Q2 2021 Li Auto Inc Earnings Call
[music].
Hello, Ladies and gentlemen, thank you for standing by for the Auto's second quarter of 2021 earnings conference call. At this time all participants are in listen only mode and today's conference call is being recorded I will now.
I'll turn the call over to your host Janet Yang the director of Investor Relations of the company. Please go ahead Shannon.
Thank you Annie good evening and good morning, everyone. Welcome to lead Auto's second quarter 2021 earnings Conference call the company's financial and operating results were published in the press release.
Released earlier today and are posted on the accomplice INR website on today's call. We have our president Mr. Kevin Yeah nation, and our CFO, Mr. Johnny Chile to begin with prepared remarks, our founder and CEO, Mr. Shao Lee were and our CTO Mr. Taiwan.
Time for the Q&A discussion before we continue please be reminded that today's discussion will contain forward looking statements made ended the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995 forward looking statements involve inherent risks and uncertainties.
As such the company's actual results may be materially different from the views expressed today.
Further information regarding risks and uncertainties is included in certain filings of the company with the U S Securities and Exchange Commission and announcements published on the website of the Hong.
<unk> stock exchange and to the company.
The company does not assume any obligation to update any forward looking statements except as required under.
Applicable law.
Also note that <unk> earnings press release, and this conference call include discussions of unaudited GAAP.
GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to <unk> press release, and interim results announcement, which contained a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures.
With that ill now turn the call over to our private.
President. Please go ahead Kevin.
Thank you Janet Hello, everyone and thank you for joining our call today first of all we are proud that our class a ordinary shares started trading on the main board of the Hong Kong stock.
Change on August 12, opening a new chapter of farm.
We are honored and also humbled by the support.
We received from all investors.
With the Hong Kong due primary listing we significantly strengthened our liquidity base with over $6.0 billion of net proceeds raised.
This will provide strong financial support for our R&D initiatives and the direct sales and servicing network expansion as well as enhanced protection for our shareholders.
We will continue to take the responsibilities associated with being a publicly traded company series.
Seriously work to build out our long term vision and create value for our users shareholders and our employees alike.
Next moving to the key highlights of our second quarter results.
Our 2021, new one has been an exceptional performer since its Steve.
On may 25th.
Our 2020 wildly one boosts and enhance the ADC range of 1080 kilometers optum.
Optimize the mobility comfort.
And the more intelligent the cockpit.
It has received rave reviews.
And strong user endorsement for his outstanding features and performance.
Our second quarter deliveries.
17.
17575 units increasing 166.
Percent year over year, our drill.
<unk> deliveries reached.
8589 hitting at.
New record.
In July we won top sales chart in the new energy SUV and large SUV categories. According to new car insurance registration data.
Reported by China, Automotive technology and research Center.
It is a powerful testament to Lee was highly competitive product features making us the leading domestic EV manufacturer in China, well these rankings and <unk> strong performance in popularity exciting achievements.
Yesterday's homerun do not with today's game, we will continue to be disciplined and dedicated.
And we will strive to constantly surpassed ourselves in products and services to earn the support trust and loyalty from our users.
Our record high deliveries would not have been possible without the calibration and the assistance of our supply chain partners. They have been helping us navigate the ongoing semiconductor shortages.
Turning to the path profitability, our gross margin reached 18, 9% this quarter.
Five six percentage points year over year and.
And the one 6% quarter over quarter, our operating cash flow was RMB, one 4 billion or 218 million U S. Dollar during the second quarter, demonstrating our consistent high operating.
Operating capability.
In the second quarter, we aimed to further broaden and deepen CP coverage to address increasing demand from prospective <unk>.
Across China and prepare ourselves for our new model launches in 2022 and beyond that.
Thus, we accelerated the expansion of our direct sales and servicing network as of July 31st.
2021, we had 109 retail stores covering 67 cities and the 100 and the 76 servicing centers.
The.
Auto authorized body and paint shops operating in 100, and this 34 cities. We are on track to reach our year end target of 200 retail stores.
We have expanded our footprint to lower tier cities in China in August we.
We opened a retail store in Lhasa debate.
This has taken us direct sales and servicing network geographical coverage of provinces autonomous regions and centrally administered museum police in mainland China to 100%.
The industry wide the.
Semiconductor shortage has affected our monthly deliveries in recent months.
