Q3 2020 Li Auto Inc. Earnings Call
[music].
Hello, Ladies and gentlemen, thank you for Sonys buys for the auto sort of caught up 2020 <unk> earnings conference call. At this time all participants are in the listen only mode. Today's conference call is being recorded.
I'll now turn the call well, what's your host John of <unk> Director of Investor Relations of the company. Please go head channel.
Thank you read the tea good evening everyone.
Everyone welcome to leak out of the third quarter 2000, <unk> earnings Conference call. Our for <unk> earnings Conference call since our IPO, the company's financial and operating results were published in the press release earlier today and are posted on the calculates the IR website onto.
On today's call, we have our president Mr., Kevin Yeah nation, our CFO Mr., Johnny Chile, and our TPS, Mr cash to begin with prepared remarks, our founder and CEO Mr. Stanley well join for the Q eight discussion beef.
Before we continue please be reminded that today's discussion will contain forward looking statements made under the safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995 for.
Forward looking statements involve in current risks and uncertainties as such the couple of <unk> actual results may be materially different from the results expressed today for the.
The information regarding the risks and uncertainties it seem cool day in sort of value of the company, which the U.S. security and Exchange Commission.
The company does not assume any obligation to update any forward looking statement, except as required under applicable law.
Please also note that the out of earnings press release, and this conference call include discussions of and a detailed GAAP financial information as well as none of the paid non-GAAP financial measures. Please.
Please refer to lead auto is price per day, which contains a reconciliation of the adjusted non-GAAP measures to comparable GAAP measures.
With that I will now turn the call to other President Kevin. Please go ahead Sir.
The agenda and Hello, everyone and the thank you for joining our call today.
We are very excited to announce the the result of our open waters of the public company fully Howard July 30 listing.
In the third quarter, we achieved the robotics results, we delivered the eat the seat.
600, and the 60, the one being the third quarter, which represented the quarter over quarter increase of 31.1% versus our deliveries in Q2.
As of the end of October accumulative deliveries.
The Twentytwenty reached.
21852 vehicles.
According to new car insurance registration data reported by China automotive.
Technology and the research Center in September and October the one become the best of setting new energy EPS UBI amongst all models in China.
Very strong testament to its highly competitive product features.
In addition in October our other showed strong growth setting a new monthly record and the giving on the saudis the confidence during our fourth.
Water deliveries.
Which we expect to reach 11000 to 12000 units.
And the achieved the new quarterly record.
At the same time, we have improved our gross margin and the operating cash flow due to increased the deliveries improved the bomb cost and the overall operating and the manufacturing efficiency in the third quarter, our gross margin expanded to 19.8%.
Compared to 13.3% in the second quarter. We also generated operating cash flow of RMB 929.8 million, which is 100 and the 5.8% higher than the prior quarter in terms of R&D.
We will further increase our investments in this regard and continue to leverage technology to create value for users and the to optimize our user experience through product and the technology innovations, we are committed to providing our supplier.
Users with safer easier and the more cost effective mobility solutions.
Surely we live up to their support and the trust in September we added the importance of new row of CTO to our senior managements roster with Mr. Taiwan, joining our team from.
The strong this new additional reflex.
Our philosophy and the pursuit of combining expertise from the automotive smart device and the Internet industries.
And the building an outstanding team across many of these planes to develop smart vehicles for our users.
We missed the will of vision, the re judgment and the banking profound expertise and the impressive track record, we believe Mr. Wang will make the crucial contributes to our products and the company.
To constantly provide a best in class experience to our users, we continually evolve and optimize our vehicle through for the past updates throughout the entire vehicle lifecycle.
We also continuously collect performance and the behavior data from our users to drive our product increases for.
By the end of October we had released the 10 major vehicle OTSG upgrade.
Two the one users to provide them with the better driving experience.
Moving to our Digitalized direct sales and service network.
It's an essential component of.
Our closed loop business system. This network fees direct the user.
Usage data and feedback to both our R&D team and the service team for us to analyze and optimize the eco features and after sales services. After the may ultimately aiming to optimize the user experience.
As of the end of October we had 41 retail stores covering 36 cities in China, maintaining a high level of operational efficiency to each retail store demonstrate that we have completed close the loop system set up next.
We plan further growth the system to create an efficient virtuous cycle of user feedback vehicle development and the service enhancement.
We cannot achieve our results without the support and trust of our users as the end user driven automotive and technology and the price Li Auto always post our users at the highest priority and the we'll spend no.
For us to provide our users with safer more convenient and the more value added products and services to further realize our ideal of CCAR and the whole the.
This concludes my prepared remark now our CEO Mr., Taiwan will discuss more of the R&D aspect of our business. Please go ahead.
Thank you for the introduction Kevin how the.
Hello, everyone is my owner to jointly auto recently, the buy into Brunner, Mr seed Chung Li.
I would love to share my thoughts on the.
R&D initiatives.
City of the company.
Of deliver in progressing the nomination.
The cost Rome was not built in one day. It has always been of better approach to follow the nature of low of the evolution.
To implement technological concept stop asked us for.
Hi thing user demand.
These believe acos, well with Lialda sales guiding principle.
Leveraging technology to create value for users to optimize the user experience steadily and continuously.
From a technology roadmap point of view the CTO office will focus on in house development of anything that has a direct impact to our end user experience such as intelligent cabin.
For the us slash autonomous driving.
And car related carting age technologies, such as cloud data mining and the song.
We will also leverage of top tiers partners, so hope to achieve our objective and.
In September.
We announced the third world for any way of strategic collaboration was global semiconductor Jain Nvidia.
On Chinese domestic leader the site asked me to be the first OEM in the world implementing Nvidia flagship chipset altering the now.
Vehicle, the owner to from wide of premium user experience.
To support these R&D activities, we will increase operating less money R&D and the size of our team continuously for.
For example, we will expand our of striving team size by three times by the first half of 2021.
I'm confident in our capability to execute this roadmap and continue to build a leading position in the intention automotive industry.
Now I will turn this call over to our CFO Mr. Li for close of low and our financial performance in the third quarter.
Central cash Hello, everyone.
We'll now go over some of our of international results results.
Our third quarter of 2017 auto.
We'll be mindful of the amounts of this call I will address our financial highlights here on the inherent for you to refer to our earnings press release of which is our wholesale margin for additional detail.
Total revenue in the third quarter of 2020.
The RMB 2.51 billion representing.
Representing an increase of 108.9% from RMB 1.95 billion in the second quarter of for.
2020 of.
This includes the vehicle sales in the flow quarter of 2020, which were RMB 2.46 billion.
Representing an increase of our funds.
From the 8.4% from the second quarter of 2020.
The increase in vehicle sales was mainly due to a.
31.1% increase in vehicle deliveries to our free.
Thousand of six.
650 vehicles in third quarter of 2000 tonnes per day.
From 6600 for vehicles in the second quarter of 2000 funded.
Revenue for other sales on services was RMB.
For the $6.1 million in the third quarter of.
For 2000 funding with.
Representing the increase of 64.1%.
From the second quarter the.
The increase the honest sales and services, while the in line with the growth vehicle sales.
The increase in vehicle volume are using our services.
Cost of sales you saw quarter was RMB two point.
Zero one billing.
The representing the increase of.
Our 19.3% from the second quarter we.
Vehicle margin in the third quarter was our.
19.8% comparing compared to 13.7% in the second quarter of 2020.
The increase of vehicle margin was primarily attributable to the decrease.
The in purchase price of certain materials.
Including of onetime rebate received.
From a supplier.
And the lower our unit manufacturing overhead cost due to the increase our production volume.
Gross margin in the third quarter was our net and 19.8% compared to 13.3% in the second quarter.
Which was mainly driven by the increase in vehicle margin.
Total operating expenses in the third quarter.
For RMB.
676.7 million.
Representing an increase of for 50.
55.2 per cent.
From RMB 476, meaning in the second quarter of 2020.
Research and development expenses in the third quarter of 2020 for RMB.
Our 334.5 million representing the increase of.
60.
Six per.
One.
For that.
From RMB 200.
One point for meaning in the second quarter of 2020.
Excluding share based compensation expenses, the adjusted research and development expenses were RMB 278.8, moving representing a quarter over quarter increase of.
Our 38.4%.
The increase was primarily attributable to starting research.
On the development for our next model.
As well as increased headcount.
Selling general and administrative expenses in the third quarter.
Of 2020 were RMB.
342.2, moving excluding share based compensation incentives the.
Adaptive filing our general and administrative expenses were RMB 264.2, meaning revenue.
The increase of 12.7%.
The increase was primarily driven by increased headcount as well as increased marketing and promoting scientists.
Loss from operations in the third quarter of 2020 was RMB 100.
Hey, meaning compared to a loss of RMB 100.
Of 76.3 million in the second quarter of.
Of 2020 the.
Excluding share based compensation expenses.
The non-GAAP adjusted loss from operations was RMB 45, meaning.
The increasing 74.5% from the second quarter of 2029.
Net loss was RMB $106.9 million in the third quarter of 2020.
Compared to RMB 75.2 meeting losses in the second quarter of 2000 today the.
Excluding share based compensation expenses and the changes in fair value of warrants and the relative our liabilities.
