Q1 2023 XPeng Inc Earnings Call
Hello, ladies and gentlemen, thank.
Thank you for standing by for the first quarter of 2020 earnings conference call for <unk>.
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 recorded.
I will now turn it over to your host Mr. Alex Xu.
Investor Relations.
Please go ahead Alex.
Thank you Hello, everyone and welcome to <unk> first quarter 2023 earnings Conference call.
So in the operating results were issued about newswire services earlier today and available online.
So view the earnings press release, and visiting the IR section of our website at IR <unk> com.
On today's call from our management suite co founder Chairman and CEO Mr. Vishal.
Vice Chairman and President Dr. Brian <unk>, Vice President of finance with Covid.
Any flu vice president of corporate finance and investment Mr. Chau Cheng and myself management will begin with pre powder remarks, and the call will conclude with a Q&A session. A webcast replay of this conference call will be available on the IR section of our website.
Before we continue please note that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 95 forward looking statements involve inherent risks.
As such the company's results may be materially different from the views expressed today further information regarding these and other risks on the second piece is included in the value in the public filings of the company.
<unk> with the U S Securities and Exchange Commission the.
The company does not assume any obligation to update any forward looking statements, except as required under applicable law. Please also note that extra earnings press release and this conference call include discussion Oh Gee gas.
GAAP financial measures as well as unaudited non-GAAP financial measures Excellence earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures I will now turn the call over to our co founder Chairman and CEO , Mr. Hersh I'll phone. Please go.
Go ahead.
Okay.
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Hi, everyone beginning in the first quarter of 2023 facing future competition X spine has centered around change.
That in mind I took action to make considerable changes to <unk> business plan organizational structure and management team.
As a result, some senior management, who completed their mission on our journey from zero to one have stepped down nonetheless, more new talent full of energy and entrepreneurial passion have quickly stepped up and taken on leadership position through both internal promotions and external recruitment.
I'm excited to see these new team members have fit in well in a short amount of time and make remarkable changes I'm also very encouraged to see the passion and determination of all ex bank employees to change as of today were ex Thanks day, one as we shifted the focus of our innovation towards cost efficiency and customers.
It is very hard for the manufacturing industry to reverse the declining trend and set up a virtuous cycle, but we managed to start the west born with ourselves and rebuild the fundamentals of the company.
Compare with competitors in the industry such a reform makes me confident that we'll be able to perform well consistently in each bottle and create a virtuous product sales cycle boost to morale increased customer satisfaction embraced our brand reputation from the third quarter of 2023.
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In the face of macroeconomic challenges and more intense competition, we achieved month on month growth of new orders for the past four months.
Excitingly order intake for the higher end MCM versions of our new P. Seven model, which was just launched in March has exceeded our expectations.
The original projection capacity, we plan was not enough to cover demand.
Compared with the previous Pea seven model. The P. Seven I offers more streamline SBU specifications with a more efficient go to market strategy.
From June we'll work with supplier partners to significantly ramp up the production of P. Seven ice components and aimed to accelerate deliveries of this popular new model with its aesthetically pleasing style design and distinguishing smart features future drive instead of driving piece than an ice it sounds great.
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Our latest production model debuted at the auto Shanghai Auto show in April the G. Six which was our first production model that is built on X banks next generation technology architecture, plus one step at two point out or if we all in Chinese.
Hey, Bill was met with Mako boat D. C has them from attendees at the Expo.
The G. Six features a stylish at Sally.
Despite a best in class interior space, ensuring a comfortable right fully equipped with a world class 800 volt high voltage. So S. IC plus one and a three C fast Chargers battery the G. Six uniquely position within its segment boasting ultra long range as high as 700.
55 kilometers ultra high energy efficiency and ultra fast charging.
More importantly upon market delivery did you stakes will be equipped with X N G P. The industry's leading Adas.
I'm pleased to share with you that GEC test drive by media began last week.
Feedback from media is that G. Six is well ahead of other EV models by one generation in terms of Adas capabilities and its 800 volt platform with faster charging and lower energy consumption, which is in analogy to the three G technology, replacing <unk> and mobile phones.
The G. Six will be officially launched in June and begin mass deliveries in July a company by a fast ramp up we believe the G. Six will emerge as one of the best selling models in China's EV SUV market segment within the 200000, RMB two 300000 RMB price range.
We expect this model to drive substantial growth and expect third quarter delivery volume and significantly outperformed industry growth in both year over year and quarter over quarter terms.
This will mark the first inflection point in our sales growth following our strategic and organizational adjustments.
