Q3 2021 Cango Inc Earnings Call

Good morning, and good evening, everyone welcome to Congo's Inc's third quarter 2021 earnings conference call. At this time, all participants are in a listen only mode.

Speaker 1: Good morning and good evening everyone. Welcome to Congo's Inc's third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. The call is also being broadcasted live on the company's IR website.

It's also being broadcast live on the company's IR website.

Joining us today are Mr. Jin Yan Lin Chief Executive Officer, and Mr. Michael Zhang Chief Financial Officer of the company. Following management's prepared remarks, we will conduct the Q&A session.

Speaker 2: Joining us today are Mr. Ji Yan Lin, Chief Executive Officer, and Mr. Michael Zhong, Chief Financial Officer of the company.

Speaker 3: Following management's prepared remarks, we will conduct the Q&A session.

Before we begin I refer you to the Safe Harbor statement in the company's earnings the company's earnings release, which also applies to the conference call today.

Speaker 4: Before we begin, I refer you to the Safe Harbor statement in the company's earnings release, which also applies to the conference call today, as management will make forward-looking statements.

Management will make forward looking statements.

Speaker 5: With that said, I am now turning the call over to Mr. GM Lin, CEO of Kengo. Please go ahead.

With that said I am now turning the call over to Mr. G M. Mr. D. M N T O Kangas. Please go ahead Sir.

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Speaker 7: Hello, everyone, and welcome to the Congress 3rd Quarter 2021 underuggNING's court

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Speaker 10: As the world's largest car consumer market, China's car market is at its peak. Since the end of the third quarter, domestic car sales have fallen by a record number of times in the past few months. Under the double effects of the pandemic and the economic downturn, consumer demand has been weak, especially in the downtown market.

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Speaker 11: The ongoing shortage of automotive tips and other key auto components continues to severely restrict global car production and sales in the third quarter. In addition, a resurgence of the COVID-19 pandemic in Southeast Asia caused widespread production cuts and temporary shutdowns among global automakers, delivering a serious blow to auto supply in the second half of 2021. As the world's largest automotive consumer market, the Chinese car market wore the brunt of these disruptions.

Our researchers don't stay of Covid, 19, pandemic, India Southeast Asia coastal widespread production cuts and temporary shutdowns among global automakers delivery a serious blow to our total supply in the second half of 'twenty, one afterwards largest automotive or consumer market. There are Chinese car market, Florida.

Round of decent disruption as of the end of the third quarter of domestic car production itself have declined year over a year for several consecutive months given the effects of the epidemic and gd economic downturn, because it seemed like the mounties very weak, especially in lower tier markets to enter the auto market shows.

Speaker 12: As of the end of the third quarter, domestic car production itself has declined year over year for several consecutive months.

Speaker 13: Given the dual effects of the epidemic and the economic downturn, consumer demand is very weak, especially in lower-tier markets, and the auto market shows a pattern of weakness in both supply and demand.

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The tough market conditions, who are broadly consistent with our expectations and impacted our third quarter call.

Speaker 19: The tough market conditions were broadly consistent with our expectations and impacted our third quarter business accordingly. Nevertheless, we achieved total revenues of RMB801 million in the third quarter, beating our guidance. Revenues from our card trading transaction business were RMB429 million, accounting for nearly 53.6% of total revenues.

Nevertheless, we achieved total revenues of RMB 881 million in the third quarter, beating our guidance revenues Osama like car trading transaction. This isn't us well RMB 429 billion, a kind of a million accounting for nearly 53, 6% of total revenue.

Years, seven years or from our automotive financing facilitation and after market services, especially location doesn't exist well I'm be at 267 million and RMB 43.43 million, respectively, and tell yourself that bottom line net loss was that I B 400.

Speaker 20: Revenues from our automotive financing facilitation and aftermarket services facilitation businesses were RMB$267 million and RMB$43.43 million, respectively. In terms of the bottom line, net loss was RMB$417 million due to the fair value change of our investment in Li Auto.

A net 17 million due to the fair value change of how well that's mainly alcohol.

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Speaker 22: Thank you for watching.

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Speaker 24: In the third quarter, the company's M1 and M3 car loan expectations were 1.58% and 0.76% respectively, which was slightly lower than the previous quarter.

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And Oh, what's the core business, that's the challenging market conditions, most directly impacted our automotive financing facilitation business give us sufficient cost supply because he was a wait and see attitude and a falling cost of the company facilitated the financing transactions totaling RMB 6200.

Speaker 25: Among our three core businesses, the challenging market conditions most directly impacted our automotive financing facilitation business, given insufficient car supply, consumers' wait-and-see attitude and falling car sales. The company facilitated financing transactions totaling RMB 6,211 million in the third quarter, down 20 percent quarter over quarter. The total outstanding balance of Cango facilitated financing

The 11 million in the third quarter down 20% quarter over quarter. The total outstanding balance of like Tango facilitated fan I think transactions was RMB 47955, 7 million as of September 30th tiny tiny one other thing.

Speaker 26: transactions was RMB $47,955 million as of September 30, 2021. At the same time, asset quality remained under pressure as of September 30, 2021. Our M1 plus and M3 plus overdue ratios had increased slightly, quarter over quarter, to 1.58% and 0.76% respectively.

Asset quality remain under pressure as of September 30th 'twenty, 'twenty, one hour and oneplus and mm three plus overdue ratios have increased slightly quarter over quarter Q1, plus five 8%.

And thereby seven 6% respectively.

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Speaker 27: In the face of external environmental tests, the company has taken the initiative since the end of the second quarter to adjust the team and business structure and focus on strategic business development to cope with the huge changes in the industry.

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Speaker 28: In the third quarter, we will re-create the model and optimize the process.

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Speaker 31: and improve the efficiency of the sales team by providing a variety of solutions and self-service services to customers, making the entire transaction process faster and smoother.

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Speaker 32: a series of adjustment measures have been implemented. In the third quarter, although the overall size of the host country has decreased, the single-army capacity has increased.

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We have to respond in a proactive way to do say external challenges since the end of the second quarter by optimizing our team and it doesn't have the structure and concentrating our sticky business development well the automotive financing facilitation business, which is still under pressure in the third quarter, we optimized our south.

We have responded proactively to these external challenges since the end of the second quarter by optimizing our team and business structure and concentrating our strategic business development. While the automotive financing facilitation business was still under pressure in the third quarter, we optimized our sales team's organizational structure and focused on stimulating each salesperson's output.

Teams, the organizational structure and focused on stimulating H south person its output.

At the same kind of we introduced the tools to empower both our dealership network and self paying Kengo go plus our wechat mini programs are Cabelas, Oh first validate and I've got a quick reference to cause stuff call bias, that's improving their service efficiency and ability to retain customers tend to go plug.

At the same time, we introduced the tools to empower both our dealership network and sales team. CanGo Go+, our WeChat mini program for car dealers, offers our dealers a quick reference tool to serve car buyers, thus improving their service efficiency and ability to retain customers.

