Q2 2021 Xpeng Inc Earnings Call
Okay.
Hello, Ladies and gentlemen, thank you for standing by for the second quarter 2021 earnings Conference call for X spine incorporated at this time all participants are in a listen only mode. After management's remarks, there will be.
[music] attending answer session. Today's conference call is being recorded I will now turn the call over to your house. They started dealing MA director of Investor Relations of the company. Please go ahead Mr. Ma.
Hello, everyone and welcome to <unk> second quarter, 2021 earnings conference call our financial.
It possibly can be felt but you should find newswire services earlier today and now available online.
The earnings press release, which can be Io session, we'll put a website.
Ill talk show phones they'll come.
But this depends on today's call will include our co founder Chairman and C. I mean, it's a hotel phone Vice chairman and President.
Okay.
We will finance Mr. Dennis <unk>.
Managing direct sales strategy with a child Chang and myself.
Management will begin with prepared remarks, and the call will conclude with a Q&A session. One Cup replay of this conference call will be available on the IR section of our website.
Before we continue please note.
Today's discussion will contain forward looking statements made on the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995 forward looking statements in income and risk.
Uncertainties.
Such the company's results may be materially different from views expressed today.
Other information.
Regarding these and other risks and uncertainties is included.
In a relevant public filings of the company filed with the U S Securities Unexplained Commission.
Company does not assume any obligation to update any forward looking statements, except as required under applicable law. Please.
Please also note that.
He taught us release and this conference call will include a discussion of GAAP financial measures as well as unaudited non-GAAP financial measures.
I mean press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures.
Now I'll turn the call over to our co founder.
Chairman and C I missed that.
Please go ahead.
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Hello, everyone. Thank you for joining <unk> second quarter 2021 earnings conference call.
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In the second quarter of 2021, I think vehicle deliveries, which 17398, another quarterly high record high representing a 439% increase year over year.
For the six months period ended June.
June 13th 2021 X spine delivered 30738 vehicles.
So passing the total number of vehicles delivered for the full year of 2020.
In July our monthly deliveries exceeding 8000 unit setting a new monthly record with an all time high order backlog.
With the rapid growth in deliveries, our second corner profitability further improved and our gross margin reached 11, 9%.
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Oh that didnt delivery growth was driven by consumers' increasing demand for smart Evs and our leadership position in smart electric vehicle product and how fast product.
Generation.
In the second quarter, the attach rate of X pilots me Porno software reached 25%.
Among the nearly 35000 pizza oven that has been delivered as of the end of June 2021, close to 8000 units were equipped with ex pilots we pointed out.
Also in June.
Oh Highway N G P mileage penetration rate exceeded 60% and then G. P assisted our customers in driving for around 145 million kilometers.
The average monthly usage way of N G P exceeded 65%.
This is a clear demonstration of customers increasing adoption.
And reliance on our advanced driver assistance system.
With the rollout of X pilot 3.5 earlier next year and afterwards ex pilot 4.0, I'll future advanced driver assistance system built on our next generation hardware platform, we'll be able to empower a broader range of ink.
Into and driver driving scenarios, including those not covered by HD maps.
As a result customers demand and the Lions on.
Advanced driver assistance system will continue to increase.
As we advance and developing cutting edge technologies safety will always remain.
Our top priority.
We have an unwavering commitment to enhancing driver safety education, and providing hardware redundancy and software iteration to ensure our customers can safely use our advanced driver assistance system.
To illustrate X bank, it's the first EV makers to implement.
The man a driver's safety proficiency tests for customers before they can activate our advanced driver assistance system. In addition, we are also the first in the industry starting problem from all P. Five model that eclipse larger technology to be adopted in some of the configurations to increase with Dundon Z O.
Perception through hardware and shopping is adaptability in handling corner cases to further safeguard driver safety.
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Our strategic focus.
Because on advancing fast product iteration allows us to further expand our addressable market.
In the second quarter, we began cells and deliveries of lithium iron phosphate or L. F. P battery power G. Three N P seven and their deliveries comprised more than 20% of total deliveries for each model.
These new editions expand our price range and customer base.
With the growing supply of L. P cells, where confidence with the increasing proportion of LSP models, among our deliveries in the future.
Moreover, the strong market response to our recently launched G. Three I the new midst.
Mid cycle face adversity of the G three exceeded our expectations.
The production preparation and switching of G. III is expected to have impact on G III and Juicy ice production and delivery for a few weeks.
We plan to start deliveries at the end of August and will increase deliveries scout.
Scale in the next quarter.
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In July we announced configuration details and the price range for our third production model the pea sized and its market reception has been overwhelmingly positive.
We expect to officially launched the <unk> five and unveil its MSRP in mid September.
Timber and begin its deliveries in October.
With pizza oven, we have already demonstrated the unique driving experience brought by our full stack in house with them for advanced driver assistance system that is capable of handling complex driving scenarios in China.
Now with <unk> we.
We are bringing to all users are driving experience that will enable them to utilize advanced driver assistance system in urban driving scenarios with the ability to switch between different driving scenarios smoothly.
I believe this is only the start of X banks journey to accentuate the development of a leading advanced.
Driver assistance technologies.
Moreover, with the P. Five we're able to offer our industry, leading advanced driver assistance systems, and smart cockpit technology to the broader family sedan market within attractive pricing range from 160000 to 230000 RMB.
Further accelerate.
Celebrating the E V disruption at the traditional IC E and non intelligent automobile market.
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Here I would like to share some of my predictions for the future.
