Q4 2022 NIU Technologies Earnings Call
Speaker 1: You.
Speaker 1: And.
Speaker 1: Four.
Speaker 2: Good day and thank you for standing by. Welcome to the new technologies fourth quarter 2022 gatherings release conference call.
Speaker 2: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.
Speaker 2: To ask a question during the session you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1, 1 again.
Speaker 2: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Wendy Zhao, Senior Investor Relations Manager of New Technologies. Please go ahead.
Speaker 3: Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss new technologies results for the fourth quarter 2022.
Speaker 3: The earnings press release, corporate presentation, and financial spreadsheets have been posted on our investor relations website. This call is being webcast from companies IR website as well. The replay of the call will be available soon.
Speaker 3: Please note today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. private security dedication reform act of 1995.
Speaker 3: 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 is included in the company's public findings with the Securities and Exchange Commission.
Speaker 3: The company does not assume any obligation to update any overlooking statement except as required by law.
Speaker 3: Our earnings price release and this call include discussions of certain non-guard financial measures.
Speaker 3: The press release contains a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results. On the call with me today are our CEO , Dr. Yan Li, and CFO , Ms. Fiyang Zhou. Now let me turn the call over to Yan.
Speaker 4: Thank you everyone for joining us on the call today. In the fourth quarter of 2022, our total sales volume was 138,279 units, representing a year-over-year census Low-R retail 43 percent, lower- Chrome HDR data deliverable.
Speaker 4: Specifically, sales in the China market drove by 42.5% year-over-year to about 118,000 units, and the sales in the overseas market decreased by 38.97% to 20,000 units.
Speaker 4: Total revenue in Q4 was RMB 612 million, a decrease of 38% yearly.
Speaker 4: This results wrap up the entire financial year for 2022, which has been a year with significant challenges for us. The total sales volume was 831,000 units, representing a year-over-year decrease of 19.8%. The revenue for the entire year was RMB 3.17 billion, a decrease of 14.5%.
Speaker 4: Now, particularly, our operations in the China market faced headwinds from uncertainty stemming from the COVID resurgence and the increase in lithium battery prices starting in Q2 2022. The total sales in the China market dropped by 28% year-to-year to about 710,000 units.
Speaker 4: A total revenue in the China market dropped about 19% to RMB about 2.36 billion in 2022.
Speaker 4: The COVID resurgence not only disrupt the market demand, but also delay the launch of several key products. Due to the month-long lockdown in Shanghai where our R&D center is located, we were unable to release several key products until September 2022, causing us to miss the peak sales period.
Speaker 4: Apart from the COVID disruptions, we have also faced headwinds from lithium battery price hikes. The raw material price for the lithium-ion battery experienced a sharp increase for nearly 50% since March 2022, significantly slowed down the penetration rate of lithium-ion battery electric two-wheelers throughout the China market.
Speaker 4: the price hike had a more significant impact on us since the majority of our e-scooters use lithium-ion batteries. To maintain a healthy growth margin, we had to increase our price by an average of 7-10% and to optimize our product portfolio towards a premium product started in Q2 of 2022.
Speaker 4: As a result, except the quarter one of 2022 where we achieved year-over-year growth, the sales volume for quarter two, Q3 and Q4 in 2022 have decreased by 25-40% year-over-year due to the lithium price impact.
Speaker 4: Now, coming to our international market has experienced a significant growth in 2022 with a remarkable 142% year-over-year increase in unit sales to about 121,000 units, a 51% year-over-year growth in scooter revenue to RMB 493 million.
Speaker 4: The micro-mobility sector, specifically the kick scooters, was the main driving force behind this surge, accounting for more than 100,000 units in sales. However, the electric two-wheeler category saw a 46% decrease in sales, selling a total of 18,000 units in 2022.
Speaker 4: The drop in electric two-wheeler sales was mainly due to the shutdown of the sharing market as most of the sharing operators did not raise additional capital for expansion. The loss in sharing market led to a decline in sales of over 11,000 units, which accounted for nearly 70 percent total sales drop in the electric two-wheeler market overseas.
Speaker 4: Now, our overseas market, like the China market, also faced challenges from the lithium battery price hype. The increase in the lithium battery price, coupled with the rising of the euro and the US dollar exchange rate, necessitated us to increase the selling price by an average of 22% in the European market, where it was still 70% of electric toolers previously.
