed a 'surrounding city'. The people inside want to come out, and the people outside want to go in." One of them told Tencent News "Peeping", but only when they went in, they knew the true face of Tesla China.

In fact, Zhu Xiaotong was the third person in charge of Tesla China, before Zheng Shunjing and Wu Bizhen. “Zheng Shunjing has laid a very good brand foundation for Tesla to become a luxury brand in China. Wu Bizhen has established a sound organizational structure to enable Tesla China to operate efficiently.” A Tesla Chinese employee described it as such.

Zhu Xiaotong’s superior position is not lacking in luck. At that time, Tesla's China business was struggling and layoffs to 46 people. After Wu Bizhen had no suitable candidates in Tesla China after leaving her job, she recommended to Musker Zhu Xiaoyu, the head of the charging pile department, who was temporarily responsible for Tesla China and cleaned Tesla's "bad mess" in China.

Shortly after he took office, the launch of new energy vehicle licenses in first-tier cities and the introduction of new energy vehicle purchase tax reduction policies have given Tesla a new opportunity – of course, Zhu Xiaoyu also seized the opportunity. At the beginning of his tenure, he said that government relations are the focus of Tesla China in the new year (2015). At that time, Tao Lin was the director of government affairs of Tesla China.

Tencent News learned that the public relations team has left the team in addition to the report object Tao Lin. Earlier, a complaint letter from the Chinese media called "I can't understand" caused Tesla's public relations director who turned a blind eye to the media to leave. Today, Tesla China's public relations work, or due to shortage of manpower, has also fallen into the predicament of the year.

Today, the Chinese team once again broke the iron law that Musk set "Tesla does not carry out marketing activities." Since the beginning of this year, Tesla has gradually carried out promotional activities in the Chinese market in the form of media cooperation. It should be known that the online cooperation promotion between Tesla and Taobao five years ago has even become a fuse for Wu Bijun's departure.

“At the time, all management was parallelized. She had an assessment of all the business. The reporting line was very short and the efficiency was very high. The decision between the US and China was almost synchronous.” The above Tesla employees told Tencent News Wang Wang, when Model S went online, Taobao immediately went offline two hours later, which also explained the speed of information transfer between China and the headquarters.

02 Under the financial problem, the double-edged sword of sales volume and quality

"If you want to get more people to model Y in the future, then you have to sell a Model S and Model X today." A Tesla China middle layer said that Musk often used this method. To urge everyone to sell more cars, every day at 23 o'clock in Beijing time, it is the morning of the western United States, China must report to the headquarters the amount of orders and deliveries of the day.

The reason why the order volume and delivery volume are so concerned is that they are the real “hematopoietic machine” compared to other methods of obtaining funds. Because only by delivering a larger number of products, it is possible to increase revenues and obtain more funds; correspondingly, only sufficient R&D expenditures and production inputs can support the release and delivery of new models in the future.

According to Musk's plan, Tesla's "Master Plan" includes:

The first step is to build an expensive sports car. The second step is to make a cheaper, medium-sized car with the money you earn. The third step is to use the money you earn to build a more popular car. The economy is the best-selling model; on this basis, it provides zero-emission power generation. Specific to the model, namely: Roadster-Model S/X-Model 3/Y...

Not only that, but Musk also hopes that Tesla is not only a car company, but also an energy company. He designed a full ecological chain around Tesla for electric vehicles, including battery pack design, software development, automotive production, component manufacturing, infrastructure management, website and showroom sales, and after-sales services.

The grand blueprint brings a lot of demand for money. According to Tesla's 2019 mid-year report, the company's final cash and cash equivalents were $5.448 billion, almost double the $2.783 billion in the same period last year. However, compared to the initial increase of 1.172 billion US dollars in cash, the net cash flow generated through financing during the period reached 1.49 billion US dollars.

Still relying on financing to obtain the net cash flow, on the one hand, Tesla still needs to continue to invest in the energy ecology. More importantly, the car itself is still at a loss. Statistics show that Tesla has delivered Model S, Model X and Model 3 to users since the launch of the first Roadster in 2008. It has never achieved annual profit and only achieved two quarterly earnings. .