Additionally, in the fourth quarter, we plan to launch eight seven seas electric MPV model, which we call X nine internally and rollout more clearly defined configurations for existing models in order to further boost our sales growth.
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We also firmly believe that 'twenty two 'twenty three will mark an inflection point in the development of smart technologies for EV and the starting point of smart technologies widespread user adoption.
We expect most of our potential customer to recognize value by 2024 to 2025.
At the end of March this year, we rolled out our C. D N G P. Max Dream of multiple models for customers in Guangzhou, Shenzhen and Shanghai via O T a update.
Customer feedback we received has been inspiring.
In the first month following D O T. A rollout C D and G piece mileage penetration rate reached over 60% and has become assisting driver for users daily commute.
For the first time I personally have also gotten used to drive English ex N. G. P. Everyday it made me feel much more relaxed you drive.
City N G. P test drives are already available at all ex pangs, our stores in Guangzhou, Shenzhen and Shanghai.
In April the percentage of order of the Max stream of our P. Seven I and Jeannine models and a total order of piece of an island jeannine increased substantially to more than 50%.
We also plan to start the rollout of highway and G. P coupon over in June .
N G P to Plano was developed based on the framework of X N G P.
So it's cold increased by five times compared to the original version it cooked with algorithms trained and complex urban driving scenarios Highway N. G. P. 2.0 is able to offer a highway driver assistance experience close to that Oh, four meaning high efficiency consistent performance.
No getting stuck no disturbance and also no intention to take over.
By the end of 2023, the number of menu will take over as part 1000 kilometers when using a highly N. G. P is expected to be reduced to one or fewer.
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By the end of the third quarter. This year will begin nationwide rollout of Alf X M. G. P across more cities without high definition map coverage. This will be the first time for the mass production of city N G P or equivalent with all HD map in China.
So in our experience the mass production of city at G. P. In cities without high definition map coverage is 100 times more difficult than the mass production of highway N. G. P with high definition map it sets a new benchmark for our R&D teams technologies and data capabilities. However, it's well worth it because it will consume.
It will be considerably enhance our user experience once we achieve it.
Our excellent G. P has to driving ability is equivalent to a novice driver moving forward and supported by the large scale datasets generated an urban driving environment and strong backend closely data training systems, we expect to introduce quarterly OTA updates for <unk>.
P.
We expect to enrich its driving experience by one year, each time offering increased safety and globalization.
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It incorporates some capabilities of large language model or L. A M into excellent G P.
I firmly believe that as we continue to make breakthroughs in X engie piece experience scenario coverage and ownership costs based on the data in the three cities. We have lunched sells off the Max Dream of all models with excellent G. P will grow significantly.
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Good design really matters young consumers since the end of last year I have been directly managing the styling and design department and put more efforts and resources into improving our design capabilities recently, we invited several talented designers with experience in defining top selling models to join.
We also created healthy competition between excellent external design teams and our in house, just my teams to generate even more creative design ideas for new models.
Listen to that if the L M and L. A and also was very helpful to all of the sign of improvement.
I believe these changes will enable our new models in future faced with persons to be equipped with market, leading interior and exterior styling and design.
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Since the first quarter, our sales marketing and service capabilities has been upgraded and a concerted effort under the leadership of a precedent one from Yang and also the whole company is making external and internal customer centric transformation quickly by enhancing our customer experience throughout the entire cell.
And service process and speeding up our response to customer demand since early this year through April we have achieved conservative improvement N. P. S. One of our core customer satisfaction indicators now.
As of April our M. P. S has rebounded to tier one level in the industry.
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Looking ahead into the next quarters, our top priority, we remain keenly focused on rapid acceleration of ourselves and EV market share growth, we have already implemented measures to flatten the management structure across our sales organization and establish a middle office that is more efficient and can more.
We respond to request that come from the frontline.
The next step will be to take a more selective approach on all existing sales network in order to strengthen the competitiveness of our channels as a whole.
In addition to increasing operational efficiency across our tier one and tier two cities South network will also introduce more high quality dealers in tier three tier four cities to bolster our product roadmap and sales targets over the next few years and the 150000 RMB two 250000 RMB pie.
Range market segment.
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We believe the automotive and automotive industry landscape will be transformed by technology innovations and fierce competitions over the next three years. In addition to great product proposition and new technology. The key to success also lies in cost reduction to the greatest extent and efficient.
<unk> R&D and operations.
Our next generation technology architecture, that's a 2.0 those powerful competitive strengths in R&D efficiency and technology innovations with.