We achieved positive bottom line with adapted net income of RMB of.
16, meaning in the third quarter.
Compared to RMB 159.2 million adjusted net loss in the second quarter of 2020.
Turning to our balance sheet and cash flow.
The balance sheet of our cash and cash equivalents.
Restricted cash from deposits and short term investments.
Was RMB 18.92 billing as of September 32020 compare.
Compared to RMB.
3.71 billing as of December for.
Looking for us.
For 2019.
The increase was primarily driven by inference of serious the private financing.
The completion of our IPO and the concurrent private placements.
Operating cash flow in the third quarter of 2020.
Was RMB 929.8 million more than doubled from RMB 451.7 million in the second quarter of 2020 for.
Free cash flow was RMB.
749.9 million in the third quarter of 2020.
Total revenue increase of 149.3%.
From RMB 300.8 meeting in the second quarter of 2020.
And now for our business outlook for the fourth quarter of 2020 the.
The company's past deliveries to be true 11 and 12.
12000 vehicles Rick.
The resulting an increase of of proxy for cemetery per.
On the seven to 30.
38.6.
For them from the third quarter of 2020.
The company also expect fourth quarter total revenues to be true RMB 3.1.
One billing you of dollar 400.
Our 57.8 million and the RMB.
3.39 billing U.S. dollar 499.4 for meaning representing an increase of 23.
3.7% to 35.1% from the third quarter.
Of 2020 now.
Now I will.
Turn the call over to the operator to start our two of the budget. Thank you.
Ladies and gentlemen, the will now begin the question and answer the question to ask the question in the press Star one of the telephone and away from into the amounts the cancer. The repurchase please press the pound of hash key.
For the benefit of all participants on today's call. Please limit yourself to two questions and the of any additional questions you compete into the cash.
If you're going to ask the question from Chinese please follow the English translation.
Once again, ladies and gentlemen, its star one for this to ask the question.
The how of much question from the line of sight Hong from Goldman Sachs. Please.
Please go ahead.
Thanks, Sean Zone Kids on current time very impressive results. Congrats on the tremendous progress of let me start with two questions of first is about the supply chain, reflecting on the once the scanning sales how would you kind of drive better sourcing efficiency and prices from here for example for battery price, which is obviously a chunky per.
For for bomb, what's the opportunity the cost further from here and also can management share some light for the progress with the media partnership when do you plan to deploy the components second is about the recall incidents in the past few weeks, okay discounts the latest progress with the hardware replacement and also what has been the impact of the wants backlog if any of for.
Contacts our of our own analysis is that this is a 10 meter whether it be cost issue, which is 0.1% of the annual revenues. So want to see if you have any any response to that most of the home of phase two for Thats. The consequence of the down to go down the of the year to year, where the value of anti towards the end of two to sort of come to the shelf agreement with on the quota share Ascension, which of course is that coming in.
Let me from it so to finish the youre positioned from an accounting for them to be the static ascend debt from your interest number for me two quick other you'll have the need to see much of his argument for you made the other secretary of course or co for franchise and one of the take or pay channel dramas into the algo share. Your one switching the to go talk we should yen Ching bodies of franchise sandwich and the for the neuro true for the cost.
I think the international engine now to trigger Charlotte sort of your thoughts one Jewish attack that utility of maybe some of the Michelle telecoms. The bundling. The initial such of Ocwen is on the particular sort of on the ticket to your core tier one of the season.
HM.
Okay.
This is Kevin Thank you of our debt.
Our answer your question for.
First the.
As we can see that seems the the launch of the one we have already seen some substantial.
The improvement of our gross margin. This is due to of the of the bomb cost the reduction and also the manufacturing efficiency of.
So.
As the our volume increase gradually we will be able to procure of Pos at the lower price and the continuously reduce the manufacturing. So this trend the will not change.
Some of the numbers that you are the C. you should already see that reflected in the financial numbers the share the bye.
Share via the Phs now.
For the other video collaboration I will turn over to a missed one high yes. Yes. This is cash speaking so regarding collaboration with Nvidia I think everything is on track.
The software part we have already reported our software into a media current savior of platform for vehicle level well test was already good result.
We will continue on software development and testing and two hour of Orient based hardware is available.
In the hardware side, we are working closely with most of the media and the desire as we.
I think everything is in the onshore wind the scoot progress and the other thing in future, we will provide more update regarding the topic. Thanks.
Thank you.
Okay. Thank you hi.
Then the for the second the question about the the recent the recall.
Currently the recall related work is progressing steadily and the expected to take about three months for us to a complete.
We handled the this recall we of the transparency and the efficiency of this is a reflection of our company's core value. We always put the customer at first the priority that's.
Thats why we got the of pipe positive feedback from our existing users and the potential buyers. So far after the announcement of the recall the growth of momentum of our new orders remain the same as before the or no no any major impact the observed.
As for the cost related to this recall of how we think.
Our estimation is about right yeah, as the inline with our estimation.
Thank you Dave Thank you of volume for the pension yes.
That's great of here, thanks for the response and congrats again.
I think Keith.
The how a next question coming from the line of Tim Shao from Morgan Stanley. Please go ahead.
According to the anyhow and of course, he said you to the Utica shale.
Okay. So the 2000.
When you get lumpy elsewhere in the on the idling the egos your way in total.
The the financial needs of T.J. Hottovy with Senator it's harder to the true content such as you can see the founding conscious of huh.
Non utilities for failed other countries beginning in current tissue you don't see a channel.
She has seen a cookie at each other idea synergies from accounts should be until each of our total the share.
Okay, Great and then challenged to your bartolucci quality the G, which is the two that you ship the.
The theory when tissue rating of the Ritchie from cutting edge true here. She says you called assay the dose, which all of US are going to continue to think of it on the year by himself test for by the way that's.
Thats, all DG, continuing kind of hits the European Packagers NTM teacher book on those features such as share gain on true nurture.
The range out for anything as I said to the timing of which.
Which is the sort of yourself, how the team to each of the current chat Utica shale teachers.
So my first question is about the R&D spending based on the today show is for the quarter results.
The noted that the auto is going to span the interest of the absolute margin or percentage of tree the value seem to be lower debt.
Other auto EBIT appears so you know is partially due to a couple nights cannibalization of cash cost come true.
But in.
In light of the growing investment sales.
The other technology innovation and also told the try the index here.
Our current management quite the Leo total kipp such a.
Relative to the way our understanding of how should we think the balance the trajectory into 2021 and my second question is style of the competitive landscape because.
We noticed that the competitor has kept this year's quite the night.
Okay into next year 2021.
With us that the market might be getting more crowded harvest cash somebody for why boss wagon NDP based model.
The meantime for us on notice all of their local peers.
I can end of ATM the goal of down the true also launch it extends the range GT the yards free.
So how quickly the auto state Park capacities.
In terms of the credit I can schedule. So those of like much of questions. Thank you.
At the heart team the auto leader no whatever that everyone here.
For the thing about all other than here in the.
True the boom of the cooling the legal assuming interest the whole goes the I'll comment the show the 10 years younger than the Italy. The you got Tony and she didn't know tranche here on the do you have been announced yet so you know among chip bar the how to ours the doesn't either to the you'll have to your the how beautiful young from June to uphold the equal to the that kind of how the LNG.
The truth shield, the journalism that actually share a fit out for the whole put that in the current evident luchsinger such as it is total needs to the our feet on the other you come out yet the knob.
The which will you go pager algae growth at how she also of the going on Dogo heading towards where the deal where are you at the state of Inova Simon Hubbert of course, you acknowledge as of the Ocaliva coaching the audio hoping that you could go to the Oklahoma the right yes.
If I go I saw you can go from the for the different came from the what would you add to that for the ARNA the hub.
The going there some of that I've been on the other how true true when the or what are the year for that then held onto our total we held onto a she's you're moving some of you going into the goes out of the put under the idea. The idea. The go it sounds as though month. So I'm wondering is sort of I mean, if the colonial Arbors. Your oil book two of the whole may which will help although the cushy of she should set of I mean the problem.
The look only at the show the other tradition cash out of it but we're going couple of thought actually although we'd be in the GAAP. So it is no change on that one and then share for the on the gas yet that's a couple of years I guess, what other interest on the annual share the how the Oh yeah.
He is on the beach area. The Australia can go given you did you pay the ruin Jay your ego going on really was that the competitor EBIT on the off of growth since the day that you have I feel free and they all day.
So let me tell you go pager that not only the shying away from the fit on the GAAP. So it about all of that yeah, Bob I'm here, especially of on the central now called the if I'm here that the on the local the use of it and go the other than the U.S. area. So it's only got adjusted well really well known the how soon she mentioned the literally taken care of.
For shipping channel letting of bundled them of course really of the should the and we'll go now, though the loan growth or the Chile and for the shot on the your budget I think one of its our job logical usually highway trust of the quota so not sure on the balance of the English has the option that youre candidly edge of the household food to how they share.
No not we're moving ramp of.
True down the yourself from that in a woman that you have a pool of of liquid tougher the non-GAAP images that bulk of the slow Josh it off the about how can tell the general growth. How are the also adjusted so in total the option you book trigger based for the UK TCIL the diet for Michelle I will say the definition diesel sales at that well.
