Q2 2022 Xpeng Inc Earnings Call
Yeah.
Hello, Ladies and gentlemen, thank you for standing by for the second quarter of 2001 or two earnings conference call.
Inc.
At this time, all participants are in listen only mode.
After management's remarks, there will be a question and answer session.
Today's conference call is being reported.
I would now like to turn the call over to your host Mr. Alex Yeah.
That's your relations of the company. Please go ahead Alex.
Thank you Hello, everyone and welcome to excellent second quarter 2022 earnings Conference call.
The issue on the break evens out where each shoot about newswire.
Or do you have to pay.
The bottom line.
So do the earnings press release.
Section on our website at IR adult shopping dot com.
On today's call from our management with <unk> <unk> co founder Chairman and CEO . Please go ahead.
I'm not sure I'm in pattern, Okay, Brian Group, Vice President of Finance.
Finance with a dentist.
Denny flu backtrack within the corporate finance and back then you could chalk John and myself.
<unk> will begin with prepared remarks, and the Colgate complete with Germany.
A web cast two weeks I'll be something cool that'd be available.
Of our web site at.
Before we continue please note that today's discussion will contain forward looking statements.
The safe Harbor provision of the U S. Private Securities Litigation Reform Act like next five forward looking statements involve a huge leap.
And this could compete and Scotch the companies without may be materially different from the views expressed today further information regarding these and other risks.
S&P.
And the value of the public cloud and you put the company ex fired <unk> Securities and Exchange Commission. The company does not assume any obligation to update any forward looking statements.
As required by law.
Please also note that excellent earnings press release and conference call, including the crucial I'm Lucky to get initial matches as well.
non-GAAP financial measures excellent, earning press release contains a reconciliation of.
non-GAAP.
Matters to the unaudited GAAP measures and then I'll turn the call over to our co founder Chairman and CEO . Please go ahead.
Thank you all.
Yeah, I think it was shoveling she's had a job for them.
What's the chance.
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Jim.
The genius <unk>.
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As you saw that change G suite Ashish.
Well, Jamie until I still am I forgetting them happen sooner.
Holly.
Okay.
Hi, everyone in the second quarter of 2022 X spine delivered 34422 vehicles, representing 98% growth year over year.
For the fourth conservative quarter, we ranked number one among emerging EV makers in China as measured by vehicle insurance registration Bobby.
Starting from the second half of this year, well launch a suite of industry, leading products and technologies developed in house as well as next generation Smart EV models equipped with state of the art technologies.
These upcoming product launches will bring our customers an unparalleled driving experience through innovation in both electrification and smart technologies.
Yeah.
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Are you sure consolidate so they can have all your teeth.
Just switch out the whole Julien.
Julien.
Yes.
Yeah. That's helpful and then Sheila teaching them to enjoy that especially questions and John just yet. So you won't go to Shuja also vintage housing.
Oh sure Tito chocolate, that's Hindu shall read the city, Jamie well then you want that Joey is it true that you have as soon as possible.
I think working capital stats for yet she doesn't scale.
She also wants <unk> total chinas specialization.
Until state they'll buy a lot of policy, but I see it is that she just should I assume.
I was hoping to finish up on getting Tau piece will create its supposed to be there or any changes.
Surely you can.
Until I see my past channel, that's always hold up going up.
So what we want and then you want without a tongue in cheek.
She George how are you.
And the chances and GPU as usual, particularly shy that Chinatowns you should absolutely, yes, pinching capital T at all.
Sure Jonathan.
No Josh the consensual cause mindset okay.
Well, Michelle Schultz Eagle places.
So are we.
Okay.
We started to do the shelter.
Yeah.
On August 10th we unveiled EQT at the side of all new flagship Jeannine SUV and began accepting reservations the preorder jeannine exceeded 22024 hours and this has exceeded.
The models that we launched previously which was D piece of <unk> that would want the same periods in the orders of Jinan keeps increasing which shows the strong demand from our customers.
On August 26th did United will join us at the Chengdu auto.
We plan to announce Jeanice twice during its official launch in September and commenced deliveries in October .
With a stylus define superior control and driving performance lavish comfort and luxury features that benchmark against luxury Suvs twice daily 1 million RMB <unk> nine has already proven itself a various two ball flagship model in the SUV segment.
<unk> nine also showcases our leadership position in electrification technology innovation is the first model to offer our groundbreaking <unk> high voltage charging technology, which is comprised of an onboard 800 volt high voltage plus one and 480 kilowatts of Super charging station.
Bringing the ultimate charging experience to our customers.
With respect to smart technology configurations based on our industry, leading city navigation guided pilots or C. D. N. G. P. Jeannine, we provide all next generation full scenario advanced driving assistance systems to market.
<unk> will significantly expand the coverage of advanced level driving assistance system.
Making driving easier and safer.
I believe the Jeannine will be the market's best SUV under 500000, RMB and become one of the best sellers among medium to large sized SUV.
And Michelle King.
Translation.
She has all the tungsten dumping I thought it's useful how well the gentlemen, chocolate xiaomi for shovel and she thought it shouldn't have any particular chisel thoughtful woman I assume that was southwest Virginia I'm interested.
Yes, you want to sleep on beach it is changing.
So James I will call it out and that's a shift so that should help as well.
If I see that she in Cushing, we feel couldn't thought okay. It's also couldnt get it you're watching data you got cheated attached.
And yellow.
Ladies and gentlemen, GTO changeover tweedle want Michelle Gulf.
P. J. It's also considered a lot of P&L heart tissue is he says it's highly needed essentially that's hunting dumping against those guys facing shingle BJ. You told me that you don't think that's any chance well know how you can tell us how many children.
Total woman 10 minutes, reaching the shuttle and touching on P&L for EG ballpark, what you're asking.
This is the only that you got when he was named CTO I mean, it does seem talking about EV.
And shouldn't that taking that you'll have you'll ship to that Scott.
Yeah.
I believe that based on our technological innovation and all platform systems architecture, we will actually innovate and accelerate the pace of our new product launches to round out our offering with vehicles price between 150000 to 500000 RMB.
In 2023, we plan to launch a b class model, which will help us expand our market share in this segment.
Also rollout E C class model next year to bring a compelling product to customers in need of additional cabin space with greater comfort.
These two new models. In addition to the G. Nine will bolster our strong sales growth momentum to carry through next year.
