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Chapter 2627 Facing Reality

Executives at Japanese automakers have been incredibly frustrated lately.

The reverse marketing campaign launched by Chinese automakers in Southeast Asia and the domestic market was tantamount to repeatedly rubbing their century-old brand premium into the ground.

The "Japanese quality myth" that they spent decades cultivating in consumers' minds was shattered by a Chinese automaker's statement that "even our competitors are dismantling our cars for research."

Consumers aren't stupid. If you dismantle someone else's car, it means you consider their car a competitor.

If someone's car is just a useless, fancy car, you naturally wouldn't even bother to take it apart.

This logic is simple and direct, and any car buyer can understand it.

What's even more troubling for Japanese automakers is the problem they discovered after reverse engineering the parts.

According to their original expectations, a Chinese private car company that had been established for only a few years could at most imitate the appearance of the cars it produced, but the core technologies and key components would definitely be inseparable from imitation or reverse engineering.

Upon disassembling the engine, it was found to be 80% copied from an old Japanese engine model.

Upon disassembling the gearbox, it appears to be a production line that was purchased from someone else and subsequently phased out.

Upon disassembling the chassis, the frame structure and suspension design are clearly identical to those of a certain established model on the market.

But the report following the dismantling of Tianchao Auto left them all speechless.

The crankshaft balance design and combustion chamber structure of the engine are all original technologies, not copied, but developed by ourselves.

Toyota engineers wrote in their report: "The shape of the combustion chamber does not match any of the mainstream models currently on the market, ruling out the possibility of reverse engineering."

The gear meshing angle and shift logic algorithm of the transmission are different from the mainstream solutions on the market. After Nissan's technical team disassembled the transmission, they put a question mark in the conclusion column. This shift logic was something they had never seen before.

There are no existing patents available for reference regarding the welding process and material composition of the chassis beam.

Honda's materials engineers sent samples of the steel plates from the chassis to the lab for spectral analysis. The results left them even more speechless: the ratio of trace elements in the steel plates was also unique.

What frustrated them even more was that every technology had been patented internationally, and the patent documents were meticulously prepared.

Toyota's legal department reviewed the list of patents registered overseas by Chinese automakers. After reviewing it, they told the technical department, "There's no circumventing this. These patents cover everything from engines to transmissions to chassis. We either have to pay patent fees or redesign the system. You can calculate the time and cost of redesign yourselves."

"How could this be? Where did this Chinese car come from?"

"Yes! There are only a handful of car companies in the world that have been around for over a century. Which car company nurtured them?"

"Could it really be a Chinese car company?"

"Impossible! Where would Chinese automakers get this kind of technology? They're still fantasizing about exchanging market access for technology."

"It seems like the wolf really did cry this time."

Then, the Japanese automakers sat down together to discuss how, in order to guard against the sudden rise of Chinese automakers, they had no choice but to launch a comprehensive price reduction.

However, if the goal is to reduce costs without infringing on Chinese automotive patents, the only option is to cut corners on the supply chain.

After several rounds of intense internal discussions, Japanese automakers unanimously turned their attention to the same direction—China.

China has cheap land and labor, an increasingly complete auto parts supporting industry, preferential policies from local governments for foreign investment projects, and significant savings in tariffs and transportation costs.

More importantly, the rise of Chinese automakers made them realize that if they did not build factories in China, they would completely lose their cost advantage when competing head-on with Chinese automakers in the Chinese market in the future, due to transportation costs and tariffs alone.

As a result, starting in the second half of 1997, Japanese automakers continuously increased their investments in China.

Toyota announced an expansion of production capacity at its joint venture plant in China and the construction of a new engine production line in Guangzhou, doubling the original investment amount.

The construction of the new joint venture factory between Honda and Dongfeng has been accelerated, with the original construction period scheduled for the year after next being brought forward to next year.

Even the traditionally conservative Nissan has signed a new agreement with its partners in Zhengzhou to produce two of its main models in China and has accelerated the localization of key components, which were previously all shipped from Japan.

……

When the news reached China, it was met with a deluge of media coverage.

Japanese automakers collectively increase investment in China

Why are Toyota, Honda, and Nissan suddenly accelerating?

Headlines like "The Chain Reaction Triggered by China's Automobile Industry" appeared repeatedly in the financial sections of major newspapers.