With Cheesecakes mass production. The second of 2.0 architecture represent platform based technology capabilities that we've built through consistent intensive R&D efforts over the past five years, which will strengthen our leadership in technology over the next three years.
We are rolling out new products that offer a more competitive cost and consistent customer experience based on separate 2.0, the new models in our R&D pipeline, which covers the 150000 RMB 350000, RMB price segment and a variety of new car types will be built on.
On a suite of shared technology platform spanning powertrain system.
Chronic and electrical architecture smart cabins in Adas will shorten future models R&D cycle by 20% and up to 80% of the architectural components will be compatible between different models, both of which enabled <unk> to substantially reduce R&D spending on new <unk>.
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Over the second half of 2023 through 2024, we are planning some map how are clear and tactical plan to achieve our target of 825% cost reduction by the end of 2024, and we expect to realize some benefit of cost reduction initiatives in part of the sign of powertrain and vehicle.
Hardware as soon as this year.
In this round of industry Revolution, I belief that cost control, both for hardware and software and efficiency enhancement for both operation and products will be among the core competitive edge as to when the ultimate competition. Nowadays that the competition is mainly around volume or scale, but the next round of competition requires compare.
Handset competitiveness and Skol innovation design cost efficiency quality and global markets all of which are indispensable.
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In terms of our cash flow our cash on hand at the end of the first quarter of 2023 amounted to over 34 billion RMB I'll further simplify our operations concentrate our R&D investment on what customers recognize and build our long term competitive position.
Advancing our platform based technology approach at.
At the same time, we'll continue to optimize our organizational structure and management process significantly to further improve our operating efficiency across the company.
Beginning in July with the Max delivery of G. Six along with other new product launches that will feel rapid sales growth I expect all monthly deliveries to increase significantly in the third quarter compared with that in the second quarter.
Furthermore, as our monthly delivery targets exceed 20000 vehicles in the fourth quarter of 2023, I expect our cash flow generated from operations to turn positive accordingly.
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Well in general it's engine, that's being broken Chilean neither she in Tempe, and treat all the poultry touching and essentially to let's say to the quarter a photo.
Photo to show you the funding that syndrome.
Now moving to our guidance, we expect our total vehicle deliveries to be between 21020 2000 units in the second quarter of 2023, representing 15% to 21% quarter over quarter growth in the revenue to be between four five and four.
7 billion RMB.
From the third quarter of 2022, even though we underwent four consecutive quarters of pain in terms of deliveries I've always believed that in every challenge lies an opportunity at.
It prompted us to reflect earlier on how to win the knockout phase in 2025, and how to get into the semi finals in 2027.
Drawing on our more competitive new products and more effective sales channels, we will achieve substantial sales volume growth on a sequential quarterly basis in the third and fourth quarters of 2023.
Sure Josh I mean, that's how we view that as well in fact that yourself on the southern teaches us that was helpful.
Thank you everyone with that I'll now turn the call over to our VP of finance, Mr. Dennis to discuss our financial performance for the first quarter of 2023.
Thank you Mr. Hu and Hello, everyone now I would like to provide a brief overview of our financial results for the first quarter of 293.
I will reference RMB only in my discussion Tonight.
Nice otherwise stated.
Our total revenues were RMB four <unk> for the first quarter of <unk> 23.
Decrease of 45, 9% year over year, and a decrease of 21, 5% quarter over quarter revenues from vehicle sales were RMB three 5 billion for the first quarter of 2023, a decrease of 49, 8% year over year and a decrease of 24, 6% from the last quarter.
The year over year and quarter over quarter decreases were mainly attributable to lower vehicle deliveries.
Discontinuation.
<unk>.
Gross margin was one 7% for the first quarter of 2023, compared with <unk>, 2% for F. N P. Like a <unk> 22, and eight 7% for the fourth quarter I'll pass it on you tube leak.
Our margin was minus two 5% for the first quarter of 2023.
There was 10, 4% for the same period <unk> hundred 92, and five 7% for the first quarter of 192, but year over year and quarter over quarter decreases. So many rent by increased sales promotions and the expiry of new energy vehicle subsidies mentioned above.
R&D expenses were RMB, one 3 billion for the first quarter 2023, representing an increase of 641% from RMB, one 2 billion, whereas M. P rate up 2022, and an increase of 503% from RMB, One 2 billion for the first quarter of 2022.
Year over year and quarter over quarter increases were mainly due to higher expenses relating to the amendment of new vehicle models.
