Which one has better car-making genes, Gree or LeTV?

Among Chinese entrepreneurs, apart from Dong Mingzhu, chairman of Gree Electric Appliances, and Jia Yueting, founder of LeTV, there is probably no third person who has such a deep obsession with making cars.

At the annual meeting of Chinese business leaders held last weekend, two business influencers who are at the center of public attention once again announced their ambition to build cars.

Dong Mingzhu was still furious about the failure of the Yinlong acquisition. During her speech, she angrily denounced those who opposed the acquisition for only seeing the immediate benefits and being short-sighted. She vowed that "although we did not succeed in the acquisition, I must do it. I hope that everyone will see the cars I built, use Gree's mobile phones, control the temperature at home, and enjoy the delicious food brought to you by Gree. This is my dream."

Jia Yueting, who is also in the whirlpool of public opinion, brushed off the capital chain difficulties faced by LeEco in his speech. Jia Yueting firmly believes that "if we look at the future from now, LeEco's car manufacturing seems to be a gamble that goes against common sense; LeEco is the most suitable and capable company in the world to make Internet smart electric vehicles."

Both speeches were quite emotional, Dong Mingzhu was angry and Jia Yueting was tearful. These subtle differences in emotions not only reflect the differences between state-owned enterprises and private enterprises, but also reflect the different meanings of car manufacturing to the two entrepreneurs. For Gree, car manufacturing is icing on the cake, while for LeTV, it is timely help.

Gree's manufacturing inertia and sentiment

Dong Mingzhu doesn't actually need a car to prove that she's not out of date.

Gree is the first company in China to achieve a 100 billion scale with a single product. Air conditioners play a decisive role in Gree's business. Unlike other home appliance companies, Gree has maintained a high level of profitability in air conditioners for a long time. According to Gree's third quarter financial report this year, the air conditioner industry has bottomed out and rebounded, with both revenue and profit growing at 332.46 (up 5.84% year-on-year), and a net profit of 4.827 billion yuan attributable to the parent company's shareholders (up 14.05% year-on-year). As a necessary durable consumer product, the air conditioner industry is not in danger of being eliminated.

Even if Gree is still a small company in the air-conditioning industry, it can still have a place in China's manufacturing industry. But this obviously does not meet Dong Mingzhu's self-definition. After completing the vertical integration of the upstream and downstream of the air-conditioning industry and the civil-commercial industry, horizontal expansion has almost become the only option for Gree Electric. Therefore, Dong Mingzhu has tried to enter the fields of small household appliances and mobile phones. Therefore, in the program "A Date with Lu Yu", she repeatedly told Lu Yu to use Gree rice cookers; at the annual meeting of Chinese business leaders, she vowed to make a mobile phone that consumers would not have to replace for three years.

It should be said that up to now, Gree's achievements in the expansion of small household appliances and mobile phones are far less impressive than those in air conditioners, especially in the mobile phone business. One of the key problems is that Dong Mingzhu cannot transcend the manufacturing mindset. High quality and mastery of core technology - the secret of the success of Gree air conditioners, which Dong Mingzhu is proud of, failed after being simply copied to the mobile phone industry: consumers prefer a cooler mobile phone to a mobile phone that can be used for three years. Otherwise, it would be completely unnecessary for Apple and Xiaomi to launch new products every year.

Like many people born in the 1960s, Dong Mingzhu could not escape the shadow of the shortage economy, so she habitually designed, manufactured and marketed mobile phones, which were fast-moving consumer goods, as durable industrial products. This doomed Gree's tragic fate in making mobile phones - very hard-working, but users did not buy it. I wonder how many people still remember that at the China Manufacturing Summit in June this year, Dong Mingzhu raised the Gree mobile phone above her head and dropped it heavily, which surprised Chen Weihong and Long Yongtu who were standing by. Dong Mingzhu's drop completely pushed Gree mobile phones into the camp of feature phones, if you still remember the marketing events of Nokia and Bird dropping mobile phones.

So what is the significance of making cars for Gree? In terms of profit margin alone, the automobile industry is no longer popular. According to statistics from the China Association of Automobile Manufacturers, the profit margin of the automobile industry was as high as 28.45% in 2003, but it had been diluted to less than 10% in 2015.

The automotive industry has two main attractions for Gree:

First, the scale is huge. In 2015, the main business income of China's automobile industry enterprises above designated size exceeded 7 trillion yuan. In comparison, air conditioners are only a fraction of that, and of course they are unmatched by small household appliances and mobile phones.

The second is the opportunity period of technological iteration. The transition from traditional fossil fuel engines to new energy power has opened up a rare time window for latecomers. In China, new energy vehicles are in a situation where a hundred companies are competing for supremacy, and Gree still has a chance.

LeTV's concept, ecology and sentiment

Unlike Gree, in LeTV's car-making story, billions have been invested in the car project and there is absolutely no reason to give up.

LeEco is probably one of the most controversial Internet companies in China. It is the strongest advocate of the “ecosystem”, but it is also accused of being a “PPT company”. Unlike Gree’s quality-driven approach, LeEco is driven by the ecosystem and dreams.

Judging from the recently released third-quarter financial report, LeTV has a booming momentum: total revenue in the first three quarters reached 16.795 billion yuan, with a growth rate of more than 100%. The sharp increase in revenue was mainly due to the hot sales of super TVs, membership payments and rapid growth in advertising business.