Tango Go Plus also provides car buyers with a variety of financing solutions and self-service options, which in turn greatly improves our sales team's efficiency, facilitating the entire car purchasing process.

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This series of adjustments has begun to produce positive results. In the third quarter, although the overall scale of automotive financing facilitation business declined compared with the previous quarter, the average amount of financing per transaction increased.

Possibly if it results in the third quarter, although the overall scale of our automotive, finishing facilitation business declined compared with the previous quarter. The average amount of a financing approach has actually increased.

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We have maintained a stable development pattern in the high-end brand and second-hand vehicles.

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The tunnel structure has been further optimized, the passenger volume has been further increased, and the profitability has been further improved. As of the end of the third quarter, the total number of car dealers in the Canggu network is 47,718, of which CS dealers are 10,317, and luxury brand dealers are 776.

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Notably, although the decline in new car sales affected the overall automotive financing facilitation business, we maintained a stable growth in the high end and he used to cost segments. As we further optimized our dealership network structure customer quality also improved without any increase their profits.

Notably, although the decline in new car sales affected our overall automotive financing facilitation business, we maintained a stable growth in the high-end and used car segment.

As we further optimized our dealership network structure, customer quality also improved, resulting in increased profitability. By the end of the third quarter, we had covered 47,718 car dealers throughout China, of which 10,317 were 4S dealers, including 776 luxury brand dealers such as BB8 plus Lexus. We also continued to network with large-scale dealer groups during the quarter and recorded two new strategic partnerships.

Ability by the end of the third quarter, we had covered 47718 car dealers throughout China of late.

10217, with forest or dealers, including 776 are luxury brand to dealers such as baby a plus Alexis.

Hopefully continue to in network with the largest scale of Zillow groups going they're codex Hanmi recorded two new strategic partnerships.

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In fact, many years ago, when Cancun was just founded, we used car finance as a cutting point and gradually expanded to the entire car industry chain. Now, the car industry is undergoing a major change.

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The auto industry has faced unprecedented challenges in recent years due to the weak economy and the ongoing pandemic, although it with colleges Hum opportunities linked Henkel was founded over a decade ago, we started towards the automotive for financing facilitation business and enter two eventually.

The auto industry has faced unprecedented challenges in recent years due to the weak economy and the ongoing pandemic. However, with challenges come opportunities. When CanGo was founded over a decade ago, we started with the automotive financing facilitation business and aimed to eventually expand into the entire auto industry chain.

Got it into the entire auto industry change.

Today, the auto industry is under dramatic challenges and changes, including the rise of NEVs prompted by the greater technological developments, the shifting role of the dealership network in the era of oversupply and increasing consumption upgrades, all of which have led to growing customer demand for elevated auto-related services.

The auto industry is I'm not dramatic I'm kind of just on the changes, including the write off of an EV is prompted by D. A greater technological development. The shifting of the dealership network aimed at Ara for oversupply and increasing consumption upgrades honestly could have led to growing customer.

Backing out for elevated auto related services.

Evolution has inspired us to accelerate our efforts and our transformation into a comprehensive automotive for transaction services platform to consolidate holiday.

This evolution has inspired us to accelerate our efforts in the transformation into a comprehensive automotive transaction service platform to consolidate our dealers through car trading transactions and empower our dealership network with the integrated auto supply chain services.

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This quarter, we are pleased to see that our car transaction business has made greater progress.

This year, at the end of May, we launched a B2B small program aimed at automotive retailers, Cangu Haoche, which aims to provide a step-by-step transaction, logistics, finance, insurance, and other automotive information-related services for automakers. As of the end of the third quarter, the number of Cangu Haoche partners has reached more than 5,700, covering 31 provinces.

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283 cities, 74 cars, 12 brands.

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Since the launch of the small program, the number of views has exceeded 1.5 million, and the number of domestic car manufacturers has fallen by 20%.

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in the third quarter. We have built 108 warehouses in cooperation with the infrastructure service providers, covering more than 1.5 million square meters. We have built more than 1.5 million warehouses in cooperation with the infrastructure service providers, covering more than 1.5 million square meters.

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shortening the logistics radius of the lower city market and improving the traffic efficiency of vehicles.

We're very pleased to see that Alex Hi, trading transaction, because they've made significant progress in the third quarter or the end of May we launched a tango how to a better be wechat mini programs, which should provide us with a one stop transactions logistics finance and insurance.

We are very pleased to see that our car trading transaction business made significant progress in the third quarter. At the end of May, we launched the Kangoo Haoche, a B2B WeChat mini-program, which provides dealers with a one-stop transaction, logistics, finance, insurance and other auto information-related services.

And the other auto inflammation related services.

So at the end of the third quarter, Tango Haoche had more than 5,700 dealer partners, covering 283 cities in 31 provinces, and included 74 self-operated car models from 12 brands and 27 car series.

At the end of the third quarter Tango, how churn has more than 5700 dealer partners covering 283 cities in 31 provinces and they included 74 self operated car models from our 12 brands and their 27 cause serious.

Since its launched Tango, how China has amassed over $1 5 million clicks and their proportion of the active car dealers has reached a 20% demonstrating and obvious increase in dealer stickiness.

Since its launch, Kangoo Haotue has amassed over 1.5 million clicks, and the proportion of active car dealers has reached 20%, demonstrating an obvious increase in dealer stickiness.

We also further consolidated our support of your warehousing and logistics capabilities. During this quarter as of the end of the third quarter. We had operated with the infrastructure service providers to establish a total of 108 warehouses coverage. It is nice cities across the country, thereby shot.

We also further consolidated our supporting warehousing and logistics capabilities during this quarter. As of the end of the third quarter, we had operated with the infrastructure service providers to establish a total of 108 warehouses covering 89 cities across the country, thereby shortening the logistics radius in the lower-tier markets and improving vehicle transaction efficiency.

To name their logistics radius in the lower tier market and improving their coach transaction efficiency.

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In the integration service, the good car platform integrates small and medium-sized car manufacturers to diversify the needs of drivers and improve their information and communication.

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to achieve high-efficiency vehicle transfer, reduce customer loss. The non-exhibition business is to provide low-guaranteed amount of multi-brand exhibition vehicles to provide low-cost, flexible exhibition, so as to attract more customers.

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Of particular note, Tango Haoche launched two new services in the third quarter, which are pairing and vehicle display, both of which gathered positive feedback from the dealers. Our pairing service integrates the diverse inventory demand of small and medium car dealers, thereby improving information exchange and sharing, allowing more efficient vehicle allocation and reducing customer charge.

And the medium cardenas, thereby improving information exchange and as Sherry.

More efficient vehicle applications and reducing customer trials.

Vehicle display service provides a high quality set of ideas with a wide variety of a display vehicles at a low cost to help them economically attract and retain customers.

The vehicle display service provides high quality certified dealers with a wide variety of display vehicles at a low cost to help them economically attract and retain customers.

