Q3 2022 NIU Technologies Earnings Call
Yeah.
Good day and thank you for standing by welcome to New Technologies third quarter 2020 earnings release Conference call.
This time all participants are in a listen only mode. After the speaker's presentation that will be a question and answer session.
So that's a question during the session you will need to press star one on the telephone. Please be advised that today's conference is being recorded I would now like.
And the conference over to your first speaker today, Ms. Wendy Chow senior IR manager. Thank you. Please go ahead.
Thank you operator, Hello, everyone welcome to today's conference call to discuss <unk> Technologies' results for the third quarter 2022.
Earnings press release, corporate presentation, and financial spreadsheets have been posted on our Investor Relations website. This call is being webcast from company's IR website as well under what play off the call will be available to them.
Please note today's discussion will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.
Forward looking statements involve risks uncertainties assumptions and other factors.
The company's actual results may be materially different from those expressed today.
Further information regarding the risk factors included in the company's public filings with the Securities and Exchange Commission.
Company does not assume any obligation to update any forward looking statement, except as required by law.
Our earnings press release and lets call include discussions of certain non-GAAP financial measures. The press release contains a definition of non-GAAP financial measures.
Relation of GAAP to non-GAAP financial results.
On the call with me today are our CEO Doctor Yodlee and CFO , Mr. Joe Nagy.
Let me turn the call over to Jack.
Thank you Wendy and thanks, everyone for joining us on the call today in Q3 2022, our business faced challenges from risk from rising raw material prices market demand fluctuations in the aftermath of the Covid researchers in China all of those factors caused serious disruptions to our operations during this quarter would deliver it mixed.
Both in China and international markets.
Sales volume was down by 19, 2% year over year total sales loyalty national market risks.
T H units attributed to the growth in the King Scooter category, bringing the biggest year over year in the sale of an unused overseas market.
In China market, we experienced a decrease in sales sales volume in China market was 263000 units down by 32, 9% year over year.
Now I'll go over challenges opportunities in each market in detail.
First of all the China marketing in Q3, 2022, we continue to experience difficulties due to the impact of the high lithium battery cost.
We're adding COVID-19 lockdowns and the delay of new product go out.
The raw material prices for the lithium iron battery sharp increase since the beginning of the year. The increase has slowed down the penetration rate of lithium ion battery electric scooters across the entire China market, well, but there'll be many tier two or tier three cities that asset based schooner percentage increases in the market at the price gaps in the beta asset.
It's widened.
This had an impact us significantly since the majority of our E scooters that lithium iron battery based especially in our entry level products, which accounted for over 90% of the volume loss year on year.
We did also actively optimizing the product portfolio to reduce the entry level percentage.
The new lithium iron costs, those product lines produce subpar gross margins.
The replacement heightened hopefully, replacing most tender scooters with a new national standards. Scooters has also declined Q2 or Q3 for our targeted market of tier one top tier two cities. For example, the oral markup aging declined by 60% of most of the replacement work complete last year, given our sales are still more concentrated in the top.
Top tier cities our sales volume was also impacted this year.
Last but not least our main products, you'll all has been significantly delayed this year, partially due to the COVID-19 resurgence lockdowns in Shanghai on the synergies where R&D center is based.
Although the high end product like a skew I was relieved the August it won't be able to ship until December .
Our new class our high angle with fears that she's 62 were shipped in late August early September those core products. This year, we launched hasn't missed a key sales seasons.
Providing industrial for the 2022 sales.
Now despite the volume drop and delay in the new product rollout the newly rolled out product received overwhelming positive responses from the media and consumers. This helped to restrict our brand at the high end lifestyle brand in China, but also lay a strong foundation for the 2023.
First we pre released our revolutionary <unk>.
Basically all because it's priced at RMB 8000 now.
<unk> 9599.
Which I had briefly talked about in my last quarter's earnings call.
This innovative look and a cutting edge aerospace mechanism material the evolutionary ex Q I was well received by the market we received more than 15000 preorders for the pre release.
Another high end product will launch around the same time as our new you plus the new <unk> plus has inherited a classic designs for all the time most popular use serious but design with improved liked define smart controls the right economics.
Additional personalization functionality, the new U class had nearly 50000 of shipment within the first 30 days I'll say throw out during the double 11 shopping festival of our new <unk> plus has ranked number one best seller product in the electric scooter category by top up together with the ask you why those new products, helping you to read.