Result in undelivered backlogs as our new other exceeded 10000 in June.
We tried our best to utilize our tournament.
Alternative solutions.
To enhance our flexibility and acquire industries.
Sources.
Going forward, we will continue to color collaborate closely with our supply chain partners to mitigate the semiconductor shortage and minimize the impact on our production.
Given the proven success of <unk>.
Our <unk> catering to the needs of families. We are working to diversify our product portfolio to appeal to.
And even broader family user base, we have three platforms under development. The <unk> platform for our next generation <unk> with the first models to be released.
In 2022, and the whale and the shock platform for our BB models to be launched in 2023.
The development of these new platforms are progressing smoothly and we are confident to launch new vehicle models sometime in July we also.
<unk>, a mou with the local company for collaboration in reconstruction and the expansion project of <unk>.
Automobile manufacturing plant in Beijing. This will further expand our production capacity and to support the increasing vehicle sales volume with the future.
Yes.
On August 27, 2021, we also signed an investment agreement with a wholly owned the subsidy subsidiary.
In China, Our holdings limited to form a new company in Mianyang, Sichuan Province, China too.
Develop and manufacture our next generation rent extension system.
We firmly believe that smart ER evs will be a superior replacement to ice's vehicles and to increase the overall EV penetration rates in the medium to long term.
We continue to view it as one of our core strategic divestments directions.
Comp ratio.
We'll leverage the R&D and the production capabilities.
Both companies to provide high quality products and further expand the market share of smart <unk>.
In the domestic market.
With respect to international market, we will keep our strategy to always make sense before taking actions.
We want to be a winner not just EMEA participant in the global market to win market share overseas.
Our car company has to develop the right product to attract customer with tests and the requirements that are different from domestic customers. We have setup a team dedicated to the overseas market and we are meticulously working on the plans to find that we need formula.
As as a corporate citizen, we are proud to have passion.
Passionately engaged in social relief activities to help people in need in July in response to the floods in Hunan Province, we organize the emergency relief with donations to support.
Effective people.
<unk> our users.
We also mobilized all trailers.
We have access in the.
At Jackson.
It takes.
Provinces to joined the rescue efforts.
In addition, we provide our users with service.
Such as warranty extension for replace the part three replacement a flood damage charging poles and free vehicle inspections for all disaster stricken vehicles, we made our efforts to re reassure them and help in any way possible for a smooth transition.
Back to novel novel Fleet.
Lastly.
We achieved a double a.
Ci ESG rating in April, making us a leader in ESG amongst 40.
Weighted automotive companies going forward, we will continue.
<unk> undertakes social responsibilities and view this as an integral part.
Our mission to build smart electric vehicles that makes them this half year.
Now I will turn this call over to our CFO, Mr. Kelly to review our financial performance in.
<unk> two <unk>.
Thank you Kevin Hello, everyone I will now walk you through some of our financial results.
The second quarter of.
2021.
Due to the time constraints.
I'll address financial highlights here and encourage hill.
In the second refer to our earnings press release.
The details.
Our total revenues in the second quarter our bar.
Plenty of only one were RMB five 4 billion.
780 points fall meeting U S dollars representing.
<unk>, an increase of 14 point.
7% from RMB 358 bidding in the first quarter of 2021. This included RMB.
Four nine beating.
All.
700.
<unk> 59 for meaning U S dollars from vehicle sales.
Which increased 41, 6% quarter over quarter.
This increase in vehicle sales was mainly driven by the increase in delivery.
After.
2021 in the U S census.
Redeemed on May 25th two.
2021.
Revenue from <unk>.
Other sales and services were RMB 100.
$42.0 million or <unk> meeting U S dollar in the second quarter of 2000.
This.
Representing an increase of 21 seven.
Perfect quarter over quarter, the increase in revenue from other sales and services over the first quarter was mainly due to the increased <unk>.
Sales of chartering.
<unk> stores.
Rates on services in line with.
On the higher accumulated accumulated our vehicle sales.
Cost of sales in the second quarter was RMB 409 billing.
<unk>.
Thanks.
630 tool.
Nine meaning U S dollars.
We.
Yes.
The increase of.
<unk> 38, who are.
Percent cultural culture gross profit in the second quarter of 2021 was RMB.
Although the RMB 952.
One eight meeting all 147.6 million U S dollars.
Our growing 54, 5% compared with the first quarter of 2021.