Speaker 4: The increased selling price had an impact on our sales in electric motorcycles in the consumer market, particularly in Europe .
Speaker 4: Now, as we reflect on the past year, the shift in market dynamics has significant negative impacts on operations. In China, the surge of lithium-ion battery prices has reversed the lithium-ion penetration in the electric, bicycle, and motorcycle market, and they rendered our entry-level products, representing 35% of sales loyal in 2021.
Speaker 4: uncompetitive in this market. In the international market, besides the lithium-ion battery increase, the shutdown of the sharing market has essentially zeroed one-third of our electric two-wheeler sales volume or more than one-half our electric two-wheeler revenue. We recognize that both of the shift may not be temporary and that we start to...
Speaker 4: First, in product development in the China market, we have shifted our R&D focus to premium product lines, i.e., the NINU products and the high-end global product lines in 2022. In 2021, we mainly focused on entry-level products to the mass market, taking advantage of the low lithium-ion battery cost.
Speaker 4: However, although those entry-level products contributed a one-time revenue surge, it had a negative impact on the growth margin once the lithium battery price increases. Additional customer recognition suffered due to the short drive range and the brand image as well.
Speaker 4: In 2022, we pivoted our product development strategy to focus back on premium mid-end products. We further introduced graphite-like asset battery solutions for our mid-end product lines for both electric bicycles and motorcycles, which allowed us to improve driving at low cost.
Speaker 4: Our high-end product lines enabled us to improve our margins to strengthen our brand position, and our mid-end product lines enabled us to achieve volume sales and gain recognition from the mass market with products that combine design aesthetics and practical functionality at affordable prices.
Speaker 4: To highlight our product development achievements so far in 2022, I'd like to mention the long-travel revolutionary SQI and the new UPI Plus in the high-end market. The SQI is our product that deals in the most high-end electric bicycle market. It boosts innovative design and cutting-edge material technologies. Price at R&B 9000 Plus.
Speaker 4: The straddle motorcycle like SQI was well received by the market with customers waiting for 5 to 6 months for deliveries.
Speaker 4: The new UQI Plus is the newest addition to our all-time most popular news series. The new UQI Plus has been enhanced with improved light design, smart controls, writing economics, and additional personalization functionalities. The UQI Plus has garnered significant attention on social media and generated widespread transits.
Speaker 4: At the end product line, we introduced the B2 and the G6 series in 2022. B2 is the electric bicycle with a simplistic design style, but it was a large form factor. It's about 10 to 30 percent larger than our popular G2 and F2, which were released in 2020 and 2021. The G6 is an electric motorcycle design with an upgraded battery capacity.
Speaker 4: with a range of over 100 km on single charger with graphite-led asset batteries. Even though all those products were introduced late in September which missed the peak season with the exception of G6, the newly introduced products quickly represent more than 70% sales during the fourth quarter in just three months of the launch.
Speaker 4: This also helped us of our ASP to increase by 16% quarter over quarter in Q4 2022. This was also promising to sign our strategic adjustment work by focusing on a premium that may end products will gradually mitigating the impact of lithium battery cost hikes, I start to reclaim the gross margins.
Speaker 4: Now, fueled by the premium product introduction of SQI New UK Plus, we also proved our marketing strategy to be product-focused and user-centric. This allowed us to get a better ROI on our marketing investment and also helped to continue enhancing the brand. Just to list a few examples, in 2022, the marketing campaign surrounding the launch of our new product.
Speaker 4: of SQI and UQI Plus result in a total of 1.4 billion views across all platforms.
Speaker 4: We also launched a new one.
Speaker 4: innovative ambassador program accord our user centric marketing strategy and you let 40 plus new users who are also influencers to co-create with new to under host local events. During the 2022 World Cup we mobilized our ambassadors for World Cup scene new scooter shows the scenes scooter shows demonstrate scooters customized the painted with elements from the World Cup
Speaker 4: those demonstrated scooters gain a total of 3.7 million views across China's social media platform in just two weeks. Now in our international market, our strategy has been diversify our product portfolio beyond the electric two-wheelers and expand the geographic regions beyond the main.
Speaker 4: European market for the past two years. This strategy demonstrates early success in 2022, although the growth in the new products and new markets has only partially offset downturns in the electric two-wheeler sharing market. And the upfront investment in growing in the new product and new market credit is redlining the profit.
