Tech Giants: Starting from Bankrupt Companies

62: Chapter 62: Chinese Standards, Global Echoes 2The negotiations with Hyundai were the most straightforward.

Hyundai Motor Group Vice Chairman Chung Eui-sun led the team personally. The forty-eight-year-old heir was decisive in his style. Ten minutes into the meeting, he laid out a complete plan:

”Hyundai and Kia brands plan to sell 1.2 million electric vehicles over the next three years. We need stable, high-quality, and cost-competitive electric drive systems. Spark Technology’s Bedrock 2nd Generation battery safety meets our requirements, and the Qingtian 2 Permanent Magnet Synchronous Motor and Control System performance is sufficient.”

He pulled up the requirements list: ”Specifically: From 2017 to 2020, we need to purchase 400,000 sets of electric drive systems annually, with 70% being the lithium iron phosphate version and 30% being the ternary lithium version. We require the landed price to be 15% lower than similar products from LG Chem, with warranty standards consistent with LG.”

”A 15% price difference is too high,” Spark Technology’s Vice President in charge of business shook his head. ”We can offer a maximum of 8% lower than LG, and that’s on the condition that the annual purchase volume truly reaches 400,000 sets.”

”What if Hyundai lists Spark Technology as the sole supplier?” Chung Eui-sun threw out a bargaining chip. ”Hyundai can promise that starting in 2020, all electric vehicle models’ electric drive systems will be purchased exclusively from Spark Technology, and we will no longer use products from LG and SK. The annual purchase volume will increase to 800,000 sets.”

This was a significant commitment. Hyundai Kia Group is currently the fifth-largest automotive group globally, with annual sales exceeding 7 million vehicles. If the transition to electrification goes smoothly, an annual purchase volume of 800,000 sets is possible.

The conference room went quiet. Everyone looked at Su Chen.

Su Chen quickly calculated in his mind: If Hyundai fully turns to Spark Technology, it means LG will lose a major client, which would shake the foundation of the South Korean battery industry. But at the same time, Spark Technology would also need to invest heavily to expand production capacity to meet Hyundai’s demand. Both risks and opportunities were significant.

”A 15% price reduction is possible,” Su Chen finally spoke, ”but there are a few conditions: First, Hyundai needs to prepay 30% of the payment as a deposit for capacity expansion; second, the contract period must be at least five years, and if Hyundai terminates it early, they must pay a penalty of 20% of the estimated purchase amount for the remaining years; third, Hyundai needs to open its vehicle electronic and electrical architecture interface standards to Spark Technology so we can perform deep adaptation.”

Chung Eui-sun and his team discussed rapidly in Korean. Five minutes later, he nodded: ”Acceptable. But Spark Technology must establish a technical service center in South Korea, equipped with at least fifty engineers to provide 7x24 hour technical support. Once Hyundai’s production line stops, the loss exceeds 5 million Korean Won per hour.”

”No problem,” Su Chen agreed. ”We can even establish a joint venture with Hyundai in South Korea to build a battery pack assembly plant; we will only assemble, not manufacture the battery cells, so the response will be faster.”

”Then it’s settled,” Chung Eui-sun was efficient. ”Can we sign the memorandum today? I have to fly to Germany tomorrow.”

At 3:00 PM, three memoranda were signed simultaneously.

The three major Japanese and Korean automakers opened their doors to Chinese technology in three different ways.

June 12, Shanghai, Waldorf Astoria Hotel.

The China region presidents of the three German luxury brands—Mercedes-Benz, BMW, and Audi—appeared on the same stage, a rare occurrence.

This in itself was a signal—facing the rise of Chinese technology, former competitors chose to join forces to respond.

Behind the scenes of the joint press conference.

One hour before the press conference, in the presidential suite on the top floor of the hotel, three German executives were conducting final negotiations.

Mercedes-Benz China President Hubertus Troska, fifty-nine years old, having worked at Mercedes-Benz for thirty-seven years, was a typical old-school Stuttgart manager. He held a coffee cup, his brow slightly furrowed: ”Are we really going to authorize gearbox technology? That is one of the last trump cards of Mercedes-Benz fuel vehicles.”

BMW China President Jochen Goller, fifty-two years old, relatively young and open-minded, shrugged: ”Hubertus, how many more years can that 9AT be used in the electric era? The EQ series no longer uses gearboxes. Using this to exchange for Spark Technology’s full set of electric drive systems is a good deal.”

