Q4 2020 Li Auto Inc. Earnings Call

[music].

Hello, Ladies and gentlemen, thank you for standing by for the August 4th quarter and for years of 'twenty and 'twenty earnings Conference calls at this time all participants are in listen only mode. This conference call is being recorded.

And I'll turn the call over to your host Janet Chen Director of Investor Relations of the company. Please go ahead channel.

Thank you of any cause Anthony and good morning, everyone. Welcome to the auto sports car here and for your interest out there in 10-K earnings conference call. The company's financial and operating results were published in the price release earlier today and of a postpaid and the Companys I read site.

On today's call, we have our president and Mr. Kevin Yeah, and I shouldn't our CFO, Mr. Johnny Kelly and our CTO, Mr. A K one to begin with prepared remarks and.

The founder and CEO, Mr. Shan Li will join for the Q&A discussion.

Before we continue please be reminded that today's discussion will contain forward looking statements made and of the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995 for looking statements involve inherent risks and uncertainties and such the complex actual reads.

<unk> may be materially different from the way it was expressed to date.

For information regarding risks and uncertainties is included in certain filings of the company with the U S Securities and Exchange Commission.

The company does not assume any obligation to update any forward looking statements, except as required under applicable law.

Please also note that the auto its earnings press release and this conference call include discussions of unaudited GAAP financial information as well as and audited non-GAAP financial measures. Please refer to the autos price relief, which contains a reconciliation of the and audited non-GAAP measures to compare.

GAAP measures.

With that now and now I'll turn the call over to our President. Please go ahead Kevin.

Thank you Hello, everyone and thank you for joining our call today the fourth quarter.

Caped off of year of significant growth and the robust financial results for our company.

Our teams and strong execution yielded record fourth quarter result that comfortably beat our outlook we delivered.

14400, and the 60 for me was in the fourth quarter of 67% quarter over quarter.

Our robust of deliveries drove revenue growth of 65, two per cent compared with the third quarter, reaching RMB for point 15 billion.

With 32006 hundred and the 'twenty for vehicles delivered to our users in 2020. The one was the best of setting new energies SUV of the year and China.

Testament to its highly competitive product features.

Outstanding performance was fueled by strong demand driven by our distinctive product offering and the superior user experience.

And the made possible by our focus of the product strategy and our ability to rapidly scale up of consistent and high quality manufacturing processes to meet the debt.

We believe that evolving consumer preferences for smart electric vehicles together with advancing technologies will continue to be tailwind for our long term sales growth.

Taking into consideration of the seasonality and the the impact of COVID-19 in North and China, We expect our first quarter deliveries.

To be between.

10500 to 11500 units.

Of the profitability side, our gross margin remains robust at 17, 5% in the fourth quarter, reflecting our manufacturing efficiency and the disciplined cost management approach.

Most notably we achieved record high operating cash flow of RMB 182 billion nearly doubled from the third quarter and the raised.

U S dollar one point 53 billion in proceeds through our successful follow on offering.

And a solid financial foundation, as we increase investment for autonomous driving technology and the a b the platform to drive our future growth.

We remain committed to proactively serving our users by anticipating their needs.

And as the response to the increased demand for our vehicles, we have steadily expanded our direct sales and servicing network.

As of January 31st 2021, we have the six retail.

Retail stores, covering 47 cities and the 121 servicing centers and also authorized the body and the paint shops operating in 89 cities, we will continue to broaden and deepen the city coverage to address increasing demand from prosper.

Active users across China and prepare ourselves.

For the new model launches in 2022 and beyond.

At the same time, we strive to continue strengthening our digital systems to integrate and the connect all the stages of the sales and servicing processes to maintain a high level of sales efficiency.

As the user driven automotive and the technology company, we always prioritize our users' comfort and safety. We are very proud of the outstanding safety rating result of our Li one achieved Li one was awarded the highest the safety reading.

In three out of the for China insurance Automotive safety Index <unk>.

The evaluation categories in January five star ratings in China Auto.

Mobile Health Index assessment, and a five star China, New current assessment program safety ratings in February.

Make it the only large premium SUV model that has received the top scores in all three index per webs.

We aim to make Li one best in class and the belief that.

Iteration is necessary for ground breaking innovation, we constantly collect feedbacks and the suggestions from our users through our ATP and also our customer service centers.

To provide updates through the photo by doing so not only we delivered more value added products and services, but also nurture long term relationship with our users.

Which will be very helpful to enhance the value in the long run since the start of the delivery in December 2019, we have released the 13 major vehicle over the air upgrades.

And demand and.

December 26, 2020, our delivered software version 2.0 through OTA updates, bringing 12, new features such as front vehicle smart alert adaptive cruise speed dashboard the camera of playback multiple user setting.

And also updated the co pilot entertainment system plus.

Plus another 12, and hence the functions, including new interfaces for the dashboard touch screen control panel and the also updated applications such as navigation map.

As of February 18th we have user in 328 cities across China with accumulative Meltage exceeding 330 million kilometers 97, 1% of users expressed dissatisfaction with.

The one in the survey we conducted in January of 2021.

And we're willing to recommend the Li one to their friends.

As always we are grateful for the consistent support and trust from our users looking forward, we will accelerate the development of second generation extended range of platform.

And also the high voltage be the technologies in order to enrich our model mix to cater to the needs of a wider range of users while adhering to our brand positioning of premium smart electric vehicle.

All of these efforts are Amy are aiming at maximizing the value proposition for our users. We are planning on the reconfiguration of our state of the art Changzhou factory for our new model pipeline, especially the <unk> premium SUV based on brand new architecture.

<unk> to be launched in 2022.

With the <unk>.

Establishment of our Shanghai R&D Center, we are also expediting, our R&D effort across the board.

Having successfully completed the first phase our strategic cycle and the entered the the second stage. This year. We will continue racing ahead towards our mission, creating homes on the move that bring happiness to the entire family.

With that I would like to turn it over to our CEO, Mr. Taiwan for a closer review of our and.

Our R&D efforts. Please go ahead.

Thank you Kevin.

Hello, everyone, let me share with you.

And the progress we have made on R&D system, the last earnings call.

Of course, with our brand new architectures for.

For the full size premium electric and.

As you read and launched in 2022.

The features of scalable and Hopper Aqua reasonable <unk> and the sensors and and.

Enabling more use cases.

The.

OTT in particular.

The collapsing.

The collaborating closely with Nvidia and decide as we to equip our next model with the powerful and media owners and see chipset.

With scalable.

And.

We could expand our vehicles over more computing power to 2000 and helps.

Along with our complete in house algorithm and closed loop data environment, we can progressively reach level for auto.

The Army's training.

The projects goes well and everything is on track.

One of the priorities for me and CTO is to attract really and scientist.

Researchers and engineers to join our team to the relevant cocky page smart electrical vehicle.

Technologies, as we aim to bring or changing innovations to people's everyday lives.

We are excited to kick off 2021 with announcement of our new R&D Center in Shanghai.

Dedicated to the development of cutting age electric vehicle technologies, such as high voltage platforms and of Youtube fast charging technologies.

This R&D center will have and and the amount of months of capabilities for new models.

We chose of Shanghai as the location due to the of Ben.

And availability of top notch talents with expertise in smart vehicles in and around the city and loan size.

Of reach supply chain.

Is establishment, where not only accelerates our new model launches and launches and the development of smart vehicle technologies, but also our recruiting efforts.

Recruiting at the R&D Center has already started we will ultimately build a team of.

Over 2000 and stuffs.

Meanwhile, we are establishing collaborations with top universities and research institutes in China.

More of days will be released in future.