Vehicle margin in the second quarter was 18.
<unk> seven.
Represents that comparable base.
16.
9%.
In the first quarter of 2021.
Increase in vehicle margin from the first quarter was primarily driven by higher average selling price in the second quarter are above 2021.
Due to our launch of 2020, while you are in late May.
Our gross margin in the.
Our second quarter of 2021 was <unk>.
18, 9% compared to.
<unk>.
17, 3% in the first quarter of 2021, which was mainly attributable to the increase of vehicle margin.
Operating expenses in the second quarter of 2021 were RMB one four.
Paul Nice bidding.
230.
6 million U S dollars.
<unk> an increase of <unk>.
44.45 three.
3% quarter over quarter.
Research and development expenses in the second quarter of 2021, while RMB.
650.
Sorry pardon for meeting all by 101.
Two meaning U S dollars.
Presenting an increase of.
<unk> 70.
27% cultural work harder.
<unk> share based compensation expenses.
Non-GAAP research and.
Development expenses.
RMB.
543, seven meeting.
Our $86.0 million U S dollar, increasing 36, 6% cultural culture, the increase in research and development expenses over the first.
<unk> are about 2021 was primarily attributable to the increase high cost and the increase.
Research and development activities for the campaign saw future vehicle.
Model.
Signing.
General and administrative expenses.
First costs in the second quarter of 2021.
Our RMB.
835.3 million.
$133.0 million.
U S dollar representing a increase of 63 point.
Yes.
63, 8% quarter over quarter, excluding share based compensation expenses non-GAAP styling.
General and administrative expenses were RMB.
<unk> hundred 80 point on <unk>.
9 million or 102000.
Meaning U S dollar <unk>.
Increasing 70.
Three 6% cultural culture, the increase over the first quarter of 2021 was primarily driven by increased marketing and promotional activities as well as.
Chris had comp and rental expenses.
With the expansion of the company saw distribution network.
Loss from operations in the second quarter of 2021 was RMB or.
535 nine meeting.
Paul.
In the $3 million, representing an increase.
Of our 31, 4% compared with the first quarter, excluding share based compensation expenses.
Non-GAAP loss loss from operations was.
Was RMB 360.
Adi.
Five meeting all $62.0 million, representing an increase of <unk>.
Six to eight two points of sales.
<unk> percent quarter over quarter.
Net loss was RMB 235.
Okay.
5 million all.
$41.0 million in the second quarter of 2021, compared with RMB 300.
Sure.
<unk> meeting net loss in the first quarter of 2020 'twenty one.
Non-GAAP net loss.
<unk> was RMB 65, 1 million or <unk>.
US dollar.
10.1 meeting in the second quarter of 2021 comparable base RMB 177 million net loss in the first quarter of <unk>.
2021.
Now.
Now turning to our balance sheet and cash flow.
Our cash and cash equivalents restricted cash terms.
Time deposits and short term investments.
Total RMB.
36 five.
Sorry.
Sure.
Beating all 566 billion in U S dollars.
As of June <unk>.
Our 2021.
<unk> cash flow in the second quarter of.
2021 was RMB 1.41 bidding.
All 200.
Pacing, meaning U S dollars free cash flow was RMB 90.
982.1 million.
152, 1 million U S dollar in the second quarter.
And now for.
Business outlook.
For the third quarter of <unk>.
2021, the company expects deliveries to be between.
25 subjects and.
6000 vehicles, representing an increase of.
Approximately.
100.
For our <unk>.
88, seven to 200.
<unk>, 2% from the third quarter of 2000.
Plenty to.
The company also expects the third quarter of total revenue to be between RMB.
Six.
98, beating and RMB.
Seven two.
<unk>, beating our U S dollar one point.
Zero H bidding and U S dollar one point.
111, 2 billion, representing an increase of.
100 <unk>.
<unk> seven <unk> eight.
8%.
188, 9% from the third quarter of 2022.
This business outlook reflects the company's current and preliminary view.
On the <unk>.
Situation and market condition.
In particular.
So in industry wide semiconductor shortage.
Due to the global COVID-19 pandemic.
Which are all subject to change I will now turn the call.
To the operator to facilitate our Q&A session.
Thank you.
Thank you.
To ask a question you will need to press star and the number one on your telephone.
Do I get the question please.
Please standby.
The last name.
