Lang Xianping: LeEco and Internet companies cannot succeed in making cars

Lang Xianping, a well-known "Internet celebrity economist", recently expressed his personal views on "Internet car manufacturing". In Lang Xianping's view, four major difficulties will cause new car manufacturing companies to fail.

At the China Business Leaders Annual Conference, Jia Yueting responded to many recent questions about LeEco's stock price, supply chain, funding, and cars. During the meeting, he made it clear that he would not give up on making cars. In my opinion, this kind of reflection is nothing more than a self-satisfied propaganda.

You know, when LeEco was at its peak, we added BAT and LeEco to form TABL, which shows that it was at its peak. If LeEco had listened to my advice, it might not have come to this point. Because in May this year, I have repeatedly told these Internet companies that you will not succeed in making cars.

LeEco’s biggest failure is that its port ecosystem loses money:

LeTV has seven major ecosystems, including four resource categories: Internet finance, Internet and cloud, content, and sports, and three port categories: mobile phones, televisions, and automobiles.

He has nearly 80 billion in cash, and since he doesn't do research and development, the only thing he can do is acquire other people's companies.

Take mobile phones as an example. If you can set standards like Huawei or Qualcomm , and not use their standards, and can make your own chips or screens, you can also succeed because you have core competitiveness. LeTV has none of these advantages. The only thing it can do is to acquire, and then start to subsidize. This is LeTV's capital operation model. This kind of capital operation is what I hate the most, and this kind of capital operation will never succeed. According to the data released by LeTV itself, in September 2015, LeTV's mobile phone accounted for 0.42% of the market and lost 400 million yuan. In September this year, it accounted for 0.97% of the market and subsidized 1.3 billion yuan.

LeTV's TV business is indeed not easy. After LeTV acquired VIZIO in 2016, the combined LCD TV shipments reached 14.57 million units, Samsung 47.9 million units, LG 279.1 million units, Hisense 14.35 million units, and TCL 13.8 million units, ranking third. The problem is that TVs are also subsidized and burned money. In 2014, the market share was 3%, and the loss was 184 million yuan. In 2015, it accounted for 6% of the market share and lost 1.352 billion yuan. In 2016, it rose to 11%, and lost 2.097 billion yuan. The total cumulative loss was 3.633 billion yuan. According to the estimate made by 2D Cloud Network, LeTV's market share in September this year was as high as 19%, which is an incredible and great achievement.

LeEco's initial success brought him huge profits, and he accumulated a lot of wealth through capital operations. This wealth mainly came from two aspects. The first part was the investors' money. The second part was the money taken from the stock market, such as cashing out at high prices and creating concepts to cash out at high prices. When the stock price rose very high this year, he cashed out billions at high prices. Then he used equity pledges and private placements to put the money into ecological subsidiaries with concepts, and continued to increase the performance of listed companies through consolidated financial statements, and then increased the stock price and cashed out again. Then the losses were put into ecological subsidiaries of non-listed companies. This is a standard capital operation method.

Through these two methods, more than 80 billion yuan was accumulated, and then a lot of things were done. From the distribution of its financing, 240 million yuan was invested in the Internet and cloud, 4.3 billion yuan in sports, 5 billion yuan in mobile phones, 6.4 billion yuan in real estate, 10.8 billion yuan in content, 15.1 billion yuan in Internet finance, 18.7 billion yuan in TV, and 4.7 billion yuan in automobiles, so there is still 14.8 billion yuan in cash left. However, LeTV plans to invest another 17 billion yuan in automobiles this year, so it will definitely be out of money, so LeTV's capital chain will be tight or even broken.

The estimated investment of 17 billion this year is already stretched, but they plan to invest another 41.6 billion in 2017. However, I believe that this amount of money is not enough if they are making cars.

Why can't cars be made? Because there are four major difficulties that are unavoidable .

The first difficulty is the amount of capital investment that you can’t imagine. Apple ’s cash reserve is 230 billion US dollars, but the car failed. LeEco invested 4.7 billion and will invest another 17 billion and another 41.6 billion. Can this amount of money compare to Apple’s?

Second, the complexity of the design is beyond your imagination. A car has 7,000 parts, not counting screws and nuts. If screws, nuts, small accessories, and small wires are added, there are about 30,000 parts. Take these 7,000 parts as an example. Each part has a design standard. Take Toyota as an example. The design standard of one of the non-major parts is a 1,000-page book. Does LeTV have this ability?

The third is that the technical difficulties are beyond your imagination. It took Tesla five years to produce electric cars, and it relied on Toyota and Mercedes-Benz for help in the most critical times.

Fourth, the complexity of supply chain management is beyond your imagination. If you produce 1,000 cars a day, 30,000 spare parts must arrive on time from all over the world. If a nut fails to come in, the car cannot be assembled and you cannot sell it.

On May 23, I told many Internet companies that it was impossible to succeed in making cars, so don't try. If you had calmed down a little and listened to Professor Lang's advice, you wouldn't be in this desperate situation today. It's a pity that you are running blindly.

The entire LeEco empire is in such a predicament because of improper thinking. And after entering this predicament, what will you do if investors dare not invest after seeing negative news? So I am very worried that LeEco's 80 billion empire will disappear in the future. Through LeEco, I want to warn our entrepreneurs again that people's success is not based on blindly rushing, but on careful planning and being conservative. I hope everyone will pay more attention and carefully understand the complexity of the world.

In the final analysis, to make smart cars well, the first step is to make cars well first. The automobile industry best represents the true level of a country's industrial system, and our automobile industry is currently far behind Europe, the United States and Japan. In key technical fields such as engine performance, safety, and exhaust emissions, we can only catch up if we make great efforts and work hard. The "curve overtaking" path imagined by Internet car companies does not actually exist. I think it is easier for traditional car manufacturers to turn cars into smart mobile terminals than for Internet companies to make cars. So I ask these Internet companies to do their main business well and do what they are good at, and not to diversify blindly.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.