Q3 2021 Xpeng Inc Earnings Call
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Hello, ladies and gentlemen, and thank you for standing by for the third quarter 2021 earnings conference call for ex banking.
At this time, all participants are in listen only mode.
After management's remarks, there will be a question and answer session.
Today's conference call is being recorded.
I will now turn the call Liberty to your hosts Mr. Aleksey <unk> head of Investor Relations of the company. Please go ahead Alex.
Thank you Hello, everyone and welcome to extra in the third quarter 2021 earnings Conference call, our financial and operating results were issued via Newswire services earlier today and are available online you can also viewed earnings press release by visiting the IR section of our website at IR.
Shopping dot com participants on today's call from our management will include co founder Chairman and CEO, Mr. Zhao Peng Vice Chairman and President Dr. Bryan Koop, Vice President of Finance Mr. Dentistry.
President of corporate finance and investments.
Charles Chang and myself.
Management will begin with prepared remarks, and the call will conclude with a Q&A session.
The replay of this conference call will be available on the IR section of our website before we continue. Please note that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.
Forward looking statements involve inherent risks and uncertainties as such the company's results may be materially different from the views expressed today further information regarding these and other risks and uncertainties is included in the relevant public filings of the company has filed with the U S Securities and Exchange Commission.
The company does not assume.
Assume any obligation to update any forward looking statements, except as required under applicable law. Please also note that ex pumps earnings press release and this conference call include the disclosure of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures excellent earnings press release contains a reconciliation.
Valuation of the unaudited non-GAAP financial measures.
Audited GAAP financial measures.
Now I'll turn the call over to our co founder Chairman and CEO, Mr. Hersh I'll put them. Please go ahead.
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In the third quarter of 2021 X paying achieved another record with deliveries, reaching 25666 units representing a year on year increase of 199%.
All total deliveries for the first nine months of 2021 exceeded 556400 units more than doubled last year's full year delivery.
Furthermore, our monthly delivery surpassed 10000 units consecutively in both September and October and will strive to reach the target of 15000 units of delivery per month.
As rapid growth in deliveries continued to drive our economies of scale and P. Seven mix in our deliveries grew substantially to around 77% our gross margin in the third quarter increased to 14, 4%.
250 basis points from last quarter.
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Our unwavering commitment to in house developed full stack autonomous driving software and core hot where independents ex things ability to continuously strengthen our technology leadership.
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At our annual Tech day event, we showcased a P fi equipped with our city N. G. P development version, which was able to navigate through the complex driving scenarios in downtown Guangzhou. This highlights that technological breakthroughs and rising popularity of advanced driver assistance system transport.
He was just mobility experience at an unprecedented speed as our mission S. Paying is accelerating technology innovation and disruption in this field.
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In our view our competitive advantages of the advanced driver assistance systems stem from all the capabilities, including passenger safety to vertically integrate hardware software and massive dataset in house overall cost.
<unk> and rapid product iteration globally.
Our ability to accumulate corner cases from complex in real life driving scenarios across China is X times core competitive edge and we will continue to strengthen our technology leadership over peers.
The attach rate of X pilots any 0.0 software reached close to 20% in pizza ovens in the third quarter and revenue from software and increased quarter over quarter.
Among the more than 50000 pizza ovens, we have delivered as of September 30th over 11000 units were equipped with X pilot three point out.
During the third quarter of 2021 the average monthly utilization rate of our N. G. P for highway and the highway N G P mileage penetration rate each exceeded 60%.
N D N G P assisted our customers in driving approximately five points up to 1 million kilometers or $3 42 million miles on highways.
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Actually launch ex pilots any point O in the second half of 2022 will begin to explore the robo taxi business. Our strategic goal in the near term is to improve the ROE buttons and safety of our autonomous driving algorithms through generalization I believe our ability to mass produce turnkey solution.
Including vehicles and software to potential mobility service operators will bring a revolutionary mobility experience to users and create significant business value.
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Ex paying not only developed full stack software in house, but also the sign and integrate core hot whereas in house to achieved rapid iteration of technology for instance will be one of the first in China. It's a mass produced 800 volt high voltage silicon carbide to cut platform and 480 kilowatts.