Now I will turn this call over to our CFO Mr. Kennedy to review, our financial performance in the fourth quarter.

Central time, and Hello, everyone.

I will now go for some of our financial results for the fourth quarter of 2020.

And to be mindful of the length of this call.

The address financial highlights here and encourage you to refer to our earnings press release, which of the posted online for additional details.

Please note that the currency is much and below our RMB.

Total revenue in the fourth quarter of 2020 or a full point for one 5 billion.

The increase of 65, 2% from 251 bidding in the third quarter of 2020.

This included a fault.

The euro six bidding of vehicle sales in the fourth quarter of 2020.

Representing increase of six day, four 6% from the third quarter.

The increase in vehicle sales.

It's mainly due to.

The.

67 increase in vehicle deliveries.

Coatings outlet.

460.

For vehicles in the fourth quarter of 2020.

From 8000.

660 vehicles in the third quarter of 2020.

Revenues from auto sales and the services work.

892 meeting in the fourth quarter of 2020, representing increase of 19.

And 93, 5% from the third quarter.

The increase in revenues from our other sales and the services.

And in line with the increased vehicle sales and the increase the number of vehicles using our services.

Cost of sales in the fourth quarter was sorry pardon.

For.

The two building representing the increase off of seven to eight 1% from the third quarter.

Vehicle margin in the fourth quarter of walls are.

The 17, 1%.

Comparing to 19 eight.

8% in the third quarter of 2020, the decrease was primarily due to the decreased one time rebate from suppliers compare with third quarter of 2020.

Gross margin in the fourth quarter was 17, 5%.

Compared to.

And 19, 8% in the third quarter, which was mainly driven by the changes the change in vehicle margin.

Total operating expenses in the fourth quarter were.

803.

Three 5 million, representing an increase of $18 seven per.

And from 676 pardon seven meaning in the third quarter of 2020.

Research and development expenses in the fourth quarter of 2024 of three.

And 300.

$74 2 million, representing the increase of 11 volume.

9% for.

334, and five meeting in the third quarter of 2020.

Excluding share based compensation expenses non.

Non-GAAP research and development expenses for a $369 1 million.

Representing a quarter over quarter increase of 32, 4%.

The increase.

Research and development expenses was primarily attributable to increased research and development activities for the company's net.

Vehicle model and increased high caught offsides by the.

Significant decrease in the share based compensation expenses over the third quarter.

In the period higher.

Cumulative share based compensation expenses.

And we're recognized related to the stock options granted to employees with service condition and the performance condition relative to the IPO.

Selling general and administrative expenses in the fourth quarter of 2020 or 429.

Three meeting the excluding share based compensation expenses.

Non-GAAP selling general and administrative expenses were 426 eight.

Meaning.

And representing an increase of 61, 5%.

The increase in selling general and.

<unk> expenses was primarily driven by the increase the marketing.

And promotional activities and.

The increased head count offset by the significant decrease in share based compensation expenses over the third quarter of 2020 and.

The enbridge period higher cumulative share based compensation and expenses were recognized related to the stock options.

Wrong headed for employees with service conditions, and the pro forma of condition relative to the IPO.

Losses from operations in the fourth quarter of 2020.

And <unk>.

So the eight nine.

9 million decreasing by.

56, 2% compared to a loss of 180 day meeting in the third quarter.

Excluding share based compensation and expenses.

Non-GAAP loss from operations was $71 1 million increasing by <unk>.

58% from the third quarter of 2020.

Net income was 100.

Seven 5 million in the fourth quarter of 2020 compared to 106 nine.

Nine meaning net loss in the third quarter of 2020, non-GAAP net income was <unk> hundred.

<unk>.

For meaning in the fourth quarter, representing the increase of.

621, 3% from <unk>.

16, meaning in the third quarter of 2020.

Now turning to our balance sheet and the cash flow.

Cash on the cash equivalents restricted cash and.

Deposits and the short term investments.

Total.

2009 pardon.

The 7 billion as of December 31st 2020, operating cash flow in the fourth quarter of 2020 was one point.

Two billing near the top.

Both from 929.8 meeting in the third quarter of 2000 and plenty.

Free cash flow was one <unk>.

<unk> bidding in the fourth quarter of 2020.

Representing the increase of 100.

13, 2% from 700.

For the nine 9 million in the third quarter of.

But 2020 as of December 31st 2020.

We had a total of 400 181 employees.

For more of our.

2000 tons of full year financial results. Please refer to our earnings press release for further detail and.

And now for our business outlook for the first quarter of 2021, the company expects deliveries to be between 10500 and.

11000.

500 vehicles, representing the increase of 262 six.

6% to 277, 1% for.

From the first quarter of 2020 the.

Company and also expect the first quarters.

Total revenues to be between two nine for bidding for <unk> pool to bidding.

Representing the increase of for 245, 9% to 278.

Eight 8% from the first quarter of 2020.

I'll now turn the call.

Over to the operator to facilitate our Q&A session.

Thank you.

Thank you.

And ladies and gentlemen, well now begin the question and answer the question.

Thank you for your questions. Please.

And the number one.

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T cells and two questions.

The addition of a question.

Cool.

And the question please.

Please follow me now.

Okay.

Once again for your questions.

And the number one.

Yeah.

First question comes from the line of sales from.

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And then just translate for myself very quickly on the <unk>.

First question is about the sequential decline of the first quarter volume of items can management elaborate on the decline with the classes on the demand or supply side. Second question is about the recent crop and policy from the Shanghai government and the city, obviously announce it when the.

The longer provide great place to plug in vehicles and factors in 2000 Twenty's free can you talk about the view on this and your projected impact of full of performance.

Yeah.

Thank you for Beth this is Kevin.

I'll answer your questions.

The first question.

We think a modest the month over month decline does not mean that our sales are encountering bottleneck.

The single module sales of over 5000 the per months still demonstrate that the our Li one is very competitive.

Deliveries in January of 'twenty, 'twenty, one and 5379 and in December was the 6100 and the 26.

On average for these two months.

Well of 5700 of 53.

And this number are in line with our prior growth expectations.

We think that the during the Chinese Spring Festival in February and also the upcoming Chinese Latin Festival, our sales will be.

Effective the by the seasonality for sure.

In addition.

Considering the impact of COVID-19 in North and China, we are putting our day.

Relative conservative delivery guidance for the first quarter of 2021.

We are confident that with the expansion of our retail store and the effective control of the pandemic.

Our sales will gradually increase.

About the second.

Second question about the Shanghai.

The policy change and Shanghai was within our expectation.

And with an implementation time debt is even later than we expected.

Also we believe the details of this policy and the implementation may change in the coming two years.

We keep the constant communication with the Shanghai local authorities the.

Implementation of this policy in 2023 will actually encourage user to purchase <unk> and the <unk> TV and also <unk> in advance we expect of the demand for <unk> will impact the reach of peak in 2022.

And the other side Shanghai only.

For 9% of our total deliveries in 2020 and the policy change we will have.

Relatively small impact on our company as a whole.

The cities without license restriction accounts for more than 55% of our accumulated deliveries by the end of 'twenty and 'twenty two.

So the distribution is very healthy.

We are also accelerating the R&D of our B the platform and the the launch of the be the model, which is expected in 2023.

Thank you that's the.

The amount of it.

Kevin and that's very helpful. Thank you very much for that.

Thank you Keith.

Our next question is for the line of Joe Morgan Stanley. Your line is open.

According to published at Kinder Morgan Stanley Japan potentially.

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So let me quickly check with the questions.

For my first question.

The convergent team share the official guidance regarding the numbers of the stores, how we plan to open in 2021.

