Q2 2022 Li Auto Inc Earnings Call
Hello, ladies and gentlemen.
Thank you for standing by for Lee orders second quarter, 2022 earnings conference call.
At this time all participants are in listen only mode. Today's conference call is being recorded I will now turn the call over to your host Janet song Investor Relations Director of Lee Auto. Please go ahead Janet.
Thank you Jason Good evening and good morning, everyone. Welcome Giuliano second quarter 2000 intended to earnings conference call. The company's financial and operating results were published in the press release earlier today, and our postpaid and accomplish I on that site.
Today's call, we have our president Mr. Kevin Yeah, No insurance and now our CFO Mr. Johnny Jellyfish begin with prepared remarks, our founder and CEO . Mr. Shao Lee will join for the Q&A discussion.
Before I continue please be reminded that today's discussion will contain forward looking statements made under the safe Harbor provisions update you as private Securities Litigation Reform Act of 1995.
Forward looking statements involve inherent risks and uncertainties as such.
Actual results may be materially different from the way you expressed today further information regarding risks and uncertainties is included in the circumstances of the company with the U S Securities and Exchange Commission and the Hong Kong stock exchange.
Les does not assume any obligation to update any forward looking statements except as required.
Pick up a law.
Please also note that <unk> earnings press release, and this conference call include discussions of unaudited GAAP financial information as well as an audited non-GAAP financial measures. Please refer to the Liard oats disclosure documents on the IR section of our <unk>, which contained a reconciliation.
<unk> update and audited non-GAAP measures to comparable GAAP measures with that ill now turn the call over to our President. Please go ahead Kevin.
Thank you Janet Hello, everyone and thank you for joining me on our call today I will review the key highlights of the second quarter and discuss our flagship Smart SUV Lee, Illinois, which has received highly positive feedback from family uses for its best in class combination of durability safety comfort.
<unk> intelligence.
We witnessed continue the consumer adoption of Evs in the second quarter, China's retail sales of new energy passenger vehicles surpassed 117 million during this quarter more than doubled year over year. According to the China passenger car Association.
Penetration rates climb into 27, 1% from 21, 8% in the first quarter. We believe it will continue to rise supported by more model launches continuous iterations of smart features and the increasing use of pressures for clean mobility.
We remain focused on offering state of art product to our family uses despite the challenges posed by the COVID-19 researches across city National White from March to May we delivered.
28687 vehicles during the second quarter.
Presenting a 63, 2% year over year increase.
Strong delivery results contributed to 73, 3% year over year increase in total revenues, which totaled RMB $8 73 billion. Our deliveries in July reached 10400 end of 'twenty two.
21, 3% year over year August 1st we proudly wrote the 200000, the one off the production line at our Changzhou manufacturing days. It took us just a 986 days to reach this production milestone.
Once again setting a record speed among China's emerging EV manufacturers following our historic speed in reaching that 100000 unit Mark Lee what is also the first domestic branded premium model priced above RMB 300.
To achieve this production milestone.
Moving to our supply chain.
Koby 19 researches severely affected the auto supply chain in the second quarter. Currently they are remaining disruption and difficulties, but we moderated they moderated.
The pandemic became more contained although we are cautiously optimistic that our supply chain, we will normalize in the second half of the year, we should highlight that potential volatility Ronnie and the required us to constantly stay on hydraulics, especially given.
Ongoing panic pandemic.
As we navigate the continuous.
I'm predictability with focus on reinforcing our supply chain system.
Strengthening our partnership with past suppliers to tackle pass shortage and the cost inflation.
And at the same time redoubled, our emphasize also passed quality controls.
Now moving to profitability.
Second quarter, we continued to see that the power of our product.
Our execution consistency and our operational resilience enable us to mitigate the cost inflation that we have been experiencing along with the rest of the industry.
As a result, our second quarter gross margin remained relatively solid.
At 21, 5% up two 6% year over year as we remain devoted to R&D and network expansion to fuel our future growth our operating expense increased by 91, 9% year over year. Meanwhile, we continued.
To optimize our cost structure and manage our cash flow effectively.
The pandemic impact we achieved another quarter of positive operating cash flow of RMB one point.
13 billion and free cash flow of RMB $451 7 million.