First in China vehicles price between 150000, and 400000 RMB will constitute the largest segment in EV market.
And show the fastest growth rate.
But a more disruptive forces that smart E V brings to traditional mobility. In this segment will also be the most vigorous and the swiftest.
Second high level or advanced driving assistance system will trigger qualitative changes and uses mobility experience.
<unk>.
Alright, as China is poised to take the lead in the development of smart Evs around the world China's Smart EV makers will be an excellent position to expand globally.
In order to be able to capitalize on such opportunities on July the seventh ex paint completed our job.
Primary IPO on the Hong Kong stock exchange and raised $15.8 billion Hong Kong dollars.
Looking ahead, we plan to further increase investments in intelligent technology innovations branding and marketing service facilities across our Supercharging, Some channel network and global.
Europe and churn.
Our differentiated product and technological path, we chose along with investments in human capital and global expansion not only bolster our leading position in the current landscape, but also underscore our long term vision and strategic deployment.
Expect.
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Looking forward.
In a few years' time, we will accelerate the pace of our new product deployment development starting from 2023, we plan to launch at least two or three new vehicles every year.
Year supporting X pilot three point O whereby we intend to make these future new models, including hardware software and.
Services simultaneously available in China, and an attached in international markets will also broaden our primary price range in China from between 150000, and 300000 RMB two between 150000 to 400000 army, making our cutting edge smart Evs assessable.
To a broader customer base.
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As we accelerate the efforts in technology innovation and product designs in development for more new models, we're committed to growing and developing our R&D team.
As of the end of second quarter, 2021 R&D head count exceeded 3000, a nearly 50% increase.
Compared to the beginning of this year.
And by the end of 2021, it will increase to more than 4500.
We also plan to increase the number of engineers dedicated to research and development of autonomous driving technology spanning software hot where big data and navigation.
<unk> map for international markets.
We estimate that the total number of engineers working in autonomous driving software hardware and relative supporting infrastructure teams to exceed 1500 by the end of this year.
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And this June the penetration rate of the these in China's market has surpassed 10% for the first time.
I believe the Chinese EV market is navigating through an inflection point for the next level of growth, which arrived earlier than expected.
To tap into this booming opportunities, we will accelerate the construction of infrastructure facilities underpinning, our long term strategic roadmap and investment as.
As of the end of June as tanks physical self network consists of 200 sell stores across the 72 cities in China.
This self sourced 110 were directly operated by us.
To keep pace with our rapid development delivery growth, we plan to lift our guidance of.
Europe sell stores from 300 to more than 350 stores by the end of 2021.
So that's where we get sort of the one off with well known brands.
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Yeah.
We also continue to rapidly expand our Supercharging network.
Josh as of June 30th the number of ex Bank branded Supercharging stations grew to 231, covering 60.65 city lease.
Recently, the first batch of 11 expand branded Supercharging stations has been deployed on the Shandong section of the Beijing Shanghai Express.
And the whole section of the Beijing, Hong Kong Macau Expressway.
We'll move forward to deploy our super charging capabilities across the entire Beijing, Shanghai, Beijing, Guangzhou, and Beijing, Hong Kong Macau Expressway.
Further enhancing our ability to serve our customers.
In long distance driving.
We plan to have more than 500, Exane Brendan Supercharging stations operational by the end of this year.
Elevating the expansion of all charging network across lower tier cities.
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With the passage.
In terms of our international expansion as of this June 30, we had explored approximately 500 G suite to Norway and in August we plan to exports P seven to the Norwegian market as well.
We'll continue our efforts in Norway in other European markets to further strengthen.
Our local operation through self delivery and customer service enhancements.
I'll try to get us to prepare ourselves for the overseas market in both left and right hand drive countries within the three years' time of 'twenty 'twenty two 'twenty 'twenty two.
And accelerate our penetration into international.
No markets with our upcoming Smart EV models equipped with X pilot 4.0, starting from 'twenty to 'twenty three.
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Turning to our production without G. C. I N P. Five commencing production our gelatin factory is now able to produce the G. Three I P seven and P. Five concurrently.
And in August.
We added a second production shift and the joule cheap battery with.
With the increase in production output, we expect monthly delivery volume to potentially reach 15000 in the fourth quarter that said supply chain challenges, particularly those pertaining to chip shortage remain the biggest production her.
It'll we're facing.
With the support of the gelatin municipal governments in August we kicked off the phase two expansion of our gelatin factory, which we expect to increase any of the signed production capacity at the site from 100000 to 200000 by the end of the first half of 'twenty.
1022.
Construction for our Guangzhou factory remains on track and we expect the main structure to be completed in the first quarter next year and mass production to begin in the third quarter 'twenty 'twenty two.
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What other fringe element, that's usual Chongqing and penetration.
In summary, we'll continue to strive to overcome the various challenges before us stemming from chip shortage.
So it's about structural shortage COVID-19 resurgence in some parts of the world and production transition from Q3 to J P. I.
In the third quarter of 2021, we expect our smart E b deliveries to be between approximately 21000.522500 units and.
Total revenue to be between approximately $4.8 billion and 5 billion RMB.
I look forward to sharing with you our latest progress on technology innovations on our third expanding technology day on October 24th this year.
Sure some of you.
A woman.
And also we paid that is without a doubt you're going to chat with them.
Thank you everyone with that I'll now turn the call over to our VP of finance, Mr. Denis loop to discuss our financial performance for the second quarter of 2021.
Thank you yourself home and Hello.