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China's economic model of shipping and transportation as a means of creating and operating private traffic has made significant progress this quarter. Based on the existing base plate, the coverage of two metropolitan provinces, Henan and Shandong, has been added this quarter. At present, the economic network has covered 12 provinces nationwide.

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Since the end of the quarter, Canghu has had more than 19,000 registered managers and 830 branch dealers. In the current shortage of traffic, we have launched sales and exchanges of new energy vehicles and second-hand blue oil vehicles in the form of pure vehicles or vehicles plus financials.

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In terms of a Catholic acquisition, we made significant progress in the third quarter with L. A independent sales reps initiative, which functions as a tool for that I think and the operating and private traffic.

In terms of traffic acquisition, we made significant progress in the third quarter with our independent sales reps initiative, which functions as a tool for directing and operating private traffic.

Spend it all on that was to cover 12 provinces nationwide.

We expanded our network to cover 12 provinces nationwide, adding two additional popular sub-provinces, which are Henan and Shandong provinces.

Thank you any additional popular said provinces, which are unknown and the Shandong Province.

The end of the quarter, we had more than 19000 Paas highway traffic port and that you saw that the sales reps and the 800 and that's that is something that we also conducted a successful pilots public program well then our existing public traffic pork involving kind of only.

As of the end of the quarter, we had more than 19,000 private traffic poor.

30,000 sales reps and 830 sub-dealers.

We also conducted a successful pilot program within our existing private traffic port.

involving card only and card plus financing transactions.

And Ah Ha plus financing transactions. The program to include itself and the delivery of both the Nev and is the traditional feel vehicles for me a close to operational and realizing products traffic monetization.

The program included sales and delivery of both MEVs and used traditional fuel vehicles, forming a closed operation loop and realizing private traffic monetization.

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After trials and improvements over the past few quarters, car transactions have gradually become more stable, and have become more compatible with our financial insurance and other business blockchains. A series of data has verified the correctness of our business logic.

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Our goal is to build a more open platform, on the one hand, to help...

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On the other hand, we can provide quality and branded car consumption to the end consumer of the lower market by providing the last kilometer of logistics, financial, insurance, and other supply chain services to small and medium-sized retailers.

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After Charles and advancements during the past few quarters, our car trading transactions business has gradually stabilized and have formed or finishes with all our financial and insurance business sectors.

After trials and advancements during the past few quarters, our card trading transactions business has gradually stabilized and formed synergies with our financial insurance business sectors.

where solid data affirms our strategy's effectiveness.

We have solid data our friends, our strategies effectiveness and our goal is to build an open platform to help the Oems to increase their marketing and self service channels penetration in the lower tier markets.

Our goal is to build an open platform to help OEMs increase their marketing and self-service channels penetration in the lower tier markets, empower medium and small dealers with supply chain services such as vehicle sources, warehousing, last mile logistics, finance and insurance and ultimately provide end users with high quality branded car consumption services.

Our need and I'm not smart enough with our supply chain services, such as our vehicles surface warehousing last mile logistics finance and insurance and ultimately provide to end users with a high quality branded card consumption services.

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The third quarter, our insurance direct sales team acquired 1,249 new open-source air-conditioning and maintenance outlets. At the same time, we have already started formal cooperation with the new energy manufacturers

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In terms of mutual benefits, insurance service small programs been implanted into

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Thanks to the excellent performance in the service channels, Fushun, an insurance economy company under Canggu, won the supply chain service award in the 2021 Qipei Supply Chain Star Award selection in September .

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Last but not least let's talk about our aftermarket services facilitation business.

Last but not least, let's talk about our aftermarket services facilitation business.

Third quarter Allied threats of insurance sales team explored a collaboration with a lifestyle that 249, new auto trade and I mentioned. This is stuff. We have also officially come off their cooperation with an EV manufacturers Lee Alto and the high fine and are working to in batches.

In the third quarter, our direct insurance sales team explored collaborations with 1,249 new auto trade and maintenance stores.

We have also officially commenced cooperation with the NEV manufacturers Li Auto and Hi-Fi and are working to embed the Kangoo Insurance Service Portal in this brand's car owner app.

They can go and ensures their service portal in this branch count well not apps, which is expected to be completed in December for them. All it depends is the integration of our insurance business without our other sectors to join a contract there.

which is expected to be completed in December .

Furthermore, we deepened the integration of our insurance business with our other sectors during the quarter. The combined car plus insurance sales transactions began to materialize, strengthening insurance's connection to our car trading transactions business.

Combined comp plus Asia, South transactions began to materialize Stephanie insurance is connection to a car trading transactions business.

We have also embedded our insurance service portal in our CanGo Go Plus dealer tool to link insurance services with our automotive financing facilitation business and created customized insurance products for forest group dealers.

We have only embedded our Asia service portal and all I can go go plus Dana tour to a linked insurance services without like automotive financing facilitation business and of course, it is customized to insurance products for Forest Group Dana.

Thanks to its outstanding performance in dealership networking services, Fushun, our subsidiary insurance company, won the Service Star in Supply Chain Award at the 2021 Auto Parts Supply Chain Golden Star Awards in September .

Two is that outstanding performance and dealership network and service for our subsidiary insurers comedy London. So they just die a supply chain award at the <unk> 2021 auto parts supply chain go to start I was in September.

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We expect that the shortage in the automotive market caused by chip supply issues will not be eased in the short term, or will continue to exist.

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At the same time, under the background of continuous anxiety in the entire industry, new energy car sales are rising, gradually becoming the mainstay of the car market. As a firm partner in the new energy car industry,

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Jewish in Luna and she's a whole U E Z that agenda.

Tuesday these aren't she stood a sunday towards resort town, who you shouldn't oriented which is on the hook.

In addition to the strategic investment in Ideal Automobile, TANGU's cooperation with XINENGYUAN's main factory has penetrated the entire automotive transaction service platform business. The products for car transactions, finance, insurance, and other automotive-related services are unmatched. At present, TANGU has developed a deep cooperation with XINENGYUAN's XINENGYUAN brand including Ideal, Xiaopeng, and Jixing.

100 <unk>.

Okay.

Yeah, So Joe Juno balls, you just you talk she's a jumbo food attempting Judah woeful Louisville would you tell them, who you bulk all these young shop home gyms, I need a human ramping back down kind of some beautiful.

We expect the market disruptions caused by the chip shortage to carry into your nextgen against all odds and despite persistent pause this time for pervasive anxiety in the auto industry.

We expect the market disruptions caused by the trip shortage to carry into next year. Against all odds and despite persistent pervasive anxiety in the auto industry, NEVs are gaining traction and gradually becoming a key market player. Tango is a firm supporter of the NEV industry.

It is gaining traction and are gradually becoming a key market player Penguin is a firm supporter of the nev industry. In addition to our strategic investments in the Alto, we have a seamlessly integrated and easy manufacturers into our entire automotive trading service platform.

In addition to our strategic investment in Li Auto, we have seamlessly integrated NEV manufacturers into our entire automotive trading service platform, including automotive transactions, financing, insurance, and other automotive products.

