Chapter 292: Expansion Of The Automotive Industry
It was only several days after Prime Minister Primó’s funeral ended that Carlo finally readjusted his mindset and threw his energy into Spain’s political affairs and the royal family’s property development.
First, let’s talk about the development of the automobile.
Since the successful hosting of the car expo at the end of last December, the Spanish Royal Mercedes-Benz Company has become a household name across Europe.
Through reports in newspapers from various countries, a considerable portion of the European public learned that Spain had invented a means of transport more efficient than carriages, and this means of transport was rapidly reaching all of Europe.
Benz also did not miss this great opportunity to make big money, and as early as the beginning of this year, he had already planned the construction of branch factories.
Considering the complexity of the European situation, after discussing with Carlo, Benz changed the original plan of establishing a small number of branch factories to establishing one branch factory in each great power country.
First is the transportation issue; cross-country transport of automobiles involves expensive tariffs, and plus relations between some countries are not that good, which adds more difficulties to cross-country automobile sales.
Second is the production volume issue. Judging from the current sales speed of automobiles, the entire European automobile market is still very large.
Only by constructing more branch factories can they keep up with the sales speed of automobiles; only by selling more automobiles can the automobile factories make more money.
In January, the first branch factory of the Royal Mercedes-Benz Automobile Company was established in Italy.
Thanks to the good relations between Spain and Italy, Benz also selected Italy as the first partner of the automobile company.
Immediately after, branch factories of the automobile company in the Austro-Hungarian Empire, the German Empire, and France were successively established, and production lines were also rapidly being assembled.
The only European great power country without an automobile branch factory is the Russian Empire. Because Spain and Russia have trade cooperation, tariffs between the two countries are relatively low.
Plus, Spain’s automobile market will always have an upper limit, so Benz decided to have the Spanish head company develop the Russian automobile market.
Don’t think that just because Russia has the largest population in Europe, only those nobles and a small number of capitalists in Russia can truly afford automobiles.
This is also the reason Benz is confident he can develop the Russian market on his own, because the number of people in Russia who can afford automobiles is limited.
In April this year, the earliest established Italian branch factory and Austro-Hungarian Empire branch factory had already assembled production lines and begun continuously producing one brand-new automobile after another.
In June, the month when Garibaldi and Prime Minister Primó passed away one after another, all branch factory production lines had been assembled and completed, producing automobiles continuously every day.
Although different branch factories have different foreign capital participation, the Royal Mercedes-Benz Automobile Company holding half the shares remains unchanged.
Although the cost of producing one automobile in these newly established automobile factories will be slightly higher, plus labor costs differ in each country.
But what can be confirmed is that in places other than Spain and Russia, on average, for every automobile sold, the Royal Mercedes-Benz Automobile Company can obtain at least 1000 pesetas in net income.
So the question is, what are the automobile sales data for European countries?
Because the assembly times of automobile factories in each country differ, the automobile sales situations in each country are also different.
The British branch factory, which was established relatively late, is currently still in a stockpiling state, only selling automobiles in small quantities to British nobles and capitalists.
While the Italian branch factory, established relatively early, has already been selling automobiles for more than a month at this point.
Worth mentioning is that, due to the relations between the Spanish and Italian royal families, the Italian Royal Family chose to invest in the branch factory and became the largest shareholder of the Italian Mercedes-Benz automobile branch factory.
Facts prove that Umberto I indeed did not choose wrong.
Italy’s automobile sales have been going on for a month and a half, and more than 1000 automobiles have already been sold, with an average of over 22 automobiles sold per day.
Italy’s automobile branch factory is located in Northern Italy, which is also the most prosperous region for Italy’s industry. Precisely because of the prosperity of industry, per capita income in Northern Italy is higher than in Southern Italy.
And precisely because of this, wages for employees recruited by the branch factory are also higher, and labor costs naturally increase as well.
Based on the actual situation of the Italian branch factory, it costs about 13,800 pesetas to produce one automobile.
This is 1200 pesetas higher than the automobile cost at the Spanish head factory, meaning nearly half the profit is lost.
Precisely because of this, the selling price of automobiles in Italy is higher than in Spain. Given the 13,800 pesetas automobile cost, the final selling price of Italian automobiles reaches as high as 17,000 pesetas, fully 2000 pesetas higher than the Spanish automobile selling price.
However, it is obvious that the raised 2000 pesetas selling price has not had much impact on Italian automobile sales.
Automobiles as a means of transport are not something ordinary people can afford to enjoy in the first place; for nobles and capitalists, that extra 2000 pesetas cost is negligible.
