Q3 2020 Xpeng Inc Earnings Call
[music] Oh, ladies and gentlemen, thank you for standing board for the third quarter 2020, <unk> earnings conference call for expert incorporated at this time all participants are in a listen only mode. After management's remarks, there will be a question and answer session. Today's conference call is being recorded I will now turn the.
Call over to your host Mr. Charles Zhang.
King director of strategy of the company. Please go ahead Mr. Jay.
Thank you Hello, everyone and welcome to the third quarter 2000, <unk> earnings Conference call I'll pass the.
The company's financial and operating results what he should have on newswire services already today and available online.
You can also view the earnings press release by visiting the IR section of our website at IR Das shelf on dotcom.
But it had been on todays call will include our co founder Chairman and CEO Mr. Shelton group.
Vice Chairman and President Dr., Brian COO.
As president of Finance Mr., Daniel tending to do any myself.
Management will begin with prepared remarks, and then the call will conclude with a few of these session as a reminder, this.
This conference is being recorded a webcast replay of this conference call will be available on the IR section of our website.
Before we continue please note that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U.S.
Private Securities Litigation Reform Act of 1995.
Forward looking statements involve inherent risks and uncertainties as such the Companys results may be materially different from the views expressed today.
Further information regarding these and other risks and uncertainties is included in the relevant public filings.
I hope the company as far the with U.S. Securities and Exchange Commission.
The company does not assume any obligation to update any forward looking statements, except as required under the applicable law [noise].
Please also note that <unk> earnings press release, and this conference call include discussions off all did it.
The financial measures as well as unaudited non-GAAP financial measures.
Next comes press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures.
I will now turn the call over to our co founder Chairman and CEO Mr. Jonathan Cohen. Please go ahead.
Hello, sorry.
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Hello, everyone. Thank you for joining excise inaugural earnings conference call today.
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On August 27, 2020 X Bank successfully listed on the New York Stock Exchange, a significant milestone marking the start of a new journey as a public company on behalf of all employees and myself I like it.
How can see gratitude and appreciation to all of the long time, and new shareholders, who have been supporting us.
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Today marks another milestone for X bank as we reported our first quarterly results. Following our successful IPO, we're pleased to be.
Speaking with you today about our strong operating and financial performance in the third quarter in which total vehicle deliveries increased by 266% year over year to 80 578 units. In addition, we achieved positive gross margin of 4.6% bolstered by significant revenue.
New growth and mass deliveries of the P. seven.
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Two quick ones usual data tools in a city that season.
The piece has then it's Alex much sports sedan, which is also a second in mass production level model deliveries of the pizza oven has maintained fast growth momentum since our master livery began in late June.
During the third quarter we.
The first 6210 piece Evans of which 90% you can support X pilot 2.5 or X pilot 3.0.
Alright, that's autonomous driving systems it.
It is worth noting that on October twond taste, the 10000 seats up and wrote off our production line in our own child teen.
Facility.
We now hold the record as the fastest emerging smart TV company, just a pass the 10000 vehicle production Mark Oh.
All of these achievements demonstrate our ever stronger capabilities across the entire spectrum in research and development manufacturing branding and self.
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Thank you and enjoy the audio our Union TV.
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Joe to chime in as high high Codeshare across engineering.
I believe it's Bang is the only Chinese car, making company that is developing full stack autonomous driving software and smart in car operating system in house.
On the second excise tax day, which was held on October 24th this year.
We showcase our first of its kind of old boys in car system, which enables continuous driver vehicle dialogue interactions covering a broad range of scenarios.
It is one of our key proprietary technology developed for an applied in our second generation X Smart a west operation system.
We also showcased on autonomous driving technology capabilities bolstered by our in house developed navigation guidance pilot system also known as <unk> and GP, which enables autonomous driving on highways with features including autonomous lane changes overtaking other vehicles and switching ramps.
<unk> other things.
Our goal is to provide the most advanced navigation guided autonomous driving systems in China we.
We plan to make the MGP system available to our customers via OTI earlier next year.
In the first quarter of 2021, we plan to conduct an expedition.
Brown and GP to cross over 2000 kilometers of highway from Concho to Beijing.
We believe this is just the beginning of how high level autonomous driving technology is transforming mobility in China.
I firmly believe that dedication to full stack in house R&D is the key.
Key to enhancing our product differentiation and solidifying our core competitiveness.
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In terms of production after our own challenging plans officially started mass production of the P. seven in the first half of the year in September our second manufacturing base broke ground in the Kwangju <unk> economic development zone with strong support from Guandjo government.