Let the are that can help me on for let him go the about all rocher Autophagy dollar value of other the hearing you should now for the future.
From a whole lot of the away so our yard in cash or mania, the always answered on the how Joe for you down into the non fill.
For the into them at HSN for elements all of the teams for the the if I'm in that although our mugard behind the under the how you go to the on Eagle Pedro from US you want to call you go to the Eagle page of knows what are the hard for that and the Tony I read on the the hotshot on the budget the tissue and that's what I'm, saying He told me about the also the to the ammonia.
So what did the if I'm yet the anyway, given that your children of on the auditor well kind of the doshi or the that each other how about the all of it on channel Genone matching the double humming yet macedo during the day you have other true on the highway sales shale. The retired from the adoption of onto that can do the the Algoma Cushing, though the let's say the sort of the each other.
Yes, the which are the right before the merger and the fit Honenone.
Now both of that I'm, not aware of being up mid.
So you go to the clinic against the sort of the going on the how things would be woman of it the mother of Axa payoff of Lysa Hell bent on huge growth the the how the other should the on the news the achieve liberalizing the the how the annual you'll see from so not very simple that you go for that you could have been a deviation fish other they all the way.
Total debt was because of consolidation of the our dinner, the jogging or whatever but.
But the other damadola income clear of can do the auto should allow the GE has the next year you don't have paid for the algae of article though.
The no matter what does it tell the Europe.
Well you know for me just the interest margin in India and due to the the outcomes from push for your goes from the transient you go for it and you should always yet Oh, you don't want to do on the show a mix of high growth total other told you Tony and other probably the it up on the into the Hall Yandex touching the Lakers should go don't go for the whole closer towards our 2000 of drinking water the audit on channel change or they don't.
You mentioned the of our usual of them by you go but anyway. The whole total of out of stockholder value of sort of how that shows up that you had your current until you all of the middle of I didn't show up for the Olympian just from the you go from here debt free.
They're not cheaters total interest income clean energy device. That's in the south of them are the book at auto several of the other thing you down the hall of go how the drilling in auto or hit each other did.
EBITDA for the after you Doctor of other generally an auto chinchilla for help on being the the upward on 20 of the down you've got jobs, yet. So I know of Europe cannot be of color then Peter Donato, especially the ones you the trigger well put the when you take the puzzle you forget the moving the I just flow in the time here for the nominal quote volume for the interested to the why the Emma.
Okay. Thank.
Thank you Lisa this is oh, Kevin our our try to translate to.
All of these comments I have already noted the tough so oh.
For the for for the Ivan R&D investment. This is a this is a this was our strategy of we decided the for five years ago, Yes, we want to invest the all the resources into one car model. Yeah. This is though this was our strategy and the for our Li one as you may know that the Wi.
Only have the is the one and the for the while we only have one configuration are this is a two day out.
Big Challenge to us, but also give us a lot of a lot of the advantages first the advantages of the software upgrade because we only have one completion of all the old he had become the more much easier.
Secondly is the for the supply chain efficiency perspective.
As you can imagine the the for our forecast at the very accurate and the the of the our suppliers are the the the the efficiency of our of our suppliers also very high because we only have a.
One configuration or the the third is our internal efficiency also very high.
Because we only have one configuration, that's why we our R&D resources the odd no do not need to our Oh, we do not need to invest for the the R&D money out of the different the coffee region. Yeah. So so as the the this this was our strategy and the the reality.
Right now we see a proof the that the our strategy was the worst was right actually as you are you already know that in the past. The 10 month, we have all always being the the number one the selling model in the large.
Large size.
New energy EPS UBI, yeah. So for for the next step for the next day, but we'll continue to maintain our efficiency of very high R&D efficiency by the at the same time, our our investment the in R&D will also be the multiple times a day.
For our second the generation of productive starting from 2022 each year, we'll have for at least the one car model and the well off but we'll stay with our strategy that the for for each commodity we only have one contribution we won two of our focus our resources the onto one of the way.
Mission and our strategy is the for any car model, we launch the into the market.
It will we our target is to make it the the number one selling model is priced segment okay.
For your second question is about the the Companys competitive landscape.
First the next year, we're going to introduce the more more function into from a feature and function into our existing the one to ensure that our competitiveness.
I will not the other will not the what will continue to be improved.
You mentioned the mother wife actually compare with mother, why the wise the much bigger car with the.
More of a space and the the design the for the Chinese family and the its performance than the size and feature is comparable with model ex us.
So we we are not the worry about the mother Y and for the for the are you the for the range extension of solution.
Actually you are right there are a group of the Oems are introducing.
New you are you the models into the market next year.
But from our viewpoint.
Range extension solution is now the technology choice, It's just day, our solution for us to our help our customer to replenish the energy right.
So has lot of working on there's a supercharge our new working on.
Battery swapping we working out of the Yemeni. The these are all our energy replenishment of solution, but the for the customer really buy a car of the a very convenient to of.
Energy replenish met their day is one only one consideration ultimately the customer is buying a of intelligent.
I'll say smart electric vehicle. So their focus the primarily is first the about the the product the product the design of the product feature function need to be very competitive. That's why we're not worried about the of the other people also view of the are you the because of the the core of our competitive advantages.
Our product itself okay.
Okay.
Okay. Thank you Kevin She's in terms of congratulations again on the grade of reserves. Thank you.
Thank you.
The how our next question from the line of Hong Kong from you.
Please go ahead.
Hi, Thanks, guys for taking my question I have two questions. The first one is regarding the network expansion.
So for you how far are much smaller distribution network, but do you have demonstrated much higher efficiency on the your closest peers.
Moving forward to how do you foresee youre all the distribution channel our expansion into how for net pockets takes time, how many stores by the end of this year and end of next year and more importantly, how do for see it the per store sales of all of them could be maintained which level.
My second question is regarding the autonomous driving the road map.
I heard the.
Hi, Seth so from Rome, Wasnt enough growth within one day, but I would be really curious to know what are what the or road map for on timeline.
Which you are you are going to achieve some kind of level and what the of the hardware solutions the Union Coors light Oh value.
Included in our view of a more camera sales and then today solution and what do you aim to achieve.
At this stage and the B.
The size of that.
Do you have from some of the all competitors are choosing to sell the software all flow for that's true package for extra among net but.
Given your how far the kids all of the you're one of the same specs are where you choose to sell the day software as an optional package.
Will you choose to install the sort of wrong. Every recall you just asked you at the entirety of one on the.
Hi, Michelle bunch of shorten the on going T go sequentially total channel one order.
The whole wish him the tools.
Total shorts on total cool Oh skins for submission Beach income do something so don't actually interest me junkie and make where might the auto show the should be in Chicago and two other non woman. So the 13 and came in NTM women from.
What about what comes out in the whole weights on the telco.
I'm getting the you got the show the amount of clean with the you got somebody on the street.
Okay, I'll go into sort of acquiring.
During the quarter don't answer the you got the Genco auto Continental cool.
Of those for losses, obviously, you can get.
Now let me just for that sort of just with regard to hold on for the year. So much. So the other you got to many of the children are known for you're talking crews for me. The interest what you sort of indicate your phone for volume.
Some of that so youre right you only it's possible for you guys in charge of short of such on hold on I of course, Sean.
Hi, Joe for do you sort of US one commercial auto insufficient the acentia tend to do so so your margin.
Okay. Thank you and I might in light of nice nice so for now I saw your Shanteau coalition, one sort of of course on the until till you got pay so children can trend of Bala downtime for somebody might the you have for some international news items on a cost for don't jostle for sure.
[laughter].
This is Kevin Thank you Paul.
I will take your first question and I.
Mr. Huang I will take your second the one.
So for the for the retail stores, we expense we plan to extend of the number of the retail store two of 50 to 60.
Across most of the cities in China by end of this year.
We are as we extend our direct sales and service network of we are quite confident that the we can leverage our growing brand recognition and the to maintain the sales efficiency of each store now and if for compare with the some of our peers are we to cash.
They are different approach yeah. So some of our peers the their approaches to quickly expand of the number of retail stores to cover more cities than fight.
Hi to slowly improve their sales efficiency.
At the later stage, we took a different approach we implemented gradually we income and gradually expansion of our sales network and the we try to maintain a high level of sales efficiency per store.
Okay.
Hi, Jim.
Yes. This is kind of a I will take over the question regarding the roadmap of auto Srini.
So regarding other slas.
Other striving roadmap.
I think we will continuously improve.
Existing software and the one of them more features for users.
So with our current hardware platform.
New features such as fully automated parking assist eight.
A at a P eight.
On the basis of fusion of use for signing on vision imports will be released the v. for that in 2021.
And also more future will of.
We will follow as well.
And the other more in future.
In 2022, we will launch brand new architecture for our new vehicles, which contains the scalable and the hardware Upgradable easy for you and the sensor sales along with more use case.
Outpace the for her.
So that our products.
For the chief of two level for autonomous driving progressively.
That's our goal.
Based on current research on the technology baseline.
We don't believe level five.
Fully autonomous driving without any in the period by human.
Come in near future.
Because it is really requires technology breakthrough in an area of Suntrust quantum computing and the other such kind of of algorithm along with it.
So there for our folkers will be.
What kind of real value, we can bring to our customer towards to the let's say per.