Number one the transportation category on top of them.
The record breaking sales up at Q1, the new clubs, we recalled re consolidate our position.
To lead in the premium electric tubular market in China.
Now along with the launch of this new product will initiate marketing events via PR, social media marketing to all cooperations of offline private lunches and user events. The marketing campaign around the new pilot launch has gained a total of $1 4 billion views across all platforms. Three X of them you would had a similar comp.
In 2021, those marketing activities again strengthen our brand messages as a lifestyle brand in China urban mobility industry.
Now amid the lithium price increase we took a step to optimize our product portfolio towards the premium to high end products to improve our gross margin as well as the strength of our brand as a premium brand in China for the first three quarters, our premium new series product percentage continue to increase from 31% to 39% well.
Our entry level zero serious product reduced from 28% to 15%.
The double 11 shopping festival online 83 personnel our E. Scooter orders came from product over 5000 RFP.
Despite the rise in raw material costs were managed to improve our post marketing China significantly by 300 basis points.
Now coming to the international market, we faced challenges in the electric two Wheeler markets from the temporary shutdown of the share market demand as well as the macroeconomic headwinds in a rising euro U S dollar exchange rate and the increased lithium prices.
First the market for the sharing electric motorcycles that temporary shutdown. This year at the sharing operators has not raised additional capital for expansion, but merely focused on current capex deployment. The assurance sales accounted for one third of our sales internationally in the international market last year.
So so this year, we experienced a zero sales from that right.
Second the REIT in the lithium prices coupled with the weak euro of forced US also to increase the prices in the European market, which impact our sales of electric motorcycles in the consumer segment.
So at the end the total sales of electric motorcycles in Q3 in the overseas market went down by 34% year over year.
However, during this quarter, we had a significant 166, 5% year over year close in our sales up southeast Asia market, mainly from the growth of Indonesia, and Thailand market doing.
During the G 20 summit in Bali, New properties will provide electric scooter to be used by the Indonesia National Police office shorts to support the local gardens effort Green Transportations.
We have continuous effort spending the southeast Asia market as we hope to grow with the trend of transition from traditional Gasfield two winters two electric two wheelers as it happens.
<unk> also started exploring battery swapping solutions to Adas adoption of electric motorcycles with its first trial in Singapore.
Contrary to the decline of the electric motorcycle market, we have experienced tremendous growth in the micro mobility market. So the kick scooter category had a significant quarters and growth of sales from kick score category doing off this off season for the electric motorcycles.
The sales they'll kick scooters rocket 255000 units during Q3, a growth of 162% quarter over quarter.
Since Q4, 2021, we have strategically who I'll kick scooter product will cover a wide range of market needs. The first launched K three in the K two are proven to be successful in the market during the.
Some are prime day sale in July used to keep kick Scooter models were ranked number one number two on Amazon best sellers and that kicks quarter CAD for your French Spanish Italian market.
So Keith cooler products gain not only popularity among customers, but also recognition from industry.
Our Q3, Max received outstanding Courage from U S biggest tech media, including Tom's Guide and the Tegra radar. It was ranked number one of the best or electric Scooter by Tom's Guide and awarded a perfect score by attack rate or the.
<unk> III a pro model was also awarded a second place for the best sustainable mobility device.
And that cuts our Spanish top medium in their annual awards.
Now during Q3, we continued to expand our product offerings, we launched a K one keeps scooter I'm Kate used to add keep scooter product portfolio K. One is entry level keep scooter product, where kit UCITS kick scooter for 6% to 14 year old.
Those two products and it would not have a complete product offerings with price range from $300. So $900 come in both children and adult kick Scooter products also along with it kicks where product was also pre launched our first <unk> product <unk> recently.
Two battery pack with two lightweight swappable batteries offering a long drive range of 62 miles.
Now besides the product launches we have also built a sales channel for our new micro mobility products through a focused effort. We have achieved with solid presence online channels building not only sales, but also a brand image and the brand awareness through our shops the arms on cross markets.
Meanwhile, riding the momentum from the recognition with game from our online shops, which started to expand our offline sales pointed by working with retail store, that's best buy in the media Mart, but I know Q3, I'll kick split was sold in more than 750 retail shops across the Europe , and North America and now expect to grow this number to over 3000 by next year.