With the closure of sales that quickly.

If we can keep the free operating efficiency and kept the average monthly sales per store and the ground hardships index.

My second question, that's part of the package of those GAAP, obviously, a lot of tech companies kept into the market like.

Apple and Xiaomi sort of what kind of the impact with disruption do you think of this new entrants.

For the premium to the EV and autonomous ride the market and what would be the implication to the hotels.

<unk>.

Thanks, Tim This is Kevin.

And our try to answer your first question.

About the the sales efficiency.

I think the the company has already our company has are the entered the the second the strategic cycle in which we will launch more models in the coming years. Therefore, we will not take the sales efficiency of 100 vehicles per store as the single target considering to keep this store.

And sales efficiency in the relatively healthy level, we will.

More aggressively increase our retail stores this year, starting from this year and beyond to prepare for the launch of our multiple models starting from 2022.

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Just of the cubic and Wendy.

Okay.

For the benefit of those of who could not speak Mandarin.

This is Kevin let me try to translate what the leisure and just described.

And.

So first of all.

And believe that it will takes about three years for any company to develop a car from scratch.

From setting up the team project, the initiation R&D testing and product launch at.

It also will take another.

Extra one year to test of the Chi and the market. So right now we have already lesion and Dr.

And has already completed all of the three and entered the the third phase of the strategic cycle.

So in the in the coming three for years.

We true, which we are ahead of those the new.

A new entry companies, we will accelerate and the speed of our development and development to build out our competitive advantage.

We we think bye bye bye 'twenty 'twenty four we will have the three major competitive advantages compared to those the new commerce.

First is the the market share and the the user base we are the gain.

By then it will.

Will be nearly.

Near the.

Half million to $1 million yeah.

The second advantage, we will have is our sales and service channel by then and we should already have our target is to have more than 1000 retail stores.

And also our factory capacity, our supply chain capacity and also our.

Charging infrastructure will all become a.

The competitive advantage for us.

Last thing.

And it's also very important is that the hour by then our product portfolio will be a much bigger and the will have of both the <unk> portfolio and the high voltage the portfolio, which will give us.

The big advantage over and over the.

The new entry companies. So we respect the lows of Hu.

Wanted to enter this industry.

Very much but we think the.

And the timing is on our site we are the.

Part of the zero to one face and we are already in the in the one to 10 phase and we are accelerating our new product the R&D and the launch.

Alright.

Thank you. Thank you Mr. Li Thanks for the great color. Thanks.

Thank you.

The next question is from the line of Hong Kong of UBS. Please go ahead.

Yes, thanks for taking my questions are basically the half two questions. The first one is related to two of the of.

Pure electric vehicles, the other piece of it for your technology.

Have a rate of change your strategy and you will have accelerated European free development. During the past several months I can see and youll have for amongst the Wil and shock of platform for yet.

Our focus on the high voltage and some of the fast charging and.

The share with us more details, especially around the technology roadmap and the timeline of the PUC.

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Shall we understand the two platforms.

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Achieving pretty decent high teens of the gross margin and the hydro close to breakeven on the op margin.

And you already have enough financial resources and <unk>.

But it would be at the higher market share are higher volume saw to build off of the branding as well as the accumulated for user base. We will strategically of chose to focus on the lower margin for two and get on tier one.

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Translate our tried to translate a lot of content.

So first of all of we have been developing our high voltage.

The platform for for some time and our focus is the two two to be able to enable our customer to replenish the energy.

Very high speak this is the mission and we gave the towards the starting from the beginning of this company and the now we believe with the with the technology and also with the standards that the the.

Chinese government and the look and also <unk>.

The plan.

Right now it's the in the in the right timing to start two.

To the rest of this product and the trying to introduce at the into the market the very soon.

And so to achieve this our high voltage.

Ultra faster speed.

Charging platform for <unk>.

And the mental technologies, we have to develop the first of course is that the high.

<unk> rate battery.

We are working with our partners on the on the for <unk>.

For times.

Chart of series battery this is another.

The product, we directed buy from our supplier.

<unk> developed together with our partners.

Secondly, the cost of the very high efficiency power train system I think at the the cost is the solution is the SAIC technology.

Yeah.

The third thing is about the the thermal system as you can imagine we are facing two issues. One is the one we charge the sky with very high speed the.

The heat we need to manage.

That would require a very sophisticated the thermal system and the other hand, the two two.

Two to make sure the user experience as well two of the even the very low temperature. We also have need to have our thermal system can cater the needs were.

And they're using low and low temperature and the.

One example is the for example of our R&D team is working on the the.

And the <unk>.

Some of it.

The code the medium solution.

For the thermal system the the.

The last the technology of course is the high power charging network.

Our target is to enable and 300 of two of 500 kilometers range within 10 to 15 minutes.

That's what we call. The also the 400 kilowatt.

The power charging network.

Because of the ultra fast charging speed the business model.

Start to become viable for.

The real commercial.

Charging station, which means the the charging business to become profitable. So therefore, we also have the plan to start to build our own.

H P C.

The power charging networks.

So from the product the launch plan starting from 2022 will launch at least the two new product each year and work and the the first the Bebe products will be launched the 2023.

And the other hand, the will cover cover a wider price range.

With our portfolio now we our plans cover <unk>.

Price range from the 150.

<unk> thousand and RMB, two 500 of K RMB.

So overall, our targeted two <unk> accelerated the replacement of cash.

Cash and then we have two solutions.

Both are very good <unk> solution and the BV solution lastly.

To answer a part of the question about the whaler and shock the world platform.

Is the.

Is the heart.

His car form that the.

With the.

More space in the car and the for shock as you can imagine from its name.

The performance of this platform will be higher.

Alright.

Hi, Paul.

Tony I will answer the.

G P M.

The question.

You can see.

2020 of the full year.

Gross margin is around <unk>.

The 16% so for this year of 2020.

One of the used car.

<unk>.

Gross margin between.

19% per day.

<unk>.

Due to the <unk>.

The volume with the.

The lower volume and.

And also the manufacturing overhead the improvement.

For the net profit side of Reed.

And one two.

Because we are still.

Our increase the investment in R&D and also the expansion of our network would be.

Haven't mentioned.

The accelerated that so we don't want to pay for any guidance on that and.

Also you should realize that the net profit in the fourth quarter is due to the.

Short term.

Investment income which of the.

And the lead types of them in China.

Yeah.

Thank you.

Okay. Thank you very much for helpful. Thank you.

Yeah.

Thank you next question is for them.

Credit Suisse.

The reason behind.

Oh, you're going to use for clients.

And then to the Hudson County, Texas.

And the immune system.

And how should we just put the one.

The question.

And Mr Tusa.

And was helpful for you for some time.

Some of the army.

And that kind of comes to the Aha. This is one of <unk>.

Okay.

Could you just for the.

And I mean.

And in the you know some of them on so I think of.

So the posture.

And we've actually spent a lot and that's continuing and issue.

Uh-huh for setup box and I kind of want them and cash flow do you know the Shanghai.

And the way.

So my question is about the <unk>.

And <unk>.

Issues because of this year and.

And the milestone of you didn't happen for the smart technology for the hotel. Meanwhile.

How can you prove you can be a catch up all of you don't even better compare youll key components such as the peso.

Thanks, Tim that's the first one.

The second one it's about the.

It's about the dealer network and you don't.

As mentioned in the way you mentioned that the Internet the look.

And you kind of maybe go to launch it took the shaft. If you compare to sort of did you see also picked up of technology.

Net of a couple of and the colonial Susquehanna close of the top line as well. Thank you.