Aggressively and steadily to level kind of of level for experience. That's the most important topic for us.
We believe with clear go sighting of.
And also excellent execution.
We would become a leader of other ones writing in the industry.
To achieve this plan I think I already described roughly the time line.
So our team size will be crippled in 2021 as I already mentioned the versus current situation.
We already have very good progress recently on the senior level ex per cent of management hiring.
The new commerce, either well known from industry, all wells graduation from top universities of transcend standard of or.
Of Berkeley, and so on.
On top of that we also have established strategic collaboration with our partners different than the normal current cooperation the tightly integrated with our team with onsite coal the weapons as part of a few of our R&D exploration.
So regarding your last question about the of it we're going to charge our user regarding the software part of.
We won't charge anything below the level of free because we think that's an essential features one of them. So everything below the level three will be for free.
Thank you.
Thank you very much for clear thank you.
Thank you.
The how our next question from the line of Li from the <unk>.
Please go ahead.
Good evening purchase or one of the speaking from censorship congratulation on the great ordering in terms of most of mine I believe I just referenced in this form of call me the to the positive non-GAAP targets.
During the Great news.
Since.
Oh shoot what do you consider a slippage on the this is essentially the booty the from how much margin.
Okay the genius true.
For the teaching them down to the machine.
When we talk about you know the Lucy.
The first question goes to the one simple needs of each year. So how maybe it was actually for the roughly 20% of QEPM. The spirit is it something in the 600 order the groups, which has actually the achievement of 90% of GPM for smokers last year with almost since I'm sure.
The bridge and income on the second question well go to securing the swamps highs would be just want the for the mine from either to the due to the Wheatstone owns one of core and proposed the we can yes right.
To provide more on that or some of the property in the since you know tunes and OEM sales.
EBITDA you Shouldnt see food.
For me the credit box you can do it I don't really nice for some of the partnership.
Okay. That's good for one of the day to day for me into the share consideration was published for the human book should be the day, so with all of the getting about Michigan.
Due to the into the use of the woman's channel exceeded the two can they be significant then.
Would it be scalability.
Okay, and the incentives for them to the kinds of.
You may need to take that any of the we should maybe from.
Okay of the boss the institutional channel.
GAAP.
Okay, then suddenly the OEM I'm the OEM.
Did you guys. You know you take the it sounds like you're essentially like who's on the news which is about.
No change in attitude himself.
Okay.
Okay. This is.
The tier I will take of the first quarter as I mentioned earlier the increase of margin. This quarter of was primarily attributable to the decrease in part two of our partners and our materials are including a one time rebate from received from the prior.
And also the lower our unit manufacturing were higher costs as our value.
Volume production volume growth.
And we are very confident.
The of the GP margin for the whole year of.
We'll around.
15%.
On the improved outside the late next year and I.
I think for Tesla I think you.
You guys should be are more familiar with the up.
Starting from.
In the very early stage of lack of past models.
Well the worse and more.
Tesla has around.
The wrong.
From a 15% to 20% margin.
Also model right and then the <unk>.
In the Gulf better bunk off the they will lower the.
Right so.
So the kind of keep their margin around kind of the debt I think this the nearest revenue or whatever.
Now the the use of this volume to raise the two rigs that.
For the margin.
The the.
The math you the in there for small the from the big.
The big volume model Momoda, yes, the I will come to me for price.
Regarding your second question, yes.
Regarding your second question is a very good question, so actually my philosophy of steel stance, but probably maybe items.
Please allow me to explain the spirit of the philosophy, so the tree structure ribs, and let's say the automotive profit distribution structure and the collaboration among the.
Let's say the whole partners here. So you can imagine traditional way there are lots of trees in the hill.
For us so every OEM probe the tears precisely.
In the margin of them because they control the key.
Let's say the of the barrier the core barrier. This is the gasoline engine.
Now a days the situation is totally changed because.
Now we entered two.
From industry, the era to intelligent era.
It's a complete new business model it will be apply.
If you want to refrain from the market and then I introduce so-called not.
Not range structure, but Ron Paypal structure that means now.
There are lots of nice among OEM amount here one tier two whenever you can call. It even the new let's say the business model of providers, such as moving or for like PD and then for the the key thing of mouth.
About of the whole thing.
Time to market in this new game of.
And then you need to based on your position to the table sit down together with the strong partner and then.
Really when the game as early as possible just like you know youre going to a dinner.
With your friends and revenue finished the main course now you can get these are majority of the others.
That's the key spirit of it.
And we believe.
Because you know when I was in tier one I need to choose my table.
The wisely for.
For now as the leading OEM actually.
Our profile is more like we already take.
Lots of less.
Let's say the work of tier one tradition of tier one because we can do for the housing we need to have the vast experience for user and do the full time, then we need to be fast. So that's at the different game. So.
Back to the main point so the philosophy still stands for now I mean, the another table.
Okay, all right, thanks for answering and share would be the wrong people share aggressive of competitors.
Thanks.
Thank you. Thank you.
Thank you.
Our next question from the line of me home from U.S. type of security.
Hello.
HM.
Yep.
Right from the terms in tier one cities like Beijing, or Shanghai Auto how quick yes, that's true.
Yeah, no losses entitled to and the license.
The study how could that impact the overall.
Oh, that's the target.
I think the lead to a higher level or what do you think of the government the public Oh yeah.
Lots of late.
For the longer horizon, what's the kind of what the the transition I thought the right Oh, we like the debate disappointing within cost of the up again of my book how much of it.
So having said all day.
Yes, it does how should I don't know exactly how that's just the I don't believe so that's one of the limited downside.
Well you don't fashion so that's the.
The net idle appeal by the flagship of element day, social the deal flow pneumococcal, how come the and I sort of my family of like without them for the year.
Yeah. So the don't ship of lets just could you share and looking for the home like sort of my boots net ship all of this is true.
Well it sounds from day one.
Oh, yes, yes.
Yes. The this is the kind of.
I will try to answer the first half of your question then leave for the second half the to me so the sale to call. The now that the our BD strategy.
Strategy.
So for the for the government policy actually we have the thing very proactively communicate with the.
All kind of for government bodies.
However, we cannot predict or comment on the policy, which will be introduced by the local government.
But the to answer your question actually I give you a an example, either in Beijing you know.
The Beijing is the city, where the license policy is the most of the restricted to us.
Our sales are still very very strong yeah. So our sales in cities where to not have license plate the restriction accounted for.
For more than 60% of our total sales in both the September and October.
That's true they are our vehicle sales are not dependent on the policy.
Incentives are are not the very sensitive to the other.
The the top line data of policy, Yeah, So and also for the overall national National our policy.
In general China's National policy and the regulation.
Encourage the co existence of multiple forms of new energy the growth, including a b. The is also a plug in hybrid the you the and the even the.
The other the the.
The the hydrogen or.
Yeah.
The new energy.
So for for Us or we we we already see that the of.
The the direction this coexistence co existence the direction has already.
Being further confirmed by the recent release the.
National New energy automotive industry development Claire Yeah. So overall the the the national policies the in favor of the yeah you the.
And the for the for the B the plan our Uh huh.
Turning to the over to Mr. Li can't comment.
The leader the.
One of the custom built the divulging of going in there for not going on growth.
There's been a lot of conventionally in the flow of median age Julianna. Other you my answer that unique value in the tier Trina the home of materials internally on the movie.
See you in the coming to overcome when do the issue the arda the alternate on two of the Jews with energy Bar now all of the you know doing the the ideology of the hottest analysts of the actionable should yet so I cannot know total generally intend not to the other for going on to other from here to do that at his own for now, but the job that I guess it other how true.
Usually the debt.
Uhhuh now that we have with middle of the how do we share the hydro the agenda that yes young EBIT how can the Io. The how do you think the not for heightened political against the see the Sally push on the emotion that you hit harder the nickel anticipate hope for some of the when the and the auto policies with the true true and how you go.
Sure the pattern of for the kind of when you kind of the I can have no debt.
The Oh sure third on the band of true what other of the comfort on the growth there or not the how to December true.
The kung abilities on the interest.
I understand the kind of you bet is how many of the our diversified him on the number of getting the how value the Jonathan the NTM the outcome here on your non about for Alex So in order to.
You do some growth will tunable novartis, okay to me into the San Diego session. The some kind of rule of thumb look when you enter the much harder on the whole 2000, I kind of put on the some of the hunting the potential of.
Hi, you're not the total amount of when you think we should have no unusual into true premiered on the verge of the for the adoption of Marriott's income push the new accounts you. The you would you share if you don't on the.
I'll just add on that in the as you weigh on TV of attachment to the North you go down or how the units are more kind of lost any of the receivable paydowns on the ocean.
Okay. Thank you Lisa I'll try to of this is the Kevin again, I would try to translate what the Sean just the expense first of all of our our our goal is the to view the high level of premium the smart electric vehicle. So this is our GAAP.
When we look at the this market the the key issue we need to solve is the the the China is the timing issue right, how how our customer replenish the energy is the key.
For the user experience and the we are we are keep the very close eye on the second the generation cash.
Moving a solution, which is a which is the very clear to us is of 400 K. watt.
Charging charging infrastructure, which we are weve, which kantar day car for two five times from.