Speaker 4: On the product portfolio expansion, we have achieved early success in 2022 electric kick scooters. We launched the category in the last quarter of 2021 and have since strategically rolled out our kick scooter product mix. To enter this category and establish brand awareness in the market, we started with a high-end product priced at $800-$900.
Speaker 4: as the best scooter company presented by Micro Mobility World. Our high-end product K3 also received coverage from some of the top tech media outlets such as Tom Scott, Tech Reader, and Xtaka.
Speaker 4: In terms of sales channel, we also took a gradual approach. We first launched the Kick Schooler category focusing on online channels like Amazon. Our Kick Schooler model ranked No.1 and No.2 on Amazon's Best Seller list in multiple countries in Europe and North America during 2022 Amazon Prime Day campaigns.
Speaker 4: Riding with the momentum from the online channels, we started to enter the offline primary sales network like Media Mart and Europe and Best Buy in the US towards the second half of 2022. We believe those approach, those slow efforts build a solid foundation for sustainable growth in 2023 and beyond.
Speaker 4: Now on the regional expansion part in the electric toolers sector, we see the opportunity that grows in the market in the Southeast Asian market, mainly in Thailand, Indonesia, and Nepal. We continued our effort in expanding the Southeast Asian market as we hope to grow the trend of transition from the traditional gas fuel toolers to electric toolers.
Speaker 4: In those high growth Southeast Asian markets we expanded the number of stores and working with local partners with a wide range of sales network. In 2022 during the G20 Summit in Bali we proudly provided electric scooters to be used by Indonesian national police officials to support the local government's effort to green transportation. Now as a result of those efforts the electric two-wheeler sales in the Southeast Asia market increased for nearly 20 years.
Speaker 4: We released our first inaugural ESG report this year. As of today, the accumulated riding data reached 16 billion km, which means reducing 4 billion kg of carbon emissions compared with fuel vehicles.
Speaker 4: To further spread the idea of building green future through technology, we launched a Renew, a global sustainability initiative during our Earth Day campaign in 2022. The campaign included a global Earth Day clean up, which mobilized new users across four continents to clean up trash in the public areas, including in places like Bali, Antarab, and Guatemala.
Speaker 4: System living has been the core at our brand since its inception, and we take pride in making a positive impact on the journey of sustainability with our users.
Speaker 4: Now that 2022 is behind us, we are confident to regain growth in 2023 with strategic adjustment we made in 2022 starting to have positive impact in Q2 2023. When compared the pre-price adjustment Q1 2022 on a year-over-year basis, our Q1 2023 still shows us some confidence.
Speaker 4: on the overseas market.
Speaker 4: Now particularly in the China market will drive quality growth with new product in the premium mid-end segment to continue our leadership. Product focused on the user centric marketing to optimize ROI and the retail efficiency improvement to drive the same store growth in the 3000 plus franchise stores.
Speaker 4: On the product side, we have a product development plan for a few key products in China, starting with Q2 this year. Those product lines will focus on premium new series, die-high and global series, covering from high performance motorcycles, light motorcycles to premium and mid- and China electric bicycles.
Speaker 4: with powertrain platform from NCM lithium battery, LFP lithium battery to graphite-like asset batteries.
Speaker 4: We started those product development in 2022 and they will be released on schedule.
Speaker 4: product development in 2022 and will be released on schedule in Q2 2023.
Speaker 4: Now, driven by the unique and differentiated product propositions, we continue to focus on building new as a leading lifestyle brand for urban mobility, and this coming may extend beyond just our product. Besides the product-centric Euless Central Marketing Strategy, we also plan to expand our co-branding initiatives with brands with similar philosophies and lifestyle.
In 2022, we successfully launched collaborations with leading global lifestyle brands such as Razer and Diesel, with co-branded products designed with each partner, and we plan to continue the success model in 2023. On the sales channel, we have launched initiative to focus driving same-store sales improvements done in Q4 2022. We recognize offline stores as a crucial center to product exhibition, test drive, and aftermarket.
stores to create a consistent high quality brand image. Additionally, we have a digitalization program to help the store showcase their product though in platforms resulting better traffic and potential conversions.