High voltage Supercharging piles, which will allow 200 kilometers of driving range through only five minutes of charging.
Domain controller, and the electric and electronic architecture. He quipped in all enforced E. B model Jeannine will also develop in house, we believe our ability to design. These core hardware in house will compound our competitive advantage in software, which will further cement our technology leadership.
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We are accelerating our product rollouts in order to increase our product penetration in our target market with price ranges between 150000 to 400000 RMB in the third quarter of 2022 will begin deliveries of our fourth E. B model the G nine.
Which supports X pilot for pointed out.
In our view ex Paal at four point O is going to fundamentally transform mobility experiences into the next stage.
Mission is to make a smart easy accessible to a broader user group in this largest passenger vehicles market segments, delivering revolutionary smart eating experience across our target market segments.
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Officially launched on September 15th our third mass produce model. The P. Five began deliveries in October as planned the lunch of PT Fi Mark for the first time that an industry, leading advanced driver assistance systems and smart cockpit system in China can be deployed to smart E B model.
With price at around 200000 RMB.
We believe that <unk> has achieved purchase cost parity with equivalent internal combustion vehicles.
I believe <unk> five will disrupt the family sedan market, which has been dominated by traditional IC models that have been made largely unchanged in terms of technology over the past decade.
Despite the recent challenges from semiconductor shortages the orders for P. Five has exceeded our expectation and the delivery of P. Five has been schedule until after Chinese new year already.
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Last Friday, we unveiled jeannine, our flagship SUV at the 2021 Guangzhou International automobile exhibition the Jeannine will be our first mass produce Marty that supports X pilot 4.0. Meanwhile, the jeannine it will be clubs with an 800 voltage high voltage silicon.
Car by platform and ex paints, new proprietary X E. A three point O electric and electronic architecture that adopt a domain controller deeply integrating hardware software.
And communication architecture to achieve powerful performance and high flexibility in O T. A upgrade also I would like to highlight that <unk>, our first model to become <unk> and developed from the ground up for international as well as the Chinese market.
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Next I would like to walk you through our strategic initiatives.
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Accelerating our research and development for new models and core technology innovations, we can see Neal to build out our R&D team as of the end of third quarter 2021 X Pangs R&D staff comprised of over 4000 employees more than two fold our staffing at the end of 2020 over the next cut.
<unk> of years, you'll continue to see our technology breakthrough in uncharted areas.
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Our sales and services network sustained rapid expansion as of September 30th ex bank's physical sales network consisted of 230.
71 sell centers across 95 cities in China.
These south stores 167, one directly operated by US and 104 franchise stores.
We expect the number of sales stores to reach more than 250 by the end of 'twenty 'twenty. One. Meanwhile, the average monthly store sells volume witnessed a sequential increase in the third quarter, reflecting enhancements to our store productivity and efficiency.
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We also continue to rapidly build out our Supercharging network as of September. The third is the number of Exane Brendan Supercharging stations increased to 439 across 121 cities and the total number of police Supercharging stations reached 1006 hundred 48 covering.
221 city.
We are the industry pioneer deploying supercharging capabilities across the entire Beijing, Shanghai, and Beijing, Hong Kong Macau Expressway.
30 ex bank branded Supercharging stations deployed alongside the expressway allow ex paying customers to access our supercharging facilities every 170 kilometers on average.
We expect X paying Brendan Supercharging stations would to be more than 600 by the end of the year accelerating our supercharging network expansion across lower tier city lease.
We expect to accomplish deconstruction of infrastructure supporting Expensed Supercharging network spanning all prefecture level cities in China. This year.
Furthermore, we will build on our well established charging facilities in main areas to extend our network to cover a majority of country level cities and highways in 2022 and 'twenty 'twenty three.
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On the overseas business Fund X Bank P. Seven was launched in Norway on October 25th we will explore opportunities to expand in Norway in other European markets, such as Sweden, Denmark, and the Netherlands, and improved our self delivery and service network continuously.
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With respect to manufacturing capabilities. Our first plant gelatin plant is currently running on double shifts with production lines working up to 20 hours per day and production is ramping up rapidly.