Faster than today's infrastructure.
For for the to allow for this the second the generation of charging infrastructure.
It will benefit the both the the the customer and the the business from the customers perspective, they don't need to are they the their card can be tied to the 10th of teammates they don't need to leave their car when the tide the.
It is a is being a chart. So the has day in the car.
And the flow from the business perspective, when the charging speed the become become that fast.
The the biz model become viable yeah, because today for the slow charging.
Actually the the charging station cannot make money the the business model doesn't work, but the when the charging speed the become faster the the bees motto become a become viable yeah. So to achieve this of 400 kilowatt charging.
Charging solution. There are three the technology dependencies first day is that they are a hendry the vault high voltage or the core platform.
Second the is the the is the the government regulation of the.
500 Uh huh.
And current regulation and the the third is a very important the the battery sales, which can sustain for C.
Hardening of so we are again, we are keeping a very close eye on these three technology development and we cannot disclose the yet.
When we are going to appeal BD, but the when these the three three technology become mature and the available to us Whoa Whoa Whoa Whoa Whoa whoa.
Definitely a work on the BV solution.
Okay, but the overall again to emphasize that the.
Rent expenses solution from our viewpoint is the long term solution is now the increase of solutions.
Because of the young the solution is the is the best the feed for the larger size as you read too.
So so.
Even when the the the second generation of tightening for tanker become available for you. This do I am one of the our viewpoint of one of the main stream of the technology choices.
Okay. Thank you.
Hi, great things with the launch.
Thank you.
Our next question from the line of young girls Shields from [laughter].
Please go ahead.
And I think the quick question about the problem.
That's that's no longer there.
Oh, no the trying to.
Launch of their own true. So my question is.
Uh huh.
That's true for me.
Oh and Oh.
Mm Hmm.
One final word smelter that's true.
Thank you.
From.
Hi, Mike.
Okay.
Uh huh.
Thank you for <unk>.
Sure.
Sure.
Good day.
Two questions for the whole.
<unk>.
Mhm.
Okay.
Okay. Thank you. This is kind of speaking maybe I take over these question.
Decision either in house or all source of chipset.
Is determined by efficiency when I talk about the efficiency is to park commercially and technically so commercially.
Let's say from OEM side.
I say I think this is a and two you have really massive warning it will be a risk because chipset industry.
Yes very.
Very asset heavy investment and also our long read return cycle.
The other myself.
I have the Iraq, plus indirect experience in China and also in that.
Making chipset SLC chipset myself.
Sales to maybe close to the.
10 years, so usually takes.
Chipset design to up to three years.
Just for the relevant and then you have three years of usually the lifecycle and then you need to think about sort of change.
So think about a six year of altogether. This.
This is really a commercially risky maybe without efficiency of auto Oems human of made.
Bye.
Itself.
So from technical side I think there's a one condition you can really series singled out to make chipset.
For yourself the us.
So for a maturity or very deep understanding of the system is really the essential condition you build your chipset yourself.
Like Tesla they had the good and the Stanley already at least at that time.
The kind of find a very good feed.
In the market than the twos.
Design by themself.
But the problem is from semiconductor point of view. They were also involved here we're in the whole process. So.
Two maker chipset Decisioning isn't really conscious decision OEM the to releasing about from both ways. In short time, we do think we will enter two that business or tactically I think we still need some time to really understand how to let's say may go.
Our software really mature around the really clean.
Moving up into the business. Thank.
Thank you.
Mhm.
Thank you the.
Our next question from the line of Rob the coal from 86, each other thoughts.
Josh. Please go ahead.
Hi management the question.
So congratulations on.
The results for the.
Right.
It's for model has proven itself.
The moment.
My question is how we range.
Hi, its frame of thinking about.
When the when's the right time to.
Develop.
Model.
Strategically what.
What type of vehicles.
The second.
In particular I want to ask about.
The concept that.
Sure.
For the back.
The early years of.
Uh huh.
I'm wondering.
Right.
For.
The of.
The trends.
She will find some other ones.
HM.
Well my kind of managing terms on one of the bigger.
And so that's one of them.
Yeah Jake.
This is true.
So, which I wouldn't really good.
She the sort of from Goldman Sachs.
Good day.
The campaign because its size.
I will.
For most of them and I'd say the one.
Oh Oh.
The machine.
Some of low single digit.
For either the auditors now.
How would you be kind of.
Sure.
Sure for God.
The team.
Yeah sure.
Well I think the bigger.
Okay, well now I should say.
The.
Well down the line.
For for example.
Okay.
What.
Whatever the of the.
That would be Oh there.
Even the digital wallet.
For the children I know the deal with you than the energy the woman. The the addition of what does your legal are true to you know how you view the home you don't who Oh does the timing and go to the vessel and the vessel work to the Jamelia are shown on the need for new digital number of value countries other than a leader.
Tenant in the yen from or religion for the champion the value on.
Kind of we are going down for just on the I mean, you sort of wouldn't be as you recall the without signing bundle of unusual other than I can look the other than the idea of not only agenda of.
Joe, noting cannot get the unknown judiciary for material do not rather not just from a not you kind of hold without the RV dealer channel is on the two as you know of the already on the of the true true of the.
Regarding other as you wait and you tend to put the beacon a whole of how interest you are due to confirm for the time here I'm, Andrew how given taking over from the show now for by the time humidity provision as you know only the opportunities on the debt issue this year to non ocwen for that.
Adjusted Teva Deger to 70 of the holiday might hung out of juices, I think maybe the Tony on the hard each and the initial how the how you're young charted the anatomy of on that know a whole bunch of amino the heart of.
The growth that most of them for Ginger our share of the given the timing of behind it the way. The images are you going to feed on the non monitored from one boy that for you. So you got the JV the calculation.
Okay. Thank you for the sound. The this is Kevin I will Oh, we translate what the lease on just the this right.
So first of all we are doing our initial phase of our company. We are a focus we focus on one of car model and the one product of our goal is to achieve the of the.
With the Li one we want to achieve the.
Become the top selling model in its price segment, which is the 300, a K to 350 K. RMB price segment with this first the product of the ones we want to leverage. The this first the first products to view the and the also to prove that the hour.
Our sales our sales and service our supply chain and our R&D are all close the loop system.
Secondly of course, the we are working on already are working on our second product.
So as we already disclosed 2022, well go into lunch hour hour next for that the which is they are full size.
Yes, the vs UBI of as for the assay. The actually we are the stop the this project the.
In the end of the 22.
2017, yeah, and the we have no any further the.
We estimate the project.
We think of we are in very good position in ER in this the su the settlement for family of.
So we will stay in the segment I will stay the with we're very focused on our existing segment yes.
Robert Thank you.
[noise] [noise]. Thank you Ivan.
I would now like to turn the call back over to the company for any closing remarks, let's say on the Chang. Please go ahead.
Okay. Thank you went the games like anyway, that's the cash today. If you have the good questions. Please feel free to contact the out of Investor relation team can get all of the today. Thank you and have a good one.
[music].
[music].
Hello, Ladies and gentlemen, thank you for standing by for all the other stuff Gordo 2020, <unk> earnings Conference call. At this time all participants are in the election only more debt.
This conference call is being recorded I will now kind of the goal of what do you watch out of <unk> director of Investor Relations of the company. Please go head channel.
Thank you read the tea good evening.
Everyone, well culturally auto start calling character of stopping <unk> earnings Conference call. Our first earnings conference call since our IPO. They calculate the financial and operating results were published in the press release earlier today and are posted on the calculates the IR website.
On today's call, we have our president Mr., Kevin Yeah, and I share, our CFO Mr., Johnny Chile, and our TPS, Mr cash to begin with prepared remark, our founder and CEO Mr. Stanley well the joint for the Q a discussion the.
For it continue please be reminded that today's discussion will contain forward looking statements made under the safe Harbor probation update you as the private Securities Litigation Reform Act of 1995 fold.
Well the kids day, most involved in the current risks and uncertainties as such the couple of extra read the out may be materially different from the <unk> ex Chrysler two day for.
For the ball may share regarding the risks and uncertainties same kobe instead of going out of the company, which then you add security and Exchange Commission the.
The complaint that's no good sales any obligation to update any forward looking statement, except as required under applicable law.
Please also note that the out of earnings press release and this conference call include discussions of our detailed GAAP financial information as well as non Oh day take note of GAAP financial measures paid.
Page three for Julie Auto price per day, which contains a reconciliation of the <unk> I could take the non-GAAP measures to comparable GAAP measures.
With that I will now turn the call of <unk>, our president of cabin. Please go ahead Sir.
For your attendance Hello, everyone and the thank you for joining our call today.
We are very excited to announce the the result of our coming quarters as the public company fully Howard July 30 listing.
The the third quarter, we achieved the robotics results, we delivered eight of them.
Tendered in the 60, Li one during the third quarter, which represented the up quarter over quarter increase of 31.1% range.
The hour delivery in Q2.
As of the end of October accumulative delivery.
The Twentytwenty rich.
The 1800, and the 50 to be cool.
According to new car insurance registration data reported by China automotive.
Technology and the research Center in September and October the Wannabe call. The best the setting new energy Sq me a moment all model in China.
Very strong testament to its highly competitive product features.