Those initiatives will aid over 3,000 stores in achieving health same store growth.
Now for the international market, we'll remain laser focused with our diversification strategy in both product portfolio and geographic expansion.
Those diversification efforts in the last two years will start to contribute significant growth in both the revenue and the profit.
First, on the micro-mobility category, it has been a high growth in 2022 with near 7x volume growth in 2022. We'll continue the super-fast growth of micro-mobility segment with comprehensive product portfolio building in 2022.
and establish the sealed channels both online and offline with retail products like Best Buy and MediaMart.
With the comprehensive six-soup product mist layout in 2022, we also plan to keep refreshing our product offerings in 2023 to enrich the product options for our users.
Now, besides the Tic scooters, we also recently officially launched our first e-bike product, the BQIC3, to the US market in March 2023. The BQIC3 is a two-batter e-bike with two lightweight swabble batteries with maximum riding distance of over 90 miles.
Now with the established sales network we built out last year, the BPOIC3 will be sold in 100 plus Best Buy stores along with the online channels in the United States and the plan to be sold within Canada in the near future. Now having invested in the micro mobility market since 2020, we are confident that the foundation will lay out in the last few years in both brand building, product portfolio and the channel building.
gain in 2023 through product expansions and geographic expansions. On the product side, we plan to allow the high performance new products such as the quad electric motorcycle RQI in order to compete in the electric two-wheeler product offerings, capturing the growth demand in Europe . On the geographic expansion in Southeast Asia to build on the growth we have achieved in 2022.
we plan to launch the better swapping and enable products and solutions by partnering with several key operators in the countries like Indonesia and Thailand. Those trials are already on the way and we expect this will finally open up the Southeast Asia market for us which hosts more than 20 million petro motorcycle sales annually.
Now as we are implementing those growth strategies for both China international market, we expect our total sales volume to grow to 1 million to 1.2 million units in 2023, representing a 20% to 45% growth compared with 2022.
Now I'll turn the call over to our CFO , Fion, to go through our financial results. Thank you, Yan. And hello everyone. Please note that our press release contains all the figures and the comparisons you need. We have also uploaded cell phone messages to our IR website for your easy reference.
As I review our financial performance, we're referring to the fourth quarter figures unless I say otherwise. And all the monetary figures are in R&D if not specified. As Yan just mentioned, we have been facing multiple challenges in 2022. Our total sales volume for the fourth quarter was 138,000 units.
to maintain a decent year over year volume growth for kids' schoolers, up 15% to 17,000 units.
For the full year 2022, the total sales volume was 832,000 units, including 711,000 units from China market and 121,000 units from overseas market. Although sales volume from China market as a whole decreased by 28% year over year, sales volume decreased by 27. shooter.
NIU and global premium series together only dropped by 10%.
The overseas market showed strong growth momentum due to the kicks cooler sales increasing up to a hundred or two thousand units in aggregate and the emo pad sales volume decreased by around 45 percent mainly due to the termination of to be sharing orders as yen just mentioned The total revenue in the fourth quarter was RMB 612 million
The global entry series only took 5% of the total domestic volume in the fourth quarter. As a result, ASP in China markets reached RMB 3783, 14% higher on a year-over-year basis.
The overseas scooter revenues, including kick scooters, emo pads and e-motorcycles, were RMB 87 million. The previous scooter ESP of the overseas market was RMB 4300.
decreased by one-fourth year over year due to a higher sales contribution of kick scooter with lower ASP. However, the kick scooter's ASP year-over-year increased more than 50%, quarter-over-quarter 10%, due to the higher proportion of high-end kick scooters like the K3 series.
Price at 800 to 900 US dollars.
Accessories, spare parts, and services revenue for RMB 79 million decreased by 31% due to the battery pack sales reduction from overseas shared mobility operators.
For the full year 2022, our total sales total revenue decreased by 14.5% to RMB 3.2 billion. The China scooter revenue as a whole saw 19% year-over-year decline. However, the mid to high-end products only dropped by 6%. And the international kick scooter international scooter revenues increased by 15% to RMB
3.4.3.2 versus 3.1.3.4, a 9.5% increase. The domestic scooter ASP3322, a 12% increase, among which half is due to the better premium product mix and the rest due to the price increase.