The Taiwan.
Our outstanding performance in the second quarter continued to the faction experts leadership in the China.
<unk> Smart E readers.
Well, we continue to introduce innovative technology differentiated products and premium service fees.
You did with strong Covid before me.
Our revenues in the second quarter grew 537% compared with the same period of 2020, we also witnessed a photo improving financials in particular, all gross margin continue the upward trend and reached 11, 9% in the second quarter.
No I would like to walk you.
Through our detailed financial results for the second quarter of 2021 I will reference RMB only in my discussion today, unless otherwise stated.
Total revenues were RMB, three 8 billion for the second quarter of 2020, one representing an increase of 537% from.
591 million for the second.
Same period of 2020, and an increase of 28% from RMB 295 feet in for the first quarter of 2020 what.
Revenues from vehicle sales were RMB, three 6 billion for the second quarter of 2021.
Representing an increase of 562% from RMB 541 million for the same period of 2020, and an increase of 28% from RMB. Two 8 billion for the first quarter of 2021, the year over year increase was mainly due to higher vehicle delivery, especially.
For the P seven quarter over quarter increase was also attributable to higher piece of themselves.
We build ups and Iot channel expansion and increasing brand equity.
Revenue from service and others were RMB 177 million 40.
For the second quarter.
Plenty of 21, representing an increase of 256% from RMB 49, 7 million for the same Peter 'twenty and an increase of 26% from RMB 141 million for the first quarter of 2021 a year over year and quarter over quarter increases were mainly due to.
More income from service parts and accessories sales in hours higher accumulate vehicle itself.
Margin was four 9% for the second quarter of 2020, one compared with a negative two 7% for the same period, a year ago and 11, 2% for the first quarter of 2021.
What we expect revenue.
We have a margin once you give them per cent for the second quarter of 2021 compared with negative.
Five 6% for the same period 2020.
And 10, 1% for the first quarter of 2020, what the improvement was primarily attributable to better product mix and material.
Cost reduction.
Research and development expenses were RMB 864 million for the second quarter of 2021 representing an increase of 117% from RMB 319 million.
40 years, Sam Peters, 2020, and an increase of 51%.
I'm be filing is 35 million for the first quarter of 2021.
Year over year and quarter over quarter increases were mainly due to one the increase in employee compensation as a rebuild our expanded research and development staff and to higher expenses related to the development of vehicles and related.
Software technologies.
Selling general and administrative expenses were RMB 1 billion for the second quarter of 2020, one representing an increase of 116% from RMB 477, Emmenia 40 F N period of 'twenty, 'twenty and an increase of 43.
Extend from RMB 721 million for the first quarter of 2021, the year over year and quarter over quarter increases were mainly due to one higher marketing promotional and advertising expenses to support vehicle sales and to the expansion of sales may work and associated.
Personal cost and commission four year franchise store sells law.
Loss from Operation was RMB, one 4 billion for the second quarter of 2021, compared with RMB 779 million for the first quarter of <unk> 40.
For the same period of 2020 and RMB nine.
$4 million 40, our first quarter of 2021.
Excluding share based compensation expense non-GAAP loss from operations was RMB, one 3 billion for the second quarter of 2021, compared with RMB 779 million for the same period of 2020 and RMB 800.
900 million four year first quarter of 2021.
Net loss was RMB, one 2 billion 40 of second quarter.
Compared with RMB 146 minute 40 S. M P a year ago, and RMB 787 million for first quarter of 2021, excluding.
Third for share based compensation expenses and fair value changes on derivatives liabilities related to revenue retention dry up yet people shares. The non-GAAP adjusted net loss was RMB, one 1 billion for the second quarter of 2021, compared with RMB 770 million for a same period of 2000.
<unk> and RMB 696 million for the first quarter of 2020 one.
Net loss attributable to ordinary shareholders of excellent Inc. Was RMB, one 2 billion for the second quarter compared with RMB, One 1 billion 40, SMP Europe 20 and compare with.
<unk> thousand $787 million for the first quarter of 2021, excluding share based compensation expense the fair value change and derivative liabilities related to the detention why are the preferred shares and accretion on the preferred shares to retention measures. The non-GAAP net loss attributable.
Ordinary shareholders of <unk>, Inc. Was RMB, one 1 billion for the second quarter of 2021, compared with RMB 769 minions, 40th same period of 2020, and RMB 696 million for the first quarter 2021.
Basic and diluted.
Net loss per ads was RMB, one point by Yeah, 40 of second quarter of 'twenty to 'twenty, one the non-GAAP basic and diluted net loss per ads was RMB one.
So if you're a 40, a second quarter upon each one gigawatt. Each 80 S represents two class a ordinary shares.
Turning.
Truly a balance sheet as of June 32000.
'twenty, one our company had cash and cash equivalents restricted cash and short term deposits short term investments and long term deposits in total RMB 32, 9 billion, which excludes the Hong Kong IPO proceeds.
Back a.
So convenient.
Compared with RMB 35, 3 billion in full year as of December 31st 2020.
With that now I would like to turn the call to up to the mark to be mindful of the lines of about I mean call for our second quarter financial results other income.
RMB to refer to our earnings press release for further details.
Concludes our prepared remarks, we will now open the call to the questions.
Please go ahead.
Yes.
Ladies and gentlemen, as a reminder, if he would like to ask a question. Please press star one on your telephone keypad to ask a question.
Please press star one on your telephone keypad to withdraw your question press the pound key.
Your first question comes from theme Shah with Morgan Stanley. Your line is open.