We expect this new X bank Smarttv men.
Manufacturing base to start production by the end of 2022.
Together with our geology manufacturing base, we have set a solid foundation for <unk> long term growth strategy.
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In terms of cells themselves network as of September 30 of 2020, its banks physical sales and service network comprises a total of 116 stores and 50.
Service centers covering 58 cities.
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Additionally, our Super charging network continues to expand across the nation as of September 30th Twentytwenty, It's paying branded Super charging station has increased 235, Kathleen 50 cities.
Furthermore, we announced an X. bank sponsored free Supercharging program at the Beijing Auto show on September 26.
The program has been initiated in 24 cities and blue be expended to at least 60 cities by the end of the year.
It's bank will strategically invest in the nation wide deployed.
Oh, the Supercharging network over the next few years.
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While continuously strengthening our leadership position in Chinas smart TV industry, while also strategically to developing opportunities.
In International markets for example in September we shipped the first batch of X banks, you three east to Europe. The Super long range version of the G. Three is our smart as you the model adapted for European markets the specifications.
The shipment marked our first step to tapping international markets.
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The most at home to the observance of each element that with our job shops in Pi Schoettle twin deal or towards the industry that could be involved in Cushing.
In the third quarter, we successfully completed our IPO, which had a total offering size of $1.7 billion together with the $900 million raised ensued and series C plus financing our fundraising totals nearly $2.6 billion in the third quarter.
With the support of substantial capital reserves, we intend to increase investments in branding sales and service network trucking network as well as in technology advancements and model development.
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For.
For the fourth quarter of 2020, we expect deliveries about vehicles to be approximately 10000 vehicles.
Our ability to achieve remarkable performance is attributable not only to our strong in house R&D capabilities, but also to our effective strategies and market positioning product.
Funding manufacturing capabilities and our operational roadmap.
Okay. Let me show me all the time, we paid down revenue to the JV are willing and diversity of uncertainty to the total.
Thank you everyone with that I'll now turn the call over to our VP of finance.
Mr., Dennis Lou to discuss our financial performance for the third quarter.
Thank you that's helpful and Hello, everyone.
As noted earlier, we did leave US shown cup nice performance in the first quarter in they so quarter and post the caustic gross profit for the first time in our company's history.
We had read reaching this milestone in large part due to our successful launch and mass DDB RPP seven which also carries an increased average selling price compared with our prior model.
All this IPO and the New York Stock Exchange at this thing not only provided funding for our.
Long term sustainable growth, but also further strengthened our brand and our inference in the electric vehicle industry.
Now I would like to walk you through our detailed financial results for the third quarter of 2020.
Total revenue were RMB 2 billion.
40, so quarter.
Representing an increase of 343% from RMB 450, meaning 40 attempts you eat up 2019.
And an increase of 237% from RMB you found it was 91 million for the second quarter of this year.
Revenue from vehicle sales to RMB one.
Or night between 40, so quarter, representing an increase of 376% from RMB 399 million for the same period of 2019, and an increase of 251% from RMB 541 million 42nd quarter. This year.
The year over year and the quarter over quarter.
The increases were mainly due to the acceleration of deliveries of the a P. Seven since we began its mass delivery in late June this year.
Gross margin was 4.6% for the second quarter compared with a negative 10.1% for the same period last year and also negative 2.7%.
Got it second quarter this year.
We'll go marching were 3.2% 40, so quarter compared to negative 10.8% for the same period, a year ago and negative 5.6% for the second quarter they see.
The increase was primarily due to better product mix deep.
Decrease in material costs.
And improvement in our manufacturing efficiency.
Research and development expenses were RMB $635 million 40, so quarter, representing an increase of 46% from RMB $435 million 40, SMP reader in 2019.
Cost and an increase of 99% from RMB 320 million for the second quarter. This year.
The year over year and the quarter over quarter increases were mainly due to a significant amount of share based compensation expense recognized related to your share based awards we grant.
To our employees with our performance condition of an IPO, if we exclude share based compensation expense number one our research and development expense will be a decrease year over year, primarily because we incurred significant amount of expense relating to development of.
BP seven in the same period last year and number two the research and development expense would increase quarter over quarter due to increase of design and development expenses relate into a new product, which will be launched next year.
Selling general and as mentioned administrative expense.
Hey, two were RMB 1.2 billion 40, so quarter, representing an increase of 321% from RMB 286 million 47 period last year and an in increase of 152% from RMB 477 million 42nd quarter of 220.