As part of our efforts to accelerate growth and accommodate additional user demand with new model launches, we continue to expand our direct sales and servicing network as of July 31st.
We had 259 retail stores covering 100 in the 18th cities as well as 300 and the 11th Service Center and also authorized the body and paint shops operating in 226 cities.
While the pace of our sales network expansion have been challenged by the COVID-19 resurgence, we will strive to further extend our reach to users by upgrading our existing stores.
I'll do it to optimize charging experience for our users. We also rolled out that's putting that function in our auto application.
17.
The matter covers over 30000 charging stations and the 300000 trading post 31 provinces and over 300 cities.
From the six may charging station, a pretax including state grid, Scott Hodge and others.
Providing convenient.
Energy replenishment options for our users.
On June 21st we are viewed Lee <unk>, our flagship smart SUV, reflecting our intense focus on family users, we divest Lee Eni to create a mobile home create happiness.
Two our relentless R&D efforts and outstanding product definition capabilities. The <unk> boost cutting edge premium features to provide outstanding handling and automates comfort and safety.
Every Lee Eni comes tender.
With our flagship full stack self developed autonomous driving system.
The mix.
Is enhanced functionality bolstered by upgraded perception and the vehicle control capability with had highly recognized by users in the test drives as the first volume production vehicle with redundancy design applied to two is powertrain steering system <unk> system and the <unk>.
Our supply system for the computing platform is office enhance reliability and safety.
Supported by a computing platform composed of two Qualcomm Snapdragon automotive grade 80 was 55 chips and our in house deep learning based Multimode Interactive technology <unk> provides a smart and curious space featuring five.
Three dimensional interactions for family members for all ages.
We have received a positive feedback along with very strong order intake for the Eni, particularly from our target firmly users we will commence delivery of <unk> by the end of August .
Well, we forged ahead with our new model launches, we also continue to pursue.
<unk> for our existing product in June we released the Otas three points one.
Update for you on taking the <unk> to the next level.
<unk> updated feature.
Our highly anticipated.
Remote vehicle control function, allowing users to move the vehicle forward and backwards in a straight line through our mobile application. This remote capability greatly increases users' convenience and improve their ability to party narrow spaces.
The update also included an audio equalizer function and further optimization of our fully self developed.
Oh, a function with enhanced accuracy for a recommended a name change and the.
Entry or exit.
Furthermore, we are steadily working on our plan of launching high powered charging the model next year. We are also working on deploying our <unk> networks to support our <unk>.
Li <unk> will be the first model in the industry to adopt video arena platform to deliver advanced autonomous driving features including an OE function showcasing our strong R&D capability with high efficiency.
Our self developed the autonomous driving algorithms have one much public recognition internationally.
Example, we ranked the first in the 2021, new things three D vision detection and tracking tasks and also won first place in the ICC V 2021 workshop.
In terms of rate.
Challenging.
We also have the largest number of autonomous driving users in China as of July 31st this year.
Users with access to an OE function exceeded 100, and the third piece of it the <unk>.
Technology knowledge and insights accumulated through the one gives us the advantage by helping us enhance our R&D efficiency during the L. A nice development process refined products and further optimize the safety and performance of autonomous driving.
In summary, we will continue to create happiness and the value for our family users by holding our existing products and extending our model lineup, while enhancing our brand recognition for family users. We will also execute our technology roadmap to solidify.
Our lead <unk>.
And advance our <unk> development.
With that I would like to turn it over to our CFO Jonny for a closer look at our financial performance. Please go ahead.
Thank you, Kevin and Hello, everyone I will now go over some of our financial results for the second quarter of 2022 to be mindful of the length of this call.
I'll address our financial highlights here and encourage you to refer to our earnings press release.
Is posted online for additional details.
Total revenues in the second quarter of 2000, and a little well RMB eight one.
Seven 3 billion or one three b.
In U S dollar.
Representing a <unk> 73.
Three 3%.
From RMB.
<unk> zero false bidding in the second quarter of last year. This included RMB eight.
Four 8 billion or 1.27 billion U S dollar of vehicle sales in the second quarter of 2022.
The increase of <unk>.
73%.
From a RMB four nine.
<unk> bidding in the second quarter of 2021.
The year over year increase in vehicle sales.
While it's mainly attributable to the increase.