Thanks for taking my questions and congratulations on the Ah.
<unk> put out.
I've got two questions. The first question is about the component supply I think the neutering chip shortage now there as well.
Hum.
But should we be concerned about a similar supply concepts into next year.
Especially expert.
Sure that is a key component.
Great rely towards.
Florida School mottos in total.
We smiled unlikely Joplin.
So I just want to know that hung with external companies such challenge into next year.
We had a company considering investing or forming strategic alliances with some parts makers like Florida cheap with batteries.
So you can't guess sufficient supply.
My second question is.
It demands a P five.
Because I think its the whole radio.
Already mentioned that the demand is pretty.
Strong.
But could you share more information about our progress in collecting older stores just pre sale.
Sure.
Understandably might not be able to share too much detail, but how.
How should we thinking about that Baldwin scale relatively cheap Oh, sorry.
Example of that as long as such a modern piece of it.
What are the.
The component shortage or the volumes that top of P five into fourth quarter.
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When did you want me to go.
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Neupogen do when people being shut down.
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A question in English English and pin it on CIT and EMEA for now.
It seems like he has also called <unk>.
Pizza players either no.
No more courage to re up that shouldn't change at all.
We're doing it we ask that each in their children nutritional lunging, each into Europe, and Sonangol and Doritos Cheetos hometowns until he died at it helps us anyway.
Switching either phone formal you could shoot no more powerful digitally native who got her you'll.
The entire wild with tilled towards video because I have to tell that.
Could you ship all I needed.
So in regards to our core components and kits that shortage I think we have to look at it from Q waste. The one the first way is they're awesome expected shortage that we can do with and prepare for it and the other.
Neither is the unexpected ones now for do you expect your ones I'm, mainly talking about the chipset or chip shortage, but the unexpected one time, mainly referring to pandemic resurgence for example make me we saw this and.
This imagine see happening in 19, where we face as he was locked out and it just so happened that one of your tier one tier two.
It's located in one of those locked down cities. There's nothing you could do about it and those will be will be considered as unexpected elements that affect our shortage and add to our challenge.
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So he goes.
Goodness, itchy and I treat towards your fishing Kinder you go you know Neil for Tycho to ensure tissue.
Towards that kind of hollow JV. She meant that you see what you are switching to shelf hometown city fascia Thompson here that kind of woman in go to touch a little in Japan nimble floated out there in the Colorado cutting machine.
Anyway churn that you're doubling the human hometown, Norway shovels, so that truth, Jon Yoder Goldman is on the you've got tenure to hook, a whole bunch of Utah general window at Chico's, you'll get cheap either.
That still go to a widget and TRT had a heart attack.
Starting channel women are considerably more realistic with Joe for that type of Botox. So you wouldn't.
So it's all goodness go up each other in order to accommodate women's that Paul talked about switching to the Gen, where you couldn't do the Apd and assurance.
Hi, why she's hungry looking daughter.
So the same pit as I go to questions anything she did a function.
Okay.
So for the first kind of challenge, which is the core components are cheap.
Sure we can do simple things to prepare for it for example, the first one is we can't make up orders way ahead of time, so that we can better prepare for chip shortage. The second thing is we can work with some top tier suppliers in terms of chips in production or development. We can work with them in several ways first of all we can find out.
Collaboration deals also we can invest in some of those core suppliers and also we can work with local governments in terms of bulk purchasing or ordering off the chipset or keeps that we meet them basically chip shortage is a big challenge faced by the whole industry, but as a company are very.
Company equipped with leading technology of its kind ex bank actually has a very very favorable position to play in this value chain because a lot of the cheap suppliers consider us as their vips, thanks to our fast development and fast iteration of our models and also we are actually very flexible in a sense that we don't.
Don't have a large deliveries a backlog yet so that allow us to be really flexible in selecting different suppliers them in.
In order to fulfill our chip demand. We also can look to the overseas market for more chip supply.
The Macquarie if you will.
The quantity and quality.
Or what's the rent going peachy toward your agenda, and Adobe Xiaomi Tony's agenda P cheap huge huge or the Chinese do.
But then the fringe out did you go to the future Chevy P. G O should go to the theater the idea on that he would agree what that's really it's a b P T. Austrian trip on book.
Oh.
Yeah. Good good Toyota suggest women shouldn't item that you thought would've been done yeah, almost kind of a good I guess I wouldn't agree with her family.
And she thought.
He got woven thoughtful insight genius, Joe for that it was show me.
So in all of them in regards to the second question, which is about the market the amount of PS five if you ask me to compare it with pizza oven I would say that actually we see us even stronger demand compared to P. Seven off the same developmental stage and also we are able to actually actually better plan ahead for the appeal.
You're ordering of P. Five and right now the P. Order has started since two months ago and every month, we are seeing the demand come in more and more as expected that allow us to actually deliver what we guaranteed by <unk> This year.
Well, if you take one union, which is on the telephone with Celgene.
It.
But anyway, she woman that Shunyata, Virginia, and forging Charlotte, San Joaquin dietary or challenging how to tell down a chunk and you shouldn't either peach, even Tucson Yeltsin's Cynthia shall issue.
So in order for them in order to fulfill that a core component of core parts demand for P. Five we actually have preparing them for.
Since the beginning of this year. So that is why it by comparison, we actually you say, it's a smaller challenge compared to the fulfillment of the order for a piece of it in Q3.
Sure.
Thank you thanks for sharing their insights.
Okay.
Sure.