Meanwhile, leveraging our Tom watch electrification and smart technologies and our platform development system developed in house to constantly upgrade product performance the average selling price of our products will rise accordingly.
As our product's superior features boost their competitiveness amongst sin class and even high class models.
With our concerted efforts to advance our platform base vehicle architecture, and multiple technological improvement in manufacturing such as integrated die casting techniques, we expect a meaningful vehicle margin expansion for the <unk> nine as well as our new models come in next year.
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She's a total kind of people you have hot chocolate didn't do well then that's when it's you don't find what they didn't know what let me show you what you shouldn't that children enjoy shelving that she had a hospital she said.
George I'm curious how long she said it was getting a lot of seasonal changes.
So once you go has a whole traditions and you still have a 10 minute assistance.
Color to your question on tissue.
You should also keep it full time she calls you won't put up on their shoulders. When it seems like you're well then guys shelf holds how is all of them. So they can reach out us wondering Shelly Yeah. Let me go with that decided to antonio's off where they couldn't go to the polling center okay.
Yes, yes.
Yes, yes.
Do you mean tissue with hunk and bullish you honey.
Well I appreciate that you don't see that.
Yes.
Oh My God Joshua that's why you saw me and it's all the things you said it well.
Well Hi, Joe since you are taking in Kansas.
So the basketball that you've lost that you couldn't do it.
Was hershey, we're showing that that couldn't policyholders couldn't quite won't yet, but couldn't be somebody that shouldn't be lost.
Starting from Jeannine ex thanks commitment to long term investment in proprietary electrification technology has bolstered our leading edge does area, while significantly enhancing our customers' experience.
<unk> nine it has leveled off explains electrification technologies to the next generation.
What's more the genome and subsequent new models will be fully compatible with high powered supercharging system, and we will consistently enhanced charging efficiency for customers through technological upgrades.
Our new models cannot only achieves the best charging speed on X banks self operated high powered Supercharging networks, but also allow our customers to have that are charging experience in third party charging stations.
Benefit from all leading high voltage platform, Xbox New models will be able to obtain a higher power allocation and longer lasting peak power at third party charging piles that Audi EV models than other EV models BC.
Besides we have built our in house capabilities in both the development and production of electrical Motors, where we also have been accelerating technology innovations.
Looking ahead, we will continue to uphold our unique approach to incorporate powertrain system designed into one cohesive vehicle architecture, leveraging a growing suite of electrification technology innovation to provide consumers with smart E V supporting longer range faster charging and the workhorse.
Yeah.
Oh I'm sorry.
How do you tell me a little so some element that didn't know when we get into some kind of Youll sessions in Illinois, We won't show you the Chi St. Peter.
Oh, I'm, sorry, yes, yes.
Whats the assumption Thats like I say once you get a hold of 20 lots eat and when she says that Union parish shovel.
You didn't intend for that would be something what does 10 minutes since the buyback what's horizontal switching to tell them what's helpful answers she.
She knows in churn because of what's happening in China. So that bothers me I was hoping I don't get it.
So what you're just talking a woman machine that's homeless on putting Corey.
It sounds like he has told her that she can walk wasn't done a survey PJ Susanna. Thank God I tend to when you're selling personal job description. So your shovel unless otherwise.
Oh geez.
She has all the pendulum swung down by only so shallow gulch won't get kitchen should it go up him. When he was on it ended up being what you definitely I mean, it's you're quite St. John's 20 shots.
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In case of 10 minutes.
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To be a cultural yet in Shandong Bush once you huh.
Oh, I'm, sorry, yes, certainly I would tend to go towards that especially out when you don't have they're not teach out of Poland. She is well yeah. That's.
I wasn't sure what does that mean it couldn't have told you that it wasn't that Yahoo deal has according if we got that.
Josh how long she so you don't put a chunky the way. They gave was you look at it.
Well, Jeremy you already announced so that's switching them that you don't get into such LTE only ultra what Michelle said, it's always once you. She does so chee Koon Ching Sunglass hut has got it.
Thanks, Thanks, So cooperated supercharging network with other compounds, our advantages in electrification technologies and slap a establish competitive edges.
Our well established self operated Supercharging network already features one of the broadest coverage and the best customer experience among China's independence E B brands.
As of early August the number of ex self operated Supercharging stations breached 1000, which is a new milestone.
To meet to fully support the Max delivery about vehicle models, featuring 800 voltage high powered charging we in house developed 480 kilowatt supercharging stations, surpassing industry benchmarks in terms of performance and costs.
Through technology innovation.
Generation Supercharging stations, not only achieve the power three times higher than the industry's mainstream 120 kilowatts of Supercharging stations, but also make the.
Make the cost at the same level of the previous generation Supercharging stations.
Expenses Supercharging system can charge up to 200 kilometers swage in five minutes.
This outstanding charging performance demonstrate our end to end high powered fast charging capability constituted by EV battery capable of fast charging on board high voltage plus one and supercharging stations underlying the best charging efficiency in our industry.
We began building our self operated 480 kilowatts supercharging stations in August .
Soon it step up of our development in major cities and allow me to highways nationwide.
By 2025, we hope to build another 2000 high power Supercharging stations.
By the best in class charging experience for our consumers and customers.
In the upcoming years ex banks' customers charging experience will be completely right. The evolution of life across all scenarios, including vacation trips returning to their homes held for the Chinese new year or long distance travels.
The scenario of using EV to drive into the city and I E. The cross country driving will be completely changed daily soon.
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Yes.
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Gulf War in G. P value doesn't totally tell what happens I guess.
So we had forecasted a woman Johnson from Jefferies.
It's a question I've had the vessel that's good what are you watching them go you can see the children Tyndall I didn't miss.
How is the Golden sheets would have suggested.
So with full pay up.
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So no we have surety that didn't doesn't get one cut at all shanda thought that sort of suggested.
But again, it's on golf, Hey, Koji necessarily sure she got a total handles.
Moving on to our smart technology advancements we are very excited to see that customers acceptance of all advanced driver assistance with our system is growing at a steady pace as.
That's just the positive influenza word of mouth among customers.
As a result, our highway and G. P mileage penetration rates in the second quarter reached over 65%.
Beginning in early May we integrated our ex pilot software as the standard configuration on mid to high end versions of all models, allowing a broader customer base to experience our industry, leading and best in class more advanced driver assistant functions at an affordable price.