The goal set by Musk to Tesla in 2019 is 360,000 to 400,000. Tesla delivered a total of 355,200 vehicles in the first three quarters, and currently has a target of only 104,800. According to Tesla's expected fourth quarter delivery, the annual delivery target can be successfully achieved without any accident.

However, focusing on delivery has brought some hidden dangers. Tesla's Fremont plant in California is constantly in tight production capacity.

The car factory, which was once a joint venture between Toyota and GM, is now unable to meet Tesla's order production. With no more funds to build a new plant and more Model 3 to be delivered, Tesla temporarily built a tent production line in the Fremont plant to assemble the Model 3 high-performance version.

The US media CNBC reported the non-compliance of the tent production line codenamed "GA4", which was later denied by Tesla. According to reports, factory workers are required to cut corners when manufacturing new cars, as well as exposed to harmful elements and pests. Even some workers were taught to use the electrical tape to quickly repair the Model 3 and stopped the wading test of the Model 3 by the end of 2018.

“There is a huge difference between the domestic auto factories.” A car media person who visited the Tesla American factory and the German BMW in the Tiexi factory in China told Tencent News “Plough” that the difference is not only in the modernization of the factory. It is also reflected in the quality of employees. He said that the Tesla factory could not be compared with the Tiexi factory and even some Chinese independent automobile brand factories in terms of modernization. The attitude of workers on the assembly line to work is also visible to the naked eye.

Another downside to paying too much attention to delivery is the quality of the product that is constantly detonating.

Tencent News "Plough" learned that the first spontaneous combustion of Model 3 has occurred in Wuhu, Anhui. The "4.21" spontaneous combustion accident in Shanghai Xuhui area, which was concerned by the outside world, as the fourth spontaneous combustion of Tesla's Model S within two months in the world, did not cause enough attention from Tesla officials.

A statement issued by Tesla on June 28 showed that there were no system defects, belonging to individual accidents, caused by a single battery module failure at the front of the vehicle. It is worth noting that Tencent News "Plough" learned that Tesla mentioned the update of the charging and thermal management system through the OTA air upgrade. Tesla has taken measures to limit the battery capacity of the vehicle.

Another example is the wading test about Model 3

Tencent News "Plough" was informed that at the beginning of this year, Model 3 was not passed at the earliest test of vehicles applying for Shanghai New Energy License. Different from other regions, the testing projects in Shanghai include water-related projects in addition to regular battery life and other parameters. In the end, Tesla reluctantly passed the waterproof modification of the chassis of a Model 3 test drive.

Tesla's proud "direct sales model" has also exposed various drawbacks in the face of financial pressure. For the same new things, this model can control the brand appearance mode to play a better role in educating consumers, but it requires a lot of capital and time investment. In contrast, the benefit of the dealer model is that the capital pressure is more passed on to the car dealers by the “wholesaler” car manufacturer.

Under the pressure of cost, Musk also announced the closure of large-scale offline stores in March this year and switched to online sales. The Chinese market is no exception. Tencent News "Plough" learned that some Tesla stores in the first-tier cities such as Beijing, Guangzhou and Shenzhen are being shut down, including: Beijing Joy City, Shenzhen Coast City, Guangzhou Liber and White Swan. Wait. Located in the prosperous business district, the Chaoyang District Joy City Store is now the showroom of the Chinese car brand Geely Automobile's sub-brand.

In fact, Tesla's existing orders have been released in large numbers. For the economically popular model Model 3, orders in two important markets in the US and China have already been delivered, and one of the signs is that the right-rudder model, which has a relatively small production and sales volume. Beginning in June 2019, Tesla has begun to model 3 in the right-rudder models of the United Kingdom, Australia, New Zealand, and Japan.

But the indicators that reflect Tesla's orders show that the new order situation does not seem optimistic. According to the Tesla Interim Report, the company's client quota for the first half of 2019 was $631 million, a decrease of $162 million compared to $793 million at the end of 2018, a reduction of 20%.