Audi China President Gaby-Luise Wüst, fifty-seven years old, the only woman, had a clear train of thought: ”It’s not just the gearbox. The technology packages the three of us are putting forward: Mercedes-Benz’s 9AT, BMW’s chassis tuning database, Audi’s quattro all-wheel-drive patents—these are all top-tier technologies from the fuel vehicle era, but their value is diminishing in the electric platform era. And Spark Technology’s electric drive system is the admission ticket for the next decade.”

She pulled up the data: ”I have calculated that if we develop an electric drive system with equivalent performance ourselves, each company would need to invest at least 10 billion Euros over three years. And success is not guaranteed. Now, using technology that is about to become obsolete to exchange for a scheme that is already mature and leading is a win-win in terms of finance and strategy.”

Hubertus Troska sighed: ”I understand the logic, it’s just... psychologically hard to accept. Twenty years ago, it was us exporting technology to Chinese companies and collecting high technology transfer fees. Now it is the other way around; we have to use technology to exchange for technology.”

”The world has changed, Hubertus,” Jochen Goller patted his shoulder. ”BMW engineers have disassembled Spark Technology’s No. 4 drone; their electronic control algorithms, material processes, and system integration capabilities have indeed reached the world’s top level. We either cooperate or get eliminated.”

The three reached an agreement.

Press conference venue.

At 3:00 PM, the press conference officially began.

More than three hundred reporters sat in the audience, with cameras aimed at the three presidents sitting side by side on stage.

Hubertus Troska spoke first: ”Mercedes-Benz, BMW, and Audi, as representatives of German luxury cars, have competed for over half a century. But today, we stand here to announce a joint decision—because we have all seen the unprecedented changes in the automotive industry over the past century.”

Jochen Goller followed up: ”Electrification and intelligence are irreversible trends. In this trend, the Chinese market is not only the world’s largest automotive market but has also become one of the sources of technological innovation. Spark Power’s technological breakthroughs in the field of the three electric systems have allowed us to see the possibility of win-win cooperation.”

Gaby-Luise Wüst announced the core content: ”After in-depth negotiations, Mercedes-Benz, BMW, and Audi have reached a comprehensive cooperation agreement with Spark Power. Starting in 2017, the three brands’ next-generation high-end electric platforms—including the Mercedes-Benz EQS subsequent models, BMW i7 subsequent models, and Audi e-tron GT subsequent models—will fully adopt Spark Power’s Divine Travel 2nd Generation battery system and Qingtian 2 Permanent Magnet Synchronous Motor and Control System. At the same time, we will co-create with Spark Technology on the third-generation electric system products to ensure that Spark Technology’s technology is perfectly integrated into the three brands.”

The audience was in an uproar. Although there had been rumors, the official announcement was still shocking.

Gaby-Luise Wüst continued: ”At the same time, as a symbol of deep cooperation and a manifestation of technical mutual trust, the three of us will authorize some core technologies from the fuel vehicle era to Spark Technology—specifically to the Red Flag brand.”

She announced one by one:

”Mercedes-Benz will authorize the full set of technical drawings, process documents, and calibration data for automatic transmissions.”

”BMW will open its chassis tuning database accumulated over forty years, including suspension dynamics data for over one hundred thousand different road conditions and vehicle models.”

”Audi will authorize the core patents of its quattro mechanical all-wheel-drive system and provide the source code for the electronic differential lock control algorithm.”

The scene exploded instantly. Reporters almost rushed onto the stage to ask questions.

Hubertus Troska explained the significance of these authorizations: ”We know that the Red Flag brand is already at the forefront of electrification. But in the field of fuel vehicles, especially high-end luxury cars, there is still room for improvement. These technology authorizations will help Red Flag perfect its product line and achieve comprehensive competitiveness of ’electric leadership, fuel vehicle strength.’”

A reporter asked a sharp question: ”Does this mean that German luxury brands admit they have fallen behind Chinese companies in electrification technology?”

Jochen Goller answered very frankly: ”In specific fields—especially battery energy density, electronic control system efficiency, and cost control—Spark Technology is indeed temporarily ahead. But this does not mean falling behind in all aspects. We still have advantages in vehicle manufacturing processes, brand accumulation, and global supply chain management. Cooperation is for mutual benefit.”

Another reporter asked: ”By authorizing these core fuel vehicle technologies, are you not afraid of cultivating a powerful competitor?”

Gaby-Luise Wüst smiled: ”The automotive industry is big enough to accommodate multiple excellent players. More importantly, we believe that technological progress should be shared globally. Twenty years ago, German automakers helped the Chinese automotive industry grow through technical cooperation; today, Chinese companies are driving the global electrification process through technological breakthroughs—this is a virtuous industrial cycle.”