Okay.
And your next question comes from Ben <unk> with Credit Suisse. Your line is open.
Uh huh.
So you can have them call them.
If you did it.
And maybe what kind of homes, you know yourself gosh, you got simple meal Southern company. Because you bought you tell me what should you go something hot summer income that people with you know what I'm, saying.
What's the answer.
The government can understand you got him in EMEA.
Took a harder to come to court.
I'll leave it to you.
How did she could be about one.
So what you need on the hunting and it's not just a little hot honey chicken tamale, she find a tuition on sand wash OXXO Amanda I'll leave you with Osha to Semgroup.
Once.
You can tell me why shouldn't someone come out it will show it took about two months ago. So how do you still shop.
Some of them could you put out guidance into two Oh.
Oh, my God someone kind of on kidney function no findings of hot Okay actually I got three questions number one is about our new products.
Actually I don't know the number five and number six proton keeping your comparison.
I spent enough really aggressive Newport up higher for example, Walmart actually offer a three pronged I don't watch it got even more than 10 products and a few years.
So that's gonna do you feel about it amplified number six products.
Question is about your margin because he's gonna start if you're excluding the separately.
Income Twenty-twenty actually a Q on Q this quarter actually increased around two 7%. According to market condition could you break down the driver at 42, 7% gross margin increase and Meanwhile, what's your guidance for second half and into Europe out of gross margin Champ and lots of questions about sneaking towards taking questions about this.
As patent protection rate take rate are in there.
Our first quarter second quarter, and our second half guidance. Thank you.
Hey, Ben it's Brian.
Brian Let me just address your first question, obviously, we can't detail are the the fifth or the sixth product at the moment, but what we can share.
Or would you is that we are intending to develop a new platform for.
For the the fifth and sixth product that that platform, we aim to be probably the largest in terms of the quantity of addressable market.
It will be a platform that is targeted in the.
Mid to high end, which are that we're starting right now at the same time I think you know around the same time that we will be also rolling out a high end products are in the same year that will probably be above the current price range.
Increasing to over 400000 or even above.
That's another.
The product that we aim to launch in that 2023 time frame. So you can see that in addition to the the <unk> III. The P..75, we will have a new platform that will have both the right hand, and left hand, driving capability targeted at both domestic and international market will be.
The other large volume driver at the same time, we'll be launching a product that will be actually higher than our current high and and 400000 and above.
So let me turn to Dennis to talk about the margin up.
Yes.
Yes, being you're right if we take out the yes.
Bella margin impact, we <unk>, we had a ball.
Two three.
Percentage point margin improvement quarter over quarter.
That a wrong, 1.1% to one two was driven by a better product mix.
In the second quarter, we had more piece.
Further in our total sales in their first quarter RPC that accounted for about 60% of your total sales, but in the second quarter at EEP step of increased to about 66%. So we had the mix improvement.
The other big Pie is the material cost reduction.
<unk> as we mentioned in India.
Previous earning call we have reached the.
Battery cost.
<unk>, starting from the first quarter, but India first quarter.
We also had some inventory, which we purchased in <unk>.
For last year, so the cost reduction.
<unk> impactful here first quarter was not 100%, but in the second quarter, we basically have 100%.
Usage 40, Aloha battery cost solar accounted for about one 1% to one two percentage points in terms of margin contribution as well. So this is a big pop up.
Marginally.
Margin improvement.
Causal factors.
Being a chance here to address your third question regarding the software attach rate in.
In Q2, our software attach rate increase from around 20% last quarter to around the 25% this quarter and we believe the increasing software attach rate and was mainly driven.
And by the high utilization rate and also the overwhelmingly positive feedback from our.
Customers.
For example in June our monthly.
In GP utilization rates exceeding the 65% and also the in GP managed penetration rate in June also exceeded the 60% and I'm looking forward.
I think it's starting from Q4, and we will start to recognize the revenue from the ex parte.
<unk> from <unk>.
Our <unk>.
Thank you.
Okay guidance second half guidance. Thank you.
And your next.
Question comes from Nick Lai with Jpmorgan. Your line is open.
Yes.
As Nick noted.
Thanks for taking my question.
Two simple questions. The first is related to financial stability.
Politically politically.
On the financial.
Mentioned earlier.
We won't be nearly 33 billion cash on balance sheet in Q.
What.
Our strategy.
Gosh.
You mentioned earlier.
In Q2, or three new model per year from 2000 and <unk>.
So Brian just.
As mentioned, we are going to launch a new production plant.
And also still smoking.
In two key so.
Very strong top line.
Help us understand how should we think about.
And warranty in metal.
Expansion investment.
Okay.
Labor and Opex in April and the first question and the second question is no.
Okay.
<unk> announced recently.
Policy guideline regarding different countries different security.
Autonomous driving business.
Should we interpret that what does that mean.
Occasionally unusually quite extreme.
That wouldn't be volatility.
Thank you Justin.
Revenue.
Between cash on balance sheet.
Just.
Okay.
Okay.
<unk> no no.
Launched in.
Japan is a good multiloquence your op margin guidance.
So.
And it's just not been picked up 32%.
That makes it the crunchy.
But wouldn't you typically get treated when Gucci boots and booties.
Sure.
Uh huh.
Typically the switching to that.
This is Rick.
How much of it.
One indication.
We anticipate.
Thank you this.
This is Brian let me just address your first question regarding <unk>.
Our cash reserve and then the future use of those cash, including the Hong Kong IPO.