From the perspective of content industry layout, LeTV has basically covered the entire industry chain from "platform + content + terminal + application", and the cumulative sales of LeTV TV has just exceeded 10 million units. Compared with its peers, Youku and Tudou are not tied to specific smartphones and TVs, and although Xiaomi has more abundant hardware operations, it also compromises smart TVs. LeTV has gone further on the road of integrating software and hardware in the content industry.

However, LeTV's moat of "platform + content + terminal + application" is still not deep enough, and the ceiling is obvious: LeTV faces resistance from Tencent and Alibaba in terms of content copyright, and also faces a two-pronged battle between traditional home appliance manufacturers and Internet companies in terms of smart terminals. While LeTV's business grew rapidly in the first three quarters, the high cost it paid cannot be ignored: LeTV's operating cost was 14.2 billion yuan, of which sales expenses were 1.6 billion yuan, a year-on-year increase of 160%.

In order to maintain a strong stock price and continue financing, Jia Yueting must tell a new story.

The latest official version of this story is "LeSEE has rewritten the history of the automobile manufacturing industry and once again made our boasts come true." At the launch conference in April this year, when LeTV's supercar LeSEE was voice-controlled by his superphone Le Max 2 and automatically drove back to the parking space on the stage, Jia Yueting wiped the tears from his face.

However, there is still an obvious flaw in this story - LeSEE is still a concept car, and Jia Yueting's boasting has only been half fulfilled. There are still ten Teslas between concept and mass production, and it also depends on whether Aston Martin and Faraday Future selected by LeTV as the OEM and technical support for the super car can really be in place.

Jia Yueting gave the conditions and timeline for mass production during the weekend of the listing: "Now as long as we have several billion to 10 billion, we will have enough for mass production. Mass production should be around next year."

Gree and LeEco, which one is more likely to transform into a car company?

Judging from the path they chose in car manufacturing, Gree and LeTV have taken two completely different paths.

Dong Mingzhu chose to start with the core of electric vehicles - battery technology.

Zhuhai Yinlong, which missed out on Dong Mingzhu's chance to work with the company, successfully developed the fourth-generation high-density lithium titanate battery in 2015, which is said to have reduced costs by 40% and increased energy density by 30%. Zhuhai Yinlong's official website states that the group is a leading company in the closed industrial chain of new energy vehicles, and now has the largest production capacity and most automated power and energy storage battery production line in China. It is also the only new energy company in the world that can produce both lithium titanate batteries and lithium iron phosphate batteries. In 2015, Yinlong's annual sales of pure electric buses ranked seventh in the country, with a market share of 3.6%.

Jia Yueting chose an ecosystemist path that is unique to LeTV.

The production and technology adopt the self-built + outsourced model. Overseas, it cooperates with Faraday&Future. In China, it has won a plot of land in Deqing, Zhejiang, but the partner has not yet been disclosed. Compared with Yinlong's electric buses that have been put into operation in many places, as a Silicon Valley startup, Faraday&Future just obtained the self-driving car road test license issued by the California government in June this year together with 13 companies including Tesla, BMW, and Google. As for batteries, the company currently relies mainly on the supply of LG Chem.

Judging from the timing, LeTV undoubtedly has the upper hand.

Although she is the tenth largest shareholder of Gree Electric Appliances, Dong Mingzhu's status is closer to that of a professional manager. In addition, the nature of a state-owned enterprise also determines that Gree's decision-making process and considerations are more complicated than those of private enterprises. In contrast, Jia Yueting firmly holds the actual control of LeEco, and LeEco Auto is not within the business of listed companies, which means that it is not restricted by many listed companies and its car manufacturing progress is much faster than Gree.

But if we look at industry experience alone, although both Gree and LeTV are cross-border, new energy vehicles are closer to traditional manufacturing, and have higher requirements for technology accumulation, quality control, supply chain management and sales support, which are all based on code, traffic, advertising and membership income models that LeTV is unfamiliar with. In this regard, Gree's manufacturing thinking and capabilities accumulated in air conditioners are closer to the requirements of new energy vehicles for game participants.

Apart from the market and capital, the biggest risk faced by Dong Mingzhu and Jia Yueting is betting on the future technology route of new energy vehicles.

At present, both Gree and LeEco have chosen the path of pure electric battery drive. In the international arena, there has always been a pattern of competition among the three paths of hybrid, pure electric and fuel cell. However, the Chinese government hopes to achieve "overtaking on the curve" in the rapid development of new energy vehicles. In the catch-up mode, it has basically adopted a biased and simple disguised choice of a single technical route of pure electric vehicles, which has directly shaped the domestic electric vehicles into a single model and affected Gree and LeEco's imagination of future cars.

Compared with pure electric technology, the main advantage of fuel cell vehicles is that they can be refueled quickly, travel far, and are applicable to a wide range of models, but China's related research and development lags far behind other developed countries. The Japanese government proposed the concept of a hydrogen society as early as 2014, and Toyota, Honda, and Nissan have all produced fuel cell vehicles. South Korea's Hyundai Motor is also conducting actual operational verification of hydrogen energy infrastructure with the US Department of Energy. The lack of domestic fuel cell technology has forced Dong Mingzhu and Jia Yueting to embrace all-electric vehicles without leaving any room for retreat.

The future of Gree and LeTV’s car manufacturing is still difficult to predict. The only thing we can be sure of now is that Dong Mingzhu and Jia Yueting are both brave people.

More than 30 years ago, a young man in Zhejiang also clamored to build a car, saying that a car is nothing more than four wheels and a sofa. Later, he actually built a car. Last year, he advertised version 2.0 of his prediction: the future car is nothing more than four wheels and a computer. He must have glimpsed the future from NASA's Mars rover.

Let’s save the blessings for the brave ones.

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.