International blended scooter ASP is 4079 vs 6597, a decrease compared to the last year since the promotion of kick scooters ramped up 10 times. Now both e-motorcycles and ASP and the kick scooters ASP increase.
17% and 13% respectively. The growth margin for the fourth quarter was 22.5, a 0.1 PPT lower than the same period of last year and 0.4 PPT higher than the previous quarter.
For the year ended December 31, 2022, the gross margin was 21.1% compared to 21.9% on an annual basis. The better product mix in the Chinese market brought up gross margin by 1.2 PPT, while the battery cost hikes and higher sales contribution of T-scooters.
dragged down the gross margin by 2 ppt. Specifically, the gross margin from China markets increased by 1.5 ppt.
Talking about operating expenses, the fourth quarter OPEX was $196 million, $7 million higher than the same period of last year, while the OPEX amounts almost stayed at the same level. The OPEX as a percentage of revenue rose from 19% to 32%, mainly due to a lower revenue base.
And the selling and marketing expenses were RMB 107 million, 8 million higher year over year. Out of that 8 million increase, depreciation and amortization expenses of the new stores were 6 million. The overseas selling expenses increased by RMB 24.5 million as we continue to expand our footprint.
to fuel growth of kick scooter sales, while domestic promotion expenses decreased by 20 million since we took a conservative position under the volatile retail environment.
Research and development expenses were R&D 40 million, 5 million lower than the fourth quarter of 2021, mainly due to the decrease in outsourcing professional fees.
And G&A expenses were RMB 48 million, 4 million higher year over year, mainly caused by an increase of RMB 12 million provision for credit loss, offsetting by a decrease in financial service fee of RMB 9 million.
For the full year 2022, the OPEX was RMB 775 million, 166 million higher than 2021. And the increase was mainly due to the ongoing 2021 new store depreciation impacts increased by 42 million.
and increase in overseas business expansion 83 million, particularly selling expenses for kick scooters like online trafficking, warehouse docking, product insurance, et cetera. And 24 million increase credit loss, 41 million R&B expenses for new scooters and kick scooters rolling.
revenue compared to 15.2% in 2021. And this quarter we had an income tax benefit from RMB 21.8 million compared to 47 million income tax expenses last year for the same period stated in our previous calls.
And in the fourth quarter, we had a net loss of RMB 37 million with the net margin of negative 6.1% under the GAAP measure, compared to net income of 47 million with the net margin of 4.8% for the same period of last year.
On a full year basis, due to the factors including lower than expected domestic sales, battery cost pressure, and increasing overseas business expansion as mentioned above, we had a net loss of RMB 49 million with the net margin of negative 1.2.
in cash, restricted cash, term deposits and short-term investments. Our net cash used in operating activities for Q4 was 300 million mainly due to the reduction in payable to suppliers as a result of seasonality.
On a full year basis, the operating cash flow was 126 million outflow, partially due to an increase in key scooters inventory at international warehouses for quickly responding to incoming orders.
Our Q4 CapEx was 43 million and on a full year basis the CapEx was 135 million compared to 286 million. Continuing to slow down as our channel strategy in China market shifting from fast door expansion to post door.
RMB 403 million to 489 million, representing a decrease of 15% to 30% year over year. Please be aware that this outlook is based on information available as of the date and reflects the company's current preliminary expectation, which...
which is subject to change due to the uncertainties relating to virus factors.
With that, let's now 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 1 and 1 on your telephone and wait for your name to be announced.
To withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A queue.
question comes from the line of Yating Chen from CICC. Please go ahead your line is open. Hi I'm Yating from CICC and I have two questions. The first one is could you please introduce your plan for channel expansion in 2023?
And what is your expectations on selling and marketing ratio in 2023? And how do we figure out the impact of channel expansion on this expenses?
This is my first question. Okay, maybe I'll address the channel expansion part and also mention the marketing expense and I think I'll let Siyuan to add a bit more. I think in 2023 we'll look at the two parts. On the China market side, I think we'll take a more moderate approach.
where we do still do expect to expand a little bit, but it's not significantly like what we did in the last couple years in 2020 or 2021. I think the focus for China is really to improve the same store sales. I think that currently what do we have about 3,000 stores is sufficient in terms of absolute store counts.
is sufficient to support the China sales growth. But having said that, I think there are optimizations where in the region, there are regions that I think we still need more stores where we need to expand. And there are some regions that actually, we feel like we actually had more stores than we needed. And there may be some optimization to that.