Our cash balance to actually exceed that $4.6 billion RMB at the moment as we stated in our Hong Kong IPO prospectus, we actually tend to use.
The proceeds mostly for R&D as well as sales and marketing.
Expansion, what I can say at this moment is that we are seeing a tremendous.
<unk> opportunity in China, the acceleration of the market is actually faster than what we expected in the beginning of the year and I think as the leading company in this.
Segment, we want to maintain our leadership by further invest into R&D infrastructure sales and marketing brand building and others.
Related efforts. So you can see that we will increase the investment pace of our business in all these areas for example in the area of R&D. We think this year, we will further accelerate your use of RMB funding, we expect the R&D.
Expenses.
Expenses for the whole year will approach about 4 billion RMB, so that will be an increase from the earlier year early in the year also in the sales and marketing I think given that expected launching of our new models.
Third and fourth quarter will be also increased.
The.
The spending on market.
Our sales and marketing infrastructure build out brand as well.
Other areas in charge and facilities et cetera.
We intend to increase the delivery target for our business. So as <unk> mentioned in the script earlier.
In the fourth.
Fourth quarter, we aim to achieve on a monthly delivery a peak number of above $15000.
<unk> per month, so thats actually.
No acceleration of current pace of delivery that we've seen and based on what we see today in that supply chain and the constraints. We are confident we can hit that level.
In the fourth quarter.
So let me turn out too.
Dennis I'll turn out to Sharepoint to talk about the data and regulatory issue that you mentioned.
She is here with us.
Carnival Fabulous launching Colgate mentioned in Europe, with Guangxi <unk> and <unk>.
I need a general manager.
That kind of sensors that region.
With Asia, So you'll see those harvest this year.
So churn which are sort of.
You can catch up on the losses.
One woman with on that.
So that's into that with you.
Unchanged, we're putting the call it will not answer that.
Sure.
Japan, <unk> and changeover, Germany, Belgium also image activation.
Sure.
Sure.
On the Norway has the Eagle bottle that watchlist, Virginia, EMEA, Angolan we'd be at hinge, whereas the jumbo tron emoji quite back to where appropriate.
Straight lined up deals with <unk> so.
So John.
Okay.
Andrea <unk> quick one to Japan, total, which well let's.
I would say that the sheer chance at CN and the need for that.
As a percentage of the shovel.
Chapter two dosage is titled usage.
With Undrawn Gen OTI, and that's usually about 10 gig.
Thank.
In Japan that Treaty Thompson, adjusted <unk> range of women.
GAAP cellular towards Europe.
Jeff a culture, which is the Eagle Ford So you don't need attitudes.
Three women, namely centered value to one center.
Gordon G suite and the <unk> filing.
So full transparency and thats in total so fit in our house <unk> clinical Danielle.
With Chi.
Okay.
Thank you for your question.
In regards to your second question regarding data security, we are actually very very happy.
To see this new regulation, that's coming out from the Chinese government, because it's going to be very very beneficial not just for the whole industry, but especially for chalco because ex Pat has been always very stringent on its data protection and also on its safety safeguarding.
In <unk>, we've been investing a lot in the R&D.
The data security and also safety safe guarding.
Not only fulfill the requirements of regulation in China, but also in Europe and across the world as well and in terms of the industry's development. In this regard we believe that a lot of the OEM than our competitors out there are focusing on building their advantage on different modules, but really the challenge.
College lies in the combination of all different modules and also how to coordinate different modules to make sure that the whole set of your intelligence or driver assistance system fulfill all of those safety requirements and data security protection requirements are the most challenging part actually comes in at the safety.
Safeguarding and also the manageable modules that really requires a full SEC in house R&D capabilities, which ex parent always possessed and also in terms of the software Otas, which also is an important matrix in regards to our data protection and also safety safe guarding we are very very cutting.
And this development as well for example, we are the first Oh.
The OEM or E V O E M in the industry that actually conduct a driver proficiency tests before allowing them to use our driver assistance system. We are also the first company of its kind that adopted this lighter technology on top of our visual technologies.
Knowledge to make sure that we protect the driver's safety.
As our top priority. So definitely we see this new regulation as a beneficial news afford not just the oh industry, but especially for OEM such as us that actually possesses the in house full SEC R&D capability. Thank you.
Alright, then your next question comes from Min Li with Bank of America Securities. Your line is open.
Thank you Jim.
So I have two question. The first question with regard to your international expansion plan.
Think of it yesterday, we just saw the news that you also start to.
To ship seven to Norway, so in the future, where you're continuing to adapt the wholesale business model.
We'll start to start to open your own brand stores.
On food and retail model. Besides that we also mentioned that starting from 2023 all of your models will.
To go to.
Using the international standard into two shifts to one so your view of the motion.
Difficult challenges by new mutual localized component and all kind of components or software is the most difficult to localize.
My first question.
Second question actually just a follow on the previous regulation.
Issue, so actually I think it's a good thing to see a strict regulation.
Let me reiterate.
And you gave the guidance for the total company two compartments.
I think in the near term is it possible.
On the otas become more difficult or the.
When you're a software and hardware are able to provide a level four autonomous driving functions, but the regulation probably only allow you to provide a level three functions.
In this case profit do you see the possibility of at least in the world.
Well done ex palms.
Oh, the vantage say Oh, well the data once you have forgotten.
Uh huh.
<unk>, so there's a little more soon.
The ones you guys are going to the Otas have Jin Guan Qiang glibly elements.
The engine since I'm talking here does it go youll sooner.