She said it very nicely, but everyone in the audience heard the subtext: The German side was not sharing voluntarily; they had to share. Because Spark Technology had the electric technology they urgently needed.

Secret talks after the signing ceremony.

After the press conference, in the suite, Su Chen held a closed-door meeting with the three presidents.

Hubertus Troska got straight to the point: ”Mr. Su, the technology authorization has been announced. Now we need to discuss the specific details of the electric platform cooperation. Mercedes-Benz’s EVA2 platform plans to launch its second generation in 2022. We hope Spark Technology can provide a customized third-generation electric system solution, not just standard products.”

He pulled up the design drawing of the EVA2 platform: ”Specifically: The battery pack needs to adapt to Mercedes-Benz’s unique ’skateboard chassis’ structure. The thickness cannot exceed 120mm, but the range needs to reach 800 kilometers (WLTP standard). The motor needs different power configurations for the front and rear, 180kW for the front axle and 340kW for the rear axle, and the rear motor must be able to be completely decoupled to achieve energy saving in pure front-wheel-drive mode.”

The technical requirements were very specific and harsh.

Zhang Zhen recorded carefully and responded: ”A 120mm-thick battery pack can be achieved using Divine Travel 2nd Generation cells, but the cooling system needs to be redesigned. For an 800-kilometer range, it will require about 130kWh of battery capacity, which will increase costs. We can do the front and rear different power motors, but the electronic control algorithm needs significant adjustments.”

”Costs can be discussed,” Hubertus Troska said. ”Mercedes-Benz customers are not that sensitive to price, but they are extremely sensitive to performance and reliability. As long as the requirements can be met, we can accept a price 30% higher than standard products.”

Jochen Goller interjected: ”BMW’s needs are different. Our customers value driving pleasure more. Therefore, the motor torque response must be extremely linear and rapid—the delay from command issuance to torque output must be less than 10 milliseconds. And the energy recovery system must be able to be imperceptible and smooth, without any drag.”

Gaby-Luise Wüst added Audi’s needs: ”Audi emphasizes the continuation of the quattro gene in the electric era. Therefore, the electronic control system must be able to achieve torque vector distribution, with each wheel independently controlled. Moreover, the control strategies for extreme road conditions such as ice and snow roads and sandy land need to be jointly developed by Audi’s chassis engineers and Spark Technology’s electronic control engineers.”

Su Chen listened to all the requirements and pondered for a moment: ”These customized requirements mean we need to establish an exclusive joint R&D team for each company. I suggest operating this way: Spark Technology and the BBA trio will jointly invest to establish a ’High-end Electric Technology Joint Research Institute’ in Shanghai, with each company dispatching thirty top engineers, and Spark Technology dispatching one hundred. All customized development will be carried out there, and intellectual property will be shared according to the investment ratio.”

This proposal was bold—upgrading the original supplier relationship to a joint R&D partnership.

The three German presidents exchanged glances. This exceeded their initial expectations, but if it could really be realized, it meant they could intervene more deeply in Spark Technology’s technological development path.

”We need to consult our headquarters,” Hubertus Troska said, ”but this sounds like a visionary plan.”

”One more thing,” Su Chen threw out the final proposal, ”Since Red Flag has obtained your fuel vehicle technology authorization, as a return, Red Flag is willing to open its upcoming ’Nebula’ intelligent cockpit system to the BBA trio. This is a next-generation cockpit based on Huawei HarmonyOS and Spark Technology’s self-developed 16-nanometer chip. In terms of interactive experience and ecological integration, we believe it leads existing systems by one generation.”

The level of technology exchange was upgraded again—from traditional powertrains to intelligent cockpits.

Jochen Goller’s eyes lit up. BMW had been investing heavily in intelligent cockpits, but progress was not as expected. ”Can we experience the demo first?”

”Of course,” Su Chen smiled. ”The facelift of the Red Flag H9 is already equipped with the beta version. We can arrange a test drive next week.”

The closed-door meeting lasted until 9:00 PM.

When Su Chen walked out of the hotel, the lights of the Bund were as bright as the Milky Way.

Lin Wan was waiting for him in the car and handed him a bottle of water: ”How did it go?”

Su Chen looked at the prosperity outside the window and said slowly: ”Today, Mercedes-Benz, BMW, and Audi used their technical foundation accumulated over half a century to exchange for a ticket to the electric era from us.”

He paused, a smile appearing on the corner of his mouth: ”This feeling... is not bad.”

The car drove into the night, heading in the direction of Spark Technology.

And the Chinese automotive industry’s path of technological counterattack wrote its most colorful stroke on this day.