Now on the international part, I think that's where we're going to focus the most, both on the European market, the US market and the Southeast Asia market. And with the European and the US market, those would be channel expansions and more about that.
expand our footprint in the already entered offline channels for the kick scooters and for the e-bags. For example, with the kick scooter with Best Buy, we were in about 300 stores and now we have a shelf display in about 650 stores.
So, in the Southeast Asia, it's actually talking with, working with traditional dealer networks to get our scooters into the dealers.
I think this is actually on the channel part. I think your question next about the sales marketing expense. I think if we look at the overall sales marketing expense compared year over year, I think there's a plan to definitely the percentage that we spend on sales and marketing.
I think we can buy tweets. Yeah, I think I'll take this question from my side. Okay.
Yeah, this is Xiong. I'll take the selling and marketing expenses ratio from my side. Actually, in 2022, it's a special year. As percentage of revenue of the selling and marketing expenses was high up to almost 14% as percentage of revenue. Considering that we...
results of around 14% selling and marketing expenses. If we look at the marketing and selling expenses as percentage of revenue in 2021, we only our ratio was only 9%.
And in 2021, we're balancing the expansion in the domestic market retail and also, you know, the traditional e-motorcycle and e-mopass business in the international market. So our targets we expect in 2023, the...
continuing expansion and also the domestic new products rolling out in 2023. And with that I think it is the ideal selling and marketing expenses ratio we expected in this year. ok
It is very clear. And my second question is, as you've mentioned, you are trying to improve store performance. And could you please share more with it? For example, how will we improve the store performance?
And if we decide to decrease the channel store, what is the benchmark of its profit? Yes, that's my question. Can you repeat what is the benchmark of the... Sorry, of the what? What is the benchmark of...
Because all our stores are franchise stores. So in reality, if the stores are profitable, the store owners tend to keep the store open. If the stores are not profitable throughout the year, on a monthly basis, they may not be profitable. But if for the entire year, it's not profitable, then it's actually difficult to keep the store open.
I think that's, so it's, you know, and this will be, we look at city by city, we look at regional basis. Now in term of the store sales improvement, I think there are really two things we're looking at. One is how do we get more traffic to the stores? So this year
We started a little bit last year, but really this year it's actually.
what we're planning is actually, as we mentioned, basically providing stores with sales leads generated from this online JDM Tmall. So our sales online, so what is called the OTO method, basically the users make the purchase online and decide to pick up the.
scooter at an offline store. Last year it only represented roughly about less than 10% of our sales and this year we're looking at to boost that to basically to 20 or 25 percent of our sales coming from online needs. So that will actually increase traffic to the stores.
I think second is actually a list of initiatives that we're implementing in the stores to help the conversion rate. So once you increase the traffic, it's about how do you convert the traffic to purchase.
Those would be things like optimized store layout and product portfolios in the stores. Because we also recognize different regions, different cities, we have an extensive product portfolio. But some products actually sell better in some regions. So we need to make sure the store optimizes the product portfolios that it carries in their store.
And with a clear message and clear trainings to the store staff, such that when users come in or potential customers come in, there is easy to communicate to the customers what to buy. And lastly, I think it's all worth watching this season of Mr js. And if you enjoyed this episode of Mr js.
We also recognize actually accessory sales are a great percentage of the store sales and the store profit. I think with our product, like the new QI, which actually really calls for customizations, there are tons of accessories that can be developed.
for the particular product, such that store can, you know, besides selling a scooters, they can sell additional accessories to make profit. I think that's sort of the three things, really the three things we're taking. But having said that, I think there is an underlying.
theme, which is the product itself has to be attractive and competitive. So I think this is actually what we feel very confident this year, is having the new product online. We have a bunch of new products ready to roll.
in the second quarter of starting our second quarter this year. And we have demonstrated really last quarter, well fourth quarter last year is actually, you know, with all the positive news we received from the new product. Once we have the newly designed product out, it helps boost the sales.
and also help improve the performance. Hopefully that answers the question. Okay. Thank you very much. That's all my questions. Thank you. We'll now move on to our next question.
improve the soil performance. Hopefully that answers the question. Okay. Thank you very much for my question. Thank you. We'll now move on to our next question. Please stand by.