It's helped us cultivate shops in ex pilots reshaping driving habits towards a human machine copilot pattern and provides hardware platform support for more innovative intelligence functions in the future.
Among order receipt among owners received from Ellie Mae C. D end of July the proportion of clients, who chose meat and high end versions of all models equipped with ex pilots grew significantly to over 50%.
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Hey, guys without damaging it.
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Well gentlemen, with the highest you thought its a little justice defense Ocean. So wish shovels that <expletive> is hungry and sort of what was yes.
Well I don't have a lot of Gela Elsa.
Elisa.
Just don't justify cynical fishing in Canada and Australia.
But the hospital Joshua woman, that's sort of what you sell it Peter.
Yeah.
We're also expanding the boundaries of smart driving at an accelerated pace as we rollout next generation products that create great value for customers.
For instance, we have completed the development and testing process for C. D. N G piece in the second quarter doing an array of pets throughout challenging driving situations such as crowded downtown streets and rainy night. Our P. Five model equipped with only study tops of computing power in combination does it sensor.
Hot work to achieve the industry's highest safety and driving efficiency levels among similar scenario.
By taking the lead in exploring oven driving scenario, we have amassed a tremendous amount of experience and develop deep insights into complex City road scenarios.
Notably the autonomous driving computing center, we co developed with Alibaba cloud will commence operations in early August .
So we as computing power it can beach, 600, petaflops, making making it the largest domestic Alton our autonomous driving computing center in China.
It will provide the requisite foundation of computing power for deep learning training, which empowers our full scenario advanced driver assistance system and will facilitate the future development of level four autonomous driving algorithms.
All of these advancements will greatly enhance our competitive advantages in smart technology.
Oh, okay.
Of course, you said or four tenants that Josh will take once you know still suggest that usual.
Yeah, Yeah, okay.
So what I'm, saying that you don't see shambles, but it sounds like then deal with Hudson City.
Yes, she is our culture and didn't see 12 months ago.
Well then she got shuffle that sometimes you have you would have put you all know well. It's just you don't consult.
And she'd be the tasteful plc's element. So it's you know what I mean, Colorado.
Sure She does Sheldon.
Well, I mean, Joe achievable quota and show them that Youll see Tobey it's Ed.
But she is unchanged in terms of things you said.
Okay. That's helpful. Any minutes talk quite a lot have you told on the touch.
Okay.
Since this year, we have been very happy and excited to see the development of smart driving technology has been received has received support from governments at all levels.
Ministry of natural resources recently announced a pilot project that high definition maps applicator in smart driving vehicles in six cities, including Beijing, Shanghai and Guangzhou.
The spaces, we look forward to the public beta test of the city N G P and in the future.
The launch of C. D N G P showcases our capability as a pioneer in smart technology.
We will leverage our competitive edge is in talent data and system efficiency to further cement our leadership position in autonomous driving technologies broaden our advantages in coverage over experience safety performance and costs.
Okay.
Well sure I shouldn't cause you to Jonathan she loves uncle Associates that have been go ahead Scott.
Okay Slovenia.
That's helpful on the shy.
What you're looking at is how long is that 10 minutes in Chicago, which then Townsend from Jefferson that trend somewhat.
Possibly it's quite helpful.
Yeah.
I'm talking about.
Well I'm not sure I'm champions.
Absolutely.
Oh gosh.
10000 citizens Joseph jumped quite some way shall we call it older and difficult corridor.
No not yet.
So don't forget the whole question, which I'll break that into wheelchairs.
It's also amazing she's donuts and artisan today from Jeff.
Which equaled the mobile title Serologic I thought wasn't sure Jonathan you couldn't do something.
As you saw and you say you touched on the sofa.
So Jeff Unfortunately high at 19.
So chongqing hopefully it.
I believe that the resolution of driving habits and car purchase decision, making driven by technology has begun.
Our next generation technology to be unveiled next year, we'll upgrade the architect yet you know funds paving the way for fast and widespread adoption of full scenario. He does enable just driving nationwide and making safe and convenient intelligent driving software a reliable partner for users.
I firmly believe that a full scenario a desk will become a core deciding factor in consumer's car purchase positions and that's consumer adoption of Adas software will become mainstream after the.
Its adoption increase of full scenario a desk in a future.
Additionally, we have already commenced R&D for our robo taxi software based on a full scenario a desk in an effort to utilize lower cost must cause used smart EV models and algorithms with strong generalization capabilities to lead the innovation.
Yeah.
You talked about franchise shovels and don't see that changing the agenda chop on the pension because she is and what isn't that's helpful. I E. Eight I don't want to change it.
In Central California.
California, Jostled, Sudan, and teaching our young incident chips will touch on that.
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Sure Sheila.
And to be able to the shellfish and she said, though unfortunately.
I imagine a quality of life.
Yeah.
Moreover, I would like to share a recent development of portfolio companies in our ecosystem.
X spine robotics completed over 100 million U S always N series a fund raising in July .
Upon completion of the sunbathing X spine robotics will accelerate as R&D off bionic robots, while pursuing synergies with these smart E D technologies to create greater value.
Also expand Aero HD first manufacturing factory for production trial are flying cars of fish and you came into service in July .
Marking a significant milestone in the development of X Bank line cards.
And your phone or channel.
Initial G.
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Oh, Oh aliens alien means you shouldn't get some buildings downtown.
That doesn't yet so don't she doesn't already have feet.
I wish I couldn't read a book.
You called out just so you got two data shows how Jason that tongue in cheek quite as well, but yeah. We got you.
Shove homesites hold much won't get into what you thought your 10000 kind of suggested that you don't have questions as usual.
How does your total quasi.
She is already full questions Huntington, Joshua Shanker senior without selfish.
He also has the shovel and she's a junior without changing any of that Kindle Sheila So that's it and so as you're looking at things very well.
Yeah, Yeah, so I mean as far as his jealously children's that's true.
So you got faceoffs in conjunction the agenda.
And fifth a woman I couldn't tell you.
So I'm going to show you couldn't Guangzhou automobile loan book just out of the Permian that you also see the central Georgia Shovel I would tell you don't get something called honest. This argument and I also wouldnt answer twice what they showed some good don't you feel that that's all.