So I would like to take over the first question. This is kind of speaking.

And regarding.

The plant in 'twenty and 'twenty one.

So we will spend more money on R&D.

It is the year for preparation of our house brand, new scalable and upgrade of the whole system architecture.

Covering.

The next generation tonnage and cotton.

And the most driving car computing platform and our own operating kind of operating system, which will be released in 2022 of.

Of course in the mile.

Similar features offered by our competitors.

Some brand new features we will be providing to our customers for sure.

From engineering risk.

The resource point of view, we will double size of our total R&D staff.

As we mentioned some building and Shanghai R&D Center and as part of this.

Expansion.

So regarding competition.

We have confidence to prove ourselves.

And see again and repeat financially last year.

So we believe exactly with the.

Fast expansion of our R&D.

Exciting news regarding our in house technology, and like autonomous driving.

And the NV yield soon.

Thank you.

Yes. This is Kevin.

And it won't be for the.

Sales and.

Network. Our company has already entered the second phase at the just now and I mentioned.

And that with the auto brand increasingly accepted by users in for.

Factor, we are changing gear, yes, we are adjusting our store expansion strategy accordingly.

So this year our goal is to reach 200 retail stores in the.

And this year covering 100 cities. This is all of them.

As you can see this is a relatively aggressive plan.

The expansion.

Of our sales network will need to increase the sales for sure and also the brand the hesitant I think the behind the this plan is that the we are preparing us for the new model launches in 2022 and beyond.

Thank you.

Thank you.

And the one.

For the next question.

Most of the home of surgery with the even for one day.

So the whole quarter.

Okay.

And we think and do what.

And we do the right.

I forgot the logistically.

So both of the distribution.

So this was all of the question the litho tool for them.

Oh, the Vista trial.

And I know what's important to growth.

Question for pursuing the take a priority.

And for the Caribbean provision comes it all goes into their business and particularly political.

The other one.

And then if you want to.

For sure.

On the other kind of the bulk of Yahoo.

And I don't see anything on.

And the balance of water.

Raw material.

And we will see demand.

And that's always on the true.

Which of the Salon.

Brokerage and translates my other questions.

So I want to wait for the first question regarding of the overseas strategy teams and.

And the other one TCT along for the Guardian of the Battle.

Okay.

So it was reported the civil competitors and there is fairly.

And Norway.

Or has the patent for free.

European market as well at the meeting.

The overseas expansion of was not part of our plan.

And I was not sure whether you have changed your mind, especially considering the heightened interest and grades.

And the headwinds Bachelor of.

Question is once you go to your list of all the seats.

We have noticed the techno motor Street.

And also the way the hand.

And the use of the asset.

And we find that transport cost saving.

And also consider it.

And as a P. Instead of the.

And the NCS and batteries and if we got some of.

And the pipe for the rest of the rest of bleeding.

Whether you can share whats the expectation of a target for the neighborhood of sort of.

And this year thanks.

Yes.

Ali This is Kevin let me take care of persons first of all of course, the we are committed to become a global leader of Smart electric vehicle. Ultimately so definitely we'll continue we'll continue the overseas market in the past several years of our strategy is to focus on China market only.

But.

At the same time, we are.

Continuously monitoring the progress of the global market.

And this year, particularly we.

We will continue to increase our.

The focus on research and in the overseas market and the initiate planning for the product and the sales channels for the oversea market overseas market, including <unk>.

Establishing overseas offices revenue will go to overseas.

For the second question about the RFP.

In fact of for our <unk> platform, we have no plan to launch with.

At least the Maya.

Our phosphate batteries for.

True.

For two reasons the first of all of the right now all of the RFP on the market cannot meet our performance requirement.

Because of the Ied has a different.

And its requirement.

Compared with the BD and secondly, because of the <unk> use of less.

The cable hour of battery. So therefore, even if we use the RFP the cost benefit will be.

We will be not significant for us.

And the for the next but for the next step for our beta is definitely we are in the process researching at the development and the developing both kind of the batteries.

For sure we will consider.

Consider LSP for our future be the car models.

Okay.

And and the last question of core expenses.

Sales for the deliveries of this year.

Oh, Yeah, I think it's too early to give that.

The full year guidance about.

We will.

And our network.

Okay, Kevin mentioned and provision.

10002.

Some of them.

It's possible.

Yeah.

Thank you.

Thank you.

For your question.

All of Citi. Please go ahead.

Oh excuse me.

And so well.

Okay.

And she Jayson.

Yeah.

So the assumption.

Well, that's one of them.

Thank you.

Okay.

One of them.

Yeah.

This isn't something range.

Hum.

All true.

Most of them.

Thank you, ladies and gentlemen, and sometimes.

Okay.

And she can't they come off the system.

One of them.

Okay. She come true.

And so Greenwood.

Yeah.

And thank you for them.

The first question comes from Shanghai.

And some kind of research.

And.

2000, and stop there and.

Could you please.

Thank you Joe.

And the second question is about the recent R&D expense and maintenance.

The R&D expenses keep increasing so what will be the next one on two of them looking five years that's true.

Time range.

And while R&D expenses.

This is the sky.

Regarding to the crusher and about.

The R&D activity.

So the definition of Shanghai R&D center, it will be mirrored configuration and speaking of R&D Center for more car models and also of advanced R&D activities.

Regarding the team of our.

And let's say others.

So altogether right on and we have more than 300 engineers working for that and.

And we would like to reach too.

Yes.

600 and total.

And of this year, yes.

Yes.

And this is done.

For the R&D.

For.

For 2020 of.

Of the early stage of our.

2020 twos the.

New model. So this year, we will the R&D investment and Bill.

And Chris who I.

At least the.

So the 1 billion of RMB and.

And with the increasing investment.

Autonomous driving on the new models.

We expect the R&D the fan.

And we will reach a $1 billion in three years.

And the amount of that we believe of half of the investments.

Over half of the investment of Kobe.

For the.

Ultimate scrubbing.

Expenses.

Well, thanks a lot.

Yes.

Okay.

Thank you.

Thank you.

In the end of my conference call I'd like to turn the call those like for the company.

And marks the Santos.

Sure.

Thank you with the against the journey with Us and today. It could have further questions. Please feel free to contact me auto of Investor Relations team and that's all for today. Thank you and have a good one.

And.

Thank you ladies and gentlemen.

Thanks for the day and thank you for participating.

Good day.

[music].

[music].

[music].

Hello, ladies and gentlemen, and thank you for standing by for the all of this fourth quarter and full year of 'twenty and 'twenty earnings Conference calls at this time all participants are in listen only mode for this conference call is being recorded.

I'll now turn the call over to your host Janet Yang.

And what exactly was nations of the company.

Go ahead channel.

Thank you Annie and good evening and good morning, everyone and welcome to the auto is fourth quarter and full year true south of the N. Gen. Eight earnings conference call the company's financial and operating results were published and the price released earlier today and of a postpaid and the Companys IR website.

On today's call, we have our president and Mr. Kevin Yeah, and I shouldn't our CFO, Mr. Johnny Perry and all of our CTO, Mr. <unk> to begin with prepared remarks.

Our founder and CEO, Mr Shan, Li well joined for the Q&A discussion.

Before we continue please be reminded that today's discussion will contain forward looking statements made and of the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995 for looking statements involve inherent risks and and so can taste and.

As such the company's actual results may be materially different from the Willis expressed to date for.

For information regarding risks and and took and case is included and certain filings of the company with the U S Securities and Exchange Commission.

The company does not assume any obligation to update any forward looking statements, except as required under applicable law.