Our next question comes on the line of Zijun Li from Citrix. Please go ahead, your line is open.
Hi, Yan and Fionn. I'm Junli from CITIC Securities. Here I have two questions. First, I wonder about our productive positioning. Because last year, you could see our sales growth.
indeed faced some pressure. But looking at the situation in the past two months, it seems that the resumption of commuting after the epidemic has stimulated the overall demand of the industry.
I would like to know how we will position the focus of our product line in the near future.
like to know how we will position the focus of our product line in the near future.
This is my first question and second question. I wonder how do we evaluate the impact of upstream change?
such as lithium battery price reductions, and we could also see some sodium batteries on our product and also on the financial performance.
It could be better if you could show your insights respectively.
it could be better if you could show your insights respectively. Thank you.
Yep, no, I think that is so let me try to address those. Quick question first on the product positioning.
I think our product offerings have always been basically from the premium end to the mid end of the market. And I think that has always been the case. Now it just happened that...
Really, in 2022, the issue with the lithium battery price increase that actually made our entry-level product basically zero series, which roughly priced at the market mid-end level or slightly below the mid-end level. This was Pooja B diagnosed a COVID-19 virus receptor, co-ctions and Fine suede
impossible to make. So that actually created pressure on the sales volume and on the revenue as well. So heading into this year, I think one, we're going to focus on bringing new product in the premium and made that market.
Second, we really starting the second half of last year, we start to introduce the graphite lead asset battery solutions to offset the lithium battery price increase. But we don't have enough product on the asset.
on the graphite light asset scooter yet. So we have more product coming out supporting the graphite light asset product solutions that can offset this lithium battery price hike that help us to gain the competitiveness in the media and the market.
So, I think that's on the pilot positioning. The second we did...
Observe that recently, basically the upstream material for the NCM batteries has the price has coming down. And then we also observe that that price coming down has also triggered down to the lithium battery itself. There is a downward.
pressure on the price. I think having the lithium price coming down will be a significant positive plus.
to our sales volume as well and the margin as well. Because we were, I think really we were in a position that the majority of our sales were from lithium. So when the lithium price increased significantly, we got impact the most.
but when the lithium price is coming down significantly, we will benefit the most. But having said that, I think so far our 2023 basically financial outlooks and both our company internal budget, we haven't really taken into consideration of the lithium price coming down yet.
And if it did come down, that means we will actually improve our gross margin, as well as that will help us in terms of pricing our product to regain more sales.
Hopefully that addressed the question.
Yes, well noted and understood. Hopefully, I'm very looking forward to our back to gain. Thank you. Yes, thank you.
Thank you. We'll now move on to our next question. Our next question comes from the line of Alice Mar from UBS. Please go ahead, your line is open. Hi, thanks for taking our questions. I have two questions actually. One is regarding the domestic market and the other one is regarding...
sector will grow by around 20% in terms of volume this year in China. But in terms of the need to premium markets, do you expect that it will like achieve a higher than average growth? Which means that do you think that the consumption power of those consumers actually recovers after they reopen?
wondering like how do you view the market potential and how do you view that your product competitiveness in this market. Thank you.
So let me address the first one with the medium to premium market one.
So let me address the first one with the medium to premium market one.
So in terms of, I think my view on this one is kind of like a
less optimistic in the sense that I think the medium to premium market, you know, I would imagine actually would grow.
slightly slower. I don't think it will grow faster than the market average. It will grow either slower or maybe just on par. The issue being that when you're looking at this entire market growth in China, a lot of consumer demands growth and a lot of actually through gymnastics and things like that and general
basically industry players doing price competition, which we already observed in Q1 this year. Basically major competitors stashing prices almost on entry level products, products around...
2,000 RMB or less. So that price competition and really shooting for.
you know, basically slashing price to drive the volume, that has always been sort of the case for this industry. So I think that's actually, you know, to some extent feel the market grows. So from that point of view, I think the mid-end to premium market, I don't think it will grow faster than average market.
But having said that, it's still a lot of room for us to gain that market, right? Because if you look at last year, we only did about 700,000 units. And the year before, we actually did about...
about 980,000 units, all in the same segment. The drop of about 200 something thousand units because the lithium price went up, we had to increase our sum of entry level products.
and it was the pricing auto market. But that doesn't mean this meet to premium market doesn't exist.