Tesla's R&D investment ratio has been decreasing over the past three years, and the R&D investment ratio has dropped to 6.09% in the first half of this year. The data shows that Tesla's R&D investment ratio in 2016, 2017, and 2016 was 6.8%, 11.7%, and 11.9%, respectively. At the same time, research and development expenses in the first half of this year decreased by 11.84% to 664 million US dollars compared with the same period of last year. This also means that the delivery of Tesla's next SUV model, Model Y, will once again face the possibility of “jumping”.

03 “Harvesting the Chinese Market”

"Zhu Xiaoyu Musk, like China, is China's land of gold nuggets." The aforementioned Tesla middle layer said. “Nuggets” mainly refers to a series of incomparable favorable treatments that Tesla enjoys in China, equity, land price, borrowing, and the newly developed electric vehicle market.

The Shanghai factory is Tesla's first overseas factory and is named "Gigafactory 3". The establishment of the Shanghai plant is mainly to reduce the cost of car purchases brought by transportation, manufacturing and customs to attract more Chinese consumers. The first phase of the 150,000-capacity plant, which started in January 2019 and was put into production in less than 10 months, is a "quick speed" for Tesla and the locals.

Can make the star company Tesla settled, and many places have tried their best to throw the olive branch to Musk. In the same way as Tesla's location in the local factory, Shanghai Lingang won in competitions in Beijing, Anhui and Hebei. At that time, the super battery factory in the fierce competition in seven states including California, Texas, New Mexico, Nevada finally won a 20-year, $1.4 billion package of preferential policies.

With a production capacity of 500,000 units in Shanghai, Tesla's sole proprietorship model is the first of its kind to establish a car factory in China. Although the relevant departments of the Chinese government have been considering releasing the 50:50 share ratio of the automobile joint venture. But so far, only the BMW Brilliance family, after 15 years of the establishment of the joint venture company, BMW increased its shareholding in the joint venture company to 75%.

Even for Tesla's landing, another Chinese new car company, Weilai Automobile, was forced to terminate at the Jialai Shanghai Jiading plant, which was signed in 2017.

According to the regulations of the “Industrial Power Investment Management Regulations” of the National Development and Reform Commission for the establishment of an independent pure electric vehicle enterprise, the utilization rate of automobile production capacity in the previous two years is higher than the average level of the same product category; The product category of pure electric vehicle enterprise investment projects has been completed and the annual output has reached the construction scale.

During the Shanghai Auto Show this year, Qin Lihong, co-founder and president of Weilai Auto, said in an interview with Tencent News "Plough" that although there was no "big move", the Weilai Shanghai factory had already started work for more than a year. The shackles of the Shanghai factory, even the Weilai listed on the NYSE, were subjected to a class action lawsuit by US investors, saying that they had false or misleading statements.

At the same time, Tesla obtained an unsecured loan of RMB 3.5 billion from the syndicate in March 2019. The loan interest rate is 90% of the central bank's annual benchmark interest rate. At the same time, the loan mechanism cannot be traced back to Tesla's assets. "Under the current situation of monetary tightening, such a large-scale loan, such low interest, is generally only available to central enterprises, state-owned enterprises and star enterprises." A banking industry commented.

Tesla also announced that it has signed a financing agreement with China Merchants Bank to obtain a 5 billion yuan unsecured 12-month revolving loan from China Merchants Bank. The interest rate is also 90% of the central bank's annual benchmark interest rate. The loan is mainly used for transportation of vehicles into China. . In addition, Tesla has received several new loan commitments from banks that can be used to invest in the United States and other places.

Not only funds, but also land. Although the land price is 5 yuan cheaper than the unit price of 1,300 yuan/square meter in the nearby land taken by Shanghai Jita Semiconductor Co., Ltd., Tesla does not seem to have obvious comparative advantages in terms of factory land price.