Here.
Now along with expansion across our product portfolio. Our sales channel is that our effort in PR and marketing in 2022, we published over 700 articles cover our product across all media platforms.
Articles have gained more than 100 million views on QR marketing to support coming Black Friday sales, we collaborate with Influencers with big fan bases to create content featuring a product those content generally total over 2 million views on Youtube and Tic Toc.
I believe the expansion of product portfolio developing sales to channels and exposures from PR marketing activities are micro mobility category has a much larger.
<unk> in branding exponential growth in 2023.
Now for Q4, we remain a cautious outlook in China market in the fourth quarter has always been a low quarter in terms of soft market demand.
On top of low demand the impact of the price increases that will be continues.
Additionally, sporadic probably resurgence also add additional uncertainty to our key markets.
In the overseas market, we haven't seen a bounce back in the electric tubular steel for the share of business and the increased price will continue to exist and have an impact on them ourselves. Some electric motorcycles, we saw positive trends in the national kick school market, but since Q4 is traditionally a low quarter, we expect a moderate growth.
That category.
So overall 2022 has to be on top of the year flowers.
Business operation as we faced headwinds from raw material price increase and the macroeconomic uncertainties for any negative impact Hardy financials in the face of mounting challenges. However, we've made it quite a few crucial operation adjustment I'll lay out a strong foundation for a promising 2023.
Since the formation of the company and you had the ambition to become a global mobility solution provider and a well recognized lifestyle brands urban mobility.
Leverage our design strength and the technology innovation capability will create a smart lithium iron scooter category in China was able to quickly establish our brand name in the electric motorcycles globally.
Now facing the recent market shift we are focused on increasing R&D effort, our premier new serious and high quality coal with serious as opposed to low end entry level part of this year. The two premium product as Q1 that you must have received overwhelming positive feedback and prove it to lift off brands just three months up debuted.
So <unk> was recognized as a revolutionary first of its kind by the media with the innovation in material technology and design the new clubs had generally a widespread trend on social media.
Also the high quality Golar series that each one G. <unk> are also well received in the market accounted for nearly 80% of our product in the first 30 days of their dividend.
Those are the proven testimonial to our brand leadership as well as our capability products from creation.
Those new products, the first teaser as to offer new products series and there are a series of premium new products and high quality Cola product R&D building up in time next year to regain the growth in the China market.
Now on the global mobility solution provider front, we have made significantly progress in 2022 through expansion of our product categories and different solutions. According to the different regional needs.
Albert there that micro mobility market continued to rebound that show equity resilience since the pandemic the urban transport electric scooters and E bikes gains popularity after COVID-19 when people prefer to come in with personal transportation method.
We have establish ourselves successfully as a recognized brand and a player in the kick scooter market within just one year entry drilling a four products always positive response from the market given your leadership in the online channels first.
It was 80% to 90% of sales in this market from offline channels, we see a huge growth potential for our kids screwed up market as our offline channels is still in its early stage.
We plan to take a similar approach in the ebay categories to repeat the success of the key scooters as we plan to officially launch the first feedback product in Q1 next year.
Actively marketing the back product duty online shops, attracting customers and also bring up at the Brown awareness. Meanwhile, after the online presence with plans to expand into the special items back stores and other offline channels in order to bring a wider traction.
Now for the electric motorcycle market, although it took a step back this year in the sharing market I believe that replacement demand is still there our nearly 30000 sharing vehicles are skewing operation.
Expect some of them will be replaced in 2023 after four or five years in operation.
Additionally, in the southeast Asia market. After several years of planting the seeds, we're able to achieve minimum meaningful growth. This year. We're also investing in R&D and had product ready for the battery swapping solutions to lower the upfront costs with consumers, which could be a game changer in the years to come.
Now windows focused strategy and our determined mindset execution, we're very optimistic that we will recover from the temporary downturn in 2022, and then re strengthen our breadth and reach and growth and profitability in 2023.
Now I'll turn the call over to CFO to discuss our financial results. Thank.
Thank you yes.
Please note our press release content.
Comparisons you need.
We have also floating cell format figures to our IR website you referenced.
As I review, our financial performance, we are referring to the third quarter. He cars, all that I say, otherwise and that all laboratory seekers Hardy.
It's not specified.
Total sales volume, including China and overseas markets for the third quarter was plus 321000 units.