Total defined to production capacity of Chongqing plant and the plants being built in Guangzhou and Wuhan will be more than 400000 units per year by adopting a double shift production at these plans annual production can reach up to 600000 units laying a strong foundation for our high growth in the next two years.
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On October the 19th ex urban Air mobility affiliates Ht Aero announced that he has entered into a definitive agreement with a consortium of investors to raise over 500 million U S dollars for its series eight capital funding. This marks the largest single tranche one.
Fundraising to date in Asia, low altitude flying vehicle sector.
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X thing as always committed to upholding the highest standards in ESG practices and is driving contributions to China's carbon neutrality goal by advancing our green eco friendly smart mobility offerings on October 15th exiting believes his inaugural ESG report and notably.
For two consecutive years ex paying received and double AA rating from MSCI ESG research topping his global auto peers.
In the near future, we expect to make greater contributions to carbon neutrality through technological innovation utilizing our in house developed full stack technology.
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In conclusion, we will make every endeavor to overcome the challenges stemming from chip shortages and the COVID-19, pandemic, which is still prevailing in some parts of the world in the fourth quarter of 'twenty 'twenty. One we expect all the smart E b deliveries to be approximately 34500 to 36000.
500 units in all total revenues to be approximately seven one to $7 5 billion RMB.
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Thank you everyone with that I'll now turn the call over to our VP of finance, Mr. Dennis Liu to discuss our financial performance for the third quarter of 2021.
Thank you Mr. Hu and Hello, everyone now I would like to provide a brief overview of our financial results for the third quarter of 2021, I will only referenced RMB in my discussion today, unless otherwise stated.
Our total revenues were $5 7 billion for the third quarter of 2021, an increase of 187% year over year, and an increase of 52% quarter over quarter.
Revenues from vehicle sales will cycle and 5 billion for the third quarter of 2021, an increase of 188% year over year and an increase of 52% from last quarter. The preliminary increase mainly attributed to higher vehicle deliveries, especially of the ERP seven lead Odeon, some channel expansion and Brent.
Improvement.
Revenues from service and others were <unk> 3 billion for the third quarter of 2021, an increase of 182% year over year, and an increase of 47% quarter over quarter, mainly attributed to more income from service parts and accessory sales and that was higher accumulated vehicles.
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Gross margin was 14, 4% for the third quarter of 2021, compared with 12, 6% for the same period of 2020 and 11.
9% last quarter.
Nickel margin reached 13, 6% for the third quarter of <unk> 21, compared with three 2% for the same period of 2020 and 11% last quarter.
The vehicle margin improvement was primarily attributable to better product mix and manufacturing efficiency enhancements driven by economies of scale.
R&D expenses were $1 3 billion for the third quarter of 2021, an increase of 90, 999% year over year, and an increase of 46% quarter over quarter, mainly due to one increase in employee compensation as a result of our expanded research and keep them as staff and two Hyatt.
Relating to the development of the Chennai that <unk> and <unk> software technology to support future growth.
SG&A expenses were $1 5 billion for the third quarter up 121, an increase of 28% year over year, an increase of 49% quarter over quarter, mainly due to one higher marketing promotional and advertising expense to support vehicle sales and two expansion.
Our sales network and associated personnel costs and commission for your franchise store sales auditing comp was <unk> 2 billion for the third quarter up 2021, including government subsidies.
Ultimately to the <unk> 3 billion, partially offset by the location and disposal cost about <unk> 1 billion related to the <unk> print.
Loss from operations was $1 8 billion for the third quarter of 2021, compared with one 7 billion <unk> hundred 20, and $1 4 billion last quarter.
Excluding share based compensation expense and non-GAAP loss from operation were $1 7 billion for the third quarter of <unk> 21, compared with <unk> 40 <unk>.
Our 2020 and $1 3 billion last quarter.
Net loss was $1 6 billion for the third quarter compared with $1 <unk>, a year ago, and $1 2 billion last quarter non-GAAP net loss was $1 5 billion for the third quarter of 2021, and there was the airport in IBD and 40 same period of 2020, and $1 1 billion last quarter.
In July we completed a primary listing in the Hong Kong.
As of September 30th wanted what 'twenty, one our company had cash cash equivalent restricted cash Showtime and long term investment.