As early as before the construction of the Italian branch factory, Carlo had gifted 10 automobiles to the Italian Royal Family as a friendly gesture.
After Umberto I personally experienced the convenience and ease of automobiles, he also became inseparable from this new means of transport.
He chose to ride in automobiles for every outing, which is also the reason he ultimately chose to cooperate with the Spanish side to construct the branch factory, because Umberto I had truly experienced the convenience brought by automobiles.
And precisely because of Umberto I’s personal endorsement, this novel means of transport became popular among Italian nobles.
Although nobles would not go so far as to use automobiles to show off wealth and compete, if someone in the noble circle didn’t even have an automobile, they would inevitably be looked at differently by others.
In the first month of automobile sales, these nobles contributed the majority of the sales volume.
Of the over 1000 automobiles sold in Italy so far, at least 700 automobiles in sales volume were contributed by these nobles.
Nobles purchase automobiles not just one or two at a time; at least three or four, or even over ten at once.
Most nobles have large families and businesses, with not only numerous family members but also confidants and attendants.
If they only buy a few automobiles, there wouldn’t be enough when needed. For nobles, they don’t mind stockpiling a few more automobiles.
Based on the cost of building one automobile at the Italian branch factory and the final automobile selling price, on average, 3200 pesetas in net income can be obtained for every automobile sold.
Of course, since it is the Italian branch factory, monetary settlement is definitely in Italy’s official currency, the lira.
However, the exchange rate between the lira and peseta is not much different; 1 pound sterling can be exchanged for 25 lire or 26 pesetas.
The Italian branch factory has sold over 1000 automobiles in total, earning a net profit as high as 1 million lire.
According to the shares between the two parties, the Spanish Royal Mercedes-Benz Automobile Company can obtain half of it, which is 55 million lire, approximately 61 million pesetas.
Based on the current Italian automobile sales situation, just one Italian branch factory can provide over ten million pesetas in net income to the Royal Mercedes-Benz Automobile Company every year.
This is still because the current popularity of automobiles is not high. Once the automobile market expands to a certain scale, the automobile factory’s income will continue to rise steadily.
For Umberto I, who invested in the automobile branch factory, this investment has indeed made a huge profit.
Constructing one branch factory only cost a few million lire, and in just a month and a half, nearly half has already been recouped.
Such an investment with extremely high returns is very successful, and the automobile branch factory also has hope of becoming a cash cow for the Italian Royal Family, providing the Italian Royal Family with substantial income every year.
More importantly, the automobile factory also drives the development of other industries in Italy.
The establishment of the branch factory is not just one automobile factory; it also includes industries such as machining, rubber industry, petroleum industry, and chemical industry.
Of course, the steel needed for automobile production can also accelerate the development of Italy’s heavy industry. For Italy, a single small automobile factory drives the development of many industries.
Although the driving force is limited, as long as the automobile factory’s sales situation does not plummet, this promotion of other industries will continue to exist.
In the long term, Italy’s industry can achieve effective improvement. It can both make money and promote national development; for Umberto I, this is simply the best deal possible.
The growth of other industries promoted by the automobile sector is also the reason Benz left the Russian market for his own development.
These branch factories, besides cultivating their own national markets, will also infiltrate markets in surrounding non-great power countries.
Especially countries like the Netherlands and Belgium; although their overall national strength is not powerful, their overall industry and economy are still relatively good.
Automobiles can sell quite a few in these countries too, which are all real financial income.
It can be anticipated that the automobile branch factories in Britain, France, and Germany will engage in fierce competition in the Low Countries.
Although the Netherlands and Belgium individually are not that large in volume, together they form a country with nearly ten million in population.
This is no longer a small market; automobile sales in the Low Countries will amount to at least tens of thousands, which translates to millions of pounds sterling in net income.
Millions of pounds sterling may seem not much, but this money is enough to build two ironclad ships.
Two ironclad ships are no small temptation for any of Britain, France, or Germany; in the future, competition over the Low Countries market is bound to be quite intense.
Similarly, there is market competition over countries like Denmark, the Sweden-Norway United Kingdom, and Romania.
These small countries can still contribute over 1000 automobiles in income, which is real achievement for any automobile branch factory.
Good news is that, because Portugal has only Spain as its land neighbor, Portugal’s automobile market has almost no competitors for Spain.
The only possible competitor is the British automobile branch factory, after all, relations between Portugal and Britain are still relatively good at this time.