SG&A expenses.
The $1 4 billion 40, a first quarter of 2023, representing a decrease of 115, 5% from RMB, One 6 billion in Florida M. Peter <unk> and a decrease of 21% from RMB, One 8 billion for the first quarter 'twenty to 'twenty two.
And quarter over quarter decreases are mainly due to lower commission paid to our franchise.
Stores, and lower marketing and advertising expenses.
I said well you know our foregoing loss from operations was RMB two 6 billion for the first quarter of 2023 compared with RMB. One 9 billion for the same period of 2022 and RMB two 5 billion for the last quarter.
Net loss was RMB, two 3 billion for the first quarter of 2023, compared with RMB, One 7 billion for the S. M. P. A year ago and RMB, two 4 billion for the last quarter.
As of March 31st 2023, all company had a cash cash equivalent to the cash and short term investment and time deposits in total up RMB 34 1 billion.
To be mindful of the length of our earnings call I will encourage listeners to refer to our earnings press release for more details on our first quarter financial results.
This concludes our prepared remarks, we will now open the call to questions. Operator. Please go ahead.
Thank you if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced.
If you wish to cancel your request please press star two.
If you're on a speaker phone. Please present the handset to ask your questions.
For the benefit of all participants on today's call.
You wish to ask a question to management in Chinese. Please immediately repeat your question in English.
For the sake of clarity the older. Please ask one question at a time when Israel will respond and then feel free to follow up with your next questions.
Today's first question comes from Tim So, whereas Morgan Stanley . Please go ahead.
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My first question is about the pricing strategy. So.
How should we thinking about exiting this price strategy or cheesecakes and gaudy upcoming models given.
Given the severe pricing competition.
Excellent tend to price a motto more aggressively when green in the multitude of life care to ensure the coffee can see much ahead appears in terms of price performance ratio.
Especially I think Mr. Jose just mentioned.
We're happy to focus on the wall in growth or the company would prefer to leave some room for a cheaper version two forlorn after the Baldwin picking off in order to effectively respond to appear surprising adjustment and the Bachelor balance our near term profitability.
So that's my first question. Thank you.
Okay.
Sure sure.
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Sure.
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Appealing to you Jeff.
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All of them, but they are important because you're kind of on its own right.
You bet.
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Sure.
And so I'm wondering about how long this coffee that since you did John Huntington.
Sure.
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That's right.
<unk> got other ones you don't pay for it.
Uhm.
Okay Alright.
Alright, Thank you for you all.
Thank you for your question you know we've considered internally. These two possibilities first of all wheel powered highs of scale before considering our pricing and we definitely expect to have a long term stable pricing. Now also we would take into consideration that would be a cost structure of our products, including the inflation off for example, D. L. P. F F P.
Batteries and other parts are taken into consideration dose factors together with our cost control measures, we definitely consider a long term stable pricing and a more competitive level for I E. Six and also other upcoming models, but in a nutshell you will we will prioritize the scale.
Yeah, Tim let me see here.
Yes sure.
So Tim let me just add it's Brian .
I think first of all the scale, we believe will lead to a better profitability ultimately because obviously a number of cost can be amortize them, we do see a more efficient manner and also as you heard in our previous description.
Description as we aim to cigna and lowered the overall cost and bomb for vehicles in the coming months over the coming year, so with better scale and our aim of achieving better cost saving on these a product I think that the the profitability will naturally.
Our return so that's how we view the the sequence of events you know strategy.
Got it thank.
Thank you, Brian Sharples organization now what you're going to see you why you think are going in the windshield.
Thank you Donald Peach equally and take a pendulum. So curious as you can see T. G. L shall wait until the winter you spoke with Hudson.
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Shovel in Chile, the Chilean judicial claims.
Absolutely just in good shape.
Cushing So you can't switch hip hop artist so Mr. Fu Sheng just.
Yeah, what do you see the chicken quick quick what would be related to the controls here.
So my second question is about the supply supply risk.
Because the pes piece and I supply bottleneck will be resolved in June .
But is there any negative read across to the supply ramp up to G. Six.
Ty has <unk> six will be the first model built on the new architecture with anybody our aluminum die casting.
That reads out in store pays off production ramp up after June launch so should we take that into consideration. Thank you.
Okay.
Sure sure.
Hershey Chocolate home shield two.
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Yes George.
No no.
That's helpful.
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And then she won't convert ensure shelves so when Joe for them.
Question, a logical Pablo San Angelo.