And deposits in total of 45 billion to.
To be mindful of landfill or earnings call I would encourage listeners to refer to our earnings press release for further details.
This concludes our prepared remarks.
I'll open the call to questions. Operator. Please go ahead.
Yeah.
Hi, operator.
<unk> would you. Please go ahead.
We're ready for Q&A.
Hello can you hear me.
Yes, we can hear you. Please go ahead to start Q&A stinky.
Thank you again to ask a question. Please press star one on your telephone keypad for the benefit of the all the participants on today's call. If you wish to ask your question to management in Chinese. Please you may get Lee repeat your question in English for the sake of clarity and order. Please ask one question at a time.
Management will respond and then feel free to follow up with your next question.
Our first question comes from deemed <unk> from Morgan Stanley. Your line is open.
Hi, Mr Hood, Brian Dennis and Jim Thanks for taking my questions and congratulations on the great results.
Two questions the.
First question is just wanted to quickly follow up about the rubber taxi plans, we just mentioned during the presentation.
Could you share more details in terms of the ESCO business Motors.
Our business model is more.
Is it more like a demonstration of the capability of Opex pilot Coke zero.
How are we going to have any different or face lease model for the robo taxi fleet operation next year or simply leverage <unk> for their for the fleet operation in Guangzhou.
And how are we going to do that.
Are there places where either province, so that's my first question.
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Thanks.
For your first question now in regards to Robo taxi in its development plan and we are still in the process of doing internal discussions. So I can only share with you some of the basic and initial frameworks and some thoughts. So basically we are going to adopt the current model that we have and we are going to use <unk> to three five to four point out or even further future otas.
Versions on these fleets and all motives or target is to test and trained our closed loop capability of integrating software hardware and also our data capability in urban roads. So that we can serve the future development of X pilot 4.05 point or even a third or more advanced versions of our <unk> pilot.
Software upgrades and so we are also not looking into doing math services in the future. We are looking to partner with the current operators. So that we can together.
So the development of this industry.
Great.
Second question is about <unk> I think we already touched on the topic a little bit during the presentation.
But can we have more updates on.
An <unk> order intake and backlog at the moment.
Just some rough quantitative guidance with great.
Roughly how many percentage of the consumers are willing to take the cars first readout radar.
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Hi, Tim it's Brian.
Let me just first of all respond we never give guidance or forecast on our specific orders in backlog. So that has been our policy since our listing but just to give you some color on <unk>.
We actually saw very robust demand.
Mr. <unk> stated in the opening speech, we actually saw the backlog now is stents to post the Chinese new year, So on average somewhat.
It's up to four months of backlog wait time. So thats also very robust demand in terms of the mix. The only thing I can tell you just a few facts one is that.
More than 50% of the orders that we received are for.
Software subscribing models switching corporates pilots three point or three five hardware architect and also regarding to your question, whether what the percentage of orders daschle has choose to.
To take delivery and have the future installation of the radar actually more than 80% of people actually have chosen that option. So we actually see both strong favorable so the reception to our <unk>.
Thank you Brian. Thank you Ms Ho congratulations on great results. Thank you very much.
Our next question comes from Jeff Chong from Citi. Your line is open.
Hey, good morning, Jeff.
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Okay. So let me translate that into.
So question one is about the robo taxi. So can we quantify our solutions on robo taxi, how how much cheaper than baidu employees.
And other competitors.
Italy is about all the other pilots penetration rate into the first half next year.
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November and December.
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Thank you let me take the first question now in regards to Robo taxi basically we're going to adopt all of our mass produced models. So technically speaking their costs would be a lot cheaper to our competitors and on average every month, we expect to see 8000 to 10000 kilometers of driving mileage that we can accumulate from athletes and so the purpose.
For using those kind of fleet as the robot taxi is to gain further ability and capability of getting more knowledge.
Maps and also accumulated corner cases in our database. So that we can sort of explore and enhance our overall capability of integrating the software and data capability Heartware and also to build up a high level of safety and reduce the cost further thank you.
And Tim This is Brian let me address your next two questions. So first of all on the question of <unk> five software solution again, I don't want to offer any guidance or forecast, but I want to point to a few facts first of all right now we're seeing more than 50% of the orders for <unk> or for the.
