Recently, there has been a strange trend where many excellent domestic enterprises are being “besieged” by public opinion.

For example, two days ago, an email about BYD passenger cars requesting suppliers to lower prices was leaked online, immediately causing BYD to face unprecedented criticism and labeling it as “involution” and “exploitation”.

Just make it clear, the company that BYD sent the letter to is called Sensata, and the header of the letter clearly indicates that it is a wholly-owned American company headquartered in Massachusetts, USA.

The full name of this company is American Sensata Industrial Group, a global sensor giant. The supplier’s profits have remained stable at over 30% for many years, with a gross profit margin of as high as 38% last year, while BYD’s own gross profit margin is only 20%

Currently, BYD sells over 4 million vehicles annually, with an annual growth rate of over 1 million vehicles in the past three years. The orders and business of Sensata have also skyrocketed. What’s the problem with this foreign company lowering prices, making some concessions, and drinking less blood?

You all said that there is a way to invite foreigners. Yes, BYD is just inviting foreigners. It is also inviting foreign car companies and foreign suppliers. Let these foreigners who are making money lie down and spit out their profits, so that everyone can buy cheaper cars and give more opportunities to local suppliers and industrial workers. Is that OK?

Let me tell you another piece of common sense. It is not common to send a letter requesting a 10% price reduction. There is probably only one reason for being so tough – there are more cost-effective domestic suppliers and alternative solutions in China.

Do you remember how BYD made Bosch lower its price back then? At that time, Bosch held a 70% market share in the domestic market and had absolute pricing power. Local car companies had no room for negotiation. Bosch once used the supply of ABS system to strangle BYD, monopolizing price increases, limiting production capacity, and even using excuses such as accidents in overseas factories. As a result, BYD developed its first ABS system with 100% independent intellectual property rights… Bosch immediately gave up and took the initiative to lower the price, directly reducing the ABS from 2000 sets to 800.

What you call ‘tough tone’ is because there are ‘alternative plans’.

The logic of a market economy is that if American companies don’t do it, some other companies will do it. It doesn’t make sense to talk about “exploitation”… Free trade and survival of the fittest are the principles taught to us by Westerners. Talking too much is not good for Ha Sheng.

This year, Bosch just announced a global layoff of 5500 people. Isn’t it said that if these “international giants”, “German companies”, and “American companies” collapse, there will be no more goods? The world is so big that companies can die, but industries cannot. Without American butchers, German butchers, and Japanese butchers, we can only eat pigs?

That can replace it!

They died, just to make room for domestic enterprises to survive.

As far as this matter is concerned, some people are following the rhythm, some are pretending to be confused with clarity, and some are just taking advantage of the situation to attack.

If you have worked in a company before, you will understand that this is a common thing. In which year do all companies not negotiate procurement prices with suppliers? This kind of letter is just a routine matter.

It is said that the “price reduction of 10%” in the letter is too harsh.

But if you let go of your emotions and start from rationality, I will explain the simplest truth to you – for your home decoration, you need to purchase tiles, a total of 100 square meters, 100 yuan per square meter, and there is no room for bargaining; But if you also have a company with 2000 square meters that need decoration, and your company purchases tiles, the price can be reduced to 50 yuan per square meter, and even further negotiations can be held.

You personally buy a laptop for seven or eight thousand yuan, but if you purchase a batch of laptops for company employees, the purchase price can even reach around three or four thousand yuan

For example, in the centralized procurement of drugs, many sky high priced drugs are directly reduced by 90%, cutting from the ankles and necks. Is it ruthless? But the common people are very happy. Even with a large number of medical insurance coverage, manufacturers can still make money. Who would worry about the decline in drug quality?

Expanding the scale and reducing the unit price can still yield huge profits.

Why don’t you understand this principle when you get on the car?

BYD’s sales in 2021 were 730000 vehicles, and in 2022 they were 1.86 million vehicles. Last year, BYD’s sales were 3.02 million vehicles. In the first 10 months of this year, BYD’s sales were already 3.25 million vehicles. In October, BYD’s monthly sales were 500000 vehicles, and it is expected to exceed 4.2 million vehicles for the whole year.

The surge in sales has also led to a significant increase in the scale of purchasing raw materials and components… millions of dollars in increments. Shouldn’t we lower the unit price?

What is a market economy? This is a market economy.

Some people are worried that “price decline leads to quality decline”. Well said, why didn’t you worry about Toyota, Honda, Volkswagen, BBA and others who “rise in price while declining in quality” in the past decade? To put it bluntly, quality is only related to the level of control and testing, but not to the price. At present, many joint venture car enterprises are still poor in quality, high in price, and jerry built, and are not they still praised as “craftsman spirit” by some spirit X countrymen?

And you should know that the contracts between car manufacturers and certain suppliers are likely from two or three years ago. The manufacturing industry makes a big breakthrough every year, and the progress of the country’s industrial level, engineering technology, and raw material control will naturally bring about cost reductions!

For example, in the past, new energy vehicles were expensive because lithium batteries were expensive and we didn’t control the raw materials. Later, as Chinese companies acquired a large amount of lithium mines overseas, the prices of battery raw materials directly halved, and battery prices fell. Why can’t cars lower their prices?

BYD is also a supplier to many other car companies, and this matter is treated equally. If you don’t believe me, can you ask other car companies if they have sent letters to BYD and CATL requesting “supplier price reductions”?

Not to mention anything else, let’s talk about Tesla. Just this year, they publicly requested suppliers to lower their prices by 10%. Why hasn’t there been any splash in public opinion? Tesla’s 2023 price reduction is known as “conscience”. Domestic car companies announced the establishment of a “no price war alliance” in the second half of the year, which was criticized as a monopoly. Domestic brands announced price reductions, which were criticized as a “roll”. Anyway, no matter what foreigners do, they are always right, and no matter what our own people do, they are not right?

Finally, as for some purchasing parties… if your company’s suppliers never lower prices, you have to suspect that your internal procurement is colluding with the other party to fatten up a bunch of ‘Smith specialists’.