According to China's passenger vehicle insurance registration data the zee penetration rate reached nearly 20% in the second quarter of 2022, while BV penetration rate, excluding eight zero class and 800 class was only 14%.
Indicating a vast market potential with long term disruptive opportunities for us.
Although market competition is becoming increasingly intense I believe will reap the rewards of X banks steadfast long term investment in electrification and core smart technologies for years to come as we bring more highly competitive new products to market.
With the <unk> nine we have taken.
With the Taishan Smart technology, and plus one follow up on architecture to new Heights.
We will continue to propel innovations across software and hardware products, bringing consumers smart E. B featuring an unparalleled combination of advanced technology, we'll be emphasizing and an exceptional smart driving experience.
With the continuous advancement of our advantages in longer driving range heightened charging deficiency and broader charging network coverage expiring, we will accelerate the transformation from Ice's N. P. H E. These in a mid to high end markets to watch B E DS.
What are the signs into legal issue, usually initially so thailand.
Well maybe cheap.
And you do what I'm Gonna change I was wondering if you would yeah I went to Genesis I want you to know so little easy way that maybe you can give us about <unk>.
In the third quarter, we will work to overcome the impact of COVID-19, as well as seasonal factors, we expect to deliver a total of 29002 study 1000 vehicles in the third quarter of 2022 with estimated revenue of 6.8.
Seven 2 billion RMB.
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That's how we keep that isn't with us.
Yes.
Joe.
Thank you everyone with that I'll now turn the call over to our VP of finance, Mr. Denis moved to discuss our financial performance for the second quarter of 2022.
Thank you Mr. <unk> and Hello, everyone now I would like to provide a brief overview of our financial results for the second quarter of 2022.
I will reference RMB only in my discussion today, unless otherwise stated.
Our total revenues were $7 4 billion for the second quarter of 2022, an increase of 98% year over year and equivalent to the latter of the last quarter.
Revenues from vehicle sales was six four <unk> for the second quarter. Upon your 22, an increase of 19, 4% year over year and a decrease of 0.9% family last quarter. The year over year increase was mainly attributable to higher vehicle deliveries, especially 40, a P 75.
Gross margin was 10, 9% for the second quarter of 2022, compared with <unk>, 49% for the same period of time.
21, and <unk>, 2% for the last quarter. We'll go margin reached nine 1% for the second quarter of 2022, compared with 11% for <unk> 2021 and 10, 4% for the last quarter.
Quarter over quarter decrease was mainly attributable to battery cost increase.
Partially bodied revenue increase as a result of setting price adjustment.
R&D expenses were $1 3 billion 42nd quarter of 2022, an increase of 46, 5% year over year, and an increase of three 6% quarter over quarter or year over year and quarter over quarter increases were mainly due to number one the increase in employee compensation, our sweet spot.
Research and development staff and number two higher expenses relating to D dependent on new vehicles to support our future goals.
SG&A expenses were $1 7 billion 42nd quarter of <unk> 22, an increase of 61, 5% year over year and equivalent to the level of the last quarter. The year over year increase was mainly due to number one higher marketing promotional and advertising expense to support vehicle at salus.
And number two the expansion of our sales network and associated personnel costs. The incumbent Commission 40 franchised store sales.
As a result of Pogo in loss from operations was $2 1 billion 42nd quarter of 2022, compared with one point for BD and Ford F. N P rate up 2021 and one point IBD and for the last quarter.
Sure.
Foreign currency transaction with <unk> for a second quarter of 2022 primary resulting family it'd be better to Asia and impact of RMB 90, I said, how the in the U S functional currency subsidiaries and rapid depreciation of RMB against the U S. Dollar in the second quarter of 2022.
Net loss was $2 7 billion for a second quarter compared with one 2 billion for the same period a year.
And 1.7 P is for the last quarter.
[noise] as of June 32022, our company had cash cash equivalents restricted cash short term deposits short term investment and long term deposits in total of $41 3 billion.
To be mindful of the length of our earnings call I would encourage listeners to refer to our earnings press release for more details on our second quarter financial results.
This concludes our prepared remarks, we will now open the call to questions. Operator. Please go ahead.
Thank you if you would like to ask a question. Please press Star then one.
We do as you please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
For the benefit of all participants on today's call. If you wish to ask your question to management in Chinese. Please immediately repeat your question in English.
Also for the sake of clarity in order to please ask one question at a time management will respond and then feel free to follow up with your next question.
Today's first question comes from Tim <unk> with Morgan Stanley .
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Yoshi double what she searches, which what is your thoughts on what you should all know it sounds like your tissue Krishna you'll.
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Did you change your the Quaker told me to cut off until you've shown due to the changing either.
Hey, you called Colchicine job P. T quiet Yoshi C H I'm kidding, but he said he because.
So my first question is about that you can watch your innovation and how we are going to translate that into all of the cross sell.
Because that's finished the leader you still go technology demand is for example, like a C. A N G. P. <unk> 100 Boe to Supercharging. So how can we maximize the attraction Oh, they took a technological innovation, especially in the premium mass market.
Where we noticed consumers might be less tech savvy and care more about their pricing to hold this ratio and how weird spec. So that's my first question.
Okay.
Yeah.
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I think what people have to say something that well so unfortunately didn't even oh.
Jim O N E.
Alright. Thank you for the question actually we do not we did not talk about performance over price ratios that much brought up we put more emphasis on the configuration of sorts of pricing more ease of configuration for a particular passing as good of a vehicle that itself would actually increase however, if you.
Look at the sales performance for the.
The subsequent six months and 18 months after the launch off of particular products you actually have to rely on the blending the after sale services the product quality and the unique competitiveness of our products themselves, let's take P. Seven for example, if you look at the first six months of sales performance of that particular product after its first law.
This house wasn't that great. However ever since we launched the city N G P function as well as all the high quality configurations are in accordance with the piece up in its model, we definitely see a huge increase in the south.
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Michelle can you kind of what you do.
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Shinji told me I apologize.
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I know you don't know what pool filled up.
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Shelton that so don't work well.
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As a woman of training.
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Sure.
Okay.
For the past four years, we have been able to attract a large quantity of customers that are interested in the consideration versus price ratio or that kind of balance IMU ended your vehicles and ever since last year, we noticed that customers looking to pay more attention to the driving range of new engine vehicles also.