Software subscription ready hardware model so.
Definitely you can see the mix is higher than the <unk> seven that we actually seeing Tom is about.
Software capable.
Models.
Secondly is that the delivery of the software subscribing models also was subject to some.
Supply chain bottleneck as you saw earlier.
We actually need to install some of the radars post the delivery so.
The result, we also offered.
Our software for free for some of these.
Customers. So I think in the short term you will see the impact due to a number of these factors, but in the long run we are confident that <unk> will see higher software subscription rates.
Thanks.
Despite a three point Alex.
Pilot three five software and as you know <unk> five software is priced higher than <unk>.
To point out.
The third question on the guidance.
I don't want to give additional color specific months delivery, but I want to reiterate two things one is that we.
Yeah.
Still ascribing for hitting a monthly peak delivery of 15000 per month in the next two months, so thats our goal and I think a week.
Good chance of hitting that.
One thing I want to mention is that.
Pricing constraint is still very severe so the visibility to the chip shortage as well as some other constraining factors.
It makes the forecast as best short.
And novel reliable in the coming months ourselves. So that's why I think we provided the guidance, but the best knowledge that we see today, but I think I know this is where we see and also how we feel about the monthly delivery peak hour right.
So did you Brian citizen everyone's omeara, chairman and CEO.
Okay.
Our next question comes from Ming Lee from Bank of America. Your line is open.
Because he is in the hall, which would mean that would have been doing just that number one.
Do you go into you know Cynthia.
G settlement that design.
What are you going to spend 10 minutes.
Yes.
As usual.
So it goes on the same time.
Doug how their bodies.
Tognino, Google Ma'am the floor.
It took a detour you Julien.
P cheetos and instead of attempting to do now to sample.
Sounds good.
So we see a woman in Germany.
Oh great.
I assume the two centers.
<unk> got 22, okay. So I'm just going to send it since <unk>.
Marty.
<unk>.
Oh cool kitchen boddington.
And then gentlemen centers of expertise and deal with them.
Pardon me.
Julian Chunked titles from Goldman Summertime. Okay. My first question is regarding Q3.
<unk> third quarter, you'll start to Q3.
One second.
And how do you see that margin improvement.
So you make a car.
Sure.
And also.
Future or when do you expect to launch.
Launch.
Thanks to our new generation of Q3 to improve.
The margin of the product and then my second question. It's a question of different functions between expanding three slides.
Point of view excuse me Michael.
Yes.
As Dennis let me address the.
First question.
We actually we moved our Chi three two are touching on praying August.
<unk> commenced with the first the model at East Houston.
As you are rightly you pointed we actually we can see the scale of improvement so we see.
In our beta labor and overhead efficiency compare waste space, we have a high amount to do the contract manufacturing. So we have seen the margin improvement on <unk> I already which we have launched and we are selling the vehicle already that's number one and number two.
Yeah.
Glen.
Clearly ex pit patent of Sun deal.
And in the comments that Jim gentlemen.
Thanks, John Sheila to Sanjay element.
Minions message Homeaway that chassis that J&J is Pennsylvania.
Hi, Hello, Hitachi that expand if anyone wishes to engender change in Japan.
Sure <unk>.
<unk> had a chance at a total change so that's how we operate on total <unk>.
And with that Noah.
So does that sound young women.
Franchise silicon proven <unk>.
Chemical producers.
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Although you Couldnt do it at all.
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Guidance for sure neither kintigh seasonal, though youre Shannon that synergy.
And just in downtown.
<unk> got to consider from Jessica.
Thank you for your second question actually we're not going to disclose any more details between the difference of the difference between X model 3.5, and ex pilot well point out because we're going to lunch and talk more about ex pilot 4.0 next year, but right now I can give you a general idea about the differences basically for X pilot three five.
We are able to cover the urban NTP function that support.
Quite a number of cities and some urban rose but that is.
Comparatively smaller in number compared to X pilot for them I know, because we expect X pilot pointed out to be able to support the majority.
Number of road and city and not just China, but also Europe as well and on top of that ex pilot ballpark.