Since the end the year over year and the quarter over quarter increase were mainly due to the share based compensation expense recognized for a reason mentioned to the power.
Excluding the share based compensation expense the increase mainly resulted from higher marketing and promotional.
Spending to support the amino vehicle sales.
Loss from operations worse, RMB 1.7 billion 40, so quarter compare was RMB 761 million 40 Sn period.
Last year.
And RMB 779 million 46.
Second quarter up Twentytwenty, excluding the share based compensation expense the non-GAAP adjusted loss from operation was RMB 823 million.
In the third quarter compared with $761 million for the same period last year and also compare was RMB.
At 179, meaning 42nd quarter this year.
Net loss was RMB 1.1 billion 40, so quarter compare was RMB 776 million for the same periods in 2019, and RMB 146 million 42nd quarter of 2000.
C is.
Excluding the share based compensation expense and fair value change and derivative liabilities related to the redemption rights of the PREPA share. The non-GAAP adjusted net loss was RMB 800 for $65 million initial quarter compare was seven.
151 million 40, SMP retail 2019, and also compared to 770, meaning for the second quarter. This year.
Net loss attributable to ordinary shareholders of sharpen worse, RMB 2.0 billion 40.
40 sales.
On water compared with RMB $982 million for the same period in 2019, and also compared with RMB $1.1 billion in the second quarter. This year.
Very change and derivative liabilities related to the detention dry our previous share and accretion of preferred share to retention.
And Barry you were noncash events.
Which were no longer recur after IPO.
Excluding the share based compensation expense the fair value change on derivative liabilities related to redo tension ryobi prefer share and accretion of preferred share to lead retention bad.
The non-GAAP adjusted net loss attributable to ordinary shareholders of shopper incorporation worse RMB $865 million 40, so quarter compared with RMB 751, meaning for the same period, a year ago and also compared to RMB 770 means.
Meaning 42nd quarter this year phase.
Basic and diluted net loss per Ats were both RMB 5.07, 43rd quarter of 2020.
Non-GAAP basic and diluted net loss per Ats were both I'm B two point 16 Forrester.
Motto Twentytwenty, each ats, we present to class a ordinary shares.
Now turning to our balance sheet.
At the end of September 2020.
The company had cash cash equivalents restricted cash and short term investment of RMB.
20 billion.
Compared with RMB $2.8 billion.
At the end of last year. The increase was primarily due to the next proceeds we receive from company initial public offering in August this year and also the series C. Perhaps one financing.
Now for our guide.
Vince as Sean mentioned earlier for the first quarter of 2020, we currently expect the delivery of vehicles.
Well be approximately 10000 units representing a year over year increase of about 211%. We also expect the total revenue for the.
Our fourth quarter 2020 will be approximately RMB 2.2 billion, representing an increase and year over year increase stop.
About 244% the forecast reflect to the company preliminary estimates of market operating condition and customer demand.
Which are all subject to change.
This concludes our prepared remarks, we will now open for the call to questions.
Operator, Please go ahead.
Thank you.
Todd if you would like to ask a question. Please press Star then the number one on.
On your telephone keypad.
For the benefit of all participants on today's call. If you wish to ask your question to management in Chinese. Please immediately repeat your question in English.
For the sake of clarity on order. Please ask one question at a time management will.
Respond and then feel free to follow up with your next question.
Your first question comes from the line of been Wang from Credit Suisse. Your line is open.
I see it going into August.
What if I thought it was.
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Todd you T. Potratz hone 70, because arnie audience. So many element I sit through Josh.
Two men, which here I'm going to sell them, which are then you can do that.
Well when you find yourself, okay actually my questions abound.
Thomas capacity after your launch in the <unk> and I remember talking of puts quotes and if you know.
It won't be to the next big step in the second half of <unk> or 22.
Thank you.
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And if anything you can't be too.
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She said, how many minutes equal to each other so dunkin' without yet.
What kinda family so.
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No.
So thank you for your question actually after launching and GP and the memory parking next year, we have several big big movies that were going to launch in the coming and its future. Those are based on ex parte a 3.0. The first thing is the.
Remember talking with Dana parking lot, which means that when you're caught a rise of the parking lot. It will automatically take you to the available spots for parking.
Well, if you're overweight in the usual process anyway, that's our job.
Sales over 43 to show.
Everyone at sort of greater than what you just short term.
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Changing to the job.
Now the second.
I think as big a lot she will be off one of the major cities first you did in second tier cities during the peak lunch hours in the morning and in the east.
