LeEco CEO sees challenges, opportunities in going global

Updated 2016-11-30 10:34:51 Global Times

Aims to focus on big picture while developing wide range of businesses

Beijing-based technology and entertainment company LeEco has been involved in a controversy concerning its rapid expansion in the face of limited capital and resources.

In early November, media reports said that LeEco owed more than 10 billion yuan (.45 billion) to its suppliers. The reports also said that its car, sports and mobile businesses have liquidity problems.

In the U.S., Nevada Treasurer Dan Schwartz has reportedly claimed that a billion electric car project launched by a US start-up Faraday Future (FF), backed by LeEco CEO, was a Ponzi scheme.

Founded as an online video streaming business in 2004, the company now has seven sub-ecosystems.

Global Times reporter Zhang Ye (GT) had an exclusive interview with the CEO Jia Yueting (Jia) via e-mail about recent concerns and questions regarding the company's future. Jia declined to respond to queries about the company's reported financial problems.

These extracts of the interview cover his outlook for the listed arms, smart TVs and autonomous cars, which are the subject of the most public interest.

Le.com (previously called Letv.com)

Le.com, the only listed arm of LeEco, is considered by Jia as the foundation of LeEco's overall ecosystem. The subsidiary includes online video streaming, smart TVs and cloud computing. Net profit of Le.com grew 31 percent year-on-year to 493 million yuan during the third quarter of the current year, but at a slower speed in comparison with the year-earlier figure of 73 percent, according to the financial report submitted to the Shenzhen bourse.

"We will pump more energy into the listed Le.com … stepping up efforts in internal production of TV dramas and films, and increasing its market share in the TV sector to 30 percent," Jia said.

Super TV

As of mid-November, LeEco had sold nearly 9 million smart TVs, called Super TV, making it possible for the company to meet its goal of shipping more than 10 million sets by year-end.

Jia admitted that the TV business is losing money, but he said he still has faith in the segment.

He forecast that the Super TV product will soon become profitable, capitalizing on consumers' desire to play games and shop on large screens.

On November 21, LeEco announced it would raise the prices on several of its smart TV models by 300 yuan, its second price hike in three months, which media reports interpreted as a move to address the company's reported capital problems. Jia said the decision reflected the rising cost of display panels in the upstream supply chain.

Jia reiterated that despite the price hike, the company was sticking with its original business model, namely "using its ecosystem to subsidize?the cost of the?hardware instead of keeping prices down by sacrificing configuration."

LeSEE

LeEco's LeSEE electric vehicle (EV) project is one of the most exciting things in the eyes of Jia. The CEO ranked it as the top priority in the company's ecosystem. Analysts have questioned the wisdom of the Internet company's attempt to move into the EV sector, which is widely perceived as a money-burning industry that needs at least 100 billion yuan to 200 billion yuan to make a viable car.

Jia said he didn't think capital will be a roadblock for the LeSEE project, which completed its first round of .08 billion fundraising in September this year.

The first car co-developed by LeEco and FF will debut at the Consumer Electronics Show in Las Vegas, Nevada next year. "I believe it will be a disruptive product that will be larger and more comfortable than Tesla's Model X," said Jia.

GT: What's your response to recent questions and concerns over LeEco's development?

Jia: LeEco has indeed encountered some problems. But I believe these are the type of problems that all domestic small and medium-sized companies face as they go global. Some Chinese "mammoths" might be confronted with even bigger and harder issues.

What concerns me most is whether our organization can follow its original strategy. Many (of our) unlisted subsidiaries lack sustainable momentum, given their insufficient focus on structure optimization and organizational development.

In the past, all of the subsidiaries pursued their own interests in separate silos without regard to the big picture, which is a situation that I am determined to change.

In the future, we will take measures such as optimizing our supply chain, strengthening cost controls and pursuing positive cash flow.

GT: Some investors suggest that LeEco should exit some non-core businesses such as real estate. What do you think?

Jia: I have heard that kind of talk. Some people expect us to stop doing the car or smartphone businesses. But the company always deliberates carefully before entering a new sector.

We never expanded into the real estate industry as the media has reported. And we have no intention of doing so. The purchase of land and property is a necessary investment for the use of our own business, such as for the construction of car production factories and our office buildings.

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