The birth of the Royal One was far more than just the creation of a luxury item, and it certainly was not built with extravagant funding just to flatter the emperor. After all, it was a product of Franz’s own industry, and in the end, he himself would be footing the bill. Without the emperor’s personal approval, those responsible would be held accountable. There was no doubt that the Austrian Automobile Group poured all its resources into building this ultra-luxury car, and it definitely was not done to show off wealth. Franz was never going to drive this car around just for fun. In fact, information about this vehicle would not be made public at all. The goal behind the request, aside from advancing automotive technology, was mainly to test the strength of Austria’s domestic industrial capabilities. As an emperor constantly bombarded with information, Franz knew very well that data and reports could be fabricated. The only thing that could not be faked was a physical product placed in front of his eyes. At that time, Austria was the only country in the world with a fully developed automobile industry. Other countries were still lagging far behind. Even if his subordinates wanted to fake something, they simply had no room to do so. In honor of the Royal One, Franz even personally inspected Austria’s largest automobile production facility—the Prague Automobile Factory. At full capacity, it could produce up to 20,000 cars annually. This number wouldn’t be surprising at all in later times, where even a random car factory could easily achieve that. However, even this factory, which could only produce fewer than 55 cars per day on average, was doubtlessly already the largest automobile factory in the world. In fact, the reality was even more impressive. This modest annual production capacity of 20,000 vehicles accounted for one-third of Austria’s entire automotive output. The production capacity of the Prague Automobile Factory alone exceeded the combined output of both Britain and France, and was roughly equal to the total production capacity of all other countries excluding Austria. This was the result of Franz essentially “cheating.” At present, the Austrian Automobile Group was the only company in the world capable of industrial-scale automobile production. There was no helping it. Being early to the game was a massive advantage. While the rest of the world hadn’t yet taken the automobile industry seriously, Franz was already pouring money into it. From the very beginning, the Austrian Automobile Group had been buried deep in the lab, focused on research and development, without ever publicly announcing its work. The rest of the industry hadn’t even reacted. No, to be precise, before their product was released, there wasn’t even a so-called competition to react. Until that point, everyone else had been focusing their research on steam-powered vehicles. Compared to the Austrian Automobile Group’s internal combustion engine cars, they were two completely different species. In the original timeline, the first internal combustion engine car didn’t hit the market until 1888. The founder of Mercedes-Benz, who later became a legendary figure, hadn’t even entered the scene yet. America’s first car company, Oldsmobile, wasn’t established until 1897. Japan’s first car company, Cadillac, wasn’t registered until 1902. … It wasn’t until the Austrian Automobile Group’s first product, the “Beetle”, hit the market that everyone suddenly realized cars could actually be built this way. With no competitors in sight, the Austrian Automobile Group naturally took the lead and quickly rose to dominance in the automotive field. Without a doubt, in an era where patent protection did not extend globally, copycats emerged swiftly. They couldn’t develop the technology on their own in the short term, but with a prototype in hand, how could they not copy it? As a result, most of the Austrian Automobile Group’s first batch of products ended up being taken apart for parts, essentially helping lay the foundation for the development of the global automotive industry. At its core, this was simply a breakthrough in conceptual thinking. Once the mental barrier was broken, any industrial power could start building cars. However, manufacturing a car wasn’t as simple as just assembling components. Having access to production technology did not automatically mean a manufacturer could produce cars of acceptable quality. It required support from a range of related industries. If any part of the chain failed, the final result would be a disaster. The copycats quickly realized this. But asking them to simultaneously develop technologies across multiple fields and overcome a series of technical challenges was simply too much. Even the massive upfront investment alone was more than most companies or individuals could handle. What capitalists love to do most is wait until the fruit is nearly ripe, then step in to pick it, rather than planting the tree itself. Industrial giants are mostly limited by their business philosophies. They usually focus on their own sectors, and even when they expand, it’s typically into related industries. This is a lesson drawn from countless classic cases. Jumping into an unfamiliar field often carries a much higher chance of failure than success. When risks can’t be accurately assessed, most people will choose