Including automotive for transactions financing insurance and other automotive products to date, we have established an in depth cooperation with Ali I'll talk expand Amjad postop.

To date, we have established in-depth cooperation with Li Auto, Xpeng and Polestar.

Yeah.

Yeah, Joe you're engine the G G suite.

Well, we're in junk tissue Jesus isn't going to end up being Julien who come who didn't meet those agenda, where you got total woman that's under a mobile what Don was a woman. She said Joe you for being here.

We will continue to improve our agility and anti-risk capabilities in the self-supply chain, and we will continue to move steadily towards our strategic goals, improving our automotive transaction service platform ecosystem.

G Shufu.

continue to be rich in products that start from the needs of users and go around car transactions, car finance, and car after-market services to make selling cars easy, not difficult, and make buying cars simple and enjoyable.

As usual well, we'd all to a joy to a general who took who says all the time.

Not much hope without gender Lama George.

Well continue to improve our agility and reduce the risk throughout our supply chain ecosystem as we navigate the tough economic or the industrial environment. Meanwhile, We're also continuously refine our car transaction services platform ecosystem.

We will continue to improve agility and reduce risk.

throughout our supply chain ecosystem as we navigate the tough economic and industrial environment.

Meanwhile, we will also continuously refine our car transaction services platform ecosystem and enrich our customer-first product matrix.

Rich our customer friendly product matrix, including car train transactions automotive financing for certification and after market services facilitation as we strive.

including car trading transactions, automotive financing facilitation and aftermarket services facilitation, as we rapidly strive toward our strategic goal, which is making the selling and buying of cars simple and enjoyable.

Strive toward all watch it as you go which is making the selling and buying of costing quite enjoyable.

Sure sure Uhm, Minnesota.

Like your woman associates, have one tongyong heat like K H that engy to the TI.

Don't eat like we push a who says that when you do that.

Next I'd like to turn the call over to our Chief Financial Officer, Michael Joe for a review of the company's financial performance.

Next, I will turn the call over to our Chief Financial Officer Michael Zhang for a review of the company's financial performance.

Okay.

Thanks, Julia Hello, everyone and welcome to our third quarter 2021 earnings call.

Thanks, Jiayuan. Hello, everyone, and welcome to our third quarter 2021 earnings call. Before I started to review our financials, please note that unless otherwise stated, all numbers are in IMB terms and all percentage comparisons are on a year-over-year basis.

Before I started to review our financials. Please note that unless.

Otherwise stated all numbers I RMB terms and all percentage comparisons are on a year over year basis.

Despite ongoing uncertainty due to the global chip shortage.

Despite the ongoing uncertainty due to the global chip shortage, our third quarter results demonstrate the flexibility and resilience of our business model.

Our third quarter results demonstrate the flexibility and flexibility and resilience of our business model.

We recorded total revenue of 800.6 million outperforming our previous guidance.

We record a total revenue of $800.6 million outperforming our previous guidance.

Looking at the performance of our three core businesses in the third quarter, revenue from our car trading transactions were $429.2 million, continuing to serve an important growth driver.

Looking at the performance of our three core business in the third quarter revenue from our car trading transaction with $429 2 million continue to serve an important growth driver.

Revenue has grown autumn automotive financing facilitation and after market services facilitation where to solve them.

Revenues from automotive financing facilitation and off-market service facilitation were $266.5 million and $42.7 million respectively.

What what what 260 615 million and $42 7 million respectively.

Now, let's move on to our cost and expenses during the quarter.

Now let's move on to our costs and expenses during the quarter.

Total operating costs and expenses in the third quarter of 2021 were $839.6 million compared to $300.4 million in the same period, 2020. This was mainly due to the related costs incurred by car trading transaction business.

Other operating costs and expenses in the third quarter 2021 eight.

839 point.

6 million compared to $300 4 million in the same period 2020, just one mainly due to.

The related costs are incurred by car trading transaction business.

Primarily as a result of the increase in revenue from car trading transaction sales and the marketing expenses.

primarily as a result of the increase in revenue from card trading transactions.

Sales and marketing expenses, general and administrative expenses, and research and development expenses each decrease as a percentage of total revenue.

They're all in administrative expenses and research and development expenses each decreased as a percentage of total revenue.

In the third quarter of 2021.

Cost of revenue in the so called out 2021 increased to 610.

Cost of revenue in the third quarter of 2021 increased to 610.5 million from 180.9 million in the same period 2020. As a percentage of total revenue, cost of revenue in the third quarter of 2021 was 76.3% compared to 41.6% in the same period 2020. And the change was primarily due to

One 5 million from $180 9 million in the same period 2020.

Percentage of total revenue cost of revenue in the third quarter of 2021 was 76, 3% compared to 41, 6% same period of 2020.

And the change was primarily due to.

And an increase in the amount of car trading transaction.

Well automotive.

for automotive transaction financing facilitation services.

Financing costs and occasionally it gives you.

Yeah.

Okay.

Automotive was done at.

Automotive.

Okay.

Pardon me, ladies and gentlemen, it appears we have lost connection to our speaker line. Please standby as we.

Pardon me, ladies and gentlemen, it appears we have lost connection to our speaker line, please stand by as we reconnect. We thank you for your patience.

<unk> reconnect we thank you for your patience.

The.

[music].

Okay.

[music].

Pardon me, ladies and gentlemen, it appears that we have reconnected the speaker line. Mr. Shah You May proceed with your conference.

Pardon me, ladies and gentlemen, it appears that we have reconnected our speaker line. Mr. Zhang, you may proceed with your conference.

Great. Thank you operator.

Uh huh.

Cost of revenue in the third quarter of 2021 increased to $610.5 million from $180.9 million in the same period of 2020. As a percentage of total revenue, cost of revenue in the third quarter of 2021 was 76.3 percent compared to 41.6 percent in the same period of 2020.

Cost of revenue in the third quarter, two southern tier one increased to $610 5 million from 189 million in the same period of 2020.

Percentage of total revenue hostile revenue third quarter of 2021 was 76, 3% compared to 41, 6% same period 2020 and.

The change was primarily due to an increase in their bulk of car trading transaction.

and the change was primarily due to an increase in the amount of card trading transactions.

For automotive financing facilitation and off market services facilitation, cost of revenue as a percentage of relevant revenue was around 40.1% in the same period 2021.

Automotive financing something to change here in the off market services facilitation.

Revenue as a percentage of relevant revenue was around.

41% in the same pure 2021.

Sales and marketing, especially against a record of 2021 were $46 8 million compared to $41 9 million in the same period 2020.

Sales and marketing expenses in third quarter 2021 were 46.8 million compared to 41.9 million in the same period 2020. As a percentage of total revenue, sales and marketing expenses in the third quarter 2021 was 5.8% compared to 9.6% in the same period of 2020.

A percentage of total revenue sales and marketing expenses in the third quarter 2021 was five 8% compared to nine 6% in the same period of 2020.

General and administrative expenses in the third quarter of 2021.