Vehicle deliveries in the second quarter of this year.
On a quarter over quarter basis affected by.
Supply shortage due to the COVID-19 in the second quarter of 2022 total revenues and the vehicle sales decreased by.
Eight, 7% and eight 9% respectively.
Revenues from other sales and services were RMB 249 million.
Paul.
$37 2 million U S dollar in the second quarter of 2022.
Representing an increase of.
83, 6% from RMB 135 pardon sorry.
7 million in the second quarter of 2021.
And a decrease of one seven.
Was that from RMB 253.4, meaning in the first quarter of two.
2000.
'twenty two.
The increase in revenue from other sales and services over the second quarter of 2021 was mainly attributable to the increased sales of charging store.
Salaries and services in line with higher accumulated vehicles.
Cost of sales in the second quarter of 2022 was the RMB six.
Eight 5 billion or one.
There are two bidding U S dollar.
This is an increase of 57, 7% year over year and a decrease of.
Seven.
4% quarter over quarter.
Gross profit in the second quarter of 2022 was RMB one point.
Eight 8 billion or 280 Park fall meeting U S dollar.
An increase of 97, 1% year over year, and a decrease of 13, 2% cultural culture.
Vehicle marketing in the second quarter.
21, 2% compare with.
18.
7% in the second quarter of last year.
And at 22, 4% in the first quarter of 2022.
The increase in vehicle margin over the second quarter of 2021 was primarily driven by a higher average selling price.
To build both with the increase of vehicle deliveries of 2021.
<unk> released in May 2021.
Gross margin in the second quarter of 2022.
It was 21, 5%.
Compared with 18, 9% in the second quarter of last year.
And the 22, 6% in the first quarter of 2022.
Operating expenses in the second quarter of 2020 at who were RMB pool point.
Safe feeding all $426 five meeting U S dollar.
Representing an increase of 91, 9% year over year and the increase of 10 nine cause that caused our work culture.
Research and development expenses in the second quarter of 2022 were RMB.
<unk>.
Five 3 billion or $228 $7 million, representing an increase of 174, 4% year over year and the increase of 11 point.
5% cultural culture.
The increase in R&D expenses over the second quarter of 2021, and the first quarter of 2022 was primarily driven by increased.
Employee compensation as a result of our growing number of.
R&D staff as well as our increased expenses associated with new models to be introduced in the future.
Selling general and administrative expenses in the second quarter of 2022.
Or RMB 133 billion or 100.
97, 8 million U S dollar.
Xander increase of 50.
58, 6% year over year, the increase of 10, 2% cultural culture.
The increase in siding general and administrative expenses over the second quarter of 2021, and the first quarter of 2022 was primarily driven by increased employee compensation as a result of our growing number of staff.
As well as increased rental expenses associated with the expansion of the Companys sales network.
Losses from operations.
Well, it's RMB $978 5 million or 100.
For the six point.
1 million U S dollar.
In the second quarter of 2022.
Presenting an increase off.
82, 6% year over year, and an increase of 100.
Six 9% quarter over quarter.
Net loss was RMB.
641.
Meeting all $95 7 million U S dollar in the second quarter of 2022.
Representing an increase of 572, 2% year over year and compared with RMB.
<unk> 9 million net loss in the first quarter of 2022.
Turning to our balance sheet and cash flow.
Our cash and cash equivalents.
Arrested tricked cash term deposits and short term investments totaled RMB 53 point.
Six 5 billion.
801 billion U S dollars as off.
Third his 2022.
Operating cash flow in the second quarter of 2022 was RMB 1.13 billion.
<unk> hundred 68.
Next meeting U S dollars.
Free cash flow free cash flow was RMB $441 7 million.
Our 67 point.
Fault, meaning U S dollar in the second quarter of two.
2022.
Now are far where our business outlook for third quarter of 2022.
The company expect the deliveries to be between.
27000 to 29000.
Vehicles, representing an increase of.
Seven 5% to 15, 5% from the third quarter of 2021.
They also expect the so called our total revenues to be between RMB.
Pardon.
96 billion and debt.
Our RMB nine point.
Five 6 billion or U S dollar 1.34 billion and the U S dollar a button point.
<unk> 3 billion, representing an increase of 15, 3% to 22, 5% from the third quarter.