The dishes in October our other showed strong growth setting a new monthly record and the giving a saudi of the confidence in our fourth quarter of deliveries.
We expect the to reach 11000 to 12000 units.
And the achieve a new quarterly record.
At the same time, we have improved our gross margin and operating cash flow due to increased the deliveries improved the bomb cost and the overall operating and the manufacturing efficiency during the third quarter, our gross margin expanded to 19.8%.
Compared to 13.3% in the second quarter. We also generated operating cash flow of RMB 929.8 million, which is why the tend to it and the 5.8% higher than the prior quarter in terms of R&D.
We will further increase our investments in this regard and continue to leverage technology to create value for users and the to optimize our user experience through.
True product and the technology innovation, we are committed to providing our supply it uses with safer easier and the more cost effective mobility solutions.
Ensuring we live up to their support and the trust in September we added the importance of new role of CTO to our senior managements roster with missed the Taiwan, joining our team from this.
The strong this new additional reflex.
Our philosophy and the pursuit of combining expertise from the automotive smart device and the internet industry.
And the building an outstanding team across many of these claims to develop the smart vehicles for our users.
When I missed the wall of vision, the retrenchment and the thinking profound expertise and the impressive track record, we believe Mr. Wang will make the crucial contribute to our products and the company.
Two of constantly provide a best in cost the experience to our users we continually evolve and optimize our vehicle through for updates throughout.
Throughout the entire vehicle lifecycle, we also continuously collect performance and the behavior data from our users to drive our product.
The recent five.
By the end of October we had released the 10 major vehicle OTSG upgrade.
Two the one users to provide them with the better driving experience.
Moving to our digital life direct sales and service network.
It's an essential component.
Our closed loop business system. This network the direct the user.
Usage data and feedback to both our R&D team and the service piece for us to analyze and optimize the eco features and after sales services out of the main ultimately aiming to optimize the user experience.
As of the end of October we had 40 watt retail stores covering 36 cities in China, maintaining a high level of the accretion the efficiency to each retail store demonstrate that we have completed close the loop system set up.
The next.
We plan further growth the system to create an efficient virtuous cycle of user feedback veeco divestment and the service enhancement.
We cannot achieve our results without the support and trust of our users.
Then you surgery, the automotive and technology and the price the auto always put our users at the highest priority and the we'll spend no efforts to provide our users with safer more convenient and the more value added products and services.
To further realize the our ideal of CCAR and how.
This concludes my prepared remark now our CEO Mr., Hi, Rob will discuss more of the R&D aspect of our business. Please go ahead.
Thank you for the introduction Kevin how the.
Hello, everyone. It's my owner to jointly auto recently Li by entrepreneur missed the sheet Chung Li.
For share my thoughts on the.
R&D initiatives as the city all of the company.
I'm a believer in progressing the nomination.
The cost of Rome was not built in one day. It has always been a better approach to follow the nature of low of the evolution.
To implement technology called concepts stop at that.
Hi thing user demand.
These the echoes well with Li all those guiding principle.
Leveraging technology to create value for users to optimize the user experience steadily and continuously.
From a technology roadmap point of view the CTO office will focus on the in house. The one of them of anything that has a direct impact to borrower and user experience such as intelligent cabin.
For the us slash autonomous driving.
And call related Carty, H. technologies, such as cloud data for mining and the song.
We will also leverage the top tiers partners, so hope to achieve our objective.
In September we announced on the third freeway strength todays call of collaboration was global semiconductor Jain of.
The idea.
On Chinese domestic the either those that asked me to be the first OEM in the war implementing Nvidia flagship chipset already vehicle the owner to provide a premium user experience.
First of all these R&D activities will increase operating less many R&D and the size of our team continuously please.
For example, we will expand our optimum striving team size by three times by the first half of 2021.
I'm confident in our capability to execute these roadmap and continue to build a leading position in the intention automotive industry.
Now I will turn this call over to our CFO Mr. Andy for.
Close of low at our financial performance in the third quarter.
Thank you, Okay Hello, everyone.
I will now go over some of our international results results of our third quarter of 2017.
We'll be mindful of the mindful of this call.
Financial highlights here on the inherent for you to refer to our earnings press release of.
Which is of wholesale margin for additional detail.
Our.
Total revenue in the third quarter of 2000 ton day were RMB 2.51 billion our.
The representing an increase of our.
On the 8.9% from RMB 1.95 billion in the second quarter of two.
2000 tonnes per day.
These include the vehicle sales.
For the quarter of 2020, which were RMB $2.46 billion.
Our rebranding of increase off of.
From the 8.4% from the second quarter of 2017 the.
The increase in vehicle sales was mainly due to.
31.1% increase in vehicle of the new route.
True.
Thousands of.
650 vehicles.
The quarter of 2000 tons.
From 6600 for vehicles in the second quarter of 2012.
Revenue for other sales on services was RMB.
For the of 6.1 million in the third quarter.
For 2020, which.
The representing the increase of 64.1%.
From the second quarter.
The increase the honest sales on the services, while the in line with the increased vehicle sales.
The increasing vehicle volume are using our services.
Cost of sales third quarter of was RMB two point.
Zero one billing.
Representing the increase on.
19.3% from the second quarter.
Vehicle margin in the third quarter was our net.
19.8% comparing compared to 13.7% in the second quarter of 2020 the.
The increase of vehicle margin was primarily attributable to the decrease.
In purchase price of certain material.
Including of onetime rebate received.
From a for prior.
And the lower unit manufacturing overhead cost due to the inquiries of production volume.
Gross margin in the third quarter was on net and 19.8 per cent compared to 13.3 for that in the second quarter.
Which was mainly driven by the increase in vehicle margin.
Total operating expenses in the third quarter.
The RMB.
$676.7 million.
Representing an increase of 50.
55.2%.
From RMB 476 million in the second quarter of 2020.
Research and development expenses in the third quarter of 2020 were RMB.
$334.5 million, representing an increase of.
Six day.
Thanks.
One.
For that.
From RMB 200.
One point for meeting in the second quarter of 2020.
The excluding share based compensation expenses.
The top is research and development expenses.
RMB 278.8 meeting will be thanking our quarter over quarter increase of.
Certainly 8.4 per fan.
The increase was primarily attributable to starting research and development for our next model.
As well as increased hi, Paul.
Selling general and administrative expenses in the third quarter.
Of 2020 were RMB.
Our 342.2, meaning excluding share based compensation expenses.
On top of filing our general and administrative expenses.
RMB 264.2, meaning.
In the increase of.
12.7%.
The increase was primarily driven by increased headcount as well as increased marketing and promoting expenses.
Loss from operations in the third quarter of 2020 was RMB 100.
Hey, meaning compared to a loss of RMB 100.
Of 76.3 meeting in the second quarter of 2020 net.
Moving share based compensation expenses, the non-GAAP adjusted loss from operations was RMB 45, meaning.
The cuisine, 74.5% from the second quarter of 2020.
Net loss was RMB my hand to of $6.9 million in the third quarter of 2000 for me.
Compared to RMB 75.2 meeting losses in the second quarter of 2012.
Excluding share based compensation expenses and the changes in fair value of warrants and the route to our liabilities we.
We achieved positive bottom line with our targeted net income of RMB.
16, meaning in the third quarter.
Compared to RMB 159.2 million adjusted net loss in the second quarter of 2000 funded.
Turning to our balance sheet and cash flow.
The balance sheet of our cash and cash equivalents.
The shift is cash have the for this and short term investments.
The RMB 18.9 true billing as of September 32020, compared.
Compared to RMB.
3.71 bidding as off of the summer.
Looking for.
2019.
The increase was primarily driven by inference of several of the primary financing.
The completion of our IPO.
And the concurrent private placements.
Operating cash flow in the third quarter of 2020.
The RMB 929.8 million.
More than doubled from RMB 451.7 million in the second quarter of 2020.
Free cash flow was RMB.
$749.9 million in the third quarter of 2020.
Thank you for the increase of 149.3%.
From RMB 300.8, meaning in the second quarter of 2020.
And now for our business outlook for.
For the fourth quarter of 2012.
The company's past deliveries to be true 11000.
And.
Well the vehicle.
Non-GAAP or increase of per.
The mentally.
On the seven to 30.
38.6 per.
For that from the third quarter of 2020.
The company also expect fourth quarter total revenues to be true RMB 3.1.
One building you have dollar for handler.
Our 57.8, meaning on the RMB.
3.39 billion U.S. dollar 499 point for meaning representing an increase of 23.
The 3.7 per cent pools.
The 35.1% from the third quarter.
Of 2020.
Now I will turn.
Turn the call over to the operator to start our throughout the day session. Thank you.
Ladies and gentlemen, we will now begin the question and answer the question to ask the question you May Press Star one until the fall.
Juan Andrade from into the amounts to cash in the request. Please press the pound of cash.
For the benefit of all participants on today's call. Please limit yourself to two questions I'd of.
The questions you can enter the queue.
If you're going to ask the question from Chinese please follow the English translation.
Once again, ladies and gentlemen, it's still one of this to ask a question.
The how of first question is from the line of say Pong from Goldman Sachs. Please.
Please go ahead.