<unk> by 19% compared to the same period of last year.
Our overseas business continue to gain traction sales volume from the international market has been growing fast in this quarter contributed 18% of our total sales volume and if looking at the nine months a country of beauty.
15% of the total volume.
China market sales volume was 263000 units, representing a 33% year over year decrease.
I'll start with the sales volume increase was contributing to the decline of our Hawaii skull that actually have a serious.
Total sales volume of our premium here is remained at the same level 224000 units in the third quarter of course is to 30000 to up there last year and those premium model together accounted for 85% of the total sales volume in China market compared to 50.
9% in the same period out to 2021.
International market continues to see high speak for other things to keep scooter sales ramped up the total sales volume reached 58000 units among which it keeps growing our sales volume was 55000 units more than doubled compared to last quarter and E motorcycle sales.
Volume decreased five one sorry to 3000 units, mainly due to the temporary headwinds from declining to be sharing ours.
This year the sharing business companies in Europe are facing challenges, raising new capital, which has which in turn impacts their budgets for expansion.
The third quarter. Our total revenue was RMB 115 billion decreased five 6% as compared to the same period of last year and landed scooter E. S. P 13287 increased by nearly 17% to break down the revenue by Wayne G E.
Scooter revenue from China market with RMB $859 million decreased by 20% and the ESP and China markets reached RMB 3265, 19% higher on a year over year basis as product mix. It was more concentrated on prime.
Liam model, that's mentioned ahead overseas revenue, including Keith Scooters E modal the motorcycles.
The 195 million in the third quarter increased by more than three fold year over year.
Here in the third quarter overseas Scooter revenue accounted for 19% of our total scooter revenue.
Randy at Scutari, FERC overseas markets decreased by 61% since the lower priced kicks quota, which asp's only 25% to 30%.
I'm now taking greater share of their total scooter revenue, but looking at each category separate fleet, both Nemo, Pat and keep scooter saw a year over year a S. P an improvement of 30% to 35%.
In addition, accessories spare parts and services revenue were RMB 99 million decreased by 7% due to the less overseas demand for extra truck battery packs.
Well, it's marching up this quarter was 22, 1% to one ppt higher compared to the third quarter of 2021, and one two ppt higher than previous quarters.
Out of the year over year to one ppt increase to five ppt was due to better product mix in the China market, one ppt due to the increase in U S. Dollar exchange rates and my next one quad four ppt due to the higher proportion of kit kicks corridor.
With lower overall marketing.
Our total operating expenses for the third quarter was 263 million, 72% higher than the same period of last year. The operating expenses as a percentage of revenue was 23% compared to 13%.
In here.
The only details about expenses telephone salary and marketing expenses were RMB 117 million 81 million higher year over year, including around 54 million in Mark and promotions for key scooters and domestic new products and the rest.
$27 million in depreciation and amortization expenses of the new stores and stuff, where they teach com.
Despite the global Eagle.
Motorcycles, we are still new to the kick screwed up market. So quickly gained product's popularity, we put lots of resources and athletes into the online E Commerce platform like awesome, Shopify and et cetera. We are glad to see you know what inputs have already paid off acts.
<unk> online customer feedback to help us enter into more offline channels, which we believe is crucial for us to further expand our keeps food on market share and bring us to the next level of ethical Albany area. He micro mobility.
We believe those online promotion expenses as a percentage of revenue with the cotton or moving forward with our marquee sharing crazy.
Starting from August and lasting through the end of October we held a series of events in downtown areas in more than 20 cities in China, showing the new products setting out pop up stores offering right.
Providing a platform for new fans to sharing their riding experiences and set up right with each other more importantly, we keep being committed to the user of <unk> communications.
To summarize we invested RMB 54, LTE and more marketing expenses to those overseas and domestic marketing promotions altogether in this quarter.
In addition last year week.
And our retail channels by adding <unk> 15, 50000, French hydro doors.
All new stores depreciation and amortization expenses will have a continuous.
Your financial impact on selling and marketing expenses.
R&D and G&A expenses, together RMB 94 million in the third quarter, an increase of 30 million compared to the same period of last year, among which staff related expenses were 17 million higher.
Design and testing expenses was 7 million higher as we expand our product portfolio and global footprint, which will continue to invest in talent professionals and other resources to support our technology and our technology.