The safety of driving and D. C are the charging experience et cetera, and as a result, because of a concerted effort and commitment in Q boosting our performance in those areas for the possible. Yes. We all are we are also able to gain a lot of trust and love and support from our loyal customers as well and in the future.
Especially going forward as we continue to develop our smart technologies and electrification and different aspects in terms of extending the driving range driving safety as well as the charging network and the convenience of charging we will be able to enjoy the economies of scale benefiting from our previous R&D efforts.
And as a result, we believe that we can ask a question you convert those customers that I would not so happy with the for example, charging experience for new energy vehicles as well as other aspects of the performance of new energy vehicles and slowly transition them into adopting more and more new energy vehicle, especially be lease going forward.
Actually since the launch of G night, all we believe that with the adoption of full scenarios Adas technology, we'll be able to boost our performance of our products to a whole new level and ever since that we will be able to attract more and more users and that would translate into ourselves performance. Thank you.
I mean, you saw Sunshine.
China shovel and kind of show you that she's only been underneath you can see at home from Yale Cancer Center.
So the yes, I'll just add something to eat.
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Yeah.
In addition to that I would also like to mention that I'm actually had with our commitment and investment in our R&D technologies. We are able to further decrease our cost of manufacturing and R&D in the future with the adoption of our platform based vehicle architecture as well as our new generation of smart.
Shannon and let the electrification technologies, let's say T. Nine for example, this is our first flagship products that actually adopt the mature level off these three areas other technologies, which as a result are able to bring down our manufacturing costs as well as our R&D costs as well because for the past years, we've been.
You know every single products that we've launched have been focusing on advancing technology and innovating to meet next generation technologies in the future. We will begin to reap the rewards of our previous investment E. D. R&D and as a result that would translate into a lot of reduction in our R&D costs as well as manufacturing costs and that will off.
So contributes to the enhancement of our overall quality of the products that we are going to launch into future as well as enhancing the manufacturing efficiency and R&D efficiency as well and since 2019, it with being investing in improving our manufacturing craftsmanship as well as a result in the upcoming two to three.
Yes, we believe that we will also welcome a new generation of a quality boots are in terms of the overall he's a few of our both the interior and exterior of our vehicles in the future as well as the you know the adoption of more and more integrated them die casting technologies that we have.
Allow us to achieve feature upgrades of our product quality and as a result, as I mentioned earlier, we will be able to actually lower our R&D and manufacturing costs as well as you know enhancing our overall product quality and so in the future. We believe that we will be able to actually Ah witness better self perform.
As a result, thank you.
Oh, Okay. Yeah. So of course, I wish I was going to say no what you're gonna Chi. So youll continue to tell you of course that you should see the automation. It can hurt the Soviet Masters key officials, yet I just want to say Gee, two Oh Gee outdoor type. So how would you go as you can have you. Just showed you you can she taught me that way.
That wasn't sure B class C class attrition.
We treat them the same Philippine time, there'll be no change to that younger championships with you that you said you also change the chachi no joint venture to Chi Tung T shirts in India doesn't show the pain, what are you listening George he's a georgetown they'll need a pin Tai, especially enjoyed city, we had negotiated rates, which I'm sure they'll use attrition okay. Paul.
My second question is about the popular strategy. So following the launch of the Chennai powered by Edward plus for you all I think <unk> going to launch two new models next year based on two platforms. So a lighter faster.
Iteration had more intense competition, what would be the reasonable lifecycle of our next generation platform and how many models we plan to build on each of the platform throughout their lifecycle. So that's my second question. Thank you.
Oh sure.
Well that's right.
Yeah.
If you're entitled Michelle machines, you name it.
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So you want to go chasing that she said Oh my gosh.
Hi Chi.
Hi.
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No it's not signed yet.
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Element certainly.
To your question of the pin persons.
Okay.
Hi, Joe.
See what assumptions and.
Total debt.
And she said if you know how shocking shovel you didn't you know without you go.
So I thought you would in the holiday.
So what does it all of it.
So a question that came up in that place.
Oh hold on the equal so there's kind of a thing that's always possible there shortly.
Okay.
Well. Thank you for your question indeed in 'twenty to 'twenty three we aim to launch two new platforms to develop them in total of six new vehicles in the future. That's based on our current platforms in total and we also estimate an average of three years lifecycle for each single platforms out before any.
System upgrade for those platforms and we also have been discussing internally a lot of possibilities to upgrade to our current platforms to allow them to empower our next generation of modification and electrification technologies into feature as well.
And so in the future we estimate that's actually our products have already entered into a very good cycle off developing based on our platform based vehicle architecture technology of using at least three to six years of lifestyle lifecycle for those platforms, which will continue to fuel our future.
A lot of development.
She doesn't have puzzle the Fayetteville. So thank you very much for sure everybody insight. Thank you.
And our next question today comes from Justin Chang with Citi. Please go ahead.
Oh.
Actually I was going to hold your questions. Jess I made good chance you want to kind of let me assure you that the other challenge, which he or she is supposed to go to a city sure sure Joe that you could ramp up Yahoo, Schinder, Pizzitola, who either to Patricia to talk I'll quote. So we just don't want you to Shaw hsinchu the tuition charged luxury.
Conclude I know what you're good little question jumping a little touch on Pete I'll.
The challenges that you saw in Q I mean here you go kind of as you did show China, essentially one gig or trucking undertook a shallow you mean congestion charges yeah.
We thought actually you went in Shanghai are all at one time that you go down you are shutting down not too shabby completes you should we should you wanted that you added to the shape you know Jonathan judging whether you want to hear you did you say.
Did you go through the J P. G P. What did you say that.
As a kid you.
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We know you own judiciary shall we usually I thought the situations you get your child Pugh, a honest Fujian chicken not to become a hydrogen resourcing time view I'll. Let you go she got some young students.
Gotcha Alright.
So my first question is about the strong Waldo cycle, how intuit's with three and we're going to launch a whole new brand a brand new product to see something and do something and she's not.
The the midterm faithfully P. Seven so could you give us some inside that whether we can challenge and yourselves a run rate at about 300000 unit level and if yes could you break down the <unk>.
A portion between the old products and as the new products and whether the current curve the old product P. Seven Q3, I N T. Five mature sustainable monthly run rate can be maintained at 12000 units. Thank you Susan.
She is here.
Hey, Jeff This is Brian Let me answer your question first of all as you know that we don't give guidance as that far out. So I cannot give you a number but I can give you some color regarding how do we see the new models kind of position and compete in our lineup.