Is also equipped with a higher level of sensing capability electric and electronic architecture, and also more stronger sort of algorithm calculation computing power as well.
She says she said then thank you.
Our next question comes from bin Wang from Credit Suisse. Your line is open.
Okay.
Thank you I've got two question number one.
Margin improving can you break down the different.
About the gross margin increase for example, how much came from higher.
And how much came from.
Yes.
How much of that mix.
Thank you it's number one.
With more technology question, because you actually might equate to now 800 mortgage.
Does that mean for the comment.
Supercharge that.
To have a dramatic repute.
The drop rate cuts on some new people from kind of maybe.
<unk> mortgage towards 800, thank you.
Yeah.
And also on my side.
Hum.
So you're going to be required.
How do you really got.
Meanwhile, phenomenon company endoscopy and kind of make a mall.
Thanks Emily.
In Colombia.
Sure Tim.
Okay Sean.
And I'd say, we're more selling than I thought.
Coming to your <unk> do you even get into shortly.
Turning to the ticket.
Opex.
Let me see Kumar and most of them.
We then understand somehow Amit bhatia with something of a shortfall.
Yes.
This is Scott.
On trim, but now with Russia.
Hey, Ben This is Dennis let me address your first question.
Regarding the <unk>.
Quarter over quarter margin improvement.
Major improvement came from the mix improvement in.
In the quarter to all of our total P. Seven accounted for about 66% of sales in quarter, two but in third quarter because of <unk> migration, we actually sold more <unk> accounted for about 77% total sales in quarter three so.
A lot of the margin.
The reason for the margin improvement and the other the.
The improvement will be for the labor.
Labor and overhead efficiency due to your scale is the cause.
<unk> improvement because now we are producing all the vehicle in the outsourcing trends that we see the kind of efficiency improvement. However, we also has some some costs to increase to offset partially the upgrade eco news for example, the yellow material increase and also to achieve <unk> offset partially of the.
The good news I mentioned briefly.
Briefly so I hope I address your first question.
Oh no no.
Thiago.
Hum GTO pass through the whole minutes a woman.
What are your new public photo Gelling you got you.
Got it good to just didn't see that you guys won't get in TCR to grow some more.
Twice weekly installments I shouldn't you bypass the channel or actually do one more question.
A lot of them are affecting our whole again deal with us about awesome channel.
She is a woman she had a total tonnage assortment so you're teaching the posture of women so shouldn't have done.
So you want somebody at home in a sense you'd answer that Chantal Chantal Chantal Lavoie challenging Jacob Securities.
<unk> does that mean traders at emerge energy.
I'll tell you well not quite to the javelin total put on the chance of that DNS illustration, though John that you've got a total debt of tissue.
Let me take the second question <unk> nine and other future models, we are going to adopt the agent 800 volt high voltage charging and so for our current charging piles, we are going to upgrade to them too I mean in the future to 360 kilowatts and also in the future pointed 80 kilowatts, and so as we lay out our deployment.
Supercharging stations, we are going I mean, the new ones, we are going to take the high voltage charging facilities such as the Indian 80 kilowatts at 480 kilowatts for sure. So there won't be any waste because we will gradually roll out our plant network.
Building.
Construction for the charging facilities.
Dominica cushion magnitude Diana book on how to seem that Dupont two months ago.
Banco macro demand.
So if you want women you can.
I started the teaching and the continued global cultural that tissue.
Douglas has been solid tissue women's at Schindler as long you meant.
You won't see in the Belgian Nigel.
Yes, because.
Each station is charging station is consists of different piles of the different voltage and so we are going to be able to diversify it did kind of piles in each single station.
Is it.
Our next question comes from Nick Lyall from Jpmorgan Youll Angel.
Huntington.
Moving down to the mid <unk>, which is also when the whole time.
Ddos CEO, Glenn could AECOM ammonia there wouldn't you just conclude.
Just on Gpus.
Oh did you would see to come in the first half so within two months.
Pete.
Nicole we lost you.
You still there.
Yeah.
Nick.
Yes.
His line got disconnected.
Our next questioner today will be.
Yes.
Our next question will be from Edison Chu from Deutsche Bank. Your line is open.
Great. Thank you for taking the question I actually just have one.