Technology development and organizational upgrades fall off the local pioneer.
Total operating expenses exclude share based compensation were RMB 247 million increased by 73% year over year, representing a 21% of revenue.
This quarter, we had an income tax benefit.
RMB 6.6 million compared to 17 million income tax expenses last year.
We were identified as a jumpsuit provincial high Tech enterprise.
We're qualified for a lower cooperating income tax.
Our tax refund was booked this quarter same as last quarter.
Core net income was two 9 million compared with RMB 92 million in the third quarter 2021, and the net income margin was 23% compared with seven 5% in the same period of 2021 adjusted all in.
non-GAAP net income was RMB 20.
Plenty of Elliot that's marching up one 7%.
Turning to our balance sheet and cash flow, we ended the quarter with RMB 148 billion in cash restricted cash target deposit and short term investments.
Our operating cash flow was positive 73 million, mainly due to the payment term benefits from the suppliers'.
Inventory slightly decreased on a sequential basis and increased by RMB, one 7 billion a year over.
The year basis, mainly because of the international keep scooter sales ramped up since we need to stop up low quality to ensure a fast turnover when others can't.
As mentioned in our previous call.
The capex for the third quarter was RMB 18 million compared to 76 million. The same period last year. The decrease was mainly due to the new store openings slowed down.
Now turning to the guidance.
In light of the wallets.
I stick market and our strategy to focus on the premium market we.
We expect our fourth quarter revenue to be in the range of RMB 789 million to $986 million no change to a decrease of 20% year over year.
Please be aware that this outlook is based on information available as of the date and reflects the company's current and preliminary expectation, which is subject to change due to the uncertainties related to our various factors such as the pace of the economy.
Pandemic recovery among others.
With that let's now turn open the call for any questions that you may have for US operator. Please go ahead. Thank you as a reminder to ask a question you will need to press star one on your telephone please standby, while we compile the Q&A roster.
Okay.
Okay.
The first question comes from the line Jade Cheng from CIBC. Please go ahead.
Okay.
Hi, This is Keith come from since you Keith.
I'll call your detailed explanation.
I have two follow up questions. The first one is about our selling and marketing.
Our selling and marketing expense he Mr. Klausner reached a historic high and Sharron Johnson mentioned some breakdowns.
What about looking at hand, so which part.
Mascara.
Since we expect it to be sustained and which parts.
Exactly.
That's a decline.
And what is the exact date.
State level, all of our call today, selling and marketing expense and we have some measures to promote to reduce it expenses.
And then my second question is about our product pipeline.
At present, we can see the coastal leases south we still very high and so as total product strategy for next year.
Especially in the Chinese domestic market, so what market.
So our new product.
If the premium market.
Tier city markets.
And so we want to achieve positive sales growth.
My two questions.
<unk>.
Thank you Chelsea this is Phil I'll answer the first question.
Regarding to your other question about the selling and marketing for sure. As you said, that's all already giving a breakdown and I think the depreciation and amortization expenses related to the new stores will continue.
The same level for them for the next two years since we opened more than a 40 and the 14th solvent newer stores are starting from 2021 and those are depreciation and amortization expenses will last for.
At least a 36 months so that means that.
Oh for the next two years, we still have those kind of expenses in the salary and marketing expenses as a mission for the new stores. We opened this year and for that I'll for eight years.
Will you know oftentimes don't see expenses in the same way. So this is the I V.
They are a major part of all of <unk>.
The expenses will still remain the salary expenses.
And the other part is the is our marketing spend is for the daily Oh.
Our daily operation.
She at all which we will reduced there's always stood apple but for the off while the Keytruda as I mentioned since we are still using the expansion strategy for the next two years, all led to our market share increased at a very significant.
Level, which I mean, you know it.
It will be around 1 million all you know around 800000 units globally, otherwise you would all tell us promotion expenses, especially the online traffic expenses, which are huge or you know by Dr. By D. R.
<unk> those online promotion expenses will still be a you know.
That's a.
Significant level.
You know I, along with all of our market share increasing in the key corridors.
Oh for the reduction of the Saudi expense since we already you know made a D. I b, we already make a D. A D. They cut off the of the staff cost.
Which means you got all we all we March several teen and we increase the all stock efficiency.
To increase the whole company's a staff cost.