A newspaper commentator wrote an article titled "The Wolf is Coming, But It Was Forced to Come," in which he stated: "Japanese automakers are collectively increasing their investment in China, ostensibly because they are optimistic about the Chinese market, but in reality, they are being cornered by the Chinese auto industry. They have found that they cannot compete with a Chinese private automaker on cost, so they have no choice but to move their factories to China, using Chinese land, Chinese labor, and Chinese supply chains to reduce costs. This is not a proactive move, but a passive response."

After reading the analysis articles in the newspaper, Suning also studied the investment announcements made by several Japanese car companies.

He put the newspaper on the table and said to Mr. Fei of Tianchao Auto, "Mr. Fei, their coming to China to build a factory is not a bad thing for us."

Mr. Fei was taken aback for a moment: "Mr. Su, they are our direct competitors. After they set up factories in China, their costs have decreased, so won't the price war become even more intense?"

Suning said, "Think about it from a different perspective. Their increased investment in China means that China's automotive industry chain will mature faster. More joint venture factories mean more local parts orders, and more local orders mean that more domestic suppliers will grow. In the past, many high-precision parts could not be made domestically, not because of a lack of technology, but because there were no orders and no one was willing to invest in equipment. Now that Japanese automakers are dumping orders on us, suppliers have the money to buy equipment, and their technical level has improved. And we can use these growing suppliers."

Mr. Fei thought for a moment and nodded: "You mean, they helped us cultivate our supply chain?"

“That’s exactly the point.” Suning leaned back in his chair. “They come to China to reduce costs, not to do charity. But in the process of reducing costs, they will help us cultivate a large number of local suppliers. Once these suppliers mature, as the largest OEM in China in terms of procurement volume, our bargaining power will only be stronger.”

"..."

"President Fei, no matter how the outside world changes, Tianchao Auto will continue to develop along the established path."

"Understood! Next, the Shunyi and Huangdao factories will expand their production capacity and further increase marketing efforts to boost sales."

"Yes, and the Pudong factory in Shanghai also needs to be further developed."

"Yes, Mr. Su."

……

Suning is not spending time figuring out its competitors these days.

After entering 1998, Suning instructed Xiao Zhao to notify the legal department to register a new company—Tianchao Capital. Upon receiving the notification, Director Cheng, the head of the legal department, brought a registration plan to Suning's office that same day.

Director Cheng laid out the proposal on the table and explained in detail, “President Su, I suggest that Tianchao Capital’s business scope cover equity investment, industrial investment, venture capital, and mergers and acquisitions, with the registered capital directly reaching the upper limit suggested by the group’s legal department. This way, whether investing in early-stage technology teams or acquiring mature projects, the business scope will be sufficient.”

Suning flipped through the plan, picked up a pen and changed a number on it, raising the registered capital by one level.

He put down his pen. “Let’s do it this way. There’s no need for a ceremony to set up the sign. Just clear out a few offices in the headquarters building, hang up a sign, and recruit a few people with experience in industrial investment to build the initial team.”

"clear."

The registration process for Tianchao Capital was completed very quickly. The Ministry of Justice and the Administration for Industry and Commerce were very familiar with the procedures, and the license was issued in less than two weeks.

There was no ceremony held on the day of the listing. A few offices were cleared out on the floor of the Tianchao Group headquarters, and a bronze plaque with the words "Tianchao Capital" engraved on it was hung at the door.

Suning transferred Zheng Chaoshan, who had worked in the group's investment department for several years, to be in charge. They also recruited several senior professionals from outside who had worked in investment banking and industrial funds. The initial team consisted of less than ten people, but each of them was capable of working independently.

Of course, the team also includes Suning's AI robots, which are responsible for overall planning and overseeing the team.

Being a hands-off boss isn't so easy. There's no shortage of entrepreneurs in the business world whose businesses have been robbed, and I certainly don't want my business to be robbed by a professional manager.

Once the Tianchao Capital team was in place, Suning had its marketing department place advertisements in several mainstream financial newspapers in China.

The advertising copy is very direct, just like Suning's consistent style of not beating around the bush.

The title is just one sentence: "Celestial Empire Capital Officially Established".

The text is even shorter: "We welcome promising projects with core technologies and strong business prospects to discuss investment and cooperation. We don't look at backgrounds, we look at origins, and we look at technology. As long as it's a project that can change the industry, Tianchao Capital is willing to go the distance with you."

Below the advertisement are the contact number and address of Tianchao Capital, and the signature is Tianchao Group.

After the advertisement was sent out, Tianchao Capital's phone kept ringing.

The landline rang from morning till night, and the young woman who answered the phone lost her voice.

A technical team with patent certificates came to seek industrialization cooperation. They introduced themselves on the phone, saying, "We have a new material project and three invention patents. We have approached more than a dozen investment institutions, but none of them dare to invest."