to wait and see. Of course, an even more pressing issue is simply not having enough money. The household car market is just getting started, and its future remains uncertain. No one can guarantee that today’s internal combustion engine cars won’t become yesterday’s steam-powered vehicles. The automotive industry is still in the money-burning phase, the equivalent of just planting a young sapling, with flowering and fruiting still far off. So, naturally, it’s still about handmade production. Large-scale industrial production is too technically demanding. Even copying the tech requires strong industrial support, which can’t be built overnight. In contrast, handmade production is much simpler. If component precision isn’t high enough, you can have someone polish the parts manually. If engine power is lacking, just increase the number of cylinders. Currently, the main competitors to the Austrian Automobile Group on the market are a bunch of handicraft workshops. Since cars have only recently been introduced and are still considered luxury goods, their high pricing allows these workshops to earn decent profits, even with higher production costs. After thinking it all through, Franz’s brow furrowed deeply. It was obvious that many within the Austrian Automobile Group had been blinded by their current success and were ignoring the existence of competitors. Since the product launched in 1882, the market share of the Austrian Automobile Group had been declining year by year. A drop in market share was inevitable. Unless a company completely monopolized the market, the entrance of new competitors would naturally lead to a reduction in market share. The problem was that the Austrian Automobile Group’s share was falling too quickly. In just three short years, it had dropped by nearly a quarter. This was Franz’s own business. If it stagnated, the loss would come out of his own pocket and that was something he absolutely could not tolerate. “Oprea, haven’t you considered developing a low-cost model to maintain market share?” Franz no longer had hopes of expanding market share. After all, the Austrian Automobile Group already held 76.4% of the auto sales market, how much more could it possibly grow? But maintaining that market share as much as possible, or at least slowing the rate of decline, was still worth striving for. Oprea hurriedly explained, “Your Majesty, launching low-cost cars would not only reduce our company’s profits but also damage the value of our automobile brand. Currently, the models we are promoting such as the Beetle, Walker, and Brady are all high-end vehicles. While lowering prices might help us gain more market share in the short term, automobiles have been a luxury item since their inception. No matter how much we cut prices, ordinary people still won’t be able to afford them. Right now, we are working hard to make cars a symbol of status and identity, so maintaining brand value is very important.” Realizing the importance of “brand value,” Oprea was clearly no ordinary businessman. However, limited by the times, he had yet to consider the possibility that cars might one day enter every household and fall from luxury items to simple means of transportation. Given that the global automobile market was only consuming a few tens of thousands of units annually, Oprea’s decision to forgo low-end models and focus on high-end branding still aligned with reality. Franz shook his head and argued, “No, the production cost of cars still has a lot of room to fall. In the future, it’s entirely possible that prices will drop to levels ordinary people can afford. In the short term, even within our current technological framework, we can already bring the cost down to something the middle class can accept. If we continue to expand production capacity, those costs will fall even further. Perhaps sales per unit will decrease, but the number of middle-class buyers is far greater than that of the wealthy. In the end, our total profits will only be higher. Besides, lowering our sales prices can also strike a blow at our competitors. Unlike us, those small workshops can’t reduce production costs at all. As for the issue of brand value, that’s even simpler. Just register a new company and launch a different brand under its name to focus on low-cost cars.” Currently, the production cost of a car is generally between 400 to 700 guilders, while the market price is typically above 1,000 guilders. The luxury versions are sold for well over 10,000. Even with such high gross margins, it still cannot hide the fact that the Austrian Automobile Group is operating at a loss. The main reasons are the high R&D investments and the consistently elevated maintenance costs, which have kept the company in a state of long-term deficit. Oprea’s focus on corporate profits is actually out of necessity. The company’s financial situation isn’t good, and they can’t just keep asking the boss for funding all the time. If it weren’t for Franz’s firm requirements, Oprea would probably have slashed the R&D budget and thrown everything into boosting sales. After all, in the short term, sales-oriented companies make more money than research-focused ones. Only when the company becomes profitable can everyone receive more generous returns. In the current state of loss, staff can only hope for some bonus money. Stock options aren’t common