64 million compared to $52 2 million in the same period of 2020.

As a percentage of total revenue general and administrative expenses in the third quarter of two southern tide here, one was 8% compared to 12% in the same period of 2020.

Research and development expenses in the third quarter of 2021 were $17 4 million compared to $14 2 million in the same period of 2020.

As a percentage of total revenues research and development, especially the third quarter of 2021 with two 2% compared to three 3% in the same period of 2020.

As a percentage of total revenues, research and development expenses in third quarter of 2021 were 2.2% compared to 3.3% in the same period of 2021.

Net loss, our reinsurance liability in the third quarter of 2021 was $55 5 million compared to a net gain of $12 9 million in the same period of 2020.

We recorded a loss from operations of 39 million in the third quarter 2021, compared to net income of $134 5 million in the same period of 2020.

We recorded loss from operation of $39 million in the third quarter of 2021 compared to an income of $134.5 million in the same period of 2020.

Due to the fact that the change of the company's investment in auto net loss in the third quarter of 2021 was $416 5 million non-GAAP adjusted net loss in the third quarter 2021 was 392 five minutes.

Due to the fair value change of the company's investment in Li Auto, net loss in the third quarter of 2021 was $416.5 million. Non-GAAP-adjusted net loss in the third quarter of 2021 was $392.5 million.

On a per share basis, diluted net loss per ADS in the third quarter of 2021 was 2.88 and diluted non-GAAP adjusted net loss per ADS in the same period was 2.72. Moving on to our balance

On a per share basis diluted net loss per se.

Third quarter of 2000 tons year, one was 2.8 and diluted non-GAAP adjusted net loss for the same period was $2 72.

Moving onto our balance sheet.

As of September 32021, we had cash and cash equivalent of.

30, 2021, we had a cash and a cash equivalent of $906.4 million compared to $1.5 billion as of June 30, 2021.

100, and a $6 4 million compared to $1 5 billion as of June 32021.

As of September 32021, the company had short term investment of $3 6 million compared to $3 2 billion as of June 32021.

As of September 30, 2021, the company had a short-term investment of $3.6 billion.

compared to $3.2 billion as of June 30, 2021.

Compared to a $3 2 billion as of June 32020.

compared to 3.2 billion as of June 30, 2021.

Looking ahead to the fourth quarter of 2021, we expect our total revenue to be between.

Looking ahead to the fourth quarter of 2021, we expect our total revenue to be between

$950 million and 1 billion. Please note that this forecast of a threat in our current and preliminary views on.

$950 million and $1 billion. Please note that these forecasts reflect our current and preliminary views on the market and operational conditions, which are subject to change. This concludes our prepared remarks. Operator, we are now ready to.

The market and operational conditions, which are subject to subject to change. This concludes our prepared remarks, operator, we're now ready to the classroom.

Thank you.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the key.

If you are using a speakerphone please pick up your handset before pressing the keys.

If at any time in your question that's been addressed I mean, we'd like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time we will pause momentarily to assemble our roster.

Our first question will come from Shelley Wang of Morgan Stanley. Please go ahead.

Our first question will come from Shelly Wang, Morgan Stanley , please go ahead.

Oh go ahead, Bonnie can Polish Hamilton should they need that Shelley.

Hello, everyone. I'm Shelly from Morgan Stanley . I have three questions to ask. The first one is about the performance of the third quarter. As you said, the sales of the third quarter are almost doubled. But if you look at the gross profit, it seems to have dropped. May I ask which business has dragged this down?

Sandoz, Helen Zhang Kindjal, yeah, he's not just sure Bonnie. Thank you don't yet see that just seemed like it kind of sounds like the tissue you can show the hardship with home be shifts I'm Taylor, especially of course, you'll kind of mall lead off Hum just yet, but it won't be parsed that yellow to orange I shouldn't think of sheep gossiping, either you will get what I, though John.

Paul Gallagher She's always has to do with just one just a woman she didn't come kind of atone bond again shows you how you'll kind of Dol huge so it's all there and just your thought at that point for the QUADRA module General Yeah, I hope it sounds cool I got to tell you said your <expletive> in homepage.

The second question is about the growth of 4G. We can see that the retail market is in the mid-term. Have you seen the recovery of car sales? What is the speed of recovery?

And the third question, I would like to ask about the bank's support for car loans. Because I feel like, I'm just saying, because right now the bank's support for real estate is less here, so will they have more support for car loans? Have you seen this? Yes, these are my three questions. Thank you.

Kitchen, he thought you only tissue Sanjay Oh, thanks, Jacek anyway didn't send out in Japan.

And then just yet.

They didn't even know what time of whole blood, you'll find that show that should be in the second that you get your mill, Kyle I'll take that Jay.

Just your thoughts on that one piece just yet.

Or should it do you go when you don't hold when she was CFO Tony.

The first question, we will ask CFO Zhang Yongyi to answer it. I will answer the following two questions. One is about the recovery of retail vehicle sales. In terms of the industry, the situation has not improved.

Luckily the weight on your Humana, but when do you guys. You said things are done the cheetah as shown here with Jim Hall to hire a lot of countries and communities.

Aren't you knock on their door through call. It sounds like the coupon Reed switches to Joe could or couldn't do.

and then, enseclaves that are often occupied by real estate clients and brokers, vehicle-only routes new vehicles, and corrupt world real estate development programs.

Ginger machine to a shoulder doesn't one cultural shifts.

In machine to a show outthat is a point fution. So which I chine can to enray the 1, you do your quanjent. So this is how G tunnel the quanj and indust ES are sure the do of a Ser up CH, not. This is D to changing. Show out your kinds of to me.

Which is you can't undo the ones you really orange. It. She was this just hung on them. So.

This is on as usual.

June to June shows, how Youre cases, homebuilder, Zhang our CFO.

As the satisfaction of the public rises, the car sales of the fourth quarter may be affected.

And what you might do that you go through the she's oceano nobody was or diesel.

No quota system in a single country.

In terms of the company, after a few months of trial and error, our car trading business has gradually stabilized in this quarter, and we have formed a strong partnership between our car insurance and the business sector. A series of data has verified the correctness of our business logic, so the third quarter can maintain the expected growth.

T J woman's attitude yoyo, that's easy to.

<unk> Joshi to pushing what you them that you took bullshit.

But what suggestions in terms of what you should do the suit.

Launches of two new Jersey, so he's ante to creep up.

Sure.

So what you can to the single once you do it you can call it.

Third question, in a virtual economy quantitative situation, what is the central bank respond to?

These are young but she was a stoppage of jobs you can do it.

The accrual once was four two times and pay off all of the changes she's not wishing Paul since how long we all thought that she twist. It also does not.

herwhile. For you try impia, how a Chang she not the time fushing Ho is. How long are she choes So that in that may to engering the to on be such to in H see nine ding being so late up to uses versus applation to that am Ty.

Yeah to your engine the telephone spill such as a trundle unit homes actions are sound goosey Hitachi being so late.

It addresses the closest competition, who that's his ability.

