To understand just how profitable the Chinese automotive industry is in this era, one only has to look at the iconic Santana.
Last year, China began mass production of the new-generation Santana 2000, with a base price of 180,000 RMB, excluding taxes. And with high demand driving up prices further, consumers had to pay well over 200,000 RMB to actually drive one home.
The Santana 2000 was based on Volkswagen's Passat model. Specifically, it used the B3 platform, which had already been phased out abroad, where the Passat line had advanced to the B5 platform by 1996. So, what was the price of the latest B5 model overseas?
Between $3,000 and $5,000.
At the current exchange rate of around 8.31 RMB to the dollar, even the higher-end version of the Passat B5 was only about 40,000 RMB.
Overseas: 40,000 RMB; domestically: 180,000 RMB—a difference of 4.5 times. Given that Santana was a joint venture brand, only imported parts incurred high tariffs. And with over 60% of Santana parts manufactured domestically, Shanghai Volkswagen's low-cost production meant the domestic Santana 2000 shouldn't have cost much more than its foreign counterpart.
Yet the price gap was astronomical, underscoring the massive profits.
Such profits were not available to just anyone. Like telecommunications and oil, the automotive industry was largely monopolized by state-owned enterprises. While private companies could technically enter the market, the barriers were formidable.
One very clear threshold: 1.5 billion RMB.
If you could come up with 1.5 billion, authorities might consider granting you a production license.
But in the late '90s, most companies in China couldn't scrape together 1.5 billion even if they sold everything.
Until policy loosened after 2000, many car brands—state-owned and private—operated as "black market" vehicles without official licenses, eking out an existence in grey areas, propped up by local protectionism and policy loopholes. After all, the automotive industry's profits were too tempting to ignore.
Of those that dared to enter, only a fraction survived. Geely was one of them.
Though Lin Su had been sent by her hometown to seek investment, Chen Qing had clearly done her homework as well.
Lin Su remained quiet, still processing Simon's earlier comments, but Chen Qing pressed on. "Boss, we've thoroughly researched Geely. Li, its founder, is an incredibly capable individual. Didn't you say that the most important thing when investing in China right now is to bet on people? Even if we don't invest a large amount, perhaps we could contribute a smaller sum."
Simon smiled. "What do you think is appropriate?"
Chen Qing replied, "Geely's total assets are roughly 100 million RMB. If we invest $10 million, we should be able to secure around 40% of the company. Boss, it's a smart deal."
Simon's smile remained unchanged. "Whether intentional or not, our system would be tied to Geely, and Chinese authorities would interpret that as my intention to enter the auto industry. Add in your restlessness, and the outcome becomes highly unpredictable."
At his remark, Chen Qing adopted a hurt look, pouting a bit. "But I always listen to you, boss."
"This isn't the right time for the auto industry on either side," Simon replied, brushing off her playfulness. "Two conditions: Wait until China joins the WTO and until the next downturn in the auto industry cycle. Then we'll take action." Switching from French back to Chinese, he added, "Let's talk about something else. How's your computer company progressing?"
Realizing there was no room for negotiation, Chen Qing switched to Chinese as well. "The first model is already being promoted. As for the benchmarking software you mentioned, I hired a team in Silicon Valley to develop it, and it's currently in internal testing. Oh, would you like to name it?"
This woman clearly knew his fondness for naming things.
Simon thought briefly, and noticing the little girl across the table eating her breakfast, he said, "MiuMiu."
The girl immediately looked up, asking, "Hmm?"
Smiling at her, Simon then turned to Chen Qing. "Let's call it 'MiuMiu Benchmarking.'"
Hearing him use her daughter's new name for software, the girl's mother, Ms. Liu, hesitated, suggesting, "Simon, maybe that's not appropriate?"
Chen Qing jumped in with enthusiasm, saying, "MiuMiu is also a woman's name! Besides, companies named after women in the Westeros system—like Danerys, Melisandre, and Ygritte—have all done well. It's a lucky omen."
Simon chuckled, realizing he'd inadvertently "created" another name, and added, "I suggest releasing this software in North America first, then expanding to China. But keep China as the primary target—don't get that mixed up."
Chen Qing nodded with a sly smile. "Boss, that's exactly what I was planning to do."
Even ten or twenty years down the line, domestic consumers were bound to have faith in imported goods. If it's an American-made product, it must be legitimate, right?