Ancillary benefit along please on today's.
At least limit yourself to two questions and if you have additional questions you can reenter the queue, if you're going to ask a question in Chinese please follow with English translation.
Once again for your questions. Please press star, one and wait we need to be announced.
Our first.
Question is from the line of Fei Fang of Goldman Sachs. Your line is open. Please go ahead.
Great. Thanks for the opportunity congratulations on the results a commencement talk a little bit about competition and regulation. So on competition. Some of your incumbent peers have really speed up launching new products.
We won't Gd BYD for instance, the frequency of their launches have increased and the heat rate seems also increase so just wondering if you have refreshed thoughts on their progress and also the potential for them to enter into the premium segment. So that's the first question SEC.
One is about regulation, so what's your thoughts on Brexit.
Regulatory risks around.
Thomas driving and assisted driving development do you think there's any regulation intention to slow down things a bit in order to protect the safety and customer experience that will look like at Garnet Hill.
I'll go to Joshua.
He goes through what kind of Diageo till end of the <unk> Thomas.
So what we've seen there.
Beautiful <unk> completion of <unk> Luna chicken Dolby on now the tissue <unk> to go ahead to continue to kind of allow you to show us that you won't find itself will contact you got to build from here.
<unk> assumed Joshua hopefully catastrophe tumor for Ya Qin qualities of that picture.
This is Kevin Thank you for the question.
Sure.
Yes.
I think for the product development cycle, we have our own strategy and scheduled to launch new product.
Hi.
So basically yes, we.
We are accelerating our development our next generation LTE I E platforms and also the HPV BV platform.
As we shared before when we rollout our brand new <unk> models.
Based on our next generation <unk> platform next year.
And the 2023 will have will be a big year for us we will have a two new models on the X platform and another two.
<unk> model launch.
Yes.
And for the for the regulation impact.
We we.
We have been.
Closely.
Communicating and engaging with.
The authorities.
Our therapies.
I think the.
The.
The intention from the MLP.
Is too.
Standardize the overall smart electrical vehicle.
And the risk that the technology requirement.
For the for the for the.
Adas solution.
Overall this is a good thing too will ensure the healthy.
Development of these.
Industry.
And I think the impact.
Impact to us is.
Basically.
Basically.
In the future we need to.
The more cautious when we when we launched the product with the Adas solution I think it will take us.
More effort to two.
Fully developed a function before before the before the.
Before the.
The launch into the market, but the but thats.
That was our original plan. So there is no no change of our strategy, but the overall I think the.
Our focus on Adas.
Not change yeah.
This is very helpful color. Thank you Kevin.
Thank you.
Thank you. Our next question is from the line of Dan Seattle Morgan Stanley Line is open. Please go ahead.
Thanks for taking my question and congratulations on the solid results I have two questions. The first question could the management team just a lifetime oil components or type of Chase are currently in short supply for the hotel.
Because you look at the numbers I think Leo towards production.
It's more resilient than peers. So how can we manage the supply disruption better than our peers.
Is there any alternative sources.
<unk> could secure that component and the support is likely more than 12000 monthly growth rate into fourth quarter.
So this is the first question.
About the supply.
And my second question I think Jonny touched briefly on during the presentation.
What's the progress in our new plan or a capacity expansion in Beijing.
What the nameplate capacity and when well with a contribution from the new capacity start to kick in.
But.
Can you Hollywood today, Glenn T Teco, Chongqing, JV charges, which had.
<unk> in Chile, the phone quality severely we can't push in Pierre when we chatted with you as soon as he until the PMT now anyway.
We shall Japan she's at Zynga since has should it be over the total year, we should it go.
This is without being no most of the year.
And then go on.
We'll go to the equity into tissue cause Institute without U K telco, Jim passenger you couldn't call these attached to.
<unk> got great attendance.
As I say to the Chipotle when you're essentially chassis the paging that at the end of the Xinjiang.
As indicating what he said was very poor.
Current authorization or is that just a lucente tenants you want <unk>, so somebody conduction tenant use of quota share.
Oh I think the team. This is Kevin I'll answer the first question about the shortage.
Right now they are.
Single Big shortage, we are facing a it's a it's a industry comment shortage.
Due to the COVID-19 situation in Malaysia.
Especially from <unk>. So this is a industry comments shortage and the in the past several months we have been.
Fighting everyday for the supply.