Shifting and that is called the autonomous fall away. So that's how that's driving that technology will allow your car to follow closely to the did the vehicles before you can make sure that you are not behind.
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Peter.
Each of the children Guzzled auditors certainty that you go to that show me, but with each one of them.
No worries that.
Oh, Yeah digital revenue to who couldn't organs can get you on what implement them old users just another bit dormant that Jay but hopefully we can get on with it.
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Coming up we also will launch a identification feature of traffic lights within a Chinese city arose and also an upgraded version of the MGP assumptions are that allows us to be transferred from highly scenarios to city routes I'm coming up. We also have more autonomous features that will allow.
Yes to be more advanced in trend in terms of the autonomous driving can largely in China.
Hi, George maybe you could could you.
Mark Twain.
Okay.
Got a question about the on demand.
In the network expansion.
Brendan once the old number okay, Okay, now and obviously you're in a continuing to one and whats the breakdown between a cellphone and sort of party I Wonder what do you do something kinda Jewish home and on you know you could put on T. problem competency based on my I'm not getting indeed attached to watch our Dominion. Indeed, Oh, you mean, just thought you couldn't be any minute that got pushed out should it so.
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So I'll take this question by end of the year before.
Well cost that we will have 150 stores covering 72 cities.
Honestly.
Now jumping on Indiana Harbor facility or is about to undergo for woman Dan.
And by end of this year, we will have 68 service centers.
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Keith.
So you mean it already.
Oh, thank you.
Are you the only Armenia energy the agreement with problems in outside the us as people have actually onto the ground I'm gonna what's actually this I'm shocked that you'd want to do the antibodies we cannot tell you Oh.
Guidance.
Correct.
Then for next year, we are still in the process of making the guidance. So we'll give you updates as we have them.
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[noise]. Your next question comes from the line of <unk> from Bank of America. Your line is open.
Got it sounds all have great holding dollars single she did you do get deep into my own debentures Eagle lymph node when he gets you, which im just like them to be shown Susie.
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You don't want to quote them something important changes into the JV a woman <unk> Oh Gee, we only give me and tell you about your comment you wouldn't take on them right into the show some good questions holding like a Hawk Judaism lunges, absolutely. None we attained age I'm Oh, it's a good thing.
Oh <unk> mission to suit I know, you're going to see whether there were several things aren't really beyond June her leadership since Oh. My question is regarding hours on a sales store expansion strategy. When are you going to own problems and also I would think on don't probably especially nowadays.
Oh store expansion is very aggressive.
No one can know Oh I thought you alone takes occasion, well regarding on your sales breakdown between tier one cities and Oh no to your Stephens Inc.
Hello, you always have on she told US Oh, several don't sleep and over to you to show where do you live up to the challenge.
Yeah, that's helpful and I'm, a day or anything and we're meeting or whatever that's either been yielding that Beijing. That's outside she does along with a dual clutch eventually but when he or she has a secular says gee booking.
I'd say pitching woman and step on those who want to shout out working capital that Hugo.
Because.
Ah expanding is headquartered in Boston joke, that's why a lot of people believe that we are mainly focus of all cells. In Guangdong. However, we have recognized that that situation and we are quickly expanding in other first tier cities, such as Beijing, and Shanghai also do a lot of tier cities like computers, and third tier cities and that is possible.
She took low map of expansion in the future and this year, we are doing a lot better in terms of sales performance in other provinces outside of Guangdong.
No the Shanghai Maple, we'll know Virginia, you wishing to shop owner team hi, somewhat when the time came to him. The pension problem. This is no change.
Entering or just.
Just what Michel me that team had a you complete antonioni would you know on the way down on a woman and Equipmentone why focus on mission of Santander decor short film and give guidance. So for the full them, India controlled hometouch angle from her plate side will adequately to Dover far onshore.
Spin on data analytics, but equal questions and.
Our next step for US is to continue on improving and producing a protocol T into marketing and our marketing and sales will be able to reach more a greater extent agreed at a high level.
Higher quantity of users and outside of Guangdong quickly expanding to first tier cities second tier cities and third tier cities to our expansion of our stores numbers service centers numbers in a super charging network and those are those will remain part of our priorities in the coming quarter and next year.
Let's see though too, but she though table and show coincide sort of answers I feel its a whole normally tools shipped home Ilsone hundred 40, total bundle, which I mean change in total but that will lead us through the GTN emails like kind of a quick.
Just like some reasons and the Chicago, that's a good one hundreds of people did you shut down here.