First of all I think we still see continued growth in our core product for example, P. Salmon was the update next year, we believe our key southern well renew and continued strong performance.
We have hope that G nine next.
Next year, well exceed the the monthly delivery a piece of it. So you can actually do a little bit of calculation of what number that will represent.
The next year's New models, the first half will launch a b class based product, that's actually got target even larger market sentiment.
Could you know Bobby you know well consider that to be a strong competitors to the current model wise in the market.
We believe that we will actually also be a model that can generate substantial numbers.
Delivery and sales, obviously that therefore, the fourth new product the C class product will be launched in the second half and given it's our premium large format positioning the number may be limited contribution, but again, it's still going to be targeting a brand new segment that we does not cover before.
So with that you can get a sense of what are the likely sort of a peak level of monthly deliveries next year will look like and we're very confident about our strong growth.
Yeah.
Yeah.
Oh, Oh, Oh Wow, Yeah go into Yahoo QUADRA.
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P J.
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Yeah sure Schlumbergera Deutschland, John you know they'll try a whole Malawi, though to go kind of as your auto shouldn't be a chunk collision. They may run generally garner share so no Boeing much H D E C.
Do you have the Yahoo, What's your chicken tikka Omega to go with the other one the Sun's heat or something conjugal I'll leave your digital marketing trend.
Okay, but do you get treated in neuroscience.
So the margin creep without you usually do.
As usual take essentially through the Mali, particularly young while how should it be a bushel off too soon.
Aren't you do their molecule maybe starts out as a mature so you see that somewhat kind of how to use them are kind of like a San Diego.
So did you do at hydropower, which doesn't sound a lot, but did you say you got people talk to you because you've got people how many of the motorcycle that usually the top automotive cycle. As you saw she was I'll call. It continuous legal what did you just still cause somebody to show up. So so my second question is about the excuse me module in the second quarter.
I think it's a little bit.
Better than consensus and on the negative side, we had the P sand and sales volume declined by three four and 5000 units during Q and this was a high margin product.
And also after factoring the the battery cost side Q on Q. It seems that the GP margin was still quite resilient. So could you could you break down to the details of it.
Liberal.
Elaborate a bit on the second quarter and also how about going to the third quarter, how do we see did Marty. Thank you.
I Chad let me, let me answer your questions and Brian I'll, just supplement that data.
You are right in the first quarter, our vehicle margin was 10, 4% in the second quarter of vehicle margin was nine one.
1%, so we chop up a 1.3 points this was fatal and Oh, Oh regional expertise yet.
Because we were able to price the battery cost increase high that due to some accumulate T are the oldest so the new price soda what TD, but until late may So we cannot fully be kaaba, yeah. That's caused this.
Prices, yes, I mean, that's one.
Defense and yellow one would be as you mentioned the <unk> piece of the mix in the second quarter was lower than 50%. So a lot has some mix impact I cannot read the detail numbers to you, but basically be the odd year marching.
Margin reduction was primary due to number one the cost increases which were not fully carpet in the second quarter and then that mix change you are there.
Looking forward to the third quarter, I think that we will be able to deliver that new price old dish starting from July so lots of good news compared with the second quarter and more importantly, we will have better product mix are in terms of the P. Seven as a percent of the total at least compared with second.
So we anticipate in the margin in that quarter will improve compared with the second quarter. It will be Cleveland, Oh, very close to the first quarter level for the moment. That's all I can tell you for a moment.
Yeah, and then Jeff let me comment on your sort of a sort of a point about a product cycle and also the current a sort of a weather.
Both are on the margin as well as from growth rate, how do we see the concentration.
As Dennis mentioned.
And.
Because of the the mixed chance as well so stabilization of battery and also our oldest and now reflective with the a few price change as well as Delaware sort of Oh, you know incentive a mixed change we see a third quarter margin should be stabilized and then.
Hi, it's better than the second quarter and also because we are starting to launch new products, obviously jeannine being deliberate in October will be the first of the few new products that we can launch we start to see our growth being sort of generated from.
New product launches as well going into fourth quarter, we feel like the seasonality is in our favor. So we do think there is a strong chance that strong.
Confident that we will go into a growth cycle led by our new product launches this end.
End of this year as well throughout the next year as well as I think with decent new models also representing better margin due to the platform design as well as higher price points are compared to our ASP. So those are the observations I can make at the moment.
Uh huh.
So actually as you go into a new challenge.
Yeah.
And our next question today comes from Ben Wong with Credit Suisse. Please go ahead.
Yeah.
Coming to on how well it wouldn't be so Quentin is it going to send you that was shown on C. Huh.
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So this is Mitch you sharla to be that.
Are you stopped buying you're supposed to happen. So make sure you don't typically we tend to see how to sure.
It seems that Joshua we saw.
Are you seeing just went to the Molly do you believe you can go see them up that's all going to be an email bonds at a switch on the call. You. It's just really think paducah. Once we saw it shouldn't keep doing a happy weekend.
You guys sound hydro production suites outside so they know what you want to sure I forgot do anything mail boxes yet.
It's all about.
I don't want a promotion.
In the.
Afternoon beat alternate Tonight, so what's the low as well.
Most of our volume guidance enough.
So basically if you had to pick a promotion you should have a better volume. So did you mean something or what's it because somebody got estimates that you already printed queso to promotional stuff on all this mess.
Meanwhile, you also keeping them pretty well, it's gotten us up on the margin and that's been a quarter I wish it will be retained for them that will offer the first quarter, but you also don't promotional but disappear stockpiling say, obviously is a mess and that's nice.
Yep.
So this is Brian to answer your question first of all the third quarter delivery guidance is what it is.
Considering all the information to date. So you will include the obviously the holiday promotion and price adjustments that were made in the past.
The I think of the guidance also reflective of the fact that we are entering to a relatively slow season and also we can see that some of the topics and the stores are less than what we've seen before because our post COVID-19 situations and also I think that Theres a part also due to that.
For the new model launch in deliveries they are a little bit of a people are waiting to compare our two existing purchases. So all of that I think you will see both from our experience as well as pump peers, our performance as well on the margin front I think what I would say is that the the promotion.
We offer to the the models actually is less than the price increases that we are made in the second quarter. So net net actually though the margin on the products.