Well, you know I'm, making the banner feedstock beginning from next year I think it all since those are those staff Costa will only reflect all of the financial our financial statements. Later for you know for at least a one or two quarters that we would see the rps.
<unk> on the financial statement, but for sure you know all we already are several you know a.
Several of our execution.
Improvements to chew on maintained the the lowest level of the expenses and to improve the whole company.
Our efficiency.
And to summarize I guess I think you know for the next two a two to three quarters, the Saudi and marketing expenses altogether, we remain at the quarterly level will remain around the RMB 100 million Q1.
130 million for the next two to three quarters.
And after that.
With D a.
You know at least a 20% decrease on a positive basis.
This is the answer for that for your first question I'll I'll pass the I'll pass the second question fall off again.
Sure I think.
Just a little bit on the first question right. So I think in terms of absolute value. So you do get that number but if you look at as a percentage of sales. So definitely go down if you look at Q3. This year, we're just getting the sales and marketing, it's almost like a 14 or 15% of the hopefully revenue I think you know partially that's what's beyond just mentioned it you come up from that.
But that's what you see on the numerator and denominator says that the revenue growth with obviously, it's not us.
It's below our expectations so.
You know a lot of fixed overhead for example.
You'll have a you know like a like.
Marketing activities or product rollout right. It's a fixed cost you buy a bag revenue amount. That's why you see a high percentage, but if you look at it.
Nothing in 2022, but if you look at 2021 or 2020.
Eagle tower sales marketing roughly as a percentage of revenue will keep it basically somewhere between 7% to 9% fluctuate.
That's what we were.
We're trying to we're targeting 2023.
But obviously the absolute dollar amount probably similar.
But I think that's a that's just on that note I think the second part you asked about.
The product development.
I think the issue it's actually were up.
We focus on premium also would've called a mass premium powered up basically the premium product with our new series.
About 5000 RMB.
For China market, the mass premium product will be something basically anything about 3500 35 under RMB, two 5 billion RMB, which what we call the high quality core product I think those will be sort of the focus.
At least that they'll be focused for 2023.
Partially because when we actually did a deep diagnostics to our entry level product the New York.
Serious.
It's basically it's gross margin contributions almost become a significant I'm not saying, it's almost zero, but you actually took into consideration at all for us are still cost over this stuff.
Those products not making value for the company.
<unk>.
So that's the reason that we're focusing on leads that would.
Cut a premium at all.
Having said that I think if you look at the entire market.
The entire market for that product is still high given our sales volume at this point.
As you know it's below 1 million units you will play your car market.
The product above 35 under RMB.
We're still looking at that market is probably at least about you know.
10 million units, if not more so I think the total addressable market is still so large for us to.
Attack.
So to this point is we feel that there's no point to spend additional.
R&D dollars product that I should make sense zero.
Alright.
Very small attribute.
Gross profit contributions.
Okay.
Okay. Okay.
So hopefully that addresses the question.
Thank you.
Yeah.
For the questions.
Next question comes from the line with Yachting chunk of TICC. Please proceed.
Hello.
Chad.
Sure Sir and there are three questions.
The first question is.
Like to know what's your strategy for overseas market in 2023, and do you have.
It's volume goes inflow last year.
And the second question.
What's your channels gesture next year domestically.
Chad.
Okay.
Reduced channel stores.
Or will you focus more on.
And the second and the third question is.
I'd like to know the gross margin.
East Criteria's and Gulf of theories.
If you can share with us.
Thank you.
Sure. So I'll answer the first two and then I'll let.
Sian address the gross margin question. So first on the overseas strategy, we're looking at a well again with you about the market into sort of what are called a motorcycle market on a micro mobility market.
Within the motorcycle markets I think are our bread and butter bread and butter markets point is Europe , and the North American market, which you know annually, we do about anywhere between 20000 units to 30000 units model electric model cycles.
As I mentioned in.
The earning call. This year, we took a step back because the sharing operator orders becomes zero.
Last year. It was 10000 units right. So.
But.
They will come back. It's just you know it kind of fluctuate depends though.
They happen to raise the capital this year to focus on internal operation with that stuff now.
Well, then I think this market will grow with the market continuously the oral market for electric motorcycle market for Europe , and the United States market is small at this point, probably like hundreds of thousand units a year or.
So oral I think it's a small market, but we're only like 2020 something percent. So it will actually continue to grow with the market now.