To those who didn't Hong Kong just as big.
Without getting too far away from them.
Sure.
And your next question comes from Adam.
Sorry.
Let me respond to that question, so because we were actually up.
On mute so on the first question I mean, you're talking about the international strategy for South marketing currently we actually are aiming to try both in term it's about working with distributors.
<unk> as well as opening our direct.
Owned stores, we were actually going to try a hybrid model in Europe for example, in Norway, and we are working with the leading distributor right now, but also we have plans to open up our own stores.
No.
Cities are capital cities in the European countries that we target so we're experimenting.
Mixed.
Our model, obviously, that's something that we will need to decide what is the best model for us, but I think it's currently it's a hybrid model.
Your second question on the Otas and also the data security right.
Right.
Okay.
To me your second question I think there's no question that was asked before.
Question about the renew regulation, how that impacts our ability to innovate and stay ahead I think.
Sure Paul mentioned in the answer earlier. It is obviously, we are welcoming the regulatory sort of a framework and I think.
Leading company in this we will benefit from the higher standard higher bar for such.
Our practice, so I think for US we don't see this actually will slowdown our innovation nor will you actually narrow the gap between us and the followers, we actually think.
The the increased regulatory attention on this area, we're actually further strengthen the top players and create more barriers for the followers to come so that's our view.
Got it thank you Brian.
Yeah.
Alright.
And your next question comes from Abbvie Fun look are you with Deutsche Bank. Your line is open.
Thank you for taking our questions.
Two.
First one it seems you know you're making a bigger push into the premium and going forward.
I'm just curious if you could share.
How you will kind of go about this differently than the sort of existing models or the more mass market models.
Will you be kind of.
Lamenting better service or whether it be some sort of brand differentiation with its kind of a premium offering.
Yeah.
And second question is just about the X pilot three five pricing.
In the past you've talked about you know as the feature set grows.
The the price should go up so I'm wondering if you could provide any details there.
What J D.
And he said I just <unk> sure.
Kind of in the way they shop, Joe King root cause on Showtime.
Just the U S.
Hey, Joe.
The machine the store, where they seem to food.
Differentiate conditions that are generally true.
Hey, everyone.
While U X Palestinian without the jogger.
Once they finish out Asia.
Isn't that kind of on Japan.
So can answer the second question first is Oh, we actually intend to have a higher pricing.
Six pilot three 5% it should be priced at a premium to the current ex pilot three point out.
Obviously.
The <unk> will still be available to vehicles.
The hardware so so in the foreseeable sort of models, we will actually have.
The current pricing maintain for the pilot three and slightly premium price Forex pilots to fly to reflect additional features.
Shipyard, claiming a depot and T J.
Our median Tonga peachy Intermune woman that JJ sensor on the journey. This is how we're managing.
Suddenly it sends a woman CAGR that's helpful. Roger but I know, what she said Oh, the Asa that John what I'd tell you, but they'll get a showdown.
What else would you want to wait to give a sense of what to eat with us on the size of those situations.
The Gulf on the shuttle that will show up in Germany. The Japanese feature on the challenging that took a teach in EMEA woman, what's the tone.
Or you could go down the food to go without a woman with journey builder and Tony you want a full tally champions I suppose hazard towards full features you don't know how much will depend upon when the Shanghai, such where else does that cause I mean, how much of it is how you have imaging it isn't that OEM, Fox, which actually I'm sorry, our sandwich.
And if we kind of hung.
Yeah, and she knows that.
She wants a chunk until you could take the kitchen is high for that channel women to take them on.
Tongo, what's at the top.
<unk> Hello, Ms. Shang you went to it said you don't want it's hunting Asia, Chicago, Detroit that element, what you want them to another China, India with secondary offerings.
Now in response.
To your first question I think <unk> seven has already proven to our capability of entering the up EMEA market, especially the one five at about 300000 RMB. He last month, all delivery of pizza have been actually surpassed that of all the a for that.
It says a lot about our capability of entering the premium market in the future we target the.
Even higher price average.
At about 400000 to 5000, even so that's entering.
Entering those premium markets are weak.
Once you actually offer standardized data driven and technology, Japan kind of differentiation that set us apart from our competitors not by offering other kinds of service.
In the long run we expect to see actually a new development coming out from our R&D that actually allow us to really be different from other market offering by 2023 to 2025 and by that time, you would actually see what I'm talking about and by that time, you would actually see that we are we will have something that actually showcase.
Our core R&D capabilities, and B and actually allow us to build an even stronger competitive edge or competitive moats against other competitors in the market and because this actually involve some confidential information about our key priority about women logic behind them allow me to keep it confidential.
Oh Goldman and when the time allows time permitting I will give you and share with you more information in this regard. Thank you.
What country you couldn't needs of children Shaw.
And she said well know for a total of Covid.
Finishing the U K that she's heard you know what.
Thought you might want to look at the woman that goes on Sunoco languages.
And I can actually give you. One example, as to some of the the flying cars that we are developing and pipeline that we our R&D at the moment, we plan to actually target and even more premium market price to add about half a million to 1 million RMB and so that would be actually one of our flagship products by that time as.
At the midpoint net market.
Thank you.
And your next question comes from Paul Gong with UBS. Your line is open.
Yes, hi, Thanks for taking my question. My first question is regarding your distribution network all right. Thank.
And since you're all countries in Europe.
Franco.
Hunter to sort of hold off.
They've kept by end of this year.
I will check this number and also where do you like Japan.
Opening.
