Tech Giants: Starting from Bankrupt Companies

116: Chapter 116 Production Capacity Alliances: Strategic AlliancesNovember 15th, Xi’an High-tech International Convention Center.

Late autumn in Xi’an already had a chill, but the convention center was bustling with heat. Above the podium hung a banner: ”Red Flag Automobile - BYD Automobile Strategic Cooperation Signing Ceremony”.

Seated below were over two hundred people: the Red Flag team, the BYD team, leaders from Guanzhong Province and Chang’an City, representatives from the automotive industry association, and dozens of media outlets.

Zhou Qingyu and Wang Chuanfu sat in the center of the podium. Both wore dark suits, their expressions relaxed, conversing in low tones from time to time; they looked less like competitors and more like old friends.

Yet, just three months ago, these two car companies were fighting tooth and nail in the market. Red Flag H9 had snatched a portion of BYD ”Han”’s customers; BYD’s hybrid technology had in turn made Red Flag feel the pressure.

Today, they were going to cooperate.

The background large screen displayed the cooperation data:

Red Flag H9 cumulative orders: 85,000 units

Changchun factory monthly capacity: 25,000 units (reached limit)

Chengdu branch factory monthly capacity: 10,000 units (production starts end of November)

Capacity gap: 5,000 units per month

Delivery cycle: extended to 4 months

”Distinguished leaders, distinguished guests.” The host opened, ”Today, two excellent Huaxia car companies will sign a strategic cooperation agreement to jointly solve the capacity bottleneck and achieve mutual benefit and win-win results.”

Zhou Qingyu spoke first.

He stood up, walked to the podium, without looking at a script.

”Three months ago, when the Red Flag H9 was released, we set a goal: to make Red Flag a national car.” Zhou Qingyu’s voice was very calm, ”Looking at it now, the first step of this goal has been achieved—85,000 families have chosen Red Flag. But what followed was a happy problem: capacity couldn’t keep up.”

There was understanding laughter from the audience.

”We tried everything: the Changchun factory on three shifts, workers working 12 hours a day; the Chengdu branch factory under emergency renovation; the supply chain running 24 hours a day. But it still wasn’t enough.” Zhou Qingyu said candidly, ”At this moment, Chairman Wang Chuanfu found me.”

The camera cut to Wang Chuanfu. This founder of BYD, in his fifties, with a round face, was always smiling, but his eyes were sharp.

”Chairman Wang said: The Xi’an factory has idle capacity, skilled workers, and a complete production line.” Zhou Qingyu continued, ”He said: We are all Huaxia cars, let’s help each other out.”

He paused, looking at Wang Chuanfu: ”Sitting here today, I want to say—Red Flag has noted this kindness.”

Applause rang out.

Wang Chuanfu took the stage. He was not as formal as Zhou Qingyu, holding the microphone in his hand as if chatting casually.

”Many people ask me: Chuanfu, why are you helping Red Flag? They are your competitors.” Wang Chuanfu smiled, ”I said: If only one car company in Huaxia can succeed, that’s not success. What we want is a forest, not a single tree.”

He walked to the large screen and pulled up a chart: ”This is the market share distribution of the Huaxia automotive market. Joint venture brands account for 60%, and domestic brands only 40%. Within that 40%, we are still fighting among ourselves.”

”Today, the cooperation between Red Flag and BYD is not about who is helping whom, but about making the cake of domestic brands bigger together.” Wang Chuanfu’s tone became serious, ”We want to make that 60% joint venture share become 50%, 40%, 30%... until one day, when Huaxia people buy cars, the first thing they think of is a Huaxia brand.”

The applause was even more enthusiastic, and many people stood up to clap.

The signing ceremony began.

Zhou Qingyu and Wang Chuanfu signed the agreement, exchanged documents, and shook hands. Flashes went off continuously.

Core content of the agreement:

BYD Xi’an factory to carve out an exclusive production line, monthly capacity of 5,000 Red Flag H9s.