And at the IPO, we will be able to reorganize our company in a systematic manner and make our procedures and stuff production more efficient and those will be reflected also in our sales performance in the coming quarters.
Your next question comes from Oh, Jeff Chung from Citigroup. Your line is open.
Hey, good willing dahab figure, how the surgically eligible yourself or would you assume in Poland about Eagle and leadership that alone in some accounts is a digit going there's it appears you.
I want to go teaching her TV licensing, but you at least if they are that are you going to suffer larger deal and he still hold the other ones either through your when you take the when the 10 minutes, we'll get a social zones, Oh lets him a judicial or well known 72, the chico's so shallow you're bullish osher generally richer.
How does the acquisition you'll know how should essentially to kind of the acquisition also took up the little hot side.
To go she ever end up you should go beyond that so so I got three questions. My first two question is the battery bottleneck issue. So how do we have a book that we bought in their supply issue and how do you see this improve going forward.
<unk>.
And my second question that it's about the same store sales growth between the new store ended the old store. So could you could you give us a breakdown.
In the third quarter on the total sales volume from Newsource and the Oh source before June and the after doing the opening and then also what is that.
Racial into October thank you.
Sure here today for Eagle in here when cancer, that's going into teaching wonderfully straight the E. Cigs your whole scenario. She told US how neither also <unk> G. Oh don't get on she said I show no new tenants into them a tight.
Hey, Catherine that Shinya, Virginia, who don't want to kill level than Kansas, how it sounds kinda and of course on selfishly either become what kinda cater to that feature that treating tovey dominion as he does enable us housing gets a single unit engine.
Thank you for your question regarding your first question about.
Battery, we bought a debottleneck I think after pandemic the new vehicle and you want to give vehicle industry is on the right also in the European market, we see sales a recovery in terms of the whole of European markets also since last end of last year and earlier this year as a result of the pandemic a lot of the battery maker.
Groups are doing their best to extend their capacity of production and so right now we are encountering very temporary.
Fly bottleneck in terms of battery supply.
Some of the accretion.
You guys again show can go to any of us in time.
So that instead of going into it.
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Typically when I go to <unk>, which has been going quite well and that is going to need over here.
Thanks Jade.
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Well, if they don't touch it again should you got to get it and I guess, what you're gonna changing you can change.
And they really aren't you'd be restricted in terms of production because as a result of the battery supply bottlenecks. However in the future with Arc Act is very proactive company.
And she is with all the battery makers and their AD dollars good relationship with that but good partnership with the battery makers and with better planning coming forward in terms of production I believe we can bridge. This bottleneck in a very quick manner and in the coming six months to 12 months a lot of people have apprehension about.
These battery supply and thinking that we are facing a risk of shortage in supply. However, I disagree with that I'm actually very competent e. the battery supply because a lot of the battery makers are now preparing very actively in their production capacity and I believe as a result of the fierce competition.
Thanks, Dewsbury makers will be able to benefit from it in terms of supply.
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Hey, Tony contingent of Windows of the chip on the shoulder.
Regarding your second question is about the breakdown on Q3 sales actually I would like to give you a little bit of context. All of our sales are made after all cost inside Oh. The vehicles are produced after the cost of the side the agreement or the sales contract. So basically all of the numbers all of the deliveries that you saw in Q3.
Good part a result of the previous contract that we signed about a month or 2.5 months ago.
Well we've enjoyed good good to go.
The woman to so you could go to the D. emergent central and sharpen tree that team hired a person Chico. Thank you chairwoman no way you, Jeff and good government Gardner.
And it's also getting usual.
Sure Doug.
The jets, which she didn't know much in that country noisy Michigan's and of course with the football.
And from our development actually we observe something interesting we used to think that it usually takes maybe six months for a new a store to mature.
And now we realize that it's actually much much quicker.
And when you want your original shades or Sharon do you see a onetime dose and time that need a cheek always do you do you ensure that means you're going to get wouldn't you don't usually all woman that it's what you do is you know, we lifeway foods, Josh warm and as you can tell for the show fleet.
A woman to young that a JV between call it the changing too when she got tissue.
And as we develop the more a cellphone factories of production has to be solved a battery supply problems and optimization in that area. We believe from Q4, which will be <unk>. If you see what she'd like yeah, even higher efficient.
In our product deliveries.
Oh no.
Uh huh.
I loved your choice right Lemony add on this point on the battery situation. It is not a.
A bottleneck in in a way that you know, we we don't have and also the access to the battery.