After breakfast, Simon's group boarded a helicopter for Manhattan, where he would stay for the morning before flying to Europe in the afternoon. His primary destination was Ukraine.
Recently, in response to renewed instability there, Simon had initiated another "weeding-out" operation to secure the Westeros system's interests in the region. He would also visit Finland, Russia, and Italy before returning next week.
In New York, following Simon's departure, the Chinese art troupe girls, who had arrived the previous Friday, began their schedule in earnest, working with the Westeros family team to prepare for their public performances in six months.
Two programs had already been selected: Picking Mulberries, which Simon himself had suggested, and The Reeds, performed as a solo dance by Wei Sanci on Saturday.
Meanwhile, Li Youhu had a successful Monday meeting with Ang Lee, living up to Simon's expectations. Director Lee found the arrogance and pride in her demeanor to be a perfect fit for the character of Yu Jiaolong. Though she hadn't received much formal acting training, her background in dance provided a solid foundation, and Lee was confident she could reach the required standard through a few months of acting exercises.
At the same time, the North American summer box office continued to heat up.
From May 24 to May 30, another week passed.
In its second week, the action-adventure The Mummy, co-produced by Danerys and Fox, comfortably retained the top spot, grossing an additional $41.93 million with a modest 34% drop, bringing its two-week cumulative earnings past the $100 million mark, to $105.47 million.
In second place was Romeo and Juliet, a modern adaptation of the classic romance novel. In its third week, it grossed another $18.83 million, with only a 26% drop. With a modest $30 million production and marketing budget, it had already amassed $75.74 million, making it the summer's most surprising hit.
Arnold Schwarzenegger's Eraser managed to cling to third place, with a 27% drop in its third week for a take of $12.98 million. The film's cumulative gross stood at just $67.19 million in North America—a painful outcome for Warner Bros., especially given its poor overseas performance.
Due to competition from The Mummy and Romeo and Juliet, Eraser had only grossed around $50 million internationally. Predictions indicated a global total of about $160 million, far below the $300 million hoped for. With production and marketing costs at $130 million, the film's likely revenue shortfall had left Warner without options to recoup losses from the international market.
By contrast, The Mummy's overseas take had already topped $100 million in its first two weeks, despite not yet being released in major markets like Japan and France. With expected domestic revenue at around $150 million, its overseas gross was likely to double, potentially reaching $300 million.
In fourth place was Spy Hard, a mid-budget comedy starring Leslie Nielsen. Opening with $12.49 million for the week, its modest production cost of $18 million, plus about $10 million in marketing, meant it was likely to break even.
In fifth place was Black Mask, the Hong Kong action film featuring an all-Asian cast, which had surprisingly bumped Austin Powers out of the top five. Black Mask's first-week gross of $10.38 million was already profitable for its North American distributor, New World Pictures, given the $5 million invested in production and marketing.
Despite its poor critical reception, with a meager 5.3 rating from critics who lambasted its weak storyline and low production quality, the film still managed to attract audiences, thanks to aggressive marketing and endorsements from big names like Jackie Chan and Quentin Tarantino. Comparisons with Eraser on online forums further boosted its visibility.
With per-screen earnings of over $8,000 on its initial 1,276 screens, Black Mask met the threshold for increased distribution, gaining 200 more screens for its second week, bringing the total to 1,534.
Sometimes the world works in strange ways. The same movie can bring delight to some and disappointment to others.
While Black Mask was showing in North America, the movie had also premiered in Hong Kong, using its entry into the North American summer lineup as a promotional draw. Unfortunately, its Hong Kong opening week brought in only
3.79 million HKD, with a total domestic box office projection of just 10 million HKD. Even though New World Pictures had covered $2 million of the production costs, the Hong Kong production company had invested 45 million HKD, facing a potential loss of nearly 30 million HKD.
Meanwhile, Black Mask's $10.38 million North American debut translated to over 80 million HKD, recouping New World's $5 million investment and turning a profit within just one week.
With further revenue from Europe, VHS, and television sales, New World stood to make significant returns.
One side faced a loss of 30 million HKD, while the other stood to gain 60 million HKD in profit.
According to the original agreement, profits and losses were split cleanly, leaving no room for adjustments.
Watching this unfold from across the ocean, the Hong Kong investor who had bankrolled Black Mask found himself seething. Seeing Simon Westeros would likely stir a desperate urge for retribution: "Simon Westeros, you better pray I never see you in Hong Kong!"
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