Division of labor model:

Spark Power: provide full set of three-electric systems (battery, motor, electronic control)

Red Flag Automobile: provide smart cockpit, L2 autonomous driving system, interior and exterior design

BYD: responsible for car body manufacturing, assembly, quality inspection

Quality control: Red Flag to station a 100-person quality management team in Xi’an.

Cooperation term: three years, renewable.

Zhou Qingyu summarized at the end: ”This is not simple OEM, it is deep synergy of the industrial chain. Red Flag’s brand, Xinghuo’s three-electric systems, and BYD’s manufacturing—this is the ’Iron Triangle’ of Huaxia’s automotive industry.”

The large screen switched, and Su Chen appeared on the screen. He was in the Shenzhen office, with the Xinghuo building in the background.

”Today’s agreement may be more important than us releasing a new car.” Su Chen said via video, ”It proves that Huaxia enterprises can move from competition to symbiosis. When we put our respective advantages together, we can create world-class products.”

”The success of the Red Flag H9 is not the end, but the beginning. Next, we will use this cooperation model to build more good cars and serve more families. The rise of Huaxia’s automotive industry needs more such ’Iron Triangles’.”

After the signing ceremony, the media group interview had sharp questions.

”Mr. Zhou, Red Flag looking for BYD for OEM, does it mean your own manufacturing capacity is insufficient?”

Zhou Qingyu answered calmly: ”In the global automotive industry, professional division of labor is the norm. BMW’s engines are used by Land Rover, Toyota’s hybrid systems are used by Subaru. Red Flag focuses on brand and R&D, BYD leverages manufacturing advantages, this is a reasonable industrial division of labor.”

”Then how to ensure quality control? Is the H9 made in Xi’an the same as the one made in Changchun?”

”Red Flag will station a 100-person quality management team in Xi’an to monitor the entire process from raw material warehousing to finished vehicle delivery. And—” Zhou Qingyu pulled up a photo, ”This is the ’Digital Twin System’ we customized for the Xi’an production line. Every process parameter of the Changchun factory will be synchronized to Xi’an in real-time. Ensuring that the cars produced by the two factories are exactly the same.”

”Chairman Wang, you gave the idle capacity to Red Flag, what about BYD’s own cars?”

Wang Chuanfu smiled and said: ”First, the Xi’an factory already had idle capacity. Second, this cooperation is not free—Red Flag pays reasonable OEM fees. Finally, and most importantly—through this cooperation, BYD can learn from Red Flag’s experience in luxury car manufacturing and improve its own craftsmanship level. This is a win-win.”

After the news of the signing spread, there was a subtle divergence in public opinion.

Some voices questioned:

”Red Flag can’t build cars itself, it has to find BYD for OEM? Then what kind of domestic brand is that?”

”Xinghuo’s three-electric systems are being used by competitors, won’t it leak technology? This is aiding the enemy!”

”Will the H9 lower its price because of this? After all, OEM costs are lower.”

User Zhang Ming—that first blind-booking user to take delivery—posted a video in response.

In the video, he stood in front of his H9, with the streets of Changchun in the background.

”I don’t care if my H9 is made in Changchun or Xi’an, I just want it to be a good car.” Zhang Ming said very directly, ”Apple phones are still made by Foxconn, does that affect it being Apple? Porsche’s Cayenne, some are even made in Slovakia, does that affect it being a Porsche?”

He walked to the front of the car and patted the hood: ”This car, the design is Red Flag’s, the three-electric systems are Xinghuo’s, and now manufacturing has BYD joining in. This is not a weakness, this is an advantage—combining the strengths of three parties.”

”As for technology sharing...” Zhang Ming paused, ”If Xinghuo’s three-electric systems can help more Huaxia cars become better, I raise both hands in approval. Technology monopoly is the greatest harm to consumers. Back then, Tesla opened up patents, which promoted the entire electric vehicle industry. Today, Xinghuo shares three-electric systems, perhaps it can promote the entire Huaxia automotive industry.”

”Finally, one word: to those who are questioning, have you driven an H9? If you haven’t, please go for a test drive before you speak. If you have driven it and still question... then it might be a problem with your butt, not your brain.”