Capacity it is actually where you have sudden jumping demand in the short time, you need to revised up your production it will actually be back difficult, but given time I think the capacity issue will be digested very quickly. So I just want to give you. This context, it's not like a you know we don't have access just like if you don't eat.
You don't have the flexibility to really change capacity dramatically in the near term.
Okay. How she is a widely that's really going to be I guess, just reaching out to you. When did you should judicial being good ammonia in the wash is somebody announces pressures coupled with the team on the piano you any geologic Virginia in those countries fund that you see.
Had reasonable chunk and I was gonna miserably, that's how we've done well production was down there you go treatment go higher you guys, usually look for John the treatment of Oh, What's your thought on the T. joke about reduce your bog the percentage of your what you're gonna autopilot or without sounding, though oh, sorry, yeah, Jami I, usually do though just.
She also the social.
What does your attach rate.
She wishes I might have to go generally up with my Guy will have found really know where you got both Washington, REIT chauvinism downsizing and there's somebody out or that decides.
Besides you yeah.
Yes. So my question is about the software income so how how how probably saw accounting treatment on the software income into two two.
<unk>.
And how do we transfer the depend up the revenue from the from the software income into two to one and then if this a panel revenue of overlap with the new software revenue of income in the first half of next year, So would there be a inflection.
I should point do you see a massive increase in the revenue and net profit going forward. Thank you <unk>.
Jeff This is Dennis let me answer your question.
Yes, so far we have received some orders for example, the a and B, how where a vehicle has for C O E.
A woman to supposedly autonomous driving on be tripling deal. We do see some old is the payment of the software, but lacks the hour kind of pre pay customer pre pay money that's not in our revenue we need to wait until we all T. AIDEA functionality, then we can book that into our revenue.
Couldn't apprenda is to book blocks into lead revenue starting from next year and we actually we have for example as of today, we have about 40% of our customer they pick up the hardware and a mommy, how where they have about 60 to 70 personal cost them and they they five your software. So this award.
Translate to significant mom Rps support revenue starting from next year, but I need to clarify so far we have a x. tighter to pull inphi entry 0.0, the coupon fies free of charge, we only charged to cost them or was the 3.0 to autonomous driving now cheapens, either and going forward.
In our fuel for models, who I have more modernization. All these software for example, we map way to triple Inphi or even 4.0, the software packages and that high we probably aware they evaluate the pricing maybe we'll increase the ESOP where revenue by all you know that remedy the software revenue.
Well be a kind of a considerable portion of our although a remedy that going for.
The teacher she's are devoting though.
Pitching.
Your next question comes from a lot of Paul Gong from Yes. Your line is open.
Oh sure sure going into all we would I'm going to talk to you go into supporting them or do you do you don't talk industrial so essentially it was under Archie to the automotive news once once you find somebody to your door thought some don't so some nights or you shipped almost any variant called reaches on your thought that's what we're seeing so much is censorship or you cool guidance. So.
She is summed up 102 subsets I'm only do so many years I see it go for sure. So my first question regarding the gross margin.
Yes, that's right slots, so Q3, our GP margin improvement to use money all resolved topped up on me our Q seven keep marching significant hires on history I used to use free is still you know.
Okay of course margins only in the Q3.
What's going to go into the Washington mutual sense of cool and final hunton into hinge on gender you're going to have to fund. So you want me to use for the auto do some my follow on question on just awesome.
[laughter] subsystems for your one question. So full guidance. Okay, you can kind of I'm going to own questions from tornadoes went into Suzhou.
No Wonder woman from London Hydro. So it took a you intend to us but also your sales somebody on the pinpoint. So my second question is regarding the on the actual pricing opex kind of sweep on zero Oh, my understanding if I recall correctly did that he thought twice about 30000 to RMB argues that hum.
Do we think about the off split between the hardware cost coverage versus software revenue and How'd, you will see the hardware or cost going forward. Thank you.
Okay, Let me handle the amount you know question, yes, we are.
At the quarter over quarter margin improvement or the no major contributor is from the.
ER beta product mix, which means more p. 70, so quarter to compare with the second quarter only minimal amount of them and then we have the Reid.
Actually in material cost, including your battery and battery material cost reduction and we also have manufacturing efficiency improvement due to the scale of the economy of scale, we don't disclose individual vehicle nine a machine that we have seen improvement.
And I both models.
I, we don't we don't disclose individual matter, but the although both models Martina improving.
So that's the first one and then a second one on the the autopilot so far we charge cost him I wish one off plenty solved and.
