Chapter 278 You Don’t Want to
The color tubes and circuit boards of the color TVs produced by the joint venture are all original imported products.
The price originally agreed upon with NEC was US$180 per set, and the Mumbai factory ordered a total of 10,000 sets, worth US$1.8 million.
But Ron certainly didn't have that much money to give him, let alone the scarce US dollars.
So, under his eloquent persuasion, NEC agreed to the joint venture's request for credit.
Who could have thought that this batch of goods would sell out so quickly? Now the joint venture production line has stopped operating.
Oda was anxious. Since the product was so popular, he must press on. NEC also had a 40% stake in the joint venture.
Each color TV sold for 18,000 rupees has a cost of only 300 US dollars. After deducting various costs and channel sharing, the net profit is 6,000 rupees.
This is a good number, as NEC can get 2,400 rupees in profit for each unit, which is equivalent to 78 US dollars.
Also, don’t forget that they have to make money again from the color tubes and circuit boards, and the total profit added up to nearly $140.
The Indian market is huge, and for high-volume models, it means hundreds of millions of dollars in profits every year.
NEC had to take this seriously, and Oda received orders from his superiors to continue expanding production capacity and seize as much market share as possible.
From the perspective of market laws, this is certainly correct.
However, since the establishment of the joint venture, Sur Electric has never settled all its debts for production lines or raw materials.
Not only did they not pay, but the Indian guy actually asked them to continue shipping the goods.
Oda was furious. He called Ron and complained and threatened him.
Finally, I finally managed to get the deposit for the next batch of goods, which was $600,000. Oh no, not in dollars, but 18 million rupees.
India is in short supply of US dollars now and only has rupees. You can take it or not.
Oda accepted it reluctantly, but if he wanted NEC to continue to provide core components, he had to pay first!
"Mr. Oda, it's only been a month and we haven't received any money from the televisions we sold. The joint venture company has no money at all." Ron spread his hands.
"When can I get the money back?" Oda pressed on.
“It’s usually six months here in India.”
"Six months!" Oda exclaimed.
"That's normal, isn't it? India is huge, and the roads are bad, so it's difficult to contact every dealer in a short period of time."
"That's too long! A six-month inventory backlog will bring down the entire company."
"If you want to win the competition in the market, you have to offer a more relaxed payment cycle than others. But don't worry, Indians are loyal and will never default on their debts."
Ron vowed that he was not afraid of Oda's investigation. He had already colluded with the dealer and would give the same answer whenever the Japanese asked.
The actual collection period of Sur Electric Appliances is actually only one month. In a place like India, if the money is out of sight for too long, it will no longer be yours.
Except for some large trading companies and supermarkets, other small distributors even pay in cash.
The 60 million in profits contributed by those 10,000 color TVs had already been pocketed by Ron.
There is no way he is going to spit it out, that's his money!
"In that case, you have to pay the deposit for the next batch of goods." Oda compromised.
"The company is completely out of money," Ron said. "We started with just $2 million in capital. We paid a $600,000 deposit for equipment and another $600,000 for core components. All that money is with NEC, and the rest is mostly used to pay employee salaries."
"This...this..." Oda was dumbfounded. After careful calculation, it turned out to be true.
"Mr. Oda, don't worry! As long as we hold on for six months, we will definitely be rich in six months!"
Oda was a little hesitant. He was reluctant to give up the booming market for joint venture products, but he also had doubts about the credibility of Indians.
"You don't want your newly-launched product to fail, do you? Ten thousand units per month! No, if you add two more production lines, that'll be thirty thousand!"
"Impossible! You haven't even settled the payment for the first production line!"
"Then add one more, and then another, and the income will double!" Ron gestured with his fingers. "Within five years, we won't have to worry about sales at all."
"An agreement must be signed, and the entire balance must be settled six months later." Oda agreed with great reluctance.
The current situation in Japan is very bad, and NEC headquarters is now looking for ways to make the financial report look better.
The ice age after the bubble is here.
Besides, 10,000 units sold per month is really a lot. And judging by the situation, demand still exceeds supply.
He couldn't remain indifferent to the huge profits. The Indian market was indeed bigger than he had imagined.
"Okay!" Ron agreed.
He has signed too many agreements, and the threshold has been raised.
Xiaori still doesn't understand India, but they will gradually adapt to it in the future.
However, the development of the joint venture was somewhat beyond his expectations. The net profit of 6,000 rupees per unit was really a lot.
Even after deducting NEC's 40% share, it is still the most profitable of Sur Electric's current products.
The money earned from joint venture products is still money, and there is no reason for Ron to give it up.
The right thing to do is to start the stopped production line as soon as possible. Every day of delay is a loss.
Not only that, but we also need to continue expanding production capacity. Oda wants to do something big, and he also wants to.
It just makes it cheaper for NEC, and I can earn some deposits in the future.
Unfortunately, the Japanese did not agree to move the color tube production line to India in advance and insisted on waiting until the two-year period expires.
The core components are blocked and most of the profits are taken away by them.