This video received over 10 million views in 24 hours and over a million likes. The trend in the comment section shifted rapidly:

”Well said! A good product is the hard truth!”

”Support cooperation between Huaxia enterprises, fight against joint venture cars together!”

”I have already ordered an H9, I don’t care where it’s made, I only care when I can take delivery!”

In the war of public opinion, Red Flag won again.

And deeper changes were happening quietly within the industry.

On the third day after the signing, the chairman of Changan Automobile called Zhou Qingyu: ”Mr. Zhou, this model of yours and BYD is very good. Changan also has idle capacity, do you want to talk about it?”

On the fourth day, the vice president of Geely visited: ”We are developing a new generation of hybrid systems and want to cooperate with Spark Power. Can you arrange a technical exchange?”

On the fifth day, the MIIT held a ”Symposium on Collaborative Innovation in the Automotive Industrial Chain”, inviting Red Flag, BYD, and Xinghuo to introduce their cooperation experience.

Zhou Qingyu said something at the symposium, which was widely quoted later:

”For the past forty years, Huaxia’s automotive industry has taken the path of ’trading market for technology’. The result is that the market was given away, but technology wasn’t exchanged. Now, we want to take a new path—not trading market for technology, but trading cooperation for win-win results.”

”Red Flag has brand and design, Xinghuo has three-electric systems and intelligence, BYD has manufacturing and cost control. When the three of us combine, we can create good products that are not inferior to joint venture cars.”

”This path may be harder than buying technology. Because you have to do your own R&D, you have to do your own trial and error, and you have to bear the risks yourself. But this path is steady and long-term.”

When the symposium ended, the MIIT leader summarized: ”The cooperation model of Red Flag - BYD - Xinghuo provides a new way of thinking for Huaxia’s automotive industry. Next, we must support this kind of industrial chain collaborative innovation in policy, allowing more enterprises to participate and form a combined force.”

Late at night, Zhou Qingyu was in his hotel room in Xi’an, looking at the ancient city wall outside the window.

His phone rang; it was Su Chen.

”Qingyu, you spoke very well at the symposium today.” Su Chen’s voice came through, ”But remember, cooperation is just a means; the product is the foundation. The first car from the Xi’an production line must be exactly the same as the one made in Changchun. Even, it should be better.”

”I understand, Mr. Su.” Zhou Qingyu said, ”I am already in Xi’an, and I will watch until the first car rolls off the line.”

”No need to be that anxious.” Su Chen said, ”Let professional people do professional things. You are the CEO, you must look at the big picture—the H9 is a success, when will the next car come out? How will Red Flag’s brand move upmarket? How is the new energy route planned?”

Zhou Qingyu fell silent. These were indeed the questions he had been thinking about recently.

”I’ll give you a suggestion.” Su Chen said, ”Next year, launch a mid-to-large SUV, priced at 250,000-300,000, using Xinghuo’s autonomous driving technology. The year after, launch a luxury sedan, priced at 400,000 or more, benchmarking against the Mercedes-Benz E-Class and BMW 5 Series. The year after that... perhaps we can talk about Red Flag’s supercar.”

”Supercar?” Zhou Qingyu was stunned for a moment, ”Red Flag making a supercar?”

”Why not?” Su Chen smiled, ”Red Flag was once the national car, representing the national image. The new era’s Red Flag should represent the highest level of Huaxia manufacturing. A supercar is the pearl on the crown of the automotive industry. We must pluck it.”

After hanging up the phone, Zhou Qingyu couldn’t calm down for a long time.

He looked at Xi’an outside the window, this ancient capital of thirteen dynasties, which was once the center of the world. Later it declined, and now it is rising again.

And Red Flag, this once national car brand, is also experiencing the same cycle.

From glory to the trough, and then to rebirth.

The difference is that this time, it is no longer alone. It has the technical support of Xinghuo, the manufacturing synergy of BYD, and the combined force of the entire Huaxia automotive industry.

Outside the window, the lights of the ancient city stretched into the night, like a river of light, flowing into the distance.

And in the distance, the dawn of daybreak was already faintly visible on the horizon.

A new day was about to begin.