“Pudong New Area has policy support for star enterprises to settle in Lingang,” a Shanghai real estate industry told Tencent News “Peeping”, several factories and logistics sites that he has recently handled, including Qingpu District and Fengxian District. Maintained at 1.5 million yuan / mu, and Tesla's land price is only half of the market price.

The Lingang area has detailed requirements for many indicators of the Tesla Shanghai plant with 50 years of use rights. Tesla was asked to invest 14.08 billion yuan in the next five years, and at the end of 2023, it would achieve an output value of more than 75 billion yuan and generate an annual tax of 2.23 billion yuan. Otherwise, Tesla will hand over the land, but will receive corresponding financial compensation for land leases, buildings and equipment. It even includes foundation time, construction completion time, and production start time.

For the local Shanghai, whether the Tesla factory is grounded is a victory, or it will take five years to see the results. In the short term, the cost increase caused by transportation, manufacturing and tariffs has gradually disappeared with the local production of Tesla in China. However, can Tesla's subsequent growth in the Chinese market meet expectations?

China is Tesla's largest overseas sales market and is growing rapidly. According to official data, Tesla's revenue in the first half of 2019 in China was 1.469 billion US dollars, an increase of 41.80% compared with 1.036 billion yuan in the same period of 2018. Second, it is the European country of Norway.

This is partly related to China's support for new energy vehicles. According to the new energy vehicle development plan, by 2020, the cumulative production and sales of pure electric vehicles and plug-in hybrid vehicles will exceed 5 million units. At present, China has become the world's number one new energy vehicle sales. New energy vehicles sold 1.27 million vehicles in 2018, a year-on-year increase of 59.9%.

The data shows that with the Model 3 delivered to the Chinese market in early 2019, the Model 3 has become the absolute main driver of Tesla's sales in China. The delivery data that can be referenced shows that Tesla had a total of 21,800 units in mainland China from January to June 2019, of which Model 3 accounted for the majority of the 16,300 units.

“The purchase of Tesla’s Chinese consumers seems to be mostly innovators and early adopters in our eyes. They are not sensitive to price and product quality and may be more concerned about Tesla’s brand and technological innovation itself.” Sla’s sales staff told Tencent News’s “Peeping” that this is not the case – Tesla’s Chinese consumer group has gradually entered a market that is price sensitive and very concerned about product quality.

According to him, many of the Model 3 car buyers belong to this group. In addition to Tesla's brand premium, these consumers expect to buy a product with the same quality fuel car quality. “This is the most obvious when delivering the vehicle.” The person recalled that when the new car was delivered, he had witnessed a number of owners holding the delivery list, and inspecting hundreds of inspection regulations, one by one. Check the vehicle configuration. Even the car buyers who have checked the chassis screws on the floor.

“The people who actually consume Tesla are the people who can drive directly after getting the car. This is totally different from the people who buy Tesla on the tiptoe today.” He said that the part of the car owners, such as when Tesla first entered China, was the real target group.

Musk is also always advised by the Chinese team. He hopes to be more active in social media and can refer to the Chinese market and Chinese consumers. Not only that, but Musk also approached Chinese consumers by eating traditional Chinese cuisine such as Sichuan hot pot, Tianjin pancake fruit, and old Beijing Xi Si Baozi, and he indicated that he would consider Tesla's headquarters in China.

In fact, Tesla pays much less attention to Chinese consumers than traditional auto companies and other new car companies because of the lack of funding.

An example is that the Chinese system of the Tesla model was criticized by a number of Tesla owners. Applications such as QQ Music and WeChat are not accessed through the test in the Chinese market, but directly through the US technical department. The Chinese operating system upgraded in January this year did not test Chinese speech. Chinese speech often shows a crash.

Tesla's Beijing Science and Technology Innovation Center, established in July 2018, is also in vain. According to the official introduction of the Science and Technology Center - a technology highland focused on the development of electric vehicles and spare parts, batteries, energy storage equipment and information technology, similar to the functions of the GM Pan Asia R&D Center. However, Tencent News "Plough" learned that the center's office in Yizhuang has no R&D personnel, only the Tesla Yizhuang Delivery Center.