2020, what this business outlook reflects the Companys current and preliminary view on the basic situation.
And the market condition, which is subject to change I will now turn the call over to our operator and start our Q&A session. Thank you.
Yeah.
Thank you if you wish to ask a question. Please press star one on your telephone.
The name to be announced.
If you wish to cancel your request please press star two.
You're on a speakerphone please pick up the.
The handset to ask your question for the benefit of all participants on today's call. Please limit yourself to two questions.
If you have additional questions you can reenter the queue.
Please ask your question in Chinese and then followed with the English translation.
All right. Our first question comes from.
Fang from Goldman Sachs. Please go ahead.
Great Yes.
Thanks for taking my question. Another second quarter performance was impressive this by Covid and how <unk> has outstanding traction for its price point so congratulations.
Those they were well done.
My question is about your guidance. So the third quarter is in question for the 27 to 29000 unit guidance that you provided it can you break it out by Lee one and Allen Nye and also as you ramp the production of the high ASP.
Well gross margin improve so that's the first question. My second question is about how nice retail traction.
So the company disclosed already all goes about how that has received 30000 come from orders. So just wondering if we can have a refresh discussion in terms of its latest retail trend feedback, especially competition with the other new energy Suvs Mtvs that some of your peers have put in the market Telecom client <unk> Shah.
Teco, whether <unk> Korea, Colorado, and she's on LNG or that you're out of the shutdown on the <unk> JV men's wearhouse shirt.
Are you selling your toward households, you sooner.
Alex you how did your garage had known the popcorn that'd be the Kishore when nobody knew that you've got T cell thiago into the shower gel 201 that you can fluctuate.
And outside of Jacob Your Truda shall hold 10 dollar to euro southern tide, though to go through and Thats being done.
I will try to use how do you call it from Guyana Jamal tissue.
Alright.
This is Kevin. Thank you for your question first.
First question.
For the first for the guideline.
Actually.
We we still stick to our previous Ah Ah Ah protection that for.
For September we're going to ship more than 10000 Elena yeah.
And therefore your second question actually.
Actually the.
The.
Yeah, and the for the sorry for the for the gross margin will be a hyatt will.
It will be higher.
Since it is a high end product.
Second question about that.
Detection right now although.
Last month, we already.
Kind of received almost a 30 K are there or not.
Today in the past two weeks, we still see a strong demand coming for airlines.
Yeah.
Yeah.
Okay got it got it sorry part of my second question I was too hot too Kevin If you can comment on sort of ally in the context of this competition with other Suvs in MPV is that some of your competitors have put in the market.
But this flywheel BYD and so on and so forth, how you're seeing competitive threat from them that sort of.
Cause you to change your strategy or introduce more marketing incentives in front of customers.
Yeah.
Oh yeah.
In fact.
Alan I, it's a it has a very unique product positioning actually in this price band with these kind of size and.
Smart features.
We don't we don't see any part of that.
They all have kind of a product.
Proposition.
Close to our <unk>.
Yeah. So right now it's more about the how much we can convert our customer to place all their L.
On our Eni.
When they have the budget.
Between 400, K two of 500 to RMB.
Okay. That's helpful. Thank you.
And as a reminder, please ask your question in Chinese first and then follow with the English translation.
And to that as well for the follow up question.
Our next.
Question comes from Tim <unk> from Morgan Stanley . Please go ahead.
You got any sense, you're totally with you and now you're going to see equates to topple like in Tennessee that same challenge.
What do you mean that was a quite a few challenge Jonathan I think go ahead <unk>.
Essentially what you would hope it to Chi.
Oh sure no civil issue I can lead to that email Linda to be touching upon day, you're going to see.
So let me show you teach out the gate, so technically tissue towards your.
Truth is your line of Ohio, which I think is sometimes it takes a couple of questions here.
<unk> <unk> <unk>.
Okay.
So they took the chi I see pick up also kind of that.
No theory, when Tina Schiel, well mentions Agricola 10 day.
Me into India.
So essentially see two shows will be cool no simple Katie you mean, you have to go to go down to essentially two it's interesting because for that sort of thing.
So again <unk> twin Dan that you would be somewhat telling saying chipotle team already Christians email so it shouldn't be Catherine <unk>.