The second electric motorcycle market, which really is still in its very early.
Early stages, the substitution market. So we do see that would grow in southeast Asia market would probably double our sales in southeast Asian market, even by doubling we're still looking at just 6% to 7000 units is still small markets.
We're trying to.
That would exploring different models like the battery swapping solutions in that market. The issue was that market is actually the electric motorcycle economics of electric motorcycle it stoops.
The price is still too expensive compared with perpetual so the upfront costs for the users actually difficult. So we're working with our partners there to see you know on the.
Sort of a battery swapping solutions that might actually.
Sort of lowered the upfront cost for the consumers. So some of the early trials already done in Singapore, but also earnings calls in Thailand.
So I think those are something we're exploring.
Then the next is sort of a micro mobility market, which this year with you.
Volume growth first being the kicks quarter market, which the entire market on a new basis is probably like a 4 million units. We're still Barrett I think we have a strong.
This year, we have been able to achieve at Nee basically people recognize us on Amazon online website, saying Hey, this is.
A brand that can produce high quality product in key scooters.
But even with this year's volume like the first three quarter you added together with just did about 80000 units.
Although if that formula units market, we're very very small the reason being that we haven't really.
Sort of enter a bench all the offline stores, yet and the.
Historically, 90% of the sales to actually conduct the offline.
So those are something we're working on which we actually have made a significant progress, but it just take time I think usually.
All of those offline.
Offline chase it actually takes six to nine months to enter the store actually be able to start to make sales. So I think that's on the on the uptick scooter market in the last month the E bicycle market, which is actually it's getting attractions are beginning of tracks in the last few years.
So we you know we have a product out next year, which actually will help us to make a name in that market I think we're going to follow a similar strategy that we took on the key scooter market basically making the name online gather enough interests online.
Hardy user adoptions.
Let's start with the offline.
On top of that so any sort of I think in keeping with the previous questions on the operating on the Soc expense right now the micro mobility business unit has the highest gross expense. That's because you know a lot of stuff that the online where do you see a high expense in tomorrow purchasing their traffic all that stuff.
When you actually 90% of the sales coming become offline you can see a significant decline to Marcellus expense.
So I think that that's sort of.
The oral supports our strategies for overseas market, we don't have the target yet I think it's too early for this causes us to give it wouldn't targets I think on the domestic channels in China. We have about 3300 stores right now so far in domestic channels, I think where we're taking a very slow.
This year to expand the stores because I think with the current market shifts, especially with the lithium battery prices went up.
The right now the number of store as you know is enough for us to sustain our gross I think the focus is merely for.
To improve the per store sales so same store sales.
In 2023, so we're not looking at expanding more stores, but really focus on improve the per store sales.
By 10% to 15% next year.
Okay. So I'll, let you answer the gross margin part sorry, Yeah I'll take the third question regarding to the gross margin jacoba serious lender with raised their definition of our accounting real essentially all the wells marching with our accounts.
For our financial statements. It contained it's not only contains the bom cost, but also an intense all the discounts.
Our rate base up there off the sales and also you know all of the Ah in.
Logistic expenses and all these salary expenses related to the odd to the AR days sales volume so that means you know.
All the direct expenses.
Expenses and cost related to the art to this <unk> will all accounted at the cost of the group felt so this is the odd this is above our gross margin and when we are not counting all the caustic and expenses altogether, all gross margin optical box theory.
Yes.
Including the entry to the premium models.
Gross margin range at around 15% to 22% so that means.
Chip, it's all the lowest level of Oracle a serious the gross margin will still up about 15%, which is the the average level of our competitors.
This quarter when you see our gross margin improved you know since you know our product to make improvement on the entry level only a content off the 10% of our sales volume plus you already are weighted average growth marking up the coldest goldwasser.
Yes will improve to around 20%. So this is everything about the uncle a series called Smart you can hope I hope this will address your question.
Thanks, a lot.
Thank you for the question once again to ask a question you can press star one on your telephone.
Yeah.
At this time there are no further questions from the line Tom May I hand, the call back to the management for closing.
Alright, Thank you operator, and thank you all for participating on today's call and for your support we appreciate your interest and look forward to putting to you again next quarter on our progress.
Thank you management, ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
The conference will begin shortly to raise your hand during Q&A you can dial one one.
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Okay.
Yes.
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