Investor That Can See The Future

Chapter 113

Automakers make contracts with dealers and pay incentives based on sales volume.

The higher the incentive, the larger the share the dealer takes. Of course, they will try to sell more aggressively by selling at least one more.

Therefore, it is common to give incentives to dealers when sales volume or market share falls.

However, if the sales volume does not increase as expected even if the incentives are raised, the company will see a loss. It is a natural result that if we raise the dealer’s share, our share of profits will decrease.

Compared to other manufacturing industries, the operating profit margin of automobiles is not very high. Even premium German brands such as BMW and Benz barely exceed 10 percent, and even less than 5 percent.

In the case of silver car sales, when sales peaked, it exceeded 10 percent, but now it is hovering around 6 percent.

“If dealers boycott sales, they may have to partially shut down the plant.”

One of the three biggest lies is the word of a merchant who sells at the bottom. But sometimes this statement is also true.

When the stock is full, the company sells it even below cost. The reason you sell even at a loss is because it makes a profit.

Automobile companies have high fixed costs. Whether the car sells well or not, fixed costs continue to be incurred. If you start reducing production, then your losses will grow out of control.

Taekyu said to me.

“Are all other companies paying attention to dealers?

“There is only one exception.”

“Where?”

“Nicola.”

Unlike other automakers that contract with dealers to sell, Nikola sets up a directly managed store in a large city for exhibitions and test drives, and sales through the Internet.

There are two reasons why this is possible.

First, Nikola is a new company. Since there was no contract with the dealer in the first place, we were able to adopt the Internet sales method without much friction.

Second, it occupies a unique position in the electric vehicle market. There is no need to rely on dealers’ sales networks because consumers find and purchase on their own.

Model TH, which was recently released, is a representative example.

We took reservations a year before the launch, and despite having to pay $1,000 in advance, 500,000 people flocked to the reservations.

In retrospect, the reason that Nikola was able to continue to invest despite huge losses is because there is no margin given to dealers.

Taehyung scratched his head.

“I thought everything would be fine if I just invested money. The reality is not that easy.”

“That’s it.”

I never expected to be faced with such a complex situation.

“But what is the reason for the decrease in sales?”

The answer is obvious.

“Because another company’s car is better.”

I asked Sergei.

“How much money do you currently have?”

“It’s just under $10 billion.”

OTK Company has invested $25 billion in Karos. More than $15 billion has already been spent on mergers and acquisitions and factory construction.

Rustbelt’s factory establishment is hard to slow down. It is no exaggeration to say that Ronald was elected because of Ronald’s core promise to increase jobs in the US manufacturing industry.

Neither the Rust Belt voters nor Ronald will stand still if he shows up to get him out of the way now.

When the plant is completed, production will more than double.

But if it doesn’t sell, the factory becomes a money eater. Maintenance costs will only continue to rise, and the deficit will snowball.

Technology development, new car development, factory construction, mergers and acquisitions, etc.

The place where the money will go is heaven and earth.

On the other hand, the money coming in will be cut off. If you make a mistake, you can even quit before you even launch a proper new car.

Ryan said.

“How about launching a partial change model and strengthening sales promotion?”

“That way we can put out an urgent fire. But how far will that go?”

Both the frame and the engine deteriorated due to a lack of timely investment. Changing only the design and interior materials is now the limit.

I looked around the executives and said coldly.

“Chrysler didn’t buy Karos, Carlos bought Chrysler. You are the management of Karos, not the management of Chrysler. Do you know what I mean?”

The executives looked at me in unison.

“In the future, the Chrysler brand will disappear. What you need to build is not a Chrysler car, it’s a Karos car.”

Ryan said.

“The question is whether we can survive until then. If the relationship with the dealer is disrupted, future sales will be hampered.”

“Don’t worry about friction with the dealer. You just need to make a car that consumers want to buy, and they will reach out to you.”

You can’t be dragged to the dealer forever. It is also worth thinking about selling directly like Nikola at this opportunity.

The question is whether we can make such an attractive car… … You have to trust Carlos’ technology.

“I invested in Karos because I had a dream of making a car that no one else has ever made. You don’t have to worry about finances. Whether it’s selling another company or doing an IPO, we’ll come up with something to support it. So, make the car you want to make.”

* * *

Carlos CEO Daryl Sagan was also invited to the inauguration.

As we were getting ready to go to Washington, D.C. together, I got a call from Golden Gate CEO James C. Goldman.

He [heard he came to America. How were you?]

“Thanks for your concern, I am doing well.”

We said goodbye after a long time.

[Is Henry doing well there?]

“It is very helpful.”

James laughed.

[Haha, I’m glad. It’s the inauguration ceremony in two days now.]

“Is James going to be there too?”

During the presidential election, almost all financial companies were on Diane’s side. The only exception is Golden Gate.

Golden Gate withdrew from Diane Camp at the last minute and sided with Ronald. Perhaps it was his decision.

[Someone else will go instead of me. Because I hate places with a lot of people.]

“i See.”

After all, like a hermit investor, he doesn’t go out in public places.

[He heard that he was going to Washington D.C. after stopping in Detroit, so he had a private plane ready at the airport.]

Even a private plane for me?

It’s a little burdensome, but wouldn’t it be polite to decline a favor you’ve been given?

“thank you for your consideration.”

[Then I look forward to meeting you soon.]

I said goodbye and hung up the phone.

Taek-gyu asked.

“What about James?”