Please also note that the auto its earnings press release and this conference call include discussions of unaudited GAAP financial information as well as Oh, they take the non-GAAP financial measures. Please refer to Li <unk> price relief, which contains a reconciliation of the and audiotapes non-GAAP measures took and pay.

For about GAAP measures.

With that now and now I'll turn the call over to our President. Please go ahead Kevin.

Thank you the denim.

Hello, everyone and thank you for joining our call today, the fourth quarter caped.

Caped off of a year of significant growth and the robust financial results for our company.

Our teams and strong execution yielded record fourth quarter result that comfortably beat our outlook we delivered.

<unk> thousand 400, and the 60 for me was in the fourth quarter of 67% quarter over quarter.

Our robust deliveries growth revenue growth of 65, 2% compared with the third quarter, reaching RMB for point 15 billion.

With 32006 hundred and the 'twenty for vehicles delivered to our users in 2020. The one was the best of Saturday, New energies SUV of the year in China.

Testament to its highly competitive product features this outstanding performance was fueled by strong demand driven by our distinctive product offerings and the superior user experience.

And the made possible by our focus of the product strategy and our ability to rapidly scale of a consistent and high quality manufacturing processes to meet the demand.

We believe that evolving consumer preferences for smart electric vehicles together with advancing technologies will continue to be per week for our long term sales growth.

Taking into consideration of the seasonality and the the impact of COVID-19 in northern China, We expect our first quarter deliveries to be between.

10500 to 11500 units.

And the profitability side, our gross margin remained robust at 17, 5% in the fourth quarter, reflecting our manufacturing efficiency and the disciplined cost management approach.

Most notably we achieved record high operating cash flow of RMB 182 billion nearly doubled from the third quarter and the raised.

U S dollar one point 53 billion in proceeds through our successful follow on offering.

Setting a solid financial foundation, as we increase investment for autonomous driving technology and the a b the platform to drive our future growth.

We remain committed to proactively serving our users by anticipating their needs.

And as the response to the increased demand for our vehicles, we have steadily expanded our direct sales and servicing network as of January 31st 2021, we had the six.

Retail stores, covering 47 cities and the 121 and servicing centers and also authorized the body and the paint shops operating in 18 and Icd's, we will continue to broaden and deepen the cte coverage to address increasing demand from prosper.

Active users across China and prepare ourselves for.

For the new model launches in 2022 and beyond.

At the same time, we strive to continue strengthening our digital systems to integrate and the connect all of the stages of the sales and servicing processes to maintain a high level of sales efficiency.

As the user driven automotive and the technology company, we always prioritize our users' comfort and safety. We are very proud of the outstanding safety rating results of our Li was achieved.

And she'd with the our users.

Which will be very helpful to enhance the value in the long run.

Since the start of the delivery in December of 2019, we have released the 13 major vehicle over the air upgrades.

And demand of.

December 26th 2020 hour delivered software version 2.0 through Ots updates, bringing 12th new features such as throughout the vehicle Smart alert adaptive cruise speed test for the camera playback multiple user setting.

And also updated the co pilot entertainment system plus.

Plus another 12, and hence the assumptions, including new interfaces for the dashboard touch screen control panel and the also updated applications such as navigation map.

As of February 18, we have user in 328 cities across China with accumulative Maldic exceeding 330 million kilometres 97.1% of users expressed dissatisfaction with.

The one in the survey we conducted in January 2021.

And the willing to recommend and the one to their friends.

As always we are grateful for the consistent support amtrust the from our users looking forward, we will accelerate the the development of seconds generation extended range of platform.

And also the high voltage be the technologies.

Other two in reach our model mix to cater to the needs of a wider range of users well adhering to our brand positioning of premium smart electric vehicle.

All of these efforts are Amy are aiming at maximizing the value proposition for our users. We're planning on the reconfiguration of our state of the art Changzhou factory for our new model pipeline, especially the free sites premium SUV based on revenue architect.

To be launched in 2022.

With the.

Establishment of our Shanghai R&D Center, we are also expedite and our R&D effort across the board.

Having successfully completed the first phase our strategic cycle and the entered the the second stage. This year. We will continue racing ahead towards our mission, creating homes on the move that bring happiness to the entire family.

With that I would like to turn it over to our CTO Vista, Taiwan for a closer review of our and our R&D efforts. Please go ahead.

Thank you Kevin.

Hello, everyone, let me share with you.

The progress we have made R&D cyst and lost earnings call.

And course with some of our brand new architectures for the two sides premium electric as you reach and launched in 2022.

The features of scalable and hopper offer equal.

You and the since our sad.

Enabling we'll use cases.

The OTT in particular.

Collapsing.

Collaborating with closely was mbd and and decide as we to equip next.

The next model, which the powerful and media Orange personal C chipset.

With scalable.

Setup.

We could expand our vehicles overhaul computing power of two 2000 and helps along with our complete in-house algorithm and closed loop data environment, we can progressively reach level for autonomies driving.

The projects goes well and everything and some track.

One of the priorities for me and CTO is to attract really and scientist.

Researchers and the engineers to drawing on the team to the amount of them carting age smart electrical vehicle.

Technologies, as we aim to bring or changing innovations to People's every day lives.

We are excited to kick of 2021 with announcement of our new R&D Center in Shanghai.

Dedicated to the development of Carting age electric vehicle technology is of such as high voltage platforms and of Youtube fast charging technologies. These.

These R&D center, we have and and the amount of months capabilities for new models.

We chose of Shanghai as the location due to the abundance availability of the top of the lodge talents with expertise and smart vehicles in and around the city and long says.

Ah reach supply chain.

Is establishment will not only accelerate our new model launches laundries and the development of smart vehicle of technologies and also our of recruiting efforts.

Recruiting and R&D Center has already started we will ultimately build a team of over two solid and stuff.

And you, while we are establishing collaborations with top universities and the research Institute in China.

More of days will be released in future.

Now I will turn this call over two hours CFO Easter Candy to review, our financial performance and the fourth quarter.

Hello, everyone.

I will narco of some of our of the initial results for the first cause of of 2020.

To be mindful of the last of the call.

The financial highlight here and encourage you to refer to our earliest press the relief which of the postpaid online for additional details.

The the cars this measure and below our RMB.

The total revenue in the fourth quarter of 2000 and plenty of all Paul for one five bidding.

Representing of increase of for fixed day, 5.2%.

From 251 bidding in the third quarter of 2020.

Give included fall part of zero.

Fix bidding of vehicle sales in the fourth quarter of 2020.

Repair and King increase of sixth day fall, 0.6% for.

From the third quarter the.

Increase in vehicle sales.

Walls, mainly due to.

67 increase and vehicle deliveries pool for kings out the.

460.

For vehicles in the fourth quarter of 2020.

From 8000.

650 vehicles in the third quarter of 2020.

Revenues from auto sales on the 30th or.

809, two meeting in the fourth quarter of 2020, representing of you increase all for on that day.

Three five per cent from the flow Carter.

The increase the and revenues from other sales and the services was in line with the increased vehicle sales and the increase the number of vehicles using our services.

Cost of sales in the force Carter was three part of the fall.

The poor bidding representing the increase off of 78 part of the 1% from the third quarter.

Vehicle margin in the fourth cause our walls.

17, part and 1%.

Comparing to 19.8% in the first quarter of 2020. The decrease was primarily due to the decreased one of the time rebate from suppliers.

Compare with sort of color of 2020.

Gross margin in the force cause our was 17.5%.

Compared to.

19.8% and the so Carter, which was mainly driven by the changes the change in the vehicle margin.

Total operating expenses in the fourth quarter were.