To them.

The share that they look good so good that the gene for me the usual Hudson did you have one.

So, the impact on the fund of the whole vehicle fleet is still positive and optimistic.

So what's up with that one.

Oh, if that's if it's subject to the first question, which is about to be a recovery of a retail site itself. If you look at your the industry. The chip shortage continues to impact the entire auto industry. When you found out your leading to inventory.

I will first respond to the third question, which is about the recovery of the retail sales. If you look at the industry, the chip shortage continues to impact the entire auto industry. We found that leading to inventory depletion for OEMs and dealers and a drop in deliveries for car makers, both of which affect new car sales.

Inventory depletion for the Oems and the dealers and I ate job into the race car makers. Both operates it affects your cost off according to the official data the chip shortage has eased the slightly in the last quarter, because that supply capacity hasn't materially improved going into the.

According to the official data, the chip shortage has eased slightly in the last quarter, but the supply capacity hasn't materially improved, going into the fourth quarter a traditional season to drive year-end sales. Due to the ongoing supply shortage, we don't expect the dealers to enhance promotional measures.

The fourth quarter of a traditional season, so do I see yeah and house due to the ongoing supply shortage.

We don't expect the dealer has a promotional measures ah, but from the Companys perspective, thanks to our successful initiative for that over the past few quarters, our car trading transaction business is developing steadily during the third quarter.

But from the company's perspective, thanks to our successful initiative over the past few quarters, our card trading transaction business has developed steadily during the third quarter.

And the second question about the banks.

And to the second question about banks, is it easier to get...

Is it easier to adapt columns founder backs actually we have observed is that said there is a shifting of pet foods.

Actually, we have observed that there is a shift in the preference of banks in which asset targets that they hold. And now, turning from the property assets, banks are looking more and more into the automotive

Thanks.

Sure as it targets that it Howard.

Now turning from a the property assets banks that are looking more and more into the automotive.

Our current laws and actually how long has that have long been one of any important after the pockets of the banks. So overall be a car loan volume of banks that have the increases over the past few years and they went outside to optimistic and positive for getting them getting support in there.

car loans, and actually car loans have long been one of the important asset targets of the banks. So overall, the car loan volume of banks have been increasing steadily over the past few years, and we are quite optimistic and positive of getting support and loans from the banks.

From the back.

Sherri what I E.

Sherry, let me answer your first question. Regarding the relationship between income and capital, we can see that the most important driving force for the growth of our income in the third quarter is our car transactions.

We are glad you took a showroom gum ball either.

Why is she bought.

She's a pretty kind of dollar to go send you to a woman show Lou that you got cut.

So he told you all that you don't want easier, but I told you all U a E.

But from another point of view, the profit margin of our car transactions is very low. That is to say, although...

The one of the jobs what kinds of them the touch all your pension how do I think about you do spend on beta your daughter's arching quiet. So joggers, so sogou South Beach Union once you should adopter salsa dancer.

Compared to last year, the revenue of car transactions has risen significantly, but the contribution to gross profit should still be relatively small.

They bother you do about it of course, you got how does it just showed up and I'm just yeah I just saw a woman a shale.

Secondly, in terms of our current business, one of the biggest contributions to Maoli is the investment in automotive finance.

Country body.

Are you going to do about a two car she's a general but you've got to value that's it quite yet, but oh its home country.

Compared to the same period last year, there is a 15% increase in this business.

Okay, Sean between our countries reopening the chute zone.

Especially like closer to the one that you still want me they cut a dollar or a car that you got to go to yoga woman its home country hop off with food on the go and draw the toll charge and this is always challenging right yeah.

At the same time, we can see that due to the shift from customer groups and channels to the second-tier cities, especially the luxurious brands of CS stores,

Yeah, Oh occupied down that you could change Oh, what's that.

In such a business line, the total commission fee we give to the dealers is still a significant increase. So to a certain extent, it has a significant impact on the business of car financing.

Neither she's a woman to adult cigarette you can tell us on the down days yeah.

She has she or he questions where they go shopping center, so you're going to lose a pseudo too quiet.

She says general that's without Yoga mall, you suggest so with all of you draw a schedule that you all did you call yourself.

At the same time, we can also see that in our car market, insurance is the main source of business, which is also a very important one for us.

Posted up on the one way you could kind of do it yourself woman died gotcha.

So somebody just Russell Baalshem switching number two goodbye so yeah. So it ultimately all of that you've got.

As shown on television body, though you've got the Buck so as they play out with the Honda you always Philadelphia, you got a good design Institute.

of the third quarter. The third quarter's revenue from the car market has fallen significantly compared to the same period last year. The third quarter's revenue from the car market has fallen significantly compared to the same period last year.

Bosch and figure out are you sure don't want Macondo decided to you to allow you to host with quite so Sean between when she especially I think it'd be Josh you shouldn't think of a shot you are let's say quite a hard she was a good one but since you do that you come already.

This is actually a gain for us in the third quarter.

has also led to some signs of helping.

So it started as a tool that you all day.

a negative impact.

You got a humana.

So you are so close on switching won't care about here. So you saw a woman does he go solo two but you don't use what you just saw with the church. All you are telling me anyway, you'll be.

So, in the overall situation, the driving factor of our income is our car transactions.

Because Maoli is relatively low, the contribution of Maoli is not obvious enough. On the other hand, the two businesses that contribute the most to Maoli are

You talked about it.

Well nobody the coinsurance, you don't do a book, albeit number but I'm glad you're all doing well, but most of the.

So you got to be down.

Whereas it's her general the secret without you I should so horses, how about telling me he got all ships, which I you always see on those so Donna.

whether insurance lending of car finance or car market. He said, say, whether the total industry's budget Castro's had an increase in cost, value of our car affect enough to create a negative impact on AUSlight. So, among the above sorts of inflation, the result of these inflation

Yeah would you.

You go you call you guys said.

Yeah I just saw its home probably you've got somebody that's got a you've got you got you got you got you got you still are John She says those are three body types and he got a be jumping ship Eagle from Asia. So its own clubs. This year are you starting to tell me how much it or what but how did you do that you cut bodies.

Trisha I know you've got a.

It will reduce the demand to the customers with a great increase in roof roof housekeeping revenue.

Oh My Gosh you.

Got all cause mortality.

I would like to respond to the first of all a question of us shortly which is a lie in the third quarter of the revenue has almost doubled its yeah. Yeah. That's the idea yeah, yeah grocer.

I would like to respond to the first question of Shelly, which is why in the third quarter the revenue has almost doubled year on year, but the year on year growth of gross margin is negative. What is the business that is dragging down the gross margin? And I can provide a couple of explanations. First is if you look at our main business, which is the car trading transactions business, it is a low margin business, so even though the revenue of this business goes up very quickly in the third quarter, but its contribution to our margin is on the low side.

Gross margin if they're negative Oh, what is the business that is dragging down the gross margin and I can't provide you a couple of explanations, but if you look at sort of what my best naphtha, which is not a cartwright and transactions fitness.