One <unk>.
Could you maybe go over long term, what kind of opportunity you see in Europe, obviously don't expect anything to concrete, but what kind of potential volume or what kind of what kind of percentage of the market you could maybe target or expect to see there.
And then longer term.
Well, Thanks, how would you divide Asia Joseph Tansey icon.
You've been doing also the shout out that guy.
What we've done trend quarter John.
That will be the decision.
So hi, Allison it's Brian.
First of all I mean to answer your question I want to emphasize that our current plan in Europe is mainly focused on building our presence.
Our capabilities and also make sure we have the right network and brand awareness build up so we are not emphasizing on delivery numbers in the near term.
And in the long run I would say that's multi year.
We actually see our self.
In a global company with.
Half of that volume will ultimately will come from outside of China and high volume inside China, That's our goal.
Again, the multi year ago, but that's what we're striving for.
Yeah.
Thank you.
Okay.
Our next question comes from Paul Gong from UBS. Your line is open.
Hi, Thanks for taking my questions I have two questions. The first one is still regarding the autonomous driving milder.
My understanding is for the X pilot three zero to $3 five.
The hardware wise, you cannot microwave too.
The old version because of the difference.
The configuration of the hardware.
How 'bout performance three five to 4.0.
Support upgrades among the hardware for the previous not buyers of the system.
You don't go into vehicle winter sequentially, it'll cool athos, causing tissue, so shouldn't that fundamentals and dealing with a whole new way to assure you again somebody can put your angle to ingest something we bump for us in Q2 funding with US again and go home until the wheelchair engender closing to your module, which is insurance.
Jonathan.
How about some of the tier two city you go into.
Okay.
No one else can cushion cheetah.
Bullishness of English under your current guidance should have been what delta that's in good times and Cheetah <unk>.
She has a four year process designation adhesion email NOLA agenda cha-cha exampled of guidance.
And should I kind of theoretical Mrs.
This is Jonathan Chang does a woman.
Way to John Edison's and alcohol to divert useful treatment without any manual handoffs and Toby.
Tobey Maguire, each and ACC LCC Uh huh.
Bulk water.
On the travel choice you treat that.
The confusion to me European daughters Us Latona.
Actually the hardware cannot be migrate to X amount of four point out because of the fundamental upgrades in computing power and sensing capability. We also upgraded the whole electronic and electric system as well. So basically these two X pilot systems are built on top of two very different infrastructure.
Also we are laying the foundation for the future development of L. Four level of autonomous driving so you will see fundamental changes in terms of the ACC LCC and also a P eight programs.
Okay. My second question is regarding the law, where operation I think Q3 has been available for over one year and so <unk> seven was available this month.
So far how have you been failing.
Donlin process in Norway like what lessons you.
And what has been proven to you offsetting both vehicles over there given the cost advantage and some of the smart virtual yourself.
Pumps car sounds pretty.
<unk> been in that market.
When theaters. So currently it's all going well, we like machine tool, what's your thoughts with what you're saying you can see that maybe youll Union dwindle down it should only those from some of your guys'.
Joe Colorado's Youll see towards total conagra to be user Haynesville sure Michel from total to goods in order to do what actual CEO.
So for me all the usual.
The elements that make that number go my kudos to them.
Well Linda could you what's good in EMEA a woman.
We'll go through that.
Alrighty, earning in.
<unk> from <unk>.
The maturities will engender.
So I'm going to show to you.
Jacob bout, who Buffalo agenda, you have.
She's only about what its little harder than getting of EQM and <unk>.
<unk> got good thing she did a switching.
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Without.
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Earning San Antonio.
So Joe Orange machine tool address.
John.
So as you can talk with data and.
<unk> 2002, <unk> on dialysis.
And I'm gonna changing and Joe for PJM in good shape allocated within businesses.
Good attention towards larger tissue <unk> took over as you know that doing good.
Sure.
Got it.
Yes.
Our international strategy determines that our target between 2022 2000 22022, it's laid a good foundation for our international expansion in the following aspects, which are the software and hardware R&D development or safety and data protection and also our team and organization structure reverb.