Damn, $140, totaling to Rs 4340, I made more money than Sur Electric.
Ultimately, it's more reassuring to have the technology in your own hands. That's why Ron couldn't wait to import the color TV production line from Dongda.
It doesn’t matter if we can’t sell at high-end prices, but the profit is definitely the highest to date, even higher than joint venture products.
It won’t be long before Sur Electric’s color TVs will be on the market in March, and they will still be the lowest price in the market.
For the next two weeks, Ron spent most of his energy on the Sur Park.
Compared to a year ago, this place has completely changed.
The headquarters building has been topped out, and the twenty-story building is very eye-catching in Mumbai today.
The silver-gray exterior facade has been painted, and workers are doing plumbing and electrical work inside.
The next step is to do the fine decoration, and it is expected to be completed and put into use in half a year.
There are even more factories on the east side of the building, like mushrooms, with one popping up every month.
There are 12 final assembly lines, 20 parts production lines, and a total of 15 factory buildings, which is very impressive.
Ron invested $12 million in hardware alone.
If we take into account imported raw materials, construction expenses and labor costs, 20 million would not be enough.
In India in the 1990s, this was definitely a big deal.
However, the investment was worth it. In just one year, Sur Electric not only recovered its investment but also made a profit of more than 1 billion rupees.
From then on, every month, not counting the color TVs that were not taken off the production line, Ron would have a net income of 200 million rupees.
Of course, this number will continue to increase as several other branch factories come into production.
Now the Mumbai factory is launching two more products, rice cookers and juicers, still thanks to Todai.
Needless to say, as for rice cookers, a large number of domestic brands such as Midea, Galanz, Hemisphere Electric Appliances, and Triangle have already emerged.
This product has little technical content, and Dongda has long achieved localization of the entire industrial chain.
But for India, it is still a high-tech product.
Thanks to the $20 million business deal from the previous year, Sur Electric quickly found a brand partner.
Triangle brand focuses on the mid-to-low-end market in Southeast Asia, which is extremely suitable for India's cost-effective concept.
This thing is not expensive, you can take it home for about a hundred dollars.
The main parts are the inner tank, heating element and thermostat. Sul Electric can process the inner tank by itself, while the heating coil and thermostat can be purchased directly from the ready-made production line.
This time, Ron achieved complete localization of rice cookers at the very beginning of production.
At Triangle, the price for a complete production line with an annual output of 200,000 units was $500,000. Ron bought four sets at once, acting like a real tycoon.
The average price of an electric rice cooker in India is around US$45, which is approximately 1,400 rupees.
It's too expensive and there's no way it can be popularized.
Soul Electric has calculated internally that if local production is achieved, the total cost per unit will be only US$9.
He plans to set the price at $30 and make a lot of money in rupees.
The juicer is simpler and Suer Electric can definitely afford it, but it's a pity that the cost of processing the blades is too high.
Perhaps because of different eating habits, there is no independent brand of juicer at the University of Tokyo.
In the end, Ron could only find a blade OEM factory in Dongda, and Suer Electric took care of the other parts and designs on its own.
Thanks to its extremely low processing costs, this small appliance is still profitable.
Around July or August, rice cookers and juicers will be available. They are low-tech and can be easily installed.
After a busy period until early March, Ron set off again for Gujarat.
According to traditional calculations, the outcome of the Gujarat state election will probably be announced in mid-March.
Now is the most intense stage of canvassing for votes, and Ron wants to send money to the BJP.
Ten million rupees is not a small sum, so he had to go there in person and show his support to them as agreed.
When Ron arrived at the BJP's headquarters in the state capital of Gandhinagar, the place was filled with crowds waving flags and cheering.
In the yard outside the headquarters building, hundreds of supporters wearing orange shirts gathered here to dance and celebrate.
Another constituency fell into the arms of the BJP, and everyone couldn't help but open champagne in advance, and the air was filled with flying confetti.
Modi, who was also wearing an orange thakur shirt, hurried out to greet Ron. He walked quickly, as if there were many more important things to do.
"Is this how you got here?" The immortal looked at the bags in their hands in surprise.
"You know, this money can't be transferred." Ron shrugged.
"Forget it, come in first."
"This took me a lot of effort." Ron patted the bags in Anil and the others' hands.
It's all filled with cash, which is not recorded in the accounts, does not go through the bank, and has no records. To put it bluntly, it's all black money.
But for Indians, money is neither black nor white, and they don't care about it.
Whether it is buying a house, a car, or other consumption, they have no awareness of paying taxes at all.
They will feel, "This is my own money, my hard-earned money."
How can you collect taxes from poor people when they don't have much money to begin with?
Fight corruption? How? Everyone uses dirty money, including in elections.
Modi hates this invisible black money system, but now he has to rely on it to help the BJP win the election, and he feels extremely uncomfortable.
Ron, however, acted as if nothing had happened. He walked up to him, put his arm around his shoulder, and discussed the upcoming election.
(End of this chapter)
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