Is a low margin business, so even though the revenue of this business goes up very quickly in the third quarter. That's a it's a contribution to our magic is that on the low side under the secondary explanation I D. A traditional drivers for gross margin.

And the second explanation, the traditional drivers for our gross margin is our...

Yeah, our automotives.

automotive financing facilitation business. If you look at this business, it has a 15% growth year-on-year. However, there is a shift in the business landscape, which is we found our customer base, as well as our channels, those dealers, are moving from a lower tier to a higher tier market, including tier 1 cities.

Automotive for financing facilitation business. If you look at this business. It has a 15% chance well see our yeah. However, there is a shifting end up isn't as the landscape, which is so it sounded like customer base as well as our channels that those peanuts and moving from a lower tier two are high.

T M markets, including tier one and a suitcase so a lot of our dealers that I endorse yet until once it is my name that we have to pay them more commission, which is leading to an increase in our cost of providing the automotive financing facilitation service.

So a lot of dealers are in those tier one cities, meaning that we have to pay them more commission, which is leading to an increase in our cost of providing the automotive financing facilitation service and has a significant impact on our gross margin.

<unk> has a significant impact.

Our gross margin and then the third explanation is pharma our after market services, which is a lot of thought and mainly by insurance.

And the third explanation is from our after-market services, which is led mainly by insurance and after-sale market.

Insurance and after sound markets.

Services are a source of our revenue and gross margin as well.

and services are a source of revenue and a gross margin as well.

But due to the third round of it with some of their insurance that opinion.

But due to the third round of reform of the insurance premium, the gross margin and the revenue from this part of the business also came down and it impacted our gross margin in the third quarter. So based on those explanations, even though you find the revenue, the total amount of revenue increased in the third quarter.

Our gross margin and the revenue if I guess, the part of US business also Ken gum and.

That impacted our gross margin in the third quarter. So based on those say ex mendacious, even though you're fine you go revenue I'm. The total the total amount of our revenue increased in the third quarter.

The business has structurally changed and our cluster goes up I don't want you to have our gross margin.

and the business structure changed and our cost goes up. That all eats up our gross margin.

Again, if you have a question. Please press Star then one.

Again, if you have a question, please press star then 1.

Yeah.

Our next question will come from David Pan with Goldman Sachs. Please go ahead.

Our next question will come from David Pan with Goldman Sachs. Please go ahead.

Okay.

Mr. Lin and Mr. Yongyi, congratulations again on the three-quarter performance. I have two questions. One is, as Mr. Yongyi mentioned, in the first generation business, there is a trend of moving from the middle-to-high-end to the first-to-second-tier. Can you provide some more columns, including the ratio of changes in the business structure?

And James on your Eagle.

No that's what ghansham.

What do you mean when.

You go through to get those on PE.

Only a few dollars.

Or you were talking about your good total knees and trusted commercially at all your central sure that John that you go to change either take what you should take note I'm shocked that she told me. She can go there to go kind of awkward Jacob.

We'll go to Alicia.

Yeah.

Oh, no doubt, whether you'd be willing to pay them the same value of acquired ones, reaching the CFO, John what do you wish.

The second question is about the news car business. What are the latest developments in our three major business sectors? Can you share some data and future initiatives?

Could you, but you can't I don't rely on any of these.

She initiatives knows what he said she said.

Uh huh.

Hello, everyone. Yongyi, please answer the question.

Oh, well, Okay, you Egypt with Archie.

With Asia.

Hi, David Oh.

David, let me answer your first question first.

Oh My God you do go into buses require use of Oh Gee.

She told US at home you got.

from the layout of the whole market, from the infrastructure of the lower-tier cities, to the core of the first and second-tier cities, especially some of the business development of luxury brand stores. This is mainly...

Put your box your tone shot him tons are the Tucson market.

Yes, yes.

It tends to go down this year, pushing a thought there tendencies, yet all walking about Denver TV, you'll put out by let's say with the hots young people at home.

One is from the perspective of the development of the entire carbon share, because we started from the low-carbon market.

You called out what you're going up in central Tulsa, but talking about the fact that Italian.

This is whole shutter some customer roster is a woman, but sometimes you don't she called out you've got about what sounds like what youre targeting.

However, with the cooperation with financial institutions and the further optimization of financial products,

That's where the gene for the Yokohama.

so that we have a CS shop in the core cities, especially some luxury brands.

We'll make it cheaper cheaper less young pushing our attention.

Oh, Yes, yes, yes gene.

So you can think about you know putting the downhill.

In addition, we can see that the market share of the SES store, which is a luxury brand in the core city, is still dominant in the entire Chinese car trade, including the car finance layout. So we can't give up this opportunity.

It's also the final one media truth to combat that.

Phone call and she said you all your ballpark to what she said a general that's you're on the go.

What you don't know what the mall Huntington's assessed it took the whole how can I take.

Hey, good uncle tied to that you can see from our industrial high surgery or you go to.

What I was saying that they want us to tell you because I thought you down there because without.

On the basis of this, we combine our own products and our team's progress to gradually expand in the field of this business. I think this is the first point.

That's a good piece was how much is the one which you hope which is sometimes seen that they don't think it would be at that time.

Gene pool, that's how they go why wouldnt be biopsy to.

Well the chunky.

Are you watching to showing the part I was always have just a D D.

The odds of the pharmacies, we cheer for adult woman Susan So whether you go for it on Toyota win I thought you've got somebody that's right you can find out it just won't be at all.

Secondly, it will be a very important strategic transformation for us in the future, which is to build a car trading and service platform. In the entire business development process of car trading, we are also concerned about building a network of perfect car trading and service,

So hopefully we can talk about them at that she's hurt you all either particular thing where you would put on pause until she was a woman wants with volatile way I'll call Jay you've got Oh, why it sounds like she's heard that y'all you called before they got work going on I'm going to go down drawing upon that she is.

But I think in any case, specifically, we learn a lot from SIL

Well good.

Sir Ballpoints you thought the whole hopping Barclays your thoughts surrounding close all our waste that she's only Godfrey told it's only out there you go.

Got you got you got you.

We feel that this is a very important link from the point of view of the supply chain and from the point of view of the whole service. So, based on what I just said, these two points are actually a business that we do as a whole.

Got you got you got you there, but what's your gut.

Most of the types of ongoing their high school at home so.

They're telling me he got to see what are the one that you got.

Two large alba the woman Oh, My God, you took that she said those legal fees for the year.

But that's the way that you called out is all about.

So the idea behind that so you don't see a woman a good sort of tell me, but yeah well.

Tore down you've got things like the cheapest.

to develop a basic business logic. I think this is the answer to your first question.

I wish I.

Wish you all the thing.

You go into Oh Gee CFO.

I wouldn't have thought it sounds good.

the first question, which is to give you more perspectives on the business extension from lower-tier cities to the higher-tier, like Tier 1, Tier 2 cities. If you look at the history of CanGo, we started our business in the lower-tier cities, but along with more collaborations with those financial institutions and our optimization of our financial-related products.