800 and.

Three five meeting representing of you increase of aging part of the seven per cent trauma 676 part of the seven meeting in the third quarter of 2020.

Research and development expenses in the first quarter of 2020 or of 300.

774, and two meeting representing increase of 11.9% from 334 and five meeting in the third quarter of 2020.

Excluding share based the commerce AJ expensive.

Non-GAAP research and development expensive for of $369.1 million.

Representing of cultural and will call for an increase of 32 pardon for percent.

The increase.

And research and development of expensive, while it's primarily attributable to increased research and development activities for the company of next.

Vehicle model and interest hi caught offside.

All sides of the.

Significant decrease share base of compensation and expenses.

The third quarter.

The invade period higher of cumulative share based of compensation expenses or recognized related to the stock option growth hate to our employees with service conditions and the performance condition related to the IPO.

Failing general and administrative expenses and the fourth quarter of 2020 or of 429 points.

<unk> three meeting excluding service compensate and expenses non-GAAP filing general and administrative expenses or 426.8, meaning representing.

Representing the increase of 61.5%.

The increase the and sailing channel and administrative expenses was primarily driven by the.

Increase the marketing.

And promotional activities and the interest high cop of size by the significant decrease and and share based of compensate the expenses or the third quarter of 2020.

And beige period, higher accumulative sharp as the compensation and expensive or recognized related to the stock options for.

Wrongheaded to unplug, the service conditions underperformers condition relative to the ideal.

Losses from operators of in the first quarter of 2020.

Was.

Seven eight and.

Nine meeting decreasing by.

56.2% compared to a loss of 108 hundred meeting in the third quarter.

Excluding share base of compensation expenses and.

Non-GAAP loss from operations was 71.1 million increasing of by a.

58% from the third quarter of 2020.

Net income was 100.

Seven five meeting in the fourth quarter of 2020 compared to handle of 6.9 meeting net cloth in the third quarter of 2020 non-GAAP net income was 500.

Of 15.

For meaning in the fourth quarter representing of the increase of.

600 plenty of 1.3% from the.

16 meeting in the third quarter of 2020.

And I will turn it into our balance sheet and the cash flow of.

Of a cash on the past the equivalents risk fitted cash.

Have deposits and the short term investments porthole of.

Plenty of nice pardon eight Severn billing as of December 31st 2020, operating cash flow and the fourth quarter of 2020 was 1.82 billing nearly doubled from 929 point.

Eight meeting in the third quarter of 2020.

Free cash flow of was one six bidding and the fourth quarter of 2020.

Representing the increase of 103rd third and 0.2% from 700.

49, nine meeting and the third quarter of.

2020 as of December 31st 2020.

We had a total of 400 181 employees.

For more of our.

2000 tons of a full year for natural results, please and referred to our earnings press release for further detail and.

Now for our business outlook for the first part of 2021, the company effects deliveries to be between per.

Thousand 500 and.

11000 for.

500 vehicles, representing the increase of 252, 6%.

277, 1% from the first quarter of 2020.

The company and also expect the first colors of.

Total revenues to be between two pardon nine for bidding two or 322 bidding reps.

Representing the increase off for.

For 245, 9% to 278.

Eight 8% from the first quarter of 2000, and Panting I will now turn the call.

Over to the operator to facilitate our queue or the better.

Thank you.

Thank you.

Ladies and gentlemen, and that became the question.

And can you questions and spent time and the number one and.

The bill amount.

Cancel the class.

A husky.

And for the benefit of all of them.

Huh.

And it sounds and two questions.

Thank you for questions you can move into the queue.

And the question.

Probably not.

Of course and once.

And once again for the questions.

And.

The first question comes and the name of the same time and clothing.

Uh-huh.

HM HM HM.

And.

Conscious of it or bullets, and they don't like alcohol and cozy.

Thanks, and then I'll need the.

For today on the on the link so it's.

And home condo and people the tree and Chico.

And the generally on <unk> on the cell bundle of and I'm going to see the drinking Esa and shutdown needles tingling.

Single and substantial and it's actually been and get you down and going on with the kind of Chico Shanghai of shooting into the how to on the answer.

And yet.

Can you give up and the window machinery and six four.

All of <unk>.

<unk> say the the.

The part of that tons of teacher, and complaining of hijacking and what kind of duty accounts each other ticketing. So.

Let me just transfer the inclement cellphone quickly on the first question is about the sequential decline of the first quarter volume of items come management and elaborate on the decline with classes on the demand or supply side second questions about the recent company policy for the shot the government the CD, obviously announcing when the.

The longer provide great place to plug and vehicles effective in 2020th Street and talk about the view on this and your project of impact of full of performance and.

Thank you of update this is Kevin.

And I'll answer your questions.

First question we've.

And we think of a modest the month over month decline does not mean that the our sales and countering bottleneck.

Single motto sales off of over 5000 for months do demonstrate that the hour Li why is very commodity.

Deliberate in January of 2021, 5000, the 379 and the in December was 6100 and the 26.

Bridge for this two months.

5753.

This number in line with our prior growth expectations.

We think that the during the Chinese Spring Festival in February and the also the upcoming Chinese Latin and festival, our sales will be effective.

Affect the the by the seasonality for sure.

In addition, considering the impact of COVID-19 in North and China, we are putting out a relative conservative delivery guidance for the first of all other of 2021.

We are confident that with the expansion of our retail store and the effective control of the pandemic.

Our sales will gradually increase.

About the the <unk>.

Second question about the Shanghai.

The policy changing Shanghai was within our expectation.

We've been instrumentation time that is even later than we expected.

Also we believe the details of this policy and the implementation may change in the coming two years.

We keep the constant communication with the Shanghai local authorities the.

The implementation of these policy in 2023 will actually encourage users to purchase <unk> and the Ptv and also <unk> in the bumps we expect of the demand for Ya and Phd will impact the reach of peak in 2022.

And the other side Shanghai only account for 90% of our total deliveries in 2020 and the policy change we will have the.

Relative a small impact on our company as a whole.

Cities without license restriction accounts for more than 55% of our of accumulated degrees by the end of 2022.

So the distribution and it's very healthy yeah.

We also accelerating the R&D of our be the platform and the the launch of the be the model, which is expected in 2023.

Thank you that's the amount of of it.

Kevin and that's very helpful. Thank you very much for that.

Thank you of heat.

The next question is for the ninth of Jeremy.

And standing and.

Uh-huh.

Credit to play somehow how was the team walk into the outage again switch and seeing Michigan and of course vehicle the situation.

For the kitchen that was feeling of of quite a N T.

Sequence of his 217013 year and shoot okay, sure physical and get into the Chi.

The electric vehicles and D.

Thank you and the shell down kind of sick okay.

And Joe Cambridge, She got the abuse the television.

Like the that'll be 13 shelving.

Tiago and teen issue for you.

Quentin sense of what kind of day switching life on a day to Peel of course I'll need to day could you go see the changes how true, but just to put the table chairs according to be and and get hold true cause and it's still not the should talk and such.

And could you go and date at the end of for.

So let me quickly check with the questions for my first question commencement team share the official guidance regarding the numbers of the stores, how we plan to open and 2021.

With a quote or sales and accurate we still keep the free operating efficiency and kept the average smokey sales per store at the ground and check your next.

And my second question is how the come package of those kind of the.

So a lot of tech companies getting to the the market like by the Apple.

Apple Rochelle me, so what kind of the impact disruption do think of this new entrance to the premium to the heavy and the he had torn the strike and market and what would be the implication to the auto.

<unk>.

Thanks team this is Kevin.

And our tried to answer your first question.