Slightly better than this current sort of pricing environment, our price and mix them. So we are seeing improvement in third quarter, Oh stabilization third quarter margins.
I don't think we have actually guided to back to the first quarter level, yet, but I think we see stabilization and improvement in the third quarter versus second quarter.
Okay. Okay.
Thank you.
Our next question today comes from Min Li.
Please go ahead.
Well this is a cyclical anytime what's it mean, what's it been Ah ha D that once he simply sometimes tough ones on T cells, because it sounds like the audience. So nice job on the OTT chat for the kids to the Hana customers Tokyo younger he can Oh husky's two the function that she tends to downtown home into the quiet someone's, who do not use them to OTT services.
That you can Oh, Johnny has is so cheap.
This is a short one.
Oh coming your way.
Well at least in the Tempe Gilman debt you didn't do so I'm wondering why you shouldn't be able to sell them into the company. So I'm wondering if he does what it says it does appear.
Uh huh.
Well I said something called out additional Oh cargo. So my questions are regarding the battery technology because.
So you just mentioned that are the.
The charging speed is much faster than our current batteries. So do you own the patent in the technology or are you a supplier.
And Oh could they subtype such kind of a battery to other Oh, yes and no.
So what is the reason for you to make a picture of the military Oh yourself.
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Publication.
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The quad pack, but what's it all again.
Yeah.
So I mean, that's all.
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That's helpful. Let's just any minute.
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So do you think that's going to be minimal.
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Pete how much it sounds like on the one two times.
So we just want to add.
C G.
Okay.
No. Thank you for your question in regards to Supercharging now there are several aspects of the consideration in the technology behind the Supercharging first of all you have to look at the buried himself and the management of the battery the <unk> battery pack as well as the Oh vehicle manufacturing and defined as well as the charging piles now.
We do conduct them our collaborations in terms of the R&D. After the development of the batteries are with our suppliers and our partners are and so we share some of those patents in both areas. However, we do we have our in house R&D capabilities and we own the patents of our managed.
A man of the batteries as well as the decided yet, but it's actually not the whole vehicles and are charging piles as well. So that's the first part of your question in regards to the second part of your question, which is about the reasons behind or the rationale behind the in house development and research of our motors are it is because it's very important for us to control.
The quality mm for the development of the motors eat to uphold the highest standards of B for example quality of our products as well as to maintain the level of technology in love with it we aim to achieve them until we know what did you. What she said we have to do the R&D in house. Thank you.
So let me just add to answer your second question. The reason is a better performance because of our self designed motor actually has a very compact design and also efficiency that allows us to prolong the ranch of the vehicles better than what we can get on the AR market.
Thank you Brian so.
A quick a follow up question regarding the new modeling <unk> pardon me three Oh, sorry, just mentioned that the product could be a competitive product Oh for model Y. So okay now I see a it'll be slightly a smoldering and oh.
And pricewise won't be slightly lower so it has a large large addressable market.
Thank you.
Yes that the what you will likely to be positioned.
Got it thank you.
Thank you and our next question today comes from Paul Gong with UBS. Please go ahead.
Yeah.
Yeah, Hi, Thanks for taking my question just two questions. So first of all I still want to discuss that a bit more on the Q3 guidance.
It is more like a supply side constraint at the mountain side question. So is it like the supply chain or do you see the really your thought amongst some prudent due to the seasonality.
And so second question is regarding the potential kind of I'd say you shouldn't. So you are going to have a second one.
As well as a few segments model next year.
Given you already got how far the medium size see then and that's U V. P 70 in mind, how do you see the kind of Ization of what's a shot though.
Joe do you go international at the horse as you all know since.
Since we talked to essentially to without somebody you got seasonal Santander supposed to cause a lot of human way Cleveland.
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They all got once you the hard to assume Union Turtle Beach. It though SUV features for the Hong Kong shouldn't that on April <unk>.
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Yeah.
Yeah.
Yeah.
Yeah.
Hey, Paul So on the first question I think I mentioned earlier that we see the weakness weakness, mostly due to a seasonal weakness, but also a post a COVID-19 control measures. There is a lack of traffic and also our head of new model launches are the are there.
A little bit of a so comparable comparison and wait and see attitude, which you saw I think being other models all other peers as well, but from our own perspective also there is the level of orders not.
Pairing with the supply chain because of the mismatch in some of the older AR models. So those are the reasons that I think we have currently provided such a delivery as the movie. So that's to answer. Your first question second question you had on the new model.
<unk> versus our current lineup, we feel like the first of all if the there's very minimal overlap in cannibalization.
Oh, what I answered.
Before this question are the are the new because model our product in terms of size and then in terms of price points will be different compared to G. Nine Oh Wow it'll be position also very differently and competing with the very different you know.
<unk> segment and also next year the new models are not sedan models. So it does not compete with PS seven as well so theres minimal cannibalization from our motto positioning and lineup.
Okay. Thank you very much.
Yeah.
Yeah.
And our next question.
Excuse me. Our next question today comes from Nick <unk> with J P. Morgan. Please go ahead.
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Well, let me quickly translate my questions. First question is really an update on chip's question on tissue.
And Ghansham.
How should each company can chime in too.
That's the first question related to Washington.
Accretion and second question is really on its become critical for them.
Yeah, that'd be going to medium and small.
Can we explain it.
Okay. Thank you.
Okay.
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Let me address your questions first of all in regards to the chip and very shortly is definitely since last year. We have seen now greatly challenged by these two problems and disappointing. However, since we believe that the problem. The shortage in these two these two raw materials will be quietly but.
E <unk> beginning of next year now for the first half of this year. There were a total of about 10 types of chipsets that we're in a high risk of supply shortage and so far we have seen a reduction in the number off the types of shortage, that's a high risk of a supply shortage and as I mentioned you.
Previously there was a total of 5000 different types of chips are included in our every single vehicle and so definitely chip shortage will still be a big problem, but however, we are very excited and glad to see that the supply shortage is being a relief and definitely by the beginning of next year.
The problem will be much less chefs and Diana for US now because to your second part of your question out because of our very early P. M measures and communications, we are not being challenged or troubled or concerns with the powers powered a shortage or a power supply.
In for example provinces such as the China. Thank you.
Yeah. Nick This is Dennis let me Frakes brandy.
So quota yeah currency law.
Loss from foreign currency transaction.