So my first question just wanted to follow up on R&D, so quarter guidance, because I think I think what it is all in guidance.
725000 links are a bit conservative.
Considering the launch of our <unk> and improving supply dynamic.
We attributed the kind of circumstance.
The transition of the one only forecast of production ramp up of al Dor and expectation or if there's any other reason we should take into consideration.
Just simply due to the hiccup or how long do we shall we expect this kind of impact will last and my second question is about the sales mix of <unk>.
The plug in hybrid and EV next year.
Should we think about the mix in 2023 and could you provide some updates regarding the numbers the numbers of new models.
Yes.
Next after Bep is going to increase substantially next year should be concerned about a potential dilution.
Our margin or could that hurt our cash flow. So those are my two questions. Thank you.
Yes, Keith this is Kevin.
So a question.
About your first question in fact, when we give out the guidance of cost. We are we have seen some.
Slowdown of the Ah.
Do you want to order intake I think the primary the issue right now is that when.
When we have the new product into the into our retail stores a lot of attention has been attracted by the new product.
Rather than the.
The old track actually we are working with our sales team to to regain the.
Attention from our potential customers for <unk>, yeah. So on the other hand about the.
The potential launch of.
The new products actually are the only comment I can give right now is that.
It will coming soon and that will come sooner than.
The expectation yeah, that's the only comment I can give.
And for.
And about the new product model be the model, we're going to launch well we plan to launch next year in fact.
As you can expect that that for any new model, we launched into the market. So we have a we have our attention.
The intention to increase the revenue also to improve our cash flow improve our profitability.
So therefore with the new.
Model in our plan we plan.
Reasonable.
Profitability off cost so it won't hurt our cash flow it won't hurt our.
Gross margin next year.
That's perfect. Thank you very much Kevin.
The next question comes from Bill Wong from Credit Suisse. Please go ahead.
Coming to half with Julia equivalents equally unique discount window.
So don't know that closer than 10 with Qunar.
Well, let me say one thing I'd say.
Yes that makes sense.
Judy I Wonder if I was looking up excuse me question isn't.
Boston doesn't like to see.
Okay.
Sure My samples with Albasha pushout with TTM, Thanks to you by SASSA.
Okay.
One question about a new one because investor Tony next three things number one.
<unk> in the U S would impact has been reduced to two or three weeks.
Matt do you want to offer.
You bet.
Couple of promotional Fuller incidence.
<unk>, Hey, we should be the next generation and the one we announced in November if you can you confirm the three things from investors. Thank you.
Okay.
Thank you for your question.
First of all about Uh huh.
The comfort.
Yeah, the waiting time actually that we see right now is a is a itself caused charter then last month.
The I say.
Already saying that the the order intake is a.
Slower right now so therefore, we can turnover the delivery faster and above.
7000 to RMB, a kind of a promotion.
Actually yeah, you got the information very updated that we are we are we kind of released this.
This policy just this Sunday.
So yeah and about the new product.
Asking about a I think the same answer I already provided that it will come soon and the sooner than our expectation.
Okay. Thank you. Thank you so much.
Yes.
The next question comes from Paul Gong from UBS. Please go ahead.
Sure. So a couple of questions how much or what.
I will go into <unk> on the highest for Joe.
Nissan one.
Sure sounds good.
You called tons. So there you go clinicians and we just want to thank you today, you could see in a handful of questions.
Its reach into additional <unk>.
You'll do about commissions.
The Panthers on commissions on a L Shaw.
That's helpful single haul woman, so with somebody else.
Two additional license with Goldman Sachs.
Beyond us and Dr. Charles Zhang.
Yes.
Amanda economical attention wasn't quartered easier so please <unk>.
So what you do.
Do we have to choose Photoshop Kimball Michelle Thanks Sundar.
Commission are you sure I said Youll filtration. So it goes all quasi equal some gone yet though.
Before that he calls Johan.
And as far the hustle.
I wouldn't say so.
So I would say.
So what's your thought about yours.
Hudson Guarantor clinicians will be young person simply.
Yes.
Sure sure.
Okay. So it sounds like you called functional somebody that you're going to see until close hopefully teach in furniture foam yet so.
So just translate my two questions. So first question is regarding the cannibalization of airline versus <unk>.