Uh huh.
I don't think we are.
Our situation is better than the other.
The other competitors.
But.
The outlook for the for the next quarter.
Yeah.
If the if the COVID-19 sits.
Situations.
We are getting better we believe the overall the industry supply will become more balanced but.
The COVID-19 situation is not predictable so it's Stuart.
A risk for us.
Tony you want to comment on them.
For the bedroom sites I think we will release more details then.
In the future.
Thank you.
Make sure it's on track to get ready for the PV launch in 2023.
Okay.
Yeah.
Great.
Thanks for sharing.
Okay.
Thank you.
Our next question is from the line of mentioned both US Securities. Please go ahead name is open.
Oh, thank you.
No, it's a bunch of them.
So Glenn.
So just to sum.
Goodbye.
Sensors or something.
Right.
He didn't do them.
No.
And that's why no one will come back to the good times.
Cost of goods sold.
Hey, John.
Same question or to something else.
And those are the same.
And then sort of Jonathan why don't you go.
The whole company as it gets outside Japan.
It needs to be the ones who are the.
Sure Glenn.
So far the announcements.
So one of the 2013.
You know Ghansham Rio Tinto discipline, Susan belly of what it is that you've got you do something that was just us we're not gonna bouquet at Goldman.
Commentary something Jonathan.
The only begin to ship you got detailed guidance just.
Not what you meant finding vessel.
First question is regarding the gross margin improvement Chang.
Sure.
In the second quarter U S P.
But also your cost of cross sell the car.
So it is decreasing so could you elaborate more and also comment on the third quarter and the fourth quarter. Okay. This is my first question and second question could you give us more details regarding Europe.
Collaboration with precision power on the collaboration of E. R. E V I think.
Thank you this is Kevin.
Quickly.
First question. Besides the besides that they are our sales price increase out there Neil do you want.
From the from the cost perspective, primarily we had partially due to the bom cost of reduction from some of our suppliers and also because of the sales volume increase therefore the amortization.
Will we.
We will reduce so that's the.
That debt.
That result in that.
The gross margin increase.
I think for the third.
Third quarter and first calls there will continue to see the.
The gross margin.
We will gradually improve also yeah. So we still.
Overall for this year blended gross margin will be somewhere between 19% to 20%.
The second.
Question is about our joint venture with Syngenta only.
Actually syngenta is leading.
Engine company in China, especially they have.
They have been.
Long term partner with BMW, Yeah. So we have this joint venture jointly.
Currently our R&D developer and manufacturer.
Our next generation.
Yes, <unk> engine with the Xinjiang and for this joint venture.
We have a 51% of the share.
Thank you.
Thank you.
Thank you.
Our next question is from the line of bin Wang Credit Suisse line is now open. Please go ahead.
Thank you I've got two questions number one.
Bolton on borrowing so we found that in the second quarter, our long term borrowing actually had go to $11.0 billion, giving up some of the cash okay.
Explain why the.
Big jump in the end of the June that's number one question number two is about the volume guidance, you actually used to be kind to us.
September number can go to 10-K, but if you could sort of put a guidance you've seen people who maintain their 10-K guidance for September.
August should be up very low number so how should we think about the sort of quarter guidance.
And we also actually had one 6 million units that anytime you're fine.
And in price or maybe next year talk about 150000 units. So what we'll do next year 'twenty 'twenty two the bonus would be 150 something years. Thank you.
Well I wouldn't you shouldn't I'm, good he gets going and Utica.
I forgot that one what kind of talent that you don't want no meal or shouldn't do either plentiful dial it in.
You're going to hold it until they seem demand and I wish him was again almost.
We'll go into a tangible that is still the number that you said that the.
For that and John Deere.
Oklahoma Southern gene Munster challenging quarter to reopen understand what's going to kick that off ivanka now when it comes out in a local San Diego exceeding what she said in kind of on an iPhone.
Two months into that patent or lower even though the economy.
I think you should go with that partnership.
No.
Ship iphones in the small towns with alcohol.
But I'm going to just show a meal bundle.
Oh sure income that you.
Yeah on the odd and contextual runs all Europe.
Normally it has a short one.
And in regards to proceed accordingly.
First of all the a lot of them.
Boring because there'll be.
Our launch.
It was seabee.
In April.
Yeah, if the SCB and the welcome Barry.
Yeah.