About the the the the sales efficiency Ah I think the the company has already our company has are the entered the and the second of the strategic cycle in which we will launch more models in the coming years. Therefore, we will not take the sales the efficiency of 100 vehicle per store as the.

The single target considering to keep this.

Store sales the efficiency in the relatively healthy level, we will more aggressively increase our retail stock. This year starting from this year and the beyond to prepare for the launch of our multiple models starting from 2022.

The.

The one common down the second.

And how can I go into the the.

Could you see a dog and against the vehicle.

And the training because of that kind of.

Okay and came out.

Yeah, and they give you kind.

And you could each year.

Kingwood accused of this is yoda Patricia per I'll get the bombing of of those are the day down the hall, Okay here for Ya.

Too cynical GTA argue and the intruder.

And here here's home to again conduit how the.

Chicago, Yeah, the whole dollar Michelle documentary of that and I'm.

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Neither of of Blue.

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Auto and you don't share the cause of the day.

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Okay.

For the benefit of those who who cannot speak Mandarin the.

This is Kevin let me try to translate what the leisure and just described.

And.

So first of all of the.

And he can't believe that it will takes about three years for any company to develop a cough from scratch.

From the setting up the team project, the initiation R&D testing and part of our lunch.

It also will take another.

Extra one year to test of the car and the market. So right now we have already the.

The auto has already completed all of the three and entered the the third phase of strategics cycle.

So in the in the coming three for years.

We true we should we are ahead of those.

New a new entry companies, we will accelerate the the speed of our deserve the development two two pewed out our competitive advantage.

And we we think bye bye Bye 2024, we will have the three.

Major competitive advantages compared to those the newcomers.

First is the the the market share and the the user base, we already gained.

By then.

It will be near the.

Nearly half.

Half a million to 1 million.

Second advantage will have these our sales and the service channel by then and we should the already have our target is to have more than 1000 retail stores.

And also our factory capacity, our supply chain capacity and also our charging.

Charging infrastructure will all become a.

Competitive advantage for us.

The last thing.

And it's also very important that the hour by then our product portfolio will be much bigger and the will have of both of <unk>.

Portfolio and and the high voltage the the portfolio, which will give us.

A big advantage over and over the the the new entry companies. So we respect the those who.

I want to enter this industry.

Very much but we think the.

The the timing is out of our site we are the.

Part of the 021 face and we are the in the in the one to 10 face and we are accelerating our new product of the R&D and the lunch.

Alright.

Thank you and then thank you Mister Li Thanks for the of Great color. Thanks.

Thank you for the next question of something I know of Hong Kong Ah, Yes.

Yeah. Thanks for taking my questions office could I have two questions. The first one is related to the of.

Pure you and that should be called the other <unk> for your technology.

How far are ready to change your strategy and you'll have all of <unk> development. During the past several months I can see and you'll have for amongst the will and shock of platform for Ya and.

I got to focus on the Highboy teach and some of the hot charge and and you'll show with us more details, especially down for a pet quality of and to the roadmap and the time nine of the <unk>.

And so what the so we'll and shocked me and person will means of decor space piece.

The room and shocked me into the hospital of Federation and it's a higher speed of how shall we understand the two platforms.

And my second question is the regarding two of the March and guidelines for two and just into one of risk today at this moment, you'll have been achieving pretty decent high teams of the of course and marching and to hide the close to breach of you from out of the opium margin, but the pain from you already have the how far enough financial resources and you pull but it would be at the higher market.

Sure.

Higher volume saw to build off the brunt of all I'll say accumulative for user base.

And you will strategically of choose to focus on the lower margin for 20 of 21 and exchange of a higher market share.

And and the hanging the shop I chose for Tivo winter. According to the total of course for me and tons of what's your solution, though so I'm kind of or just the Nissan century, and I guess I'll try and call those for me and all the info on the.

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Ah how long the behalf the development you share almost there and I push the yoga and find the time here as you know for the yoga food either.

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Yeah and has it been moving and she didn't see Paul.

Uh-huh.

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Right now.

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No.

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If you're not moving non who manpack the boxes up.

And the growth.

The.

That's one of the.

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Jean Luc Chucky the eligible.

See the of the auto.

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True.

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And could change the Messiah.

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Giving you the the indigo how you wish for the economical and get.

Oh, Thank you for the hockey the Tech Yahoo the growth.

Okay. Okay [laughter].

This is kind of of our true.

And slate I will try to translate a lot of content.

So first first of all we have been developing our high voltage.

The the platform for for some time and our focus is the to to to be able to enable our customer to replenish the energy.

Very high speak the.

This is the mission and we give the two hours starting from the beginning of this company and and now we believe with the with the technology and also with the standard the that the the Chinese government and the low and all sorts of these are.

Plan right now is the in the in the right timing to start to.

To divert for this product and the tried to introduce it into the market the very soon.

So to achieve the high voltage and Ah.

Ultra fastest speed the.

Charging platform.

And for.

Fundamental technology. So we have to develop the first of course is the the high C right battery.

We are working with our partners on the on the for four times.

And chart of theory battery this is the not the.

A product the week directed by from all the supplier we developed the it together with our punish set.

Second day is the cost of the very high efficiency empower train system I think at the the cough. This the solution is the Src technology.

Yeah.

The third thing is about the the thermal system as you can imagine we are facing two issues why is the one we charge of this car with very high speed the.

Heat, we need to manage the.

The require very sophisticated the thermal system and the other hand, the two of to to make sure of the user experience is value of the even the very low temperature. We also have need to have our thermal system can can cater the neat.

And they're using low and low temperature and the White example is the for example of our R&D Tv's working on the the.

The <unk>.

Simple.

The code the median solution.

For the simple system the the.

The last the technology causes the high powered charging network.

Our target is to enable 302 of 500 kilometres range within 10 to 15 minutes. Yeah. That's what we had the also the 400 K what high.

High powered charging the network.

Because of the ultra fast charging speed the visit and model.

Start to become viable for re real commercial.

The charging station, which means the the charging business who become profitable. So therefore, we also have the plan to start to build our own.

HTC high powered charging networks yeah.

So from the product the.

Launch Glenn starting from 2022 will of lunch at least the two new product each year and work and the the first the BB product and will be lunch the 2023.

And the other hand, the will cover cover a wide the price range.

With our portfolio now we are placed cover.

Price range of from the 150.

I'm Southern RMB, two 500 of K RMB.

So overall our targeted too.

Salary to the replacement of icy.

Yeah, and then we have two solutions.

Those are very good yeah, the solution and the be the solution lastly.

To answer a part of the question about the whale and shock the whale platform.

Is the.

Is the heart.

His car for that the with the.

More space in the car and the for shock as you can imagine from his name.

The performance of this platform will be higher.

Alright.

Hi, Paul and this is.

Tony I will offer the.

G P and.

The question.

And you can see.

2000, and plenty the full year.

Gross margin is the wrong.

16% so for this year of 2000 for you.

One of the impact.

Gross margin between.

19% of the put that.

Due to the.

Credit the volume with the.

Laura Bong and also.

And also the manufacturing or had the improvement.

For for the non profit side of the.

And one too.

Called the are still.

Are you <unk> the rest of the million R&D and also the expansion of off of our network and we'd be as.

Haven't mentioned the Bureau.

February of that.

So we don't work and pay for any kind of of on that and.

Although you usually realize at the net profit and the fourth quarter is due to the.

South of them.

The mathnasium pattern, which of the.

The least HIV and China, So it's yeah.

Thank you.

Okay. Thank you very much for the helpful. Thank you.

Thank you.

Question it's.

Uh-huh.