For the year X pilot 3.0, a one off if cost them a chooses to pay that in installments are they will need to pay a close out in a year for three years. Then they can get you at that time lag time or the kind of service we I've seen.
Opportunity on the how way up because of the technology improvement and also to yeah I'm more volume in a more scale, so both hardware and software.
Have the efficiency in terms of the costs to ER and I work for to improve the margin for.
Yes, the subway I swear us the vehicle margin going forward.
Yeah, Paul you're right I mean, I think the our hardware on T.
Hi, This 2.0 has a more expensive than the the version that has only the pilot 2.5 and also the price difference covers.
The hardware costs as well as having some margin there as well and we expect the cost of those hardware can continue to go down as we produced more and more of these expanded 2.0 equipped vehicles.
Okay. Thank you.
Your next question comes from the line of John Lu from Bank of China. Your line is open.
Ankle equation, when John Hodulik with individual Jana, Oh, well, Glenn tissue, Guangzhou, <unk> or Michele della <unk>.
Tony.
Pat Toehold and a woman she also Jim Jaye Buddy.
I'm showing that we normally show without doubt, it's sad to lose and I know many of you have seen gadget album, why should I say I mean, they they sound hyakutake in about a minute ago.
Can you know get 'em, we cannot eliminate our handle myself nominal attendees when I sat <unk> cool.
Well, yeah I got it.
Just did.
She took a break nama.
Well, thank you John and good good evening management.
Thanks for taking my questions.
I have a question in terms of our sales distribution on different from either to peers. We have those sales loads the upsells sales.
Beautiful and dealership.
And how do they compare these two modes in terms of marketing efficiency and customer experience and could you give us the breakdown of these two modes and whatnot.
Plant in future.
Thanks.
Yeah.
Okay.
No well mission I radioed the bank this new channel Jay.
So how much you don't go through some new jobs and I think it's the intermodal chips Janet.
Yes, with the neonatal shovel tissue disorder, which incidentally on what your leverage.
For the job.
So that she can pay Neil.
So far Ginnie haulage namal.
Well see you on the Chicago Tannenbaum, Chief Global Hotel chain team had a Joe even though.
Yes, well, yes, the team pay check.
Sure that incident childrens choice either Jan you Richard.
So no change on that John Hi, Shelley will go.
No John that achieves an email will not quite tissue that announcement, which have already opened fata did you put on the wages you put on the treatment when we shared that we on the tool so that generation.
Currently we have 116 sales point self storage amongst them 46 ourselves.
70, our partners, we started on the cheap or franchise stores now in my understanding as we begin to build the brand. It is more efficient to have your own self owned stores. So that you can educate the market and do more branding in terms of your development and as you mature as the.
And get more and more well known in the market. It is more efficient to have partnerships with other dealerships. So that you can have a high efficiency aimed at generating sales and right now we believe that both of those channels are very important is contributing to our sales and so in the future. We are going to set up different kind of.
Stores. According to the location according to the type of cities that we are in.
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Well no way young Trina General one organ toward our sense was that you lost at Mizuho.
Brett or your own recording Osawa or and how sales are what the gym into without <unk> know what my when I kind of weakened so don't you do but let's yeah. Our man that you should put back to looking out how long what John <unk> John D. What's really the same oh, a phased out.
Can I explain these by this away that being what's your one cities.
Insurance agent, we will have.
Developed more in depth.
Depends on our own self build dirt.
Starches and into low GRC T., we we are your dealer shape and.
And with that are there.
Pension of our brand brand name the end, we all yours.
Morning Southfield.
I'm, a little I'm not so sure that to the let's see okay team I'd insist on do you didn't get on to the table to if you will in Pune Hi, Jake to each other says on the GE, Jamie Cook with digital.
It took a little bit too much much higher than what was sort of the woman Julian the issue.
Oh geopolitical tensions there was a female boxing for the back yard.
Central and I, you know kids only but you kind of did you put on the trends it finishes.
Commissions actually shoveling, the natural course, I know they've yet agenda.
So as I mentioned before.
So as I mentioned before we have to take into <unk>.
Take into consideration how many different elements for example, the brand awareness the acceptance level of.
New energy vehicles off the market and all of our customers. So right now we don't have any preference over which kind of stories that we're setting up for a first tier cities or two third tier cities.
It all depends on us specific situation.
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Inbound Oh, we're highly go when she Oh sure why it's how would that sort of what kind of woman incented to do several sales Oh, Wendy who told me that went out in the be all we had to downtime the monkey woman, Georgia, either the insurgency. It seems that GTT Sunjata you go you any leeway.