One entrepreneur came with a few pages of business plan to try his luck. "I have an idea to make new energy batteries. Although it is still in the laboratory stage, I think this direction has great potential in the future."

Local investment promotion departments from various regions recommend high-quality local projects, and they proactively fax over their project information for Tianchao Capital to screen.

Some people came from all over the country after witnessing the rise of Tianchao Auto. They dragged their suitcases to the Tianchao Group headquarters and said, "I work in industrial automation and I have a self-developed control system that I'm looking for investment. Can I have a ten-minute chat with someone from Tianchao Capital?"

Tianchao Capital's investment team selects projects according to the standards set by Suning—prioritizing hard technology, manufacturing, and projects that can synergize with Tianchao Group's existing industrial chain.

During the internal selection meeting, Team Leader Zheng explained to his team, "President Su's meaning is very clear. We are not financial investors, but industrial investors. Financial investors only look at the rate of return, while we look at whether this project can create a synergy with Tianchao Group's industrial chain. If it cannot create a synergy, we must be cautious no matter how high the rate of return is. If it can create a synergy, even if it is not profitable now, as long as the technology is solid, we dare to invest."

Someone asked with a puzzled look, "Mr. Zheng, what do you mean by 'being able to form synergy'?"

Mr. Zheng said, "For example, if there is a team that makes high-precision sensors for automobiles, then that's our target market. Because we purchase millions of sensors every year, investing in them will not only help them survive, but we can also get a more stable and cheaper supply. Conversely, if there is a project that makes fast-moving consumer goods, no matter how high the return is, we will not touch it for the time being, because it does not fit with our existing industrial chain."

"understood."

This set of standards, once used to screen projects, leaves only a few, but each one is very significant.

There is a team that works on carbon fiber composite materials, and their technology is capable of achieving lightweighting in automobiles.

After investing in them, Tianchao Capital directly provided them with supporting services for Tianchao Auto's body-in-white project.

There is a startup company that makes industrial robots, and they have independently developed all the core algorithms.

After Tianchao Capital invested, it also injected some advanced robotics technology, which indeed made the mass production of the subsidiary's products even more advanced.

Their robots were purchased in several sets by the Shunyi and Huangdao factories, and quickly went from the laboratory to the mass production workshop.

Although these projects may not generate much financial return in the short term, each investment is embedding a new piece into the Tianchao Group's industrial chain.

Tianchao Capital's investment is not only a massive influx of funds, but also involves selecting high-quality companies to invest in more advanced technologies and making these cars subsidiaries of Tianchao Auto.

With this combination of measures, Tianchao's automotive industry chain has become increasingly complete, and Tianchao Group has become increasingly powerful.

……

After news of Tianchao Capital's listing spread in financial circles, the front desk of its Beijing headquarters received countless business plans.

Zhuangzhuang now has an extra task every day: to organize the business plans sent by Tianchao Capital by industry, create a catalog, and then deliver it to Su Ning, the head of Tianchao Group.

Zhuangzhuang flipped through those business plans. Some were for electronic components, some for new materials, some for biomedicine, and some were written in such a whimsical way that even she couldn't understand them, but she found them quite interesting.

These proposals came from all over the country, some printed on clean A4 paper and neatly bound, with the covers carefully covered with plastic film.

Some were crumpled and stuffed into a brown paper envelope, with the writing on the envelope in ballpoint pen, clearly indicating that the entrepreneur had saved up their meal money to pay for postage.

Zhuangzhuang once again experienced the hardships of being an entrepreneur, and wished that all of China's capital had invested in these projects.

But Zhuangzhuang also knew that this was almost impossible, after all, Chinese capital wasn't there to do charity.

Suning set several strict criteria for Tianchao Capital's investment direction: priority should be given to hard technology, manufacturing, and projects that can synergize with Tianchao Group's existing industrial chain.

The investment team uses these criteria to screen projects, but Suning itself is also keeping an eye on those high-quality projects.

Every day after finishing his business with Tianchao Group, Suning would spend one or two hours reviewing those business plans.

Suning glanced at some projects and put them aside, while he would stop and look at a few more pages. In a very few cases, he would ask Xiao Zhao to contact the other party and arrange a time to meet with him in Beijing.

These projects were naturally considered high-quality projects by Suning, and many of them were founded by entrepreneurs who became famous in later generations.

Since I possess an omnipotent God's perspective, there's no reason to waste this innate talent.

...(End of this chapter)