One how much of the recent weekly yourself do you want or Darcy is due to the kind of amortization of the deal model and how much of it do you think that's due to the <unk>.
From a macro environment, that's where I see a weakening demand for the for the car T. In General My second question is regarding the offshore Saudi.
Key highlights of the BV management.
Yes, as I mentioned, Todd <unk>, they should be based on different models see how far different.
Can you give us color on how shall we think about C. You decrease or the.
Activities of <unk> offsets.
Crowded market with <unk>.
Mark already.
Okay.
Paul This is Kevin I will take your first question and this time we will.
Address the second question the first question.
The thing is that before we put in.
The car.
<unk> into our retail source before people start to test drive it actually we see no change off the order intake pattern off.
Yeah, but it's to us to certain extent too.
Our surprised that when we have the customer coming into the stores are too.
To test drive some of the customer our regional plan was to test drive the one but when they see our Eni and Wednesday after the test drive there or not.
We see especially the the the the customer with the <unk>.
<unk> budget.
See a lot of them converted to ally customer yeah. So so right now as I just explained that that's why one of the reason why we also have some more promotion plan for for the one yeah and I think but on the other hand, we still have a coffee.
I missed that.
The one is the steel.
A very competitive product because if.
If we compare it with the existing product.
Other than al not on their product in the same press spend 300 to 400 K R&D D. Why is that still one of the most competitive product in the market.
No.
Yeah Yeah.
Well I'll give you the trend in Turkey.
Uh huh.
We are eager to do together with them yet.
So what was it this year.
Interesting.
So the natural for that the only change.
And that is a total in the company.
No.
You look at us.
I'll now turn his young digitally.
With that I will point you to that.
They're not that I'm not sure the difficulty that.
Could you mail, who reorder that's struggling down again I'm sure.
So they cannot go home.
Beautiful arguably.
So it gives you about your posture.
With that Jackie I don't fully undrawn.
Yeah.
Yes.
Oh, yes, yes.
I'm not comfortable with yet.
Okay.
So we're not limited to only a single digit here, you'll see that strategically what does that tell you that's one way.
Obviously, a good enough job on that.
That means India issue.
Danielle <unk>.
To Uh huh.
Hello, David.
T K.
I'll, let you need Oh no. The thing is that I hope that you know that you guys I don't know if they telephoned yet.
She is younger Archie yeah huge again, this envelope that tissue, but again looking at it.
Yeah, No. We're just Europe I mean in the junior hires I'll, probably get them into the ocean.
Two of the Trinidad.
It was only about 100 years anything that could.
Okay.
And so that has gone out yet.
So you did that for me.
So really two angles the differentiation. The first one is around charging are in fact, we already have a prototype running right now that can charge 400 kilometers of range in 10 minutes.
And the goal here is there a similar to a range extended vehicle, which is to replace all internal combustion engine vehicle for customers.
No anxiety.
In terms of range.
Our data shows that among our online customers, 80% of them have home charging at a 100% of them.
A favorable charging either at home or in the office, so home charging or often charging that's really not the key here. The key challenge is to enable customers to travel freely within key economic zones within China. For example, they also Delta River region, the Beijing, Tianjin region, Wuhan, So try and these big Mega.
City.
Areas.
We will support with high power charging so that customers can drive long distances with no driver with no range anxiety.
Even if they are driving electric vehicles.
So the second advantage when it comes to electric vehicles, the space because of the engineering capability enabled by electric vehicles, and new architectures, new body types. We can provide a lot more space in our electric vehicles compare to a range extended vehicle with the same footprint.
We're not concerned.
How much of those require additional one day you got to see it I suppose how do we get off on <unk>.
Congrats on total number of assumptions with Osaka.
If the airline cannibalization of Dijon, one is a higher than expected how much of the capacity you see it and we prepare for <unk>.
Yeah.
Yeah.
The capex that is.
Our 15000.
So I have not.
Yeah.
Well. Thank you very much thank you.
Oh, Hello facial ghansham.
Yeah.
Yeah.
Yeah.
The next question comes from Ming Lee from Bank of America. Please go ahead.
Go ahead.
No no I wasn't injured ankle when Tina <unk>.
Seven years.
Didn't see the template that she's sitting all handled them all you do.
Yeah.
Uh huh.