yet, though profit-sharing is already starting to appear. However, as a research-focused company that has been losing money for over a decade, the Austrian Automobile Group has shown no signs of offering dividends. Still, Oprea has integrity. He didn’t follow the example of some unethical executives at publicly listed companies who focus only on personal gain without caring about the company’s long-term development. Otherwise, it would be quite easy to manipulate the situation and show a profit. Whether by slashing R&D expenses or slowing down the construction of service centers, the company could quickly turn profitable. If it weren’t for those two money sinks dragging it down, the Austrian Automobile Group would absolutely be the most profitable company of its era, rivaling even national treasuries in wealth. Even if they only earned 100 guilders in profit per car, the group would still bring in a pure income of 5 to 6 million guilders annually. In reality, the figure would likely be higher. Not every car sold is a basic model with minimal profit. Those luxury models priced in the tens of thousands could easily bring in several thousand in profit per unit sold. Of course, the true core strengths of the Austrian Automobile Group lie in its technology and after-sales service. They may be losing money in the short term, but these aspects will be the most profitable in the long run. Once the infrastructure is fully in place, it will be nearly impossible for competitors to break in for a very long time. This is already evident within Austria. In regions covered by the group’s service network, the only cars that actually sell are from “Austrian Automobile.” Other manufacturers, limited by their own capabilities, are simply unable to establish as many service centers. When a car breaks down, customers are left to figure out repairs on their own or wait for the manufacturer’s technicians to arrive. “Yes, Your Majesty!” Oprea responded. After a brief pause, he added, “Your Majesty, to increase the company’s revenue, reverse the current losses, and enhance our competitiveness, the management is planning to include fuel stations while laying out our support infrastructure, so our customers can refuel conveniently while on the road.” If you tried to do something like this in the future, the antitrust laws would come knocking before you even had a chance to start. “Convenient for our users” already clearly implies exclusivity. Even if other brands’ cars made it to the gas stations, all they could do was watch from the sidelines. But in the 19th century, the era of massive monopolies, this sort of thing was completely normal. Just like now, the Austrian Automobile Group’s service centers don’t offer repairs for other brands. After thinking for a moment, Franz shook his head and said, “Gas stations are fine, but you can’t be that extreme. This is different from service centers, it’s very likely to stir up public resentment. Public outcry against monopolies is growing louder, and it’s only a matter of time before various countries enact antitrust laws. Leaving such an obvious vulnerability now will make it easy to be targeted in the future. This is something you must take seriously. If you want to increase competitiveness, use more discreet methods. For example: membership card services. Anyone who buys a vehicle from our group can enjoy membership benefits, including fuel discounts at our gas stations. Other customers who want fuel discounts can purchase a membership card themselves. You can issue different membership cards in various cities. Ideally, each card only provides discounts in one region. As for the reason, just come up with any reasonable excuse. As long as it sounds legitimate on the surface and people can somewhat accept it, that’s good enough.” There are plenty of reasonable excuses for why the Austrian Automobile Group’s service centers don’t provide repairs for other brands of cars. For example, they don’t have the matching spare parts, so repairs can’t be done; or the mechanics haven’t worked with that particular model and don’t know how to fix it. But that kind of excuse doesn’t work for gas stations. After all, everyone uses the same fuel, and there’s no issue of incompatibility. If service were refused, car owners would definitely raise a fuss. Franz naturally wouldn’t do something so antagonistic. In comparison, membership services are much more acceptable to the public. As long as it’s not heavily advertised, most people wouldn’t even be able to understand the complex relationships between companies. Change the branding, and make the gas stations appear unrelated to the car company. The auto group could even pay an annual “membership fee” to the gas stations, so there’d be nothing for anyone to complain about. Besides, in this era, without networked information systems, membership cards can’t be used nationwide anyway so the excuse of “unrecognized cards” or “independent operation of gas stations in different regions” works just fine. Even if the cards can’t be recognized, the cars can. And if other auto manufacturers are willing to pay membership fees too, Franz wouldn’t mind letting them enjoy the discounts together. *** https://postimg.cc/gallery/PwXsBkC (Maps of the current territories of the countries in this novel made by ScH)
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