First a question for Richard.

But just to give you a martha M.

That business a business that extension from our lower tier cities. So the higher tier like tier one tier two cities. If you look at history Ah Ha can go away starting on my business and I have no idea if it is a.

Along with that more collaboration so once it goes to the financial institutions and our optimization of our last financial related products.

We are now extending our business and strategic layout to high-tier cities, and we are starting to work with luxury 4S dealers and other large-scale dealer groups.

Extending our business I'm just does it lay out still on a high tier cities and we are starting to work with a luxury for us that they love and other larger scale data.

So if you look at what would be a home market of automotive for financing and a car transaction market.

So, if you look at the whole market of automotive financing and car transaction markets, this market is basically dominated by the large-scale dealers groups and luxury for dealers.

This market is that basically are dominated by the larger scale of dealer groups and then luxury forest peanuts. So all on 100 and kind of like a perfect in our sales teams as well as our product matrix and on the other side you always thought to collaborate with that those are luxury it at a high.

So, on one hand, internally, we are perfecting our sales team, as well as our product matrix.

On the other side, we start to collaborate with those luxury and high-end and large-scale dealer groups.

And and a hot larger scale dealer groups and this is not one person that has gone and secondly is.

This is one perspective, and secondly, it is in line with our strategic intention for business transformation, because ultimately what we want to do is an automotive transaction and service integrated platform. To build that network, we have to work with those four dealers from luxury brands and large-scale dealers groups.

It is in line with our schedule and passion for our business.

Transformation, because that's ultimately what we're monitoring is a automotive her transactional and service integrated platform.

That's not what we have to work with the Doe shelf life peanuts from luxury brands and our largest guarantee that's good if you look at your desk for patch as well as their service I think their collaboration is such a big expansion is paramount and that now inevitable.

If you look at the supply chain as well as the service, I think the collaboration is such a business extension is paramount and inevitable. So this is our basic business logic for such an extension.

So this is our basic business logic for such an expansion.

Yes.

I would like to add that in such a business development process, as we all know, the competition is very intense in such a divided market.

Well harsh yard.

Sure this is tod.

Yeah.

Without that it's almost always is outside.

Sure.

Thinking she votes withheld downzone might take a bunch of gene designated aren't you did.

Say walnuts over you've got.

So as a newly joined service platform, in the process of corresponding marketing and other corresponding operating costs, it will indeed bring us a certain amount of benefits from the performance of finance, especially from the performance of main business costs and capital.

So she's Yahoo go down there you got a 14 Thai baht. So any thoughts that you can go shopping days, yeah think about getting a bump when she thought Asia China issue.

James I'm, sorry, it wasn't Giordano says don't chase liquid quite do what month.

I Hope you all share that business holds holds real jumbo home audio across yet we thought I did that.

Uh huh.

Churn bump.

Okay.

And I just want to add one more thing. You know that this is a very competitive segment, so as a relatively new service platform to enter into that segment, we do have to pay the marketing as well as the operation cost. So if you look at the short-term financial performance, this may drag down on our gross margin in the way that the cost of revenue will go up.

And I just want to add one more thing you know that this is a very competitive segment so as a reality.

Whereas if they knew who serve as a platform to enter into that segment.

We do have to pay on the marketing as well as our operation cost. So if you look at the short term our financial performance display a dropdown on our gross margin and in the way that the cost of our revenue will go up.

The only thing you called out one that the argument.

As for the second question you just asked, I would like to answer it briefly. We are very optimistic about the future prospects of the new-generation car industry. This is also a very important consideration for us to invest in ideal cars, and we are still holding 8 million ADS ideal cars, and we plan to hold them for a long time. At the same time, in terms of business,

Done it that way.

Oh, well not do it.

And she said I took away a lot of changes to the Gulf will call. So it is a woman change she culture shock. She taught us that a woman would change they're not C. O D shall she tau bye-bye speeches.

Yeah.

She said pushing as soon as she took you'll tell me if that's all digital talent vehicle, that's all posted up on that.

In fact, we not only have this kind of cooperation with Ideal Automobile, but also with small companies such as Xiaopeng, Biadi, Nezha, Aichi, Jixing, Beijing New Energy, etc., including Geely. These domestic major new energy automobile manufacturers are all involved in many categories such as transactions, finance, insurance, etc.

Yeah no.

So it's all.

Choosing humana anthem, a bulk what you'd Eva telling me you said you got one or two.

We are the challenges you're seeing in your end that she touched himself.

So Joey Juno, Boston, Washington, Bulking dogs.

Hello.

So, in this business layout, we have made a strategic focus layout. At the same time, we will continue to combine our entire transaction and service platform construction. We will also provide our services and cooperation to new energy vehicle manufacturers in low-end cities. Thank you.

So a woman she said.

Yep.

Oh My Gosh, it's all he got Johnny's God.

So when you put your boss closer to them.

We've got a whole huge at home and that's E O hoping that that's what it's all about Oh wait.

She touched on sometimes they're.

Yeah would you bought that you won't walk Magellan Basil.

The bulk of them that Jeremy.

So that's all.

Sure sure.

Yeah.

I'm trying to respond to your second question, Oh, we're very optimistic and I am positive on the Paas batch offer and EV market I didn't know where what it did play with Lee I'll talk Andrew we're still here.

And to respond to your second question, we are very optimistic and positive on the prospect of an EV market.

Each malicious 80 ask I'll finally, outdoor and our plan is to hold them for a long time.

and our plan is to hold them for a long time. Besides Li Auto, we're also a nationwide service partner and we cooperate with a lot of NEV brands, including Xiaopeng, BYD, Hongzhou, Aiways, Polestar, and Beijing EV, as well as other NEV vehicle models produced by Dongfeng DS, etc. So at present, our financing and insurance capabilities allow us to provide products and services to those NEV brands.

Besides the lead Alto well also.

And what sort of as a partner and a we cooperate with a lot of fun and easy brands, including Chopin BYD How's all I always post that and the Beijing E V as well as the other I E.

The vehicle models that produced that I don't want the assay et cetera, So I pass on to our financing and insurance capabilities allow us to provide products and services to those and EV manufacturers and I ran it not just scale and they start was just so we can also help those yet and E V. Manny.

So, at present, our financing and insurance capabilities allow us to provide products and services to those NEV manufacturers on a relatively large scale. And based on our strengths, we can also help those NEV manufacturers to better enter into the lower-tier markets.

Factors to better enter into the lower tier market, and then and based on our offline scenarios and our service network, we can empower them to acquire customers and to provide better services and those are lower tier markets.

And based on our offline scenarios and service network, we can empower them to acquire customers and to provide better services in those low-tier markets.

[noise] as we have no further questions at this time. This concludes our question and answer session.

As we have no further questions at this time, this concludes our question and answer session, which also concludes today's call. Thank you for attending today's presentation. You may now disconnect.

Also concludes today's call. Thank you for attending today's presentation you may now disconnect.