So basically in Norway in other international market, you would see us doing more restructuring and exploration intense off our product technology and also our organization. So cells are right now is not our priority in D&S into the international market, but in the future from 2020 on to 2025, we had.
Going to conceived and developed models that are suitable for not just the Chinese market, but for the international market in the sense that we are going to comply with all the safety regulations and environmental regulations to the highest standards in the European market as well as just global market in general so by that time, I think we'll be more prepared to meet the sales target I'll I'll start.
That expands into the overseas market.
Thank you very much worthy of higher operator, we're ready for closing remarks.
Thank you.
Alright. Please go ahead.
Okay operator.
You still have one more question left for the fourth Jpmorgan Nicoletta.
Okay.
Our next question again is from Nick Lai Your line is open.
Okay.
Any.
Yes.
Hello, Yes.
Okay.
When you ask the question very briefly.
Okay.
Two questions quickly one is on the profit margin outlook and the second is on <unk>.
As quickly English and then translate in Chinese on the profit margin Indeed, greater you saw in third quarter.
To first half next year, how should we feel CEO upon the probability considering plastic and potential industry headwinds on the positive side P. Five should contribute to meaningful bonus and <unk> launched a lot of component with Q3. So that's the.
Sure.
Efficiency can but on the same time, we have important implement material price hike and also <unk> have your board poppy margin that could be margin dilutive as we sell more <unk> into first half next year.
That's a first question on margins in the second Q milestone considering the transport market, how should we think about the multi year run rate.
Ciena is fully ramped up.
Is it fair to compare Chee Meng with comparable peers.
Nielsen is equal.
Maybe the <unk> product.
Finally, once again I'm going to just take a yoga.
We'll get that million starting to fade.
Citigroup.
I mean, there's so many issues that come along.
If I can cheat sheet piece I'm gonna component in Q3.
Got it.
Efficiency gain.
So Jim Kieffer I've had that nobody competes in Shanghai.
Hitachi to Maggie.
<unk> massively multiplayer weekend.
It depends who the Shelton, who did the telecom keytruda so yes.
In South Africa, and very profitable.
Countries due to the shutdown.
I think so Neal.
Yes.
Tissue.
The balance sheet.
Hey, Nick This is Dennis let me address the after his question.
Regarding the margin as I mentioned previously.
Our quarter three margin improvement compared with quarter, two is primarily due to the.
Product mix improvement multifamily youre right going to react.
First quarter, we will deliver <unk> five and then the <unk>.
<unk> three <unk> III volume will be better than the old model. So.
That mix will have.
The impact I mean, the <unk> seven.
Percentage in terms of total sale would reduce but having said that we are.
Actually in our future partner include India G. <unk> for the future model, we will have better margin than for example, a bigger car we have seen a better margin for your future models to account.
Yeah near term.
The impact due to the mix change by going to our next CEO, we will actually Wuxi more good news from the better product mix, including the new product introduction.
No no.
Nick It's Brian.
Again.
No forecast on Jeannine, Unfortunately, but I just wanted to tell you that we are very confident that <unk> will be.
Flagship product.
Deliver I think.
Similar to our top selling models.
For a number of reasons first of all the <unk> is positioned and sized more similar to Es. Six then yesterday. So the addressable market is actually much bigger secondly.
Secondly, upon the launch of <unk> at the time, you will offer superior.
Our capability in a number of areas in terms of autonomous highly.
Capable of driving capabilities as well.
Charging capabilities.
Leading electric architecture.
Components for up at a much faster.
Upgrades et cetera. So we think it will be probably one of the most.
Technologically superior product coupled with.
No the.
Attractive design and also by then a leading.
Infrastructure Opex on network. So we're very actually confident that we will achieve.
Strong debuted and also to be know that <unk> is designed for the global market and so that product only will be sold in China. They also be designed and sold in international markets and was Europe, specifically in mind. So I think we think that this is gonna be a very important product.
We'll expand going forward.
Thank you Brian from two things.
There is no further question at this time you may continue.
Yeah.
Okay.
Thank you once again for joining US today. If you have further questions. Please feel free to contact <unk> Investor relations through the contact information provided from our website or the Pearson group Investor Relations.
This concludes today's conference call you May now disconnect. Your line. Thank you.
Okay.
[music].