Direct operating stores or are you going to more differentially see third party tissue.
As you deal with how you saw the dealers and also related question. On this is song in times of challenge to think serious comment today ammonia mutation for the coverage of the network or the <unk>.
But you should feel of the network.
Where do you foresee the further improvement.
My second question is regarding non profit models.
It seems that youre going to accelerate for the non trough in your models for 'twenty or 'twenty history.
I think there yourself.
Hum.
I apologize.
The similarity is versus pass a law that person has.
Now on the floor models despite of our noncore chuckle about call. It at a much higher volume. So when you are planning in this number of models, what do you say Amen considerations to pellets.
How many more of those and what this gave more challenges to your distribution network, given many of the stores need to or not.
Right.
Many of the positions to have.
Several cars.
I'm fine you charge or do you guys look when you got it.
Vishal, one or two of what comes out of our maintenance for the hall on industry generally oceans down by John Deere and she was only up I used yahtzee, India core $10.2 million, so somebody else's out there so it wasn't a window.
The hotspots.
So of course I don't want you to also women says you shouldn't do you know how to see your call Samsung, but I know it sounded like I shouldn't do you know the huddle starts at Tenda you got to handle all of the countries. So couldn't dawdle since I know at the end of foresee some back to Ohio to Sunoco and general high systems.
And I showed you some gains some cogent ied until so do you go.
They all go into and I saw the harsh sunlight cool.
That is cool Cushing Shlomo, it's hard to know.
On your end of Hanmi, Daniel Teng quiet until Congress until a trop two at yours can cause I know firsthand up a young social shelf ones I can touch that Alejandro chances of short answer that's really at the end of <unk> you.
So unless somebody younger.
Not in Burlington County, sufficiently signed them at that time.
Yourself.
Cushing Shun, whether you go how do you show Shaw to your mental coffee shops, you thought you got you.
The email Johann Dorothy on the Hong Kong, China, as I mentioned in Brazil, and it goes well knock on door, it's Hudson done any OEM system economies have a winter shashank.
Oh no.
What the shuffle upheaval in here.
Tony on that job.
Oh.
That woman.
And that guidance.
The JV silica and email and Adobe Io Tesla.
So that's easily chunky.
She got.
All right.
So it made sense to your first question it definitely by the end of the year, we plan to open 360 into the stores and we will have both directly operated self operated and also a partnership stores and at the ratio of all directly run stores will increase.
Some of that.
Okay.
That's all I needed.
A woman that union.
Hum.
Thank goodness.
So you'll stay at home.
Yes.
Uhm.
Women that union.
Okay.
Sure.
Income into the Pepsi.
At the end of program in a two minute kind of woman couldn't numerous teng <unk>.
Charles each one tender.
E G in Europe or in a shelter for almost the whole momentum.
Sugar you eat the whole walnuts yaacov <unk> more question from kickoff conducted under the sheets.
So it wasn't that.
And a full guidance being unchanged.
He got to continue to shine and cut costs.
And also since several months ago, we already saw a great improvement on beyond single stores profitability.
Since last year, we already saw that happening across different models that we actually.
Lunch himself and so across the board, we see a lot of our stores are making profit and so that is why when we look at the deployment of our new stores. We will look at first of all the infrastructure of that particular city, meaning that do we are we don't know that we have the supercharging supports in that particular city and also how developed that south.
Is that support that particular cities and so actually with those two core components of the infrastructure and all of those networks, we see great improve money into ourselves performance in a few months' time and so that is what we're going to actually heavily invest in for the second half of the year to actually further expand our distribution network.
And at what point do you think you are going to want to live with it do you go to shuffle, what tissues Jimmi Sue them under Jim can you just show them in total.
Total likelihood of Jim Jim Jim can go into the guidance that that you could push it doesn't mean, we wouldn't eventual dogs.
Or minimum wage.
So I'm Gonna Jim King.
Yes.
A shovel in the future.
Sure the BG Dunkin' Donuts U S dollar.
Sure.
No more.
No more Virgin.
The Ministry of the shovel intuition shoot out of Chicago, which as you well know those shows they'll deal with it.
Well my point she shoot Paul you mentioned that that sounds Tony Linda.
She didn't get any types of damage that is the woman condensate since you didn't even to the phone itself for Europe for her town decouple Julio shield attrition normally that she'd have woman coming off with that couldn't bother J J, but it's also I didn't even know what do you test the trimble to switch.
It didn't it.
Now in response to your second question I will let I would like to talk about two things. The first thing is X band will still continue to focus on high quality product, which means that all of the models that we are in we expect them to achieve the number one or number two of them. It's a market share of its kind for example, seven.
<unk> has already achieved number two in terms of cells are in classroom and class B sedan and G. Three is ranked number one we're number two in the markets all of its kind in the future going forward. When we have more models on our pipeline and our pipeline and when we launch more models. We begin we are going to adopt a different soy distribution.
Or showcase strategy. So we are going to actually look at the local market and local cities and analyze the market demand.
In selecting which models to showcase in the showroom any of the store and in some of our flagship stores, where we have more space, we will actually be able to showcase them the whole.
The whole selection of all models. Thank you.
Thank you once again for joining us to say if you have further questions. Please feel free to contact <unk> Investor relations through the contact information provided on our website or the TPG Investor relations. Thank you.
Thank you everyone.
Thank you all bye bye this.
This concludes our conference call you may now disconnect your lines. Thank you.
Yeah.
Oh.
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Yeah.
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Yeah.
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Okay.
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