Somebody in the hospital.

Oh the Tivo.

True.

Mhm and continuing on taxes and.

<unk> for you some day I'm pushing the nurses posted on the questions.

And you'll meet and she said and on and uncle Cox I almost hung up here for the fire.

Some of the army and I can't.

The huh.

Even the Ah killed and just I'm gonna.

Could you tell the the how can I didn't know you mean Ah.

That's kind of October 2000, and.

Some of the amount of geology seizure he talks job and he will be.

And do we bashed and a lot and then she continued issue if I'm being pushed out of the box and that's kind of one of them and Joshua.

And how you should of weight on me.

Some of the tiny shop and my questions about the small car on the issues because of August.

And the mouse.

For the.

What kind of technology Porgy auto.

Meanwhile, and how.

Can you prove you can be catch up and you don't even better compare you'll key compared to the touch and pester you and.

That's the.

And I think one is about the.

Is about and the demon metalwork, and and you just mentioned and you went to mention that the Internet to look previously and maybe go to watch it took the chefs.

So did you see and it should be double kind of lets you wouldn't be the.

And what type of the colonial system and it was close of the top of as well. Thank you.

So I would like to take over and the first question and this is kind of speaking.

Regarding.

The plan in 2021.

So we will spend more money R&D. It is the year of for preparation of our house brand, new scalable and upgrade the whole system architecture.

Covering.

Next generation and time did you copied.

And and the most driving car of computing platform and our own operating kind of operating system, which will be ready in 2022 of course the Meanwhile.

Similar features offered by our competitors plus some brand new features will be provided to our customers for sure.

From engineering.

Source point of view, we will double size of our total R&D stop and.

As we mentioned so the building and Shanghai R&d's injuries part of this.

Expansion.

So regarding computation.

We have continues to prove ourselves and cushy.

And see again as repeat financially last year.

So we believe exciting with.

Fast expansion of farmer and D.

Exciting news regarding hour.

Technology and like Ottomans driving.

Can be and build soon.

Thank you.

Yes. This is Kevin thank.

Thank you won't be for the.

Sales.

[noise] work I'll come the has already entered the second phase at the just non mentioned.

With the the auto brand increasingly accepted by users.

In fact, the we are changing gear, yes, we are adjusting our strike pension strategy accordingly.

So this year our goal is to reach 200 retail stores in.

And this year covering 100 cities. This is our 10.

And so you can see this is relatively of aggressive plan.

The expansion of our sales network will need to increase the sales for sure and also the brand the enhancement.

I think the behind the this plan and is that that we are prepay bring us for the new model of lunches in 2022 and beyond.

Thank you.

Thank you.

And the C. I T V for the next question.

Most of the homelessness or the two of them for one day.

The salad.

Oh of course.

And can deal with Google isn't that you're going to the right or to the 10th.

The whole dark blue.

Well, they will kind of dollars.

So you should get and additional assignments and all.

Oh cool.

The 200 and the oldest Utah.

I know where to go and to go with what day.

And before the take the power.

Okay, no problem with the the temperature political the the overdosing Davis.

The other one for myself.

And put some of the kind of awkward the applicant.

Sure No one will call me with all of the 14th of you on the television.

And we will typically the signal huh.

And I want to try and get them because of the southern for me real quick and to transfer it to my my questions.

So I Wanna list of the first question of regarding the overseas graduations and another one to see too long for the garden with the bedroom with the person okay.

And it was reported the civil competitors and the Hispanic losing Norway or has the panel tour for European market as well I can eat the older sister and some of course not carnival can.

But I was not sure whether you have changed your mind and spirit of considering the high point for some great. So what can the inconvenience of course.

And the citizens Bachelor of questions wants to go through a list of all kinds of the CTO, we have noticed the pets and I'm on the street.

And also the like the hands.

Right and the using the atropine recent iron the bedrooms for cost of living and hugging also consider it's and a recent S. P. Instead of the day.

And the and.

Yeah, and batteries and if we got some the pie for the rest of the bleeding, whether we can share with the the expectation of of target for the name of it was sort of this year. Thanks.

Yeah.

Thank you all day.

This is Kevin and let me take care of persons first of all of course the.

Are committed the to become a global leader of Smart electric vehicle. Ultimately so definitely will continue will cause you the overseas market in the past several years, our strategy is to for focus on China market the only but.

At the same time, we are continuously of monitoring the progress of the global market.

And this year, particularly we are.

We will continue to increase our.

Focused on research on the the overseas market and the initiate planning for the product and the sales of channels for the oversee market overseas market, including.

Is that establishing overseas offices definitely will go to oversee home.

For the second person about RFP.

In fact, the for our pet for and we have no plan to lunch with the.

At least and my.

Phosphate the batteries for two for.

For two reasons the first of all of the right now all of the <unk> on the market the cannot meet hour performance requirement.

Because the Ied has different performance requirement.

Compared with the the Beady secondly, because of the <unk> the use of less.

Cable of our of battery. So therefore, you then we use the I'll ask the the cost benefit the will be.

Will be not the six significant for us.

And the for the next but for the next step flower Beanies definitely we are in the process researching at the development and the developing both kind of the batteries yeah for sure we will consider.

Consider LSP for the future BB come all of those.

Mhm.

Alright, and and the last question for for the Spectation score, but the neighbors of of this year.

Oh, Yeah, I think that part of it will give the.

The full year of guidance about.

And we will.

And our network.

Okay kind of of medicine, and the two days.

10000 to 12.

12th of them.

And that's possible.

The amount.

Have you.

Thank you.

And it's from a single of the city.

He's kind of huh.

HM HM HM HM.

Won't won't go into the.

Oh Wow okay.

And she will.

HM HM HM HM HM HM.

Uh-huh 2019, Brooklyn place.

Both of them or something.

One of them interest.

Okay I'll go into the system and stuff.

Kitchen, and pinball jeans, and we can do that.

Thank you and and sometimes.

Okay I'm onto the Cheetah.

And she can't they come off and she shouldn't.

Mhm.

Okay. She can go and Cuba once and <unk>.

And that's.

The morning.

Yeah.

Alright, thank you both of them.

And which one was the first question comes from some kind of research and he's amazing.

2000, and stuff there and could you think of a small detail accounts.

And the second question is about the recent Orange and expense will notice the expenses keep increasing so what will be and that's the one on to I'm gonna be five years, that's true time range of consultation for the X one.

This is the price.

Regarding the the question about.

R&D activity.

So the definition of Shanghai are and you center.

It will be mirrored the company Horatian SPG R&D center for more car models and also out of last R&D activities.

Of regarding the team of our the.

Others.

Oh altogether right now and we have more than free Henry engineers, working for that and and we would like to reach too.

Of two 600 and total and of this year yeah.

And.

And this is kind of.

For the on the.

For 2010 days.

Of the earliest days of our.

2022.

New model. So if the year, we will the R&D investment of and will increase who.

At least the sort of the billing of RMB and this and.

Increasing the rest of movie and of almost driving on the new models off of.

The on the the fans.

Fans will reach of beating the dollar again and three years and.

And the amount of that we believe half of the.

And then the.

Over half of the method of Kobe.

For the.

Ultimate scrubbing.

If I could.

Wow, that's a lot and.

Well that sounds good thank you.

Thank you and again, we can.

And the end of my conference call and I'd like to kind of cold all the way to the company for.

HM HM HM.

Sure.

The rest against the journey and like I said today it could have big of questions. Please feel free to contact with the auto Inglett Your relations team and that's all for today. Thank you and have a good one.

And today.

Okay.

For the day and thank you for participating even though.

And.