Thanks, Sean Zone Kids on Kevin kind of very impressive results. Congrats on the tremendous progress let me start with two questions first is about the supply chain reflect the ones. The scanning sales how would you plan to drive better sourcing efficiencies prices from here for example for battery of price, which is obviously a chunky per.
For for a bomb what's the opportunity to kind of cost further from here and also can management share some light on the progress with the media partnership when do you plan to deploy the components second is about the recall incidents in the past few weeks, okay discounts the latest progress with hardware replacement and also what has been the impact of the wants backlog if any of for.
Contacts our our own analysis is that this is a tomato red and blue cost issue, which is 0.1 per cent of your annual revenue. So want to see if you have any response to that most of the home sales and sort of Thats. The consequence of the Fidel tickle down the of the wood of buildup of anti channel due to the sort of confidential agreement with other quota share the section which of course the cycling in and.
Plenty from its sort of an issue youre.
In the channel from other country ahead without computers that took a Sunday from interest number of from it for what data Youre.
For the needle the majority that you wait for you made the other two which of course for Copel franchise cash on one of take or pay TV dramas into the algo sure. Your once we tend not to go talk we should yen Ching one is of franchise sandwich and the projects in the auto show for the goal setting that aside from the Michelle value trigger Charlotte sort of goes host one chiller share that got you tailor the maybe sort of the usual seller considering the.
The initial touching on is on particular source for the tickets your core tier washer for will be.
Sure.
Okay.
This is Kevin Thank you our debt.
Our answer your question.
First the.
As we can see that thinks of the launch of the one we have already seen some substantial.
The improvement of our gross margin this is due to the.
The the bump cost of reduction and also the manufacturing efficiency.
So.
As the our volume increase gradually we'll be able to procure of apart at the lower price and the continuous the reduce the manufacturing. So this trend the will not change.
Some of the numbers. The you I'd see you should already see that reflected in the financial numbers the share the bye.
Share by the Phs now.
For the video collaboration I will turn over to.
Just one high yes, yes. This is kind of speaking so regarding collaboration with Nvidia I think everything is on track.
So for part we have already party dollar for software into the current Savior of platform for vehicle level of World test with already good result, we.
We will continue on software development and testing and two hour of Orient based hardware is available.
In the hardware side, we are working closely with most of media and the decide as we I think everything you see the onshore wind is good progress and the other thing in future.
Future will provide more update regarding the topic.
Thank you.
Okay. Thank you hi.
Then the for the second the question about the the recent the recall.
Currently the recall related work is progressing steadily and the expected to take about three months for us to complete.
We handled the this recall with the transparency and the efficiency. This.
This is a reflection of our company's core value, we always put the our customer at first the priority that's.
Thats why we got the pipes positive feedback from our existing users and the potential buyers. So far after the announcement of the recall the growth momentum of our new orders remain the same as before the law no no and the major impact the observed.
As for the cost related to this recall, how we think.
Estimation is about the right, yes as the in line with our estimation.
Thank you Dave Thank you for away for the pension yes.
Hey, that's great of here, thanks for the response and congrats again.
Thank you.
The how our next question coming from the line of Tim Zhao from Morgan Stanley. Please go ahead.
According to the new homes of course, you said you to the Utica shale GAAP.
Hey, guys you guys you get lumpy so it's weighted on the job.
The NTT tissue away auto renewal.
So the financial lease on T.J., Hottovy centre, which added to the Tutsi holding cash income data.
The Commission.
The team failed other countries again, the income that you show T. don't the chasing the cookie launch of Ngs synergies from accounts you the until the channel by total.
Okay. Thanks, and thanks to your auto routine quite day, the G, which is due to the attrition.
The tears when tissue range because the G.
Yes. He says you called out of CBS, which has helped the content with total debt.
On the bar has shown test where by the way.
That all the continuing kind of gets the European type of shows Alan can teach of of out until the two choices such as share get on chart showing.
The range operating single the its energy the timing of.
So just for yourself.
Moving to each of the current Jacek.
Jeff.
So my first question is part of the R&D spending based on the today show is for the quarter results for.
The noted that the auto seller disbanding of interest.
The absolute the margin or percentage of the revenue seems to be lower debt.
Other auto the peers, so clearly as part of it you check economic capitalization of cash cost come true.
But.
In light of the growing investment sales for tomorrow.
The technology innovation and those sort of telling the try the next year.
The management.
The Leo total kipp such as the.
Now to the lower understanding how should we think about the trajectory into 2000 total loan and my second question is the.
The competitive landscape because.
We noticed that the competitive ask at this year's quite the night.
Looking into the next year or 2021.
We are the market might be getting more crowded harvest cash.
Some other why boss wagon MVP based model.
In the meantime growth on notice all of their local peers.
The second hand of ATM the goal of bound the crude also launched the extended range GT the yards.
So how could the OTO state park capacities.
In terms of the current again strategy. So those of US my two questions. Thank you.
That's how the team or the retail no what I would add to the one deal.
For the thing about all other than the the.
True almost all of the didn't go through the Internet. The whole goes the I'll comment on the show the journey of sound run the Italy. The you go to the Encino trace year, although the ship. So you know of uncertain bar, the how to ours it doesn't either going the other deal how beautiful Yelp, Sean would you don't have the total dollars equal to the diversity of kind of how the LNG.
The traditional that's because of that issue for you.
Although the quote that in the current EBITDA loss into the that you did those against the dollar fit on the you come out yet the.
You go to the younger pager algae oil and how she also of the going on they'll get auto towards operating wire, yet trippitt of it up on the operating cost you acknowledge as of the Ocaliva goes you build your own Tonight, even Tokyo the homes.
But if we're going to sort of even go from for the different game I mean, the what would you add to that book.
The the Arnold Donald.
The ugliness on that I've been on the other how true data.
Well one of the you hear from that then onto the high so time will tell on true.
Sure sure and what we sell in the air going up go chunk of the put on the the idea the I'd say the go it sounds as though of month. So I'm wondering is sort of I mean, you put the yard on year average your oil of book I'm sure. The whole made which will have a couple of the cushy up she should the gel if I'm in the heart of net to look only at the show the other two additional kind of the shout here, but what I can comment on that chart here, although we'd be in the current.
So it is no change on that one and then share for the on the Das yet that's the couple of years I guess, what other interest on the annual share the harder now of Europe. He is on the Vince yet the also value.
Non-GAAP given you did are you pay the rule and Jay you are you going the Royal that's the competitor EBIT on the off for growth South of the day that you have I feel the entail the.
Net neutral you go Pedro good value the show a bit on the fit on the GAAP. So we have been rumor that you have Bob on the it's actually of them yet that to the corner from here that the hung low for the you got big chunk out of the downturn.
Yes, so it sounds like Appalachia were really one of the how soon in Shenzhen diligent area.
Oh sure that day, a bundle of course really of the should then the go non-GAAP diluted from growth all of the keenly on two of the shot on the the budget.
Thank you for your.
For the away from the quota so the Fisher well the balance of the Eagle share should that youre going to the edge of the household who the solutions.
The whole not.
True down the you're selling that in a woman that you have a total of on that part of it on the images that bulk of to the flow of Josh the album.
Consolidated although the tower also as you know the John total the how she book Tigger. Thanks for the huge piece of the.
The data for Michelle sales.
Turning to the diesel sales of that will meet the our docking highs on the I will let him go they of our total share that multiproduct value of other day EBITDA for that.
From a whole lot of the away it's already on the in cash or Mania average.
Sure Tom the how Joe for you down into the field.
The into other amenities and what elements all of the teams for the two of them in the total our mobile you can get that the hotel EBITDA you Pedro from US you onto how you go to the Eagle page the animals with of the also that the jungle pointed out we are going up the hotshot on the when you adjust for all that's what I'm, saying, Hey, total you have up the also the to the ammonia.
If I mean, the anyone even that you're doing the summit what data from all kind of the don't don't share or the other these hour how about for the all.
The all of it on channel Agenone margin the Dol Bohemia Macedo together you have other true on the highway that share the entire family adoption of onto that can do the are going from Cushing, though none of those are the use of Ariad Europe, which are the writer for go to much of the fit out of the anomaly.
Now both of the remodel that being up.
So when you go to the clinical interest of the go no the whole seem to be one of the mother Axa payoff of flash of Hell bent on the auto the how that's the reality of the channel or don't actually on the the high value could you just cannot back some of that you go for that you guys have connecting beta fish out of the euro.
Total that will of course of consolidation of the dinner, the docking or whatever but.
The other one is on the dollar income although the potentially allow the GRC next year you are those that painful value of our people though.
No no.
There is a channel that Europe.
Well you know when he said the interest charge in India and due to the relative to some cushion you go to the majority of it you go for it then you should always yet Oh, you don't continue on the show a mission of holiday book.
Total other told you from you know probably the it up on the into the how young the telomerase ecosystem for the whole closer towards our 2000 strong order the audit of should I change or they don't forget you define your flow of them by you go but any GAAP.
Our total to know how the stockholder value, which are the for the total let you address until your pool of digital opening up for the Olympian just from the utility debt, they're not teachers don't go interest income clean energy the bar that's in the sounds like the my the push the don't of several of the other thing you down the hall of color, how the junket auto or do they.
