Li Bin said, “Don’t make cars without 20 billion.” Evergrande said, “I have already invested 47.4 billion in making cars.”
Of all the elements involved in making cars at Evergrande, money is the least of their worries. However, the 47.4 billion investment still exceeded their expectations.
On March 25th, Evergrande Motors held its 2020 annual performance conference. As making the cars just began, of course, the results weren’t pretty. Evergrande emphasized investment: they had invested a total of 47.4 billion yuan in making cars.
During the conference, Evergrande Motors stated that to achieve the goal of 1 million sales of Hengchi new energy vehicles by 2025, Evergrande had made preparations in terms of capital, research and development, production, sales, and charging facility construction, and had nine models with clear benchmark products. Also, Evergrande will scale-up production of high-energy density batteries that support super-fast charging in the second half of this year.
At the upcoming Shanghai Auto Show, Evergrande Motors will also show off their car production process to the public for the first time and gradually showcase their car-building concept to the outside world. With the power of capital, Evergrande is driving forward with their unique method of car-building.
A Plan to Invest 9 Billion This Year
Evergrande Motors leaves the impression of being extravagant.
Initially, Evergrande planned to invest 45 billion yuan in making cars within three years. During the mid-term performance conference in August 2020, Pan Darong, Evergrande Motors’ CFO, introduced that Evergrande Group invested 14.7 billion yuan in 2019, 3 billion yuan in the first half of 2020, 2.7 billion yuan in the second half of 2020, and will invest 9 billion yuan in 2021, with a total investment of 29.4 billion yuan.
However, Evergrande Motors’ spending in reality is much faster than expected.
During the 2020 performance conference, Liu Yongzhuo, the CEO of Evergrande Motors, said that Evergrande had cumulatively invested 47.4 billion yuan in the new energy vehicle industry. Among them, the investment in the fields of vehicle R&D design, power batteries, automatic driving and intelligent networking was 24.9 billion yuan, and the investment in factory construction, equipment procurement, and parts procurement was 22.5 billion yuan.
This figure has exceeded the 30 billion Hong Kong dollars invested by Tencent, Sequoia Capital, and Didi Chuxing, among other investors, in Evergrande Motors. However, at the performance conference, Evergrande Motors exuded confidence in its financial strength. After all, the $2.3 trillion wealth of its parent company, Evergrande Group, is not something that everyone can match.
Besides the huge investment, Evergrande also had income in the automotive business in 2020.
In the early days, Evergrande Auto’s automotive revenue was 188 million yuan, accounting for approximately 1.2% of the group’s total revenue, with the remaining income coming from the healthcare business sector. In 2020, Evergrande Auto’s business had a gross profit of negative 118 million yuan and a net profit of negative 5.22 billion yuan.
Comprehensive Deployment in R&D, Production and Sales
When asked how Evergrande’s new energy vehicles can win in fierce competition, Evergrande Chairman Sean Xiao quoted the words of the Chairman of Evergrande Group, Xu Jiayin, saying, “If Evergrande wants to surpass others, it must strategically develop a new way of making domestic cars by opening up the concept of using global resources. “
That is, using all possible means to aggregate global resources and recruit global talents. This is what Xu Jiayin calls “buy, buy, buy”.
Regarding R&D, Liu Yongzhuo introduced that through international mergers and acquisitions and cooperation, Evergrande Auto has core technologies that lead the world in fields such as chassis architecture, powertrain, batteries, engineering technology, intelligent connected vehicles, and autonomous driving. On the day of the press conference, the H-SMART OS Hengchi intelligent connected system jointly developed by Evergrande Auto, Tencent, and Baidu also made its first appearance.
Li Junxiu, the dean of Evergrande Auto’s Global Battery Research Institute, stated that Evergrande’s high specific energy battery products that support super-fast charging will also be mass-produced in the second half of this year.
Regarding human resources, Evergrande Auto has established global research institutes, intelligent science academies, and other R&D institutions, with a global research team of more than 3,500 people. Among them, technical experts include Gao Jingshen, former vice general manager of GAC Toyota, Fang Chi, former dean of Dongfeng Automobile Engineering Research Institute, Li Junxiu, former dean of SK Group’s battery research institute in South Korea, Xu Xingyi, former senior technical expert of Ford Motor Company, and Alex James Hamade, former senior quality director of Tesla.
Regarding production, Gao Jingshen, Executive Vice President of Evergrande Auto, stated that Evergrande Auto has strategic cooperation with world-renowned engineering and technology companies such as MAGNA, EDAG, and AVL, as well as 148 major automotive component leaders worldwide, and has established multiple intelligent manufacturing bases in accordance with the standards of Industry 4.0, to ensure the product quality of Hengchi.
Currently, Evergrande’s intelligent factories in Tianjin, Shanghai, and Guangzhou have started trial production and commissioning.For sales layout, Evergrande Auto will build 36 Hengchi exhibition and experience centers and 1,600 Hengchi sales centers in cities such as Beijing, Shanghai, and Guangzhou. At the same time, leveraging the 43,058 service outlets and 21.28 million platform members of RV King, it will establish online and offline sales channels.
In terms of after-sales service, Evergrande Auto has established a joint venture with the State Grid Corporation of China to provide fast, convenient, and low-cost smart charging services. In addition, Evergrande also has 3,000 maintenance, repair, and after-sales service centers and over 43,000 service outlets to provide after-sales services to users at any time.
It is worth mentioning that although it does not have independent car-making experience, Evergrande Auto stated that cost control is also one of its major advantages. By synchronously developing 14 models, it plans to achieve annual sales of over one million vehicles by 2025 and over five million vehicles by 2035, achieving significant comprehensive cost reduction thanks to its economies of scale in R&D, production, supply, and sales.
Car-making requires A-level
Synchronously developing 14 models is probably the first case in the new energy vehicle industry.
Currently, there are already nine Hengchi models released globally, and the other five are under development. Evergrande stated that Hengchi models cover several categories, including A, B, C, and D levels, and include sedans, SUVs, MPVs, and cross-border vehicles.
At the same time, each model has a clear target market and benchmark models, including not only Tesla’s Model 3, Model Y, and Model L, as well as electric models of new car-making companies such as NIO ET7 and NIO ES8, but also traditional models of BBA.
According to the plan, the entry-level models of Evergrande Auto (below 200,000 yuan) will account for 43% of all models; mid-range models (200,000-350,000 yuan) will account for 37%; mid-to-high end models (350,000-500,000 yuan) will account for 12%; and high-end models (over 500,000 yuan) will account for 8%.
However, Evergrande Auto has not yet officially delivered any models for mass production, and its prices will be based on cost and market conditions in the future.
In 2020, Evergrande Auto announced its goal of achieving annual sales of one million vehicles by 2025 and five million vehicles by 2035, shocking the industry. Now, one more year has passed by 2025, and Evergrande’s goal has not changed, nor has people’s curiosity about its car-making efforts. With money, people, and vision, the only thing missing is cars to be tested in the market.
Evergrande Auto has vowed to not only make every effort to build cars but also to create “world-class technology and world-class quality” in new energy vehicles. Whether this boast can come true remains to be seen in the second half of this year, when the mass production of Evergrande’s self-developed “world-leading technology” batteries may reveal some true developments.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.