This is also the reason the British automobile branch factory was established last. To prevent the British from seizing the market after establishing their automobile branch factory, as early as the beginning of this year, Carlo ordered the development of Portugal’s automobile market.
Good news is that the development of Portugal’s automobile market has gone quite smoothly.
Thanks to the railway already connecting the two countries, Spain transported over 1000 automobiles to Portugal, and after several months of sales, they have all sold out.
Similar to the situation in Italy, automobiles have also become popular among Portugal’s noble circles. Owning an automobile is not something worth showing off for nobles, but if a Portuguese noble doesn’t even have one automobile, that noble will definitely be mocked in noble circles.
Plus, automobiles are indeed faster than carriages and more comfortable to ride in. This led to automobiles quickly being accepted by Europe’s nobles and rapidly replacing carriages as the most popular means of transport.
Spain’s automobile head factory holds the three major markets of Spain, Portugal, and Russia, plus being the origin of automobiles, it is far ahead in sales, leading other automobile branch factories by a wide margin.
By late June 1882, Spain’s automobile head factory had sold over 5000 automobiles in total, with total sales volume over 60 million pesetas and net profit of 15 million pesetas.
If automobile production volume were not limited, the number of automobiles sold would only be more.
From this sales data, it can also be seen that the Royal Mercedes-Benz Automobile Company has officially become a cash cow for the Spanish Royal Family, with money-making speed in no way inferior to the Royal United Bank or the national bank.
After more than ten years of development, the Spanish Royal Bank currently earns only tens of millions of pesetas in income for the royal family each year.
This is still because of investments in a large number of enterprises. The income generated by the bank itself is not as much as what the Royal Mercedes-Benz Automobile Company earns, after all, Spain’s own financial market is also limited.
The limited financial market not only has the juggernaut Royal United Bank, but also the national bank, which is second only to the Royal United Bank.
The two large official banks monopolize Spain’s banking industry, and other private banks can only pick up scraps behind these two major official banks.
Of the 15 million pesetas income earned by the Royal Mercedes-Benz Automobile Company, 5 million was reinvested into research and development in the automobile industry.
The remaining 10 million pesetas was transferred to the Royal United Bank for investment.
As the world’s automobile holdings increase, prices of rubber and petroleum will also continuously rise.
Before automobiles were even released, the Royal United Bank had already made certain investments in the rubber industry and petroleum industry, precisely to seize the initiative and make a fortune in these two industries.
Speaking of oil fields, this also reminded Carlo of the privilege obtained from the colonial exchange with Britain earlier, allowing colonization of Oman.
As one of the Middle East countries, there are of course oil fields on Oman’s land.
However, bad news is that if oil fields are discovered in the Oman Region, it is very likely to attract high attention from the British. If the British discover large oil fields in the Middle East, it will not be easy for Spain to hold onto Oman.
Precisely because of this, even though Spain has obtained Britain’s permission to launch a colonial war against Oman, Carlo has no plans in that regard.
Conquering Oman is very necessary, but even after conquering Oman, Carlo will not conduct large-scale oil field exploration there.
Anyway, current petroleum prices are not expensive, and petroleum demand is not that great. Spain can completely explore those small oil fields on existing colonies, or import petroleum from other European countries; it is not too big an expense anyway.
Only after Spain possesses sufficient military power, ensuring it can hold Oman even under British intervention, will Carlo consider exploring and exploiting Oman’s oil fields.
Before that, if there is hope to expand into Middle East lands, Carlo will also take certain actions.
Before petroleum in the Middle East is discovered, before petroleum prices rise, this Middle East land that is nothing but desert actually has not much value.
The entire Middle East Peninsula south of the Mesopotamian Plain has combined economic value not as great as one Cuba.
This is not an exaggeration. This land is all desert, with basically zero development value.
It is precisely because this land’s geographical position is still somewhat important that the British have ideas about it.
However, the British have not penetrated into the Middle East Peninsula; the places they mainly develop are the coasts of the Middle East Peninsula, concentrated in the southern Middle East Peninsula and the Persian Gulf coast.
It is easy to understand why the British chose to colonize these two locations.
The southern Middle East Peninsula faces the African Continent across the sea, and this is also the estuary of the Red Sea.
If the British control both shores of the Red Sea estuary, they can form a second line of insurance. Even if European countries enter the Red Sea via the Suez Canal from the Mediterranean Sea, they will be blockaded by Britain at the Red Sea estuary.
The northern Persian Gulf coast is Persia, which is also a key area for the British to guard against Russia’s southward advance.
The reason the British chose to colonize these two regions is not for their economic value, but solely for their geographical position and strategic value.