Yeah. This is Kevin.
Thank you I'm being for the question.
I think when we gave out the guidance for third quarter.
We have already taking to consideration of the potential risk off the impact of the COVID-19 EMEA Lithia.
Yeah. So therefore, we don't want to be too aggressive so.
So I think today is already the thirties.
The next two days so you will see our August number yeah.
And therefore for the next year.
I think.
Your estimation is.
Is that within the range of our hour.
Our plan yes.
We of course, we want to further increase the monthly delivery ophthalmic you want.
Thank you.
Yeah.
Thank you. Our next question is from the line of Changyou U C. I C C.
Go ahead line is open.
So regarding someone's Amanda.
I, often wonder Dan Jones.
Article that Jeremy.
And that's what I'm gonna grow them and you got your team.
Thank you.
The short tenure under RMB Classic Gi, neither John Richie Thiago in Uruguay Europe.
And then the trough now microbial children and buyback for which we will hold our 20th coupon metric, but yeah I think that when you did it and we don't think that I would.
My question. My first question is about our financials.
Your expenses.
Could you give us some details on the.
Acceleration of SG&A in the second quarter, and then the guidance on the full year R&D and SG&A expenses.
And my second question is down our.
Sure and extra models launching 2023 could you give us any.
Some other updates on the development, especially from our key mouse.
High pressure charging system. Thank you.
Yes, Paul.
SG&A this is.
Tony and therefore the SG&A.
Uh huh.
Kessel mentioned that.
More of a hit to the network.
Network expansion and also the mirth scan the promotion.
Activity in the second quarter.
We will also and also the increased high com.
And the rental expenses and in this.
Second half of this year, we will continue to expand our retail stores saw 12 hour talk.
Okay.
Right.
And for R&D, we still want to keep our.
<unk>.
The whole year guidance, which is about rub 3 billion RMB.
Second.
Yes.
This is Kevin.
For the H P C. A BD model. So we are on track.
In terms of R&D process.
Our.
To share some of the milestones.
Yes.
For example, we already have our.
Fourth.
New battery.
Simple already so.
So that's a big milestone and also for our for our H P C.
Super fast charging.
Our charging port design, we have or the <unk>.
Finish the concept design and we plan to have our.
Our first.
Pillar two charging station within this year.
Thank you.
Thank you.
Our next question is from the line of seeing you Fang of UBS. Your line is open. Please go ahead.
Hi, I'm not sure. If this is Marty this is Paul.
Yes.
I have two questions. So first one is regarding your speed.
Yes.
The b versus the platinum.
What's the <unk> in terms.
So off position.
Starting off on Sunday afternoon history, you have so how do you position the different settlement tons of sign yourself.
Each segment.
So how shall we think that's going to be the JV.
He is more focused on the launch of vehicle SUV, MPV et cetera, and the Bofa more focus.
Some of the smaller veeco next to see banks et cetera.
Shall we think about the different positioning of the <unk> versus <unk>. My second question is regarding Europe on D C.
<unk> DSP, it's going forwards.
For second half of this year and next year and going forward.
How much portion is going to be spent on the <unk> how much on the <unk> how much on the autonomous driving.
Let me translate my questions quickly.
Diego Winter and I saw the floor.
Assignment so chose to.
Tony and I will tell you, though for you or Tim I'm sorry.
Hudson was from some of the truth.
Such amount equivalent Yo saw it sometime second order.
Can you share those.
MTV SUV somebody in a hole.
Welcome to advertise shelf, so tell us how much on Joe.
Dr Wholesome natural Sean Nguyen farther you call somebody I'm constantly on the Eagle Ford well.
Sure.
What other bdcs.
Until cool <unk>, Samsung toward other BDC titled Celadon Justice EMEA.
With us with <unk>. It took a period of time vessels to manage won't be an issue.
Paul Yes.
Let me take the first question this is Kevin.
In the future when we have.
<unk> BV and and the <unk> at the same time actually we are not differentiate these two.
Based on size.
Based on size of our car form factor so so basically.
The.
No.
All of these two two.
Two driving.
Powertrain, we will based on these.
Develop cars to cover the price band from a 200, K RMB 500, RMB and they will.
Each will have a different size of cars.
Designed for family users.
I think the key difference between these two are.
Based on the customers.
If they are more concerned about that.
Bvs range anxiety and they don't have access to good the charging infrastructure.