So when I understand them and getting starting first with Needham <unk> company in June I kind of what I make a deal with that so they won't be quite equal.
I got it you got a quick.
Well things that.
I have I saw I have seen no to that so.
SGN expenses in Q3.
So to the.
Substantially okay. So give us some reasons about is there the increase in M&A expenses under the the guidance.
Future fall as Jamie Thank you.
Okay.
Sure Jim I won't read on that one for you.
Okay are you seeing huge yes, we have the quarter over quarter increase in SGN, a and the increase is primarily for the brand in spending the channel sales.
Pension channel development and also kinda advertisement to support new vehicle sales.
As the primary higher spending R&D SGN AE and going for as you are aware we are still in the in the kind of in the middle in early phase in terms of the channel development and to be more strength in our brand to support higher RM Taka next see us.
So we for CE, marking and sales expense will continue to maintain at this kind of level or slightly increase in the near future. We OE RFM tie. We were also to manage your other for example for some spending we don't need to grow.
In nine were small and waterfront controller Buffalo. Some subvented lies to investment for future will continue to spend a little money on that area to support future growth.
Thank you.
Your next question comes.
Malone Nikolai from JP Morgan Your line is open.
Yeah, Hey, simple, we don't think Washington, selling team as I was saying, we're essentially take was different to what Youre, Tim Duncan down when T. T could still maintain thanks. Thanks, you too. So it was it was a seasonal pick my older. She goes up come come they cellphones.
She also on incentives in tough markets, and maybe alter not dilutive to Canada and waiting 10 Das systems, So what you'll see with the which anytime so top line look like with that so.
So intimate john's onto a made to order to that so we'd like to I don't she shortly on the weekend type deal where dependent pick our order book do you have a one teacher says.
So in the long term targets and profit as you can probably been type C. Biased towards automotive you Suky tenancies that you can probably hear suits. The horse that you picked also good hi molecule joins the whole Joe can you hold your kids should she had policy to tier so okay and then the Chancellor might include my question in English, but first functions.
Sure Doug.
Got back lot weaker and currently we have waited tunnel of about four to five weeks and what our sales strategy to shorten that waiting time and the second question is really we got through the new factory in Guangdong and what is the capacity and the Capex can you put some color.
And give us some guidance thanks.
So Nick first of all we as you probably heard during our IPO process, we don't disclose backlog information as policy.
But I think in terms of the wait time actually depends on the specific model Youre ordering I and my understanding is that four weeks to six weeks are the standard.
The Big time these days for LP seven we actually tried very hard to shorten that delivery time, because I think I, obviously that will improve.
User expands our customer satisfaction, we actually are stepping up our production as we speak.
Also the same time, we're reducing the.
At this time lag in terms of transportation and logistics as well delivery cycle.
Cycle. So I think hopefully we can actually control the delivery time to shorten that was in the four weeks as we think.
I appreciate it good showing engine. So we'll know equally to the heart of the SK Eugene.
And.
So again I guess in the majority of Takata, Joe Technology, which offers.
The retail for the U.S engines has shown that into the JV or changing the way to anybody and what you do and what we can say that over to Shelly single showdown, which one are you.
Let me just add to that Im actually.
For some high models will go into do.
Maybe she over time or a quick pre production of those models to increase that to shorten the wait time and also to optimization of our delivery procedures. A process. We believe in the coming quarters, which you will be able to quit the short the wait times.
And your question on console plant right now the design capacity for this second plant. We are planning to have 100 K annual production in.
In terms of the cost of building that we estimate this.
Would be close to three billing RMB into total cost, including the core.
And then and the obvious.
Obviously as you heard from our previous announcement.
The government supported financing package is more than enough to cover deconstruction any common costs that plant expansion.
In terms of your question our high my relationship.
Our.
Yeah.
Contract manufacturing agreement with Highmark will end by the end of next year, where obviously maintaining a very.
Frequent dialogue with Hamas to how to best optimize that relationship. So if there is any decision or conclusion, while obviously disclosed to the public.
Open season.
I think.
Thank you very much.
Okay.
As there are no further questions now I'd like to turn the call back over to the company for closing remarks.
Thank you once again for joining US today, if you have for his questions. Please feel free to contact US comes I'm <unk> Investor Relations there was a contact information.
And provided on our web site for the TPG Investor Relations.
Thank you.
This concludes today's conference call you may now disconnect.
Yes.
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