To the other two after you don't know how the generally in auto Gi Bill of help on the in the double of not only on the day you got charged yet the inaugural Kenobi of color then Peter Donato, especially over the the trigger well put the money to put the you from moving the hydro in the time of year dug in Amarillo core the you put it in terms of the whether or not.
Okay.
Thank you Lisa this is Kevin our our.
Try to translate to.
All of these comments, yes, I have already relative to staff. So.
For the slot for the Ivan R&D investment. This is a this is a this was our strategy we decided the for five years ago, Yes, we want to invest the all resources into one car model. Yeah. This is though this was our strategy and the for our Li one as you may know that the Wi.
Only have the the one and the for the while we only have one configuration. This is per day out a big challenge to us, but also give us a lot of a lot of the advantages first the advantages of the software upgrade because we only have one continuation of the OTI has become the more.
Much easier.
Second the is the for the supply chain efficiency perspective.
As you can imagine the the for our forecast is the very accurate and the the of the our suppliers are the the.
The the efficiency of our of our suppliers also very high because we only have one configuration.
The third is our internal efficiency also very high.
Because we only have one company vision Thats why we our R&D resources the odd no.
No I do not need to our.
We do not need to invest for the the R&D money out of different the coffee region. Yeah. So so as the the they this was our strategy and the the reality right now we see a proof that the our strategy was the worst was right actually as you are you already know that in.
The past the 10 month, we have all always being the the number one the selling model in the.
Large size.
New energy EPS UBI, yeah. So for for the next step for the next step of we'll continue to maintain our efficiency of very high R&D efficiency by the at the same time, our investment in R&D will.
The the multiple times a day.
For our second the generation of productive starting from 2022 each year, we'll have for at least the one car model and well off but we'll stay with our strategy that the floor for each car model. We only have one composition. We won two of our focus our resources the onto one obligation.
And our strategy is for any car model, we launch of the into the market. It will we our target is to make it to the number one selling model is priced segment okay.
For your second question is about the they are kind of competitive landscape.
First the next year, we're going to introduce more more function into from a feature and function into our existing the want to ensure that our competitiveness.
I will not the.
We're not the what will continue to be improved.
You mentioned the mother wife actually compare with model why the wise the much bigger car.
With the.
More space and the design the for the Chinese family and the its performance than the size.
The feature is comparable with model ex so.
So we we are not the worry about the mother Y and the for the for the Yang the for the range extension of solution.
Actually you are right there are other.
Group of the Oems are introducing.
New you are you the models into the market net.
Next year, but.
But from our viewpoint.
Renting extension solution is not the technology choice. It's just day, our solution for us to help our customer to replenish the energy right. So.
So as the working on there's a super charge, our new working on the battery swap the we working on the Yemeni. The these are all energy replenishment solution.
But the for the customer really buy a car of the.
A very convenient.
Energy replenish net their day is one only one consideration ultimately the customer is buying a intelligent.
I'll say smart electric vehicle. So their focus the primarily is first the about the the product the product the design the product feature function need to be very competitive. That's why we are not worried about the the other people also view of the are you the because the the core of our competitive advantages.
Our product itself.
Okay.
Okay. Thank you Kevin it's usually the sounds of congratulations again on the great results. Thank you.
Thank you.
The how our next question from the line of Hong Kong from the EPS.
Please go ahead.
Hi, Thanks, guys for taking my question I have two questions. The first one is regarding the network expansion. So.
So for you how far are much smaller distribution network unless you have demonstrated much higher efficiency on the your closest peers.
Moving forward as to how do you foresee youre on the distribution channel our expansion to have the net pockets takes kind of how many stores by the end of this year and end of next year and more importantly, how do you foresee the per store sales volume could be much pent up wish level.
My second question is regarding the autonomous driving the growth math.
I heard the.
Hi, Seth So Rome wasn't enough growth within one day, but I would be really curious to know what would the your road map on timeline.
Which you are you are going to achieve some kind of level and what the of the hardware solution, where union crudes light overview.
Including all of you have a more camera sales and then today's solution and what do you and to achieve outside.
At this stage and the.
The size of that.
Do you have from some of the all competitors are choosing to sell the software of oil for.
That's true parquet charts from net but.
Gave when you have for keep all the you're one of the same specs are where you choose to sell the day software is up optional package of.
Will you choose to install the some of the wrong every week. So just as you did the in the near one on the.
Hi, Michelle by just one day I'm going to do you go sequentially the telco channel one of nor the.
The whole wish and I.
Shorts on total cool.
Yes, sure some the champions and do some consolidation Thats interest me again, Mike we are might auto show the should be and juggled under the non woman. So the 13 and came in NTM.
Turning now to US I was at the end the whole weights auto.
Thank you at the show the cleanup.
So the you got some on the street.
The I'll go interest.
Going the telco, it sort of which offset the usage.
MPL dojo continental.
Of those swallow it shows the them up.
Obviously, you know what many of us so thats the the adjusted OIBDAR the whole on the quick you go out in the.
So most of the holiday demand. The children are known for you talk on cash.
The interest what you for something that gives you a pharma operating cash from basketball.
You only possible for your types in charge of shore, So sensodyne call Shawn.
Hi, Joe sort of you still goes on general thoughts on sufficient shifting to the due solely on.
Thank you and I might in light of nice nice so for now essential for your Shanteau coalition, one sort of of course, some debt until till you got pace of children to interest Obama non touch somebody might you have for some international military on the unable accident year losses.
Yes.
[laughter].
This is Kevin Thank you Paul.
I will take your first question and I missed.
Mr. Huang I will take your second the one.
So for the for the retail stores, we expense we plan to extend of the number of the retail store two of 50 to 60.
Across most of the cities in China by end of this year.
We as we extend our direct sales and service network.
We are quite confident that the we can leverage our growing brand recognition and the to maintain the sales efficiency of each store now and if.
If the compare with the some of our peers.
We took a different approach yeah. So some of our peers. The their approaches to quickly expand of the number of retail stores to cover more cities then quite.
Hi to slowly improve their sales efficiency.
At the later stage, we took a different approach we implement gradually we incurred the gradually expansion of our sales network and the we try to maintain a high level of sales efficiency per store.
Okay.
Hi, yes.
Yes, this is kind of.
The takeover the question regarding the roadmap of striking.
So regarding other slas.
And then the striving roadmap.
I think we will continuously improve.
Existing software and two of them more features for users.
So with our current hardware platform.
New features such as fully automated parking assist eight.
A at a P eight.
On the basis of fusion of your for signing and Vician.
Imports will be release of the for that.
In 2021.
And also more future will of.
We will follow as well, we will end the year more in future.
In 2022.
The launch brand new architecture for our new vehicles, which contains the scalable and the hardware Upgradable easy you add the since our sad along with more use case of.
Pays for the fall into.
So that our products.
The cheap to level for the striving progressively.
That's our goal.
Based on current research on the technology baseline.
We don't the level five.
Fully autonomous driving without any in the pure ring by human.
Come in near future.
Because it is really requires technology breakthrough in areas such as.
Quantum computing and the other.
Kind of the algorithm along with it.
So therefore, our for curves will be.
What kind of real value, we can bring to our customer towards to the.
Let's say.
Aggressively and steadily to level kind of a level for experience. That's the most important topic for us.
We believe with clear growth sighting.
And also excellent execution.
We would become a leader of the trading in the industry.
To achieve this plan I think I already described roughly the timeline.
So our team size will be crippled in 2021 as I already mentioned the versus current situation.
We already have very good progress recently on senior level ex per cent of management hiring.
The new commerce, either well known from industry awareness graduation from top universities and transfer the standard or.
Of Berkeley and saw on.
On top of that we also have established strategic collaboration with our partners different than the normal current corporation the tightly integrated with our team with onside Cody rampant as part of a few of our R&D exploration.
So regarding your last question about.
If we are going to charge our user regarding the software part of.
We won't charge anything below the level of free because we think that's an essential features one of them. So everything the low level free will be for free.
Thank you.
Thank you very much for okay. Thank you.
Okay.
Thank you.
The how our next question from the line of labor from from the.
Please go ahead.
The company, which is one of the speaking from sales to see congratulation on the gross margin and also most of mine.
And just winners in the sponsor community the positive non-GAAP targets.
Moving upward move congratulations.
Our suit of doing it goes to the slippage.
You can do on the dish would essentially gucci the from how much margin from the homes.
Okay.
Sure so the teaching them down to the machine.
When we talk about you know the winter. So the first question goes to non simple needs of each year. So how many of those actions through the roughly 20% of QEPM, which spans meats from and 600 order the routes, which has the actually the achievement.
She is like 90% of GPM responsible for last year was almost two times Youre. The bridge and then the second question well go to secure missed the one ties with the just want the for the mine for you.
Actually the issue the wheatstone own sort of core and proposed the weekend.
Right and can provide more on the risk on the property since you now tunes.
Oh, okay.
Even the issue here.
Thank you for me.
Other bachchan build items when I should some of the no debt.
Okay. That's it for one of the day to day.
From the into the to the consideration would have boosted the human book.
The paid the now with all of you get to the partnership.
So turning into the Ocean most of the women's show exceeded the two can the good for them.
The scalability.
Okay, and the incentives for them to the table.
The way, which is entirely the we should.