The real truth, we believe they would choose.
Yes.
Yes.
Have a good the charging infrastructure.
They will choose VEB, so that's our viewpoint yes.
Yes.
R&D expenses, we still want to keep our.
Is it in the guidance.
No.
2003.
Who.
One.
$1 billion.
Yeah that will cover.
<unk> are becoming a model and also.
The ultimate thriving.
Also.
Some area, we want to do.
And the next.
Our total three year and also.
Investment.
On the.
R&D for the future.
Embedded in <unk>.
Thank.
Paul.
Thank you.
Yeah.
Thank you.
Once again.
To ask a question you will need the best Star one on your telephone to withdraw your question. Please press the pound the husky.
Anthony.
Once again.
Please press star one on your telephone.
Next.
Next question is from the line of <unk> of Citic. Please.
Please go ahead your line is open.
Thank you Bobby.
Thank you Adam.
Thank you Shannon inflation.
Sure.
If you come to my initial thought was you don't know come up which is opening in Shanghai.
Thank you everyone for squeezing back.
Question <unk> comes from I was wondering I get that.
No I think that's an issue.
Youre welcome.
I'll give you the lip synching bookings.
Looking back on it.
Certainly for that child got to close.
Upon Congress or something.
Hey, guys I wanted to make income Sheila.
He's going to come out.
Download.
Well San Jamar acquisition.
Okay.
Well I hope all of you know.
Sure.
Uh huh.
Okay.
Okay.
So no change of consumption.
Well, thank you for the interesting part.
Sure.
That's helpful.
My first question is Oh.
What's in our pricing strategy.
Trying to maintain our high margin.
Well, maybe we have more flexibility in the pricing power pricing items and the second question is that considering a lot of new commerce.
In this sector.
Maybe.
<unk> 23 is a period, that's a lot of new commerce, drawing and the launching of a new model.
And by the year 2025, maybe.
Maybe the market share is going to be concentrated again, so how are we expecting that to three or five years computation like technical.
And also and actually so could you give us some colors. Thank you.
Yes.
Thank you.
This is the kind of it yeah.
First of all about the pricing.
Our our point of view.
For each of the product we designed based on a price point and unless we see the competitiveness issue.
Otherwise what will not alter the price point of this product I think.
To answer your question in another way.
To gain more volume definitely will will launch perhaps the cover wider price Ben yeah. So so as we mentioned in the.
Future our product that will cover.
200, Okay, RMB, two 500 K RMB.
Not to say, we are going to reduce the price of some of our product.
We are going to design different practice to cover a different price point.
That's our philosophy.
And also by the way they are the market size of between 200 K to 500 K is the increasing.
That's probably the are they only increasing.
<unk>.
Yes. It is.
Segment.
<unk> increasing.
And above.
The future competition.
Starting from 2023 I think.
We will speak to our three.
Key choices.
The first one is that we compete in the overall TV market.
That's why we designed the.
That's why we.
We believe that we have to solve the Reg anxiety issue. That's the that's one of the core value we want to deliver to our customer. That's why you see we already have.
<unk> solution and we're going to have our next generation <unk> solution.
Completely sold.
Rich anxiety issue for our customers and this is our medium term long term strategy, we will continue to to to launch <unk>.
Any product on the other hand, we also see the opportunity to to to solve the <unk> issue with with a high powered charging.
Solutions.
So that's why we have these new are new will end shock platform. This is the first the twice the second choices.
<unk> is our target customer twice, we want to focus only on the family users. We see this is.
Growing.
Our growing.
Demand in the segment.
And when we designed <unk> we.
We want to we want to.
Design the car catering to the needs of all of the family members.
The third thing is that we will continue to focus on.
<unk>.
Autonomous driving solution development and also the smart cabin solutions development. So these three things are the are the fundamental.
Building block of our product competitiveness.
We don't think it will.
We believe we'll us.
Speak to this these three.
Key things.
Thanks, Kevin that's very helpful. Thank you.
Thank you and as we are reaching the antibody conference call I'd like to turn the call back over to the company for closing remarks, Mr. Chang. Please go.
Thank you Annie. Thank you once again for joining with US today. If you have any further questions. Please feel free to contact me autos in Russia Relations team then that's all for today. Thank you and have a good one.
Yeah.
Us.
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Yes.
Sure.
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Yeah.
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