I think the market still, this market made to a premium market, it still exists in terms of at least 8 million units plus. So for us, basically the median to the premium, a premium probably like at least like two to three million units and the mid and at least I think five to six million units. So for us...
you know, only last year's 700,000 units, we're still a small percentage. So we're less concerned about how fast the oil market grows, but more focused on whether we can have a competitive product. We know we can have like a great design product, but it has to be price competitive in that market as well.
I think that addressed your first question. I think, can you repeat on your second question on the Southeast Asia market, which I didn't record down clearly. Okay, thank you. My second question about the entrance of the Indonesia or Thailand market, you mentioned that, I think you mentioned your introduction that you will leverage the better.
We've been talking about Southeast Asia market for at least for a few years. The entire market was huge. They do about 20 million or 18-20 million of petrol scooters or motorcycles.
for the, you know, for an annual basis, right? I think Indonesia was at least six million units and Thailand, Malaysia, everything. And I think in the past what's happening is,
That market, there's basically electric model cycles from price point of view. It's too pricey for that consumer market. So, it's difficult to find an entry point. We were able to gain about 60% growth last year, but it's still...
or lease the battery so the battery cost actually booking on a monthly fee as opposed to upfront cost.
So we're exploring, so that will help to lower the upfront cost. There are also second speculation on potential government subsidies. I think just to give you an example here where the Southeast Asian market kind of like the Indian market. Indian markets, they're even bigger.
from annually about 100,000 units of electric two-wheelers to about 600,000 units last year.
annually about 100,000 units of electric two-wheelers to about 600,000 units last year.
Whereas South East Asia market right now, the electric two-wheelers is very minimal. It's less than 100,000, but by electric motorcycles. So we do think that there is, you know, you compare those two markets, we do think the South East Asia market at least has a potential in the next couple of years to grow to the size of India market.
And we've been actually planting seeds there for multiple years.
So, you know, this is actually we do think in the next couple years is the market that you know we're able to capture some of the potential high growth there.
Thank you and also wish that we have some breakthroughs in the following years.
Very clear, thank you and also wish that we have some group through the following years. Thank you. Thank you.
Thank you. We'll now move on to our next question. Our next question comes from the line of Scarlett Gue from Credit Suisse. Please go ahead, your line is open.
Thank you for taking my question. I have one question. How do you view the competition landscape with some new entrants or potential new entrants? For example the brands who are trying to transfer from traditional ICE motorcycle makers to the electrified
motorcycle field. For example, Hongdai and Da Chang Jiang and the Wuling, they all have launched new products. And the price range is from 3,000 RMB to 7,000 RMB. I guess there are some price overlaps between those products.
So how do you view the difference between you and those products in terms of, with those brands in terms of products or sales channels or some other aspects? Thank you.
So how do you view the difference between you and those products in terms of with those brands in terms of products or sales channels or some other aspects? Thank you.
Yeah, so Scarlett, I think for us, it's a first, you know, China market is still a big market. I think may say 40 million units a year, 45 million a year, sometimes some markets is 50 million units a year. It's a huge market, so such that I think it's a, you know,
When more brands are coming in, it's still able to accommodate more brands. So from that perspective, it's actually less a worry from our perspective. Because even when we do about 1 million units in China, it's only still like 2% of the market.
So it's a, you know, we have less concern when more brands come in. I think the right one would be, or the more related one would be if the brands actually position their products similar to our products like premium brands.
or those ones, which I think there was last year about Honda coming with leveraging their three models, like a Zoomer, I forgot what the other two models.
like well-known petrol models that made it electric and actually did raise quite a fuss in the industry. So we don't take those competitions lightly. We think with the Honda's brand, as well as recognition in this market, and especially in the market,
with sort of the legacy models that people recognize, you know, it will create a more competition in the premium market.
And in reality, I think for us it will be that that was just more...
really a pressure and push us, push you to come up with competitive product or with better product. I think, I assume your question's on the China market per se. Um, yep, yep.
Thank you, thank you very much. Thank you, there are no further questions at this time so I'll hand the conference back to you. Thank you Rick.
So if there's no questions, thank you operator and thank you all for participating on today's call and for your support. We'll appreciate your interest and look forward to reporting to you again next quarter on our progress.
Operator. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.
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