Super Rich from Winning a Lottery

Chapter 415 271: Huasheng Automobile's Explosive Sales_3

Right now, Huasheng Automobile Group's annual production capacity is at most 300,000 vehicles.

But because we haven't officially gone into full production at the beginning of the year yet, and are only doing R&D trial production and production line adjustments, the total capacity for this year won't exceed 200,000 units at most.

So starting next year, production capacity will greatly restrict Huasheng Automobile's sales and development; we have to solve the capacity expansion problem as soon as possible.

Our sales volume has already reached 200,000 units this year, and next year we'll have at least 400,000 units in sales.

If we're more optimistic, it's even possible to sell 600,000 units in a year—but the premise is that our production capacity must keep up.

This of course has a basis. For example, in 2009, BYD's annual sales reached 400,000 vehicles, and this year, that is 2010, their sales will break through 800,000.

By that projection, Huasheng Automobile selling 600,000 vehicles next year is not something particularly difficult.

Moreover, in the coming years, domestic auto sales will continue to grow sharply, because the domestic economy is developing faster and faster. People have more money, more and more people are buying houses—since they've bought a house, they'll definitely want to buy a car too, right?

If they really don't have the cash, they can also take out a mortgage loan like when buying a house, repay one or two thousand yuan a month, and it'll be paid off in three to five years, with much less pressure.

Fortunately, the Huasheng new energy vehicle production base in Jian'an City is about to be completed and put into operation.

Since new energy vehicles don't sell well and can't be put into large-scale production for now, we'll use it to produce fuel vehicles first.

But the capacity of the new energy production base in Jian'an City is at most 200,000 units, so we still need to further expand the plant and increase capacity!

Yi Anguo was thinking about increasing investment in the Jian'an new energy vehicle production base; the local government in Jian'an would definitely be very supportive of that. But Huasheng Group's executive president, CEO Wang Jianping, voiced his opposition.

"I know, Chairman, you want to contribute to the development of your hometown, but we are a business. Besides doing what we can for local development, we also have to take operating costs into account."

"Xijiang Province already has an annual production capacity of 300,000 units. After adding the 200,000 annual capacity from the Jian'an new energy production base once it's completed, we'll reach 500,000 units of annual capacity. That's already enough for Xijiang Province, and can even radiate to neighboring provinces."

"To save on transportation costs, we should lay out production lines across the whole country, instead of confining ourselves to Xijiang Province."

"Even though we have our own logistics company, logistics costs still have to be factored in. A car may sell for a high price, but the cost is also high, and the net profit isn't that high."

"For example, say our net profit per car sold is 10,000 yuan—but that's the net profit when we sell within Xijiang Province. If we ship to the northern market, we have to add logistics costs of over a thousand yuan. That means we were supposed to earn a net profit of 10,000 yuan per car, but in the end we can only earn 9,000, or even less."

"If we also have a production base in the North, that would be equivalent to increasing profit by more than 1,000 yuan per vehicle. If we sell 100,000 cars a year in the North, that's over 100 million yuan in costs right there."

"Even if we have our own logistics company and can bring costs down to the minimum, we still have to spend tens of millions in extra costs every year, right?"

"If we just locate the production lines directly in the North, we can save a substantial amount in logistics expenses every year, and that portion can be directly converted into net profit."

Previously, Yi Anguo had only been thinking simply about helping his hometown develop and boosting the local economy; he hadn't considered the logistics cost issue.

He also felt that when a car sells for hundreds of thousands, two or three hundred thousand, at least fifty or sixty thousand, seventy or eighty thousand and up, the logistics cost is just a minor matter.

But he hadn't expected that once you actually do the math, it's shocking: selling 100,000 cars a year would add over 100 million yuan in logistics costs.

This obviously greatly increases the company's burden and is clearly very uneconomical.

And in places like the Northeast, land prices are even cheaper now, labor costs are also lower, and crucially, the Northeast is one of our country's old industrial bases. If we set up a plant there and directly acquire some of the local automobile factories that are on the verge of bankruptcy and closure, it's very simple and convenient, and the investment will be lower and more cost-effective than building a new plant from scratch.

In addition, the time to bring production online will be faster, and there's also a large number of skilled workers who can directly start production.

If we build a new plant ourselves, not only will the investment be larger, but it will also take a long time to complete and start production, and we'll need to recruit a large number of skilled technical workers.

Even if you recruit a large number of new local workers, they still need training and need experienced technical staff to lead them. If everyone is a rookie on the production line, that definitely won't work.

"What you're saying also makes sense, but this matter has to be handled quickly!" Yi Anguo thought for a moment and said.

"Although our existing capacity is still sufficient for the moment, and in the first half of next year we'll have the Jian'an new energy vehicle production base coming online, which should be enough to get by, capacity may become quite tight in the second half of the year."

Wang Jianping said with some doubt, "By next year we'll have an annual capacity of 500,000 vehicles. That should be more than enough, right?"

"This year our sales won't exceed 200,000 units at most; even if we double that next year, it'll only be 400,000."

Yi Anguo smiled and said, "You should be a bit bolder. While our car sales this year won't exceed 200,000 units at most, there are reasons for that. First, this is our first year in the market; second, we're constrained by production capacity."

"Do you know what BYD's sales volume is this year? It's 800,000 units. We're projecting 600,000 units for next year—does that still sound like a lot to you?"