So you can take a bunch of homes.
Home Center, Macomb with LNG to the eco Mod.
<unk> My first question is regarding the.
The gross margin trend and also the backseat closer Chen for second half this year.
The Tioga wouldn't you know sue quietly.
She has come to you and your clients your way.
So is it the one good jokes to being equal kind of cool.
So why don't I say kind of all about close as how somebody who is just seen a GMP <unk> cool music are positioning it does not.
Women's and Mccann.
<unk> seen to date and Jose do you.
So we see you know what you see.
No.
Danielle Dubin, Protos and <unk> got some but she touches or attempting to be sure that in a lot of talk kind of way.
Now if you default on.
Second question is regarding the competitive landscape.
Recently, we also see our Idaho, Brent volume sales as grow.
<unk> steadily.
And besides that.
We also.
How do we expect.
The new device.
It's a it's a product competitiveness versus current Oh. Thank you.
Sure.
Yeah.
This is Kevin.
Uh huh.
Yeah. Thank.
Thank you for your question. The first question about the the.
The battery cost actually as we all know that the in the recent months that the raw material for battery has come.
Come down a little bit, but we would expect that for the coming months.
This year, the raw material costs are well off will again fluctuate.
So therefore, the gross margin.
Our outlook is a lot of time a lot of time are based on the.
The best cost yeah. So therefore, I can only comment on the battery cost will be a kind of a uh huh saturation yeah.
And then for the <unk>.
Newport has a competitive business I will ask Lisa to to comment.
Hi, Julien.
Here are about cause and I'll talk a little bit, but I'll go back.
Is it easier.
Usually there are about one five of those are also with us.
He'll be arguably a conquest.
You said it all.
To Oh.
Okay.
So you can see from that.
Yes sure.
That said our strategic agenda.
Sure.
Okay.
So right now around.
I can share a few things one is that it will be delivered released much sooner than many people expecting are expecting.
And the second thing is that the pure from release to delivery will be shorter than nine and win.
Is available I think that would be a good time to compare the product come crowded competitiveness with newly released our competitors and we have full confidence that we will dominate all of these products.
Oh wait.
Okay.
Yeah.
The next question comes from Xu Xingu from C. I T. I C. S. Please go ahead.
And she said well you're not going to take us through drilling.
Do you go from here.
I'm kind of bouncing, Kevin Mitchell quite chunky, you'll come to order.
No Jonathan Cohen <unk> company.
Alpine was one comes through that you'll do with novel things Josh.
Thank you I was hoping that you could come to you to call. It now.
I have one unusual kind of through the ATM.
And as you said you don't eat me that or who should I take that you're calling them equal what does your woman that's it.
I have two questions. The first question is about the <unk> product with our competitiveness strategy for E. R.
The product and the second question is about money raising Oh, Okay could you. Please talk a little bit more about ATM and further.
Capital Reserve project. Thank you.
Yeah.
From a whole myriad of whole car.
Yeah. He is obviously the applebee's.
It does seem that you give on that.
Okay.
She's happy about that.
So you kind of point out our fertilizer together you said earlier.
Yes.
Hi, Bob.
You bet.
Yeah, Matt.
That's how the bomb yet.
You bet.
So I can just ask about yourself.
Yeah, I don't know if he gives you what you don't know.
Could you are there.
No we didn't see the future trajectory.
Yes.
Oh yeah.
They say Oh man it.
CRE at Northern Trust John Uhm.
Those are things that you can see yet okay.
Okay.
So what they suggested that they saw me from yet.
Hopefully they come at all.
But I think the.
So I'll just yet.
So those are the orange or the.
Clarity is there an.
Arguably the.
The housekeeper township, I really wish it up just a quick one EBIT, Alex I think we got yet.
Sure Paul.
Can hinder it.
Total Bill Chunkier law.
Let's look at powder Shadow buildup I deal with it at all.
Oh, good okay, if I do the job.
All contents.
Conscious of that.
I'll give them to us.
Yeah.
Oh sure sure we're hitting a bunch importantly, yet again as we went into the market on E procurement rules housekeeping.
I assume you're talking about.
Okay.
Yeah.
Yeah.
Oh boy.
Finally on this year.
Sure.
Sure.
Boudreau Triaxial phe need you for that.