Because when we had the U S. I P O N E. Hong Kong IPO nature of money was raised and kept our India U S. Subsidiaries. So yeah, yeah functional currencies U S dollar and still kind of in her campaign lending a U S subsidiary Atlanta money too.
Yeah, Tom actually I mean, the company that says that they are your subsidiaries in China, So that kind of intercompany Nanjing. So this is kind of the yeah I M. B, a balmy 90 assets held by our U S. Subsidiaries. So you know if you can show the money should be returned back to like.
U S. So to come back to the U S. Dollar so when I M. B has the appreciation we look at the year it'd be variation benefits and in the second quarter due to Dodd glad P. RMB depreciation against the U S. Dollar Saturday, so that I think maybe I shouldn't impact negative mix yeah.
Asian impact he or she.
Second quarter. So you know future it'd be a currency change it we will do that on a monthly basis. So if RMB appreciation against the U S dollar that will have.
Yeah pass a P. A gain on foreign currency transaction, so you're right. That's the idea and the trend there Nick is it just to make it clear first of all it's noncash it's not it doesn't mean that we have converted the cash it's just the valuation because of the currency exchange rate differences, resulting such a sort of swings obviously every.
Quarter, we have to value the the assets using our functional currency and that's why there's differences, resulting farmed out because the RMB exchange rate reacted pretty Oh, I would say significantly in the last quarter.
Yeah.
Thank you Dennis and Brian Thank you.
[laughter].
Your next question comes from James Sorry, It was yours and see what is going on.
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Thank you. Thank you for your question now in regards to the competitive landscape within the price range of 300000 RMB. We believe the competition will continue to be their intent for this year and the coming here as well and there are two types of competition out there I really the first time this regarding the try to arrange as well as the performance boat over pricing.
And the other is about the overall at the site and its modification features for those kind of products and four P. Five its advantages it definitely and requests to do you know if they're the outstanding in terms of its over what the science is my features as well as its immersive and their immense I'm sort of a cabinet space as well.
We have observed a very steady sales performance for P. Five if a car to a P. Five itself outperformance guidance out for 2023 did you talk about guidance with that kind of level of details in terms of specific quantity of sales expectation, but are you now because there are some smaller you know some new updates for a piece of it we definitely oh.
Beef that you know maybe it will have a small impact onto south performance of P. Five but overall, we like to see a very good job performance in terms of the south for <unk> overall and also with the yeah as we observe off our pizza oven with the newly launched C. D and E. N. G. P are we be upset.
A booth.
Sales performance and we expect to see the same situation happens four P. Five as well, which means that would be out with the launch of a higher level of smart features such as city of Marvell M. P. The self perform the split P. Five well thank you.
And how about Oh, what do you think California, you shook why a woman treating yatra I'll take you up on your drink or were talking quite home market. They want what is your actual lately I think he will.
But people are not only you got your opinion, that's just from our colleagues I don't have a co pay for them today and he brought back from Washington, She didn't get in Oh, when they can actually come out if they don't classical though our crinone puts it all goes out to Brian actually see I'll call. It kind of tells.
Pedro Hydrosol Kashi, all tango commentary any Michigan cool, but like a Houston.
The only way to where it's actually a a box and tightly control alone no question that if we can't get tight cohorts you document Glenn Okay.
Oh, My God you guys so much.
Rahul collapsing patent critical Union of choice in a number of them go to lay down the use of the jumbo nutritious English chocolate that are not.
My My My My second question is how do we think about the time timing off by my math, you think off Supercharging.
There must be a couple of rice quickly all the way to a gradually penetrate penetrate over a few years.
In addition, how should be high voltage platform increase the portraits all manufacturing cost of the vehicles can cancun H.
Oh cheap I got paid Rite Aid's press a press a press okay. Cathy you penetrate to local price model.
Okay.
When you told us a whole lot of women and children.
That's cool.
Jacob so.
So you don't go forward, which I guess would be what Michelle.
Oh, I'm, sorry, it's home to Cheetos case of that.
So, which one of them that shot.
Many of these digital.
George any food companion.
Sundance Homeaway, she thought casuals and whats all at once you know so well.
GTO GTO.
The adult paces to see that's when we get into it you got to pay their travel with us are starting to see the city.
That's helpful.
T J you hold up here.
Okay, Yeah got any other questions televised on T C C.
Oh cool Chinchillas that lay the home and if he told me he told US he won't call. It out. So you don't want their corruption, either Jay or coming in at one time, but nobody is something that will not have to say that I think he was changing the number.
Today I'll tell you can tell us what is hydrocodone about telco anymore.
So that's how I would.
That's helpful. Okay, that's why I'm really hopeful to hold quite well Michelle she inside the shop, I know them as horizontal wells and I'll show you his football changing use of wholesale Virginia and attention.
Yeah.
Now I'd cards are ingrained in regards to other construction and the adoption of our Supercharging network definitely it's developing quicker than expected. This quarter. We started you know the aggressive construction of all network and by Q4. This year, we believe that we will have another dozen mutations.
With this super charging facilities and by 2023 hour Supercharging them that works, we'll be constructing even at a higher space at a higher pace. Now for example denied with its highest configuration model you know fully compatible with the four seeks to protect itself. It would be all the other configurations on an all day, you know bottles actually Oh.
Nine out of persons with Jeannine actually support we see super charging them a function and in the future you know because of our platforms right now where support these high voltage and high powered Supercharging facility. We believe that our future models will all be equipped with this kind of functionality, which means that we can be able to do better supply chain control to it.
Our featured products with this kind of stuff. He was he and allow us to achieve a better economies of scales as well as cost control with a effects now there are two things that we need to focus on when we talk about Supercharging network. Construction. One is development ended the sign out of all vehicle products to support this kind of high voltage and Supercharging our function and the other is.
D. A quickening construction of our Supercharging network into charging piles and by the second half of 2023. We believe that you will know we expect to see a very well established supercharging networks that can fully promote the adoption of our supercharging them quick charging facilities. Thank you.
Okay got it.
Thank you.
Okay.
And ladies and gentlemen, this concludes our question and answer session.
To turn the conference back over to the company for closing remarks.
Okay.
Thank you once again joining us today, if you have further questions. Please feel free to contact us.
The relations through the contact information provided on our website or the Pearson group.
Sure.
This concludes today's conference call you May now disconnect. Your line. Thank you.
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