“Cancel the plane ticket.”

* * *

Gulfstream was waiting at the airport.

Daryl said in a curious way.

“Thanks, I’m riding a private plane.”

We sat comfortably facing each other. I’ve ridden it once before, and the seats are wide and comfortable.

“I haven’t even been to the inauguration of the Korean president, but I think I will be invited to the inauguration of the US president.”

“That’s it.”

If you think about it, it’s very strange.

Taek-gyu took a beer out of the refrigerator and handed it to me.

“Do you remember when we went to Japan together in the past?”

“Huh.”

That was the first time I realized that the economy seats of low-cost airlines were so narrow.

“It was fun back then.”

“… … I was not having fun.”

For 3 nights and 4 days, I couldn’t tour properly, and I was just dragged around Akahabara, Komi Kenny, and here and there. In fact, I couldn’t do any shopping, and I came back with only comic books and game CDs in my suitcase.

I should have known from the moment they told me they would pay for accommodation. But it must have been a good memory for Taek-gyu.

I asked Daryl.

“What is the public opinion about Ronald now?”

He smiled bitterly.

“The support in the Rustbelt is still high.”

“That’s fortunate.”

“But not elsewhere.”

“… … .”

I thought so.

When a new government is inaugurated, the approval rating usually rises with anticipation. Surprisingly, however, Ronald’s approval ratings continued to decline after his election.

Currently, his approval rating is less than his own.

Protests against Ronald still took place around the world, including in the United States. Even if the business is to be successful, Ronald must do well.

I kept talking with Daryl about the future.

“If we hurry, we could launch an internal combustion locomotive with autonomous driving technology within this year. However, the ultimate future car is an electric car or hydrogen car equipped with autonomous driving technology. But for now, we only have software technology.”

No matter how good an operating system is, you need a CPU, semiconductor, and motherboard to run it.

“The problem is the battery.”

Electric vehicles require large-capacity batteries instead of oil tanks. However, there are limited companies that can mass-produce car batteries.

Therefore, it is essential to partner with a battery company to launch an electric vehicle.

From the perspective of automakers, if they make and sell electric vehicles, they have to share profits with battery makers. For this reason, everyone has been hesitant to expand electric vehicles.

You can slow change, but you can’t stop it.

While automakers were hesitating, a start-up company, Nikola, joined hands with Japanese battery maker Technics and quickly jumped into the market.

As Nikola began to lead the electric vehicle market, automakers that had been left behind began to develop and launch electric vehicles all at once. But for now, they are following Nikola’s footsteps.

“It’s similar to Kodak’s insistence on film cameras and then missing out on digital cameras.”

Taehyung nodded his head.

“Like Nintendo, which pushed ROM cartridges, was pushed by the Sony PlayStation, which chose CDs?”

It’s a surprisingly accurate analogy.

The operating system created by Karos is a system that can control the entire vehicle, not just autonomous driving.

As such, it is more suitable for an electric vehicle than an internal combustion engine vehicle.

“I think we should consider acquiring a battery company or cooperating with it.”

The question is money, after all?

While we were talking, the private plane flew towards Washington D.C.

* * *

The inauguration ceremony was held on Capitol Hill in front of the Capitol.

Security was tight. He had to go through invitations and undergo a thorough body search, just like when he boarded a plane.

I thought the checkpoint search was too much, but no one had any complaints. After the 9/11 terrorist attacks, this has long been a daily routine for Americans.

A few days ago, I thought the weather was bad, and it looked like it was going to rain. However, for security reasons, umbrellas are prohibited.

Anti-Ronald protests were in full swing outside the inauguration hall.

Hundreds of people held a surprise demonstration with pickets, and the police forcefully dispersed and arrested the protesters. Either way, the inauguration hall was packed with spectators.(Read more @ wuxiax.com)

Delegations from 92 countries were present to celebrate Ronald’s inauguration.

Taegyu said.

“Isn’t that guy the prime minister of our country?”

When I turned my head, I saw the figures of politicians and businessmen, including Prime Minister Hwang Gyu-sang. It was so far away that I couldn’t see his face very well.

I said to Taek-gyu, who was frantically looking around.

“It’s crazy, so stop looking around.”

“Why? It’s amazing.”

“… … .”

Actually me too

“Wow! Diane is here too.”

Her appearance caused a slight stir in her inauguration. This is Diane’s first public appearance since her presidential defeat.

She smiled brightly and shook hands with several people.

“Your face looks bright.”

“It wouldn’t be like that.”

Diane is an elite politician from the Underwood family, who has served as a senator and secretary of state. She was of the opinion that it would be the easiest election of all time, just when political heresy Ronald Stamp was chosen as her opponent.

However, the results were unexpected.

The polls put Diane ahead of Ronald by more than 3 million votes, but she was significantly behind in the electoral college. It can be said that her political career is virtually over with this election defeat.

Diane, who was shaking hands with the people around her, suddenly walked towards her.

Taek-gyu stabbed me in the side.

“Aren’t you coming to me?”

“surely… … .”

But really, Diane stood in front of me and held out her hand.

“Nice to meet you. This is Diane Underwood.”

There was a natural dignity in her expression and voice.

I suddenly grabbed her hand and that of her.

“nice to meet you. This is Jinhoo Kang.”

She spoke to me with bones.

“We had a chance to meet once before, but this is the first time we see each other.”

He seems to remember that I asked for a meeting before the election. Diane turned down the request, and I went to Ronald that way.