Jimmy unless you have a bunch of you made some country down there.
P J.
If you take all of that.
Okay.
Yeah.
So talking about a range extended vehicle if you look at over the next five years, we still believe that arguably is the best solution for Suvs period I'll give you. One example, if you look at BYD you'd have two main products above 200000 RMB.
As a sedan and there is a tongue SUV. So in terms of the heart, which is the sedan. The EV sales much better than Dms, which is the hybrid vehicle, but for Tom.
The case is exactly the opposite PMI sells better than EV and the reason for that is when people buy cars.
The 200 to 300000 RMB range when they buy an SUV they have a very clear expectation that they want to go on longer trips, especially post COVID-19. So <unk> is still the best solution up until today for SUV, that's all range of anxiety.
So under that consumption within our <unk>.
Our biggest goal is to solve the efficiency challenge and if you look at it online.
If I look at it there is many top media that have tested the eni or energy consumption level are still beating.
In its class even with low SLC.
Fuel consumption is only around 60%.
A much smaller internal combustion engine vehicles and is much better than what many claim to be competitors, which are much smaller suvs.
Because at the end of the day, our EV and EV is not an internal combustion engine, adding the battery to it. So that's the key difference between <unk> and <unk>.
Range extended electric vehicles.
There shouldn't be any discussion.
Which one is more advanced sort of which ones more backwards for the users range extended vehicles isn't easy that half.
To have an internal combustion or we call a range extender, where you have is really more of an internal combustion engine vehicle with a battery I'll give you. Another example, China, which is a very.
Established company with very.
Capable technical skills and their latest vehicle F. L. Three is in <unk> rather than <unk>.
The fact that time has all the Pf technologies in the world, but they still built in our EV as their most advanced.
Solution because at the end of the day again.
<unk> is really an electric vehicle.
Okay.
Second question on the cash flow and ATM offering I think for us.
The alcohol.
Very healthy operating cash flow and free cash.
Hello.
10.
You'll find our business I recall there.
In the long run.
We have never clear yeah.
Uh huh.
Early stage off you saw.
Industry.
10.
A few years, so we still want to.
You thought to ask Marty <unk>.
Secure vault cash.
Further.
On the.
Companies saw development, especially on the R&D.
Also the new model.
R&D side.
The ATM offering.
B.
Based on this year.
Market condition.
As I just mentioned, we do want to.
To secure more cash from the equity offering so we choose.
Yes.
Yes.
Yes.
Most of the ATM offering.
We need to stop before.
We publish our earnings release.
So.
Hopefully we can finish.
Phineas shot itself offering coming office.
Okay.
Yeah.
Okay.
The next question comes from John <unk> from Barclays. Please go ahead.
Sure Glenn Eaton, She's who was at you went way down the <unk> <unk> two could be easy to take a tuition.
Hence you wish not to be with the tuition should rehashing does own chassis Sheena issue visa sees them choice.
Tuition.
We are going to you had to wait and see.
Woman shopper and yes to the operating expenses to cause some argue that it's a good it's been done there to the tissue will mean got to my own two kinds of wanting you to me Jim wishes to me out when I see things.
I have two questions first question is about.
The for the for the new EV cars.
Are those new cars still gonna be family oriented Suvs.
Or something else and second question is really about the guidance for the second half operating expenses.
Sure. Thank you.
When you do E Vita seem that they're attempting to accomplish that.
I got Bermuda, even comp excuse me 800 allergen test kit.
So I have a short answer for the first question.
Terms of the body type for electric vehicle, they still want to keep it confidential before it's released because it was a very unique design.
Yeah.
Hi.
And.
And also to add to.
Alicia Arthur we still are.
Emily customers.
All right.
And the fall order.
Operating expenses I think we have a very clear roadmap.
Our roadmap for our product and.
Our goal on deal size.
Yes.
We also targeted Dolby we will.
Keep going feedback on the R&D side and also on the network.
<unk>.
Hum.
Okay.
Yeah.
Yeah.
As we are reaching the end of our conference call I'd like to turn the call back over.
To the company for closing remarks, Ms. Janet song. Please go ahead.
Okay.
Thank you once again for joining with US today. If you have any further questions. Please feel free to contact me at Investor Relations team.
That's all for today. Thank you.
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