Oh, Yeah, absolutely what you generally get a foothold massage out though $10.
People go to Jack Lynch from a woman's egg.
So also launching what union taught us it says Gee that's for sure.
Yeah.
Which you don't see.
Absolutely people. So that you don't have a huge change.
Thank you for your question now Cheesecakes is different from much unite in a sense that we actually are well prepared for its delivery. We've given the two months between the S. O peachy to final delivery. So we made the announcement in January we expect to have their deliveries in July and so in Q3 definitely we expect a much faster ramp up.
The delivery of a gene she takes compare to I P seven or <unk> 90 in the past and also what she thinks is different from <unk> seven I in a sense that we have a really well to patch supply chain to support the future delivery and in terms of the technology application you know for the integrated aluminum die casting technology definitely it's been a challenge but.
Whole industry, you know are facing the low yield range out of that particular technology, however, with being in this particular using this technology for the for over a year and right now all the development has been very satisfactory and we expect to have no severe challenge in using this technology on cheesecakes. Thank you.
Oh, okay.
According to the fascia sheesh.
Yeah.
Thank you and our next question today comes from Ben <unk> with Credit Suisse. Please go ahead.
And because of Covid.
What are you going to according to the pinch or that some of them kind of tweaking that.
Did you eat comes on you're talking to touch element the interest on our go to meet you ought to do a multi line.
Uh huh.
My first question is on power battery recently.
Copper prices have declined so what's the impact for your bedroom sourcing and the margin in the second quarter. Thank you.
Okay.
This is Dennis Thank you for a question.
Actually are in the first quarter, we see the battery cost reduction compared with quarter four last year, we have about a 5% reduction and then in the second quarter, we see further reduction.
All the.
About 10% to 12% over quarter four last year. So that's about five to seven percentage points of increase compared with the quarter. What I didn't say that we also are happy.
Okay.
Marketing spending available marketing spending so in terms of material cost.
Especially for the battery cost well improve our margin by for example are you Patrick costs it would be.
Council about 40% of total Costa so seven percentage points, which translates into a three to four percentage margin improvement that's fun.
Montreal site, but the other big chunk of it would be a revenue side that will also impact the margin as well so they used to see a brief answer to your questions.
Thank you my second and last question its apartments, where you bought them.
I mean, he actually got out that you would target more than 30% growth and did.
Could you maintain a same takeda field maintained in client in the second half this year.
Average monthly volume wont be 20, Covid, because I was wondering on the full year volume target change or not thank you.
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No.
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The sensor, Montana uninteresting Chevron in Montana.
Hello, Michelle how we should think about it understands the Chinese Jonathan on the mood Gotcha.
They've been.
Regarding the volume growth, we still expect a we kind of be growing faster than the market. This year, obviously the market growth this year kind of be tampered, given what's going on in the industry, but what we see most importantly is that the third and fourth quarter, we expect our chorus will be secured.
Italy higher than the market growth and also we believe that with the G. Six volunteers delivery starting in the third quarter, we would like to aim to achieve monthly delivery over 15000 vehicles per month in the third quarter, what are the targets and then the fourth quarter given the.
Our CRO and also additional a model a sort of a mix a favorable changes. We think we can actually also target over 20000 per month in the fourth quarter as our peak sales. So these are our ghost in the second half.
Thank you so much. Thank you all my question.
Yeah.
Thank you and our next question comes from Paul Gong with UBS. Please go ahead.
Great.
Oh, Thanks for taking my questions too.
Two questions as well on the first question is regarding the <unk>.
The new orders and pay on the piece that I.
Also all of our Parisian.
We can't even with only two of them to some woman sounds good contact with all of that to size. How much you said, because I think a bunch of films on toward the holiday time, So now I'm going to squeeze you on something really cool Hashanah cultural thing on number and until such time that you don't want your shadow AUM that didnt done probably I can.
You can probably go to bakery.
Come and go so I'm not sure I'm pretty cool.
Those are the type of.
Oh come on you can talk about once it's also a worst moment I choose or somebody on a woman Coca Cola Coca Cola, Oh, well the Goldcorp that's useful if I could.
Somebody ends up she signed somebody with equal unless useful so too will jump on that you've got one against somebody else. Iranian. So my first question is regarding the <unk> tell you the piece of the.
The order supports the solid cook a ratio on the supply chain.
Uh huh.
Can you quantify at all what was the order you implied Mumford Oh level, what you saw Oh boy bunch in preparation for that and why we have overestimated the keep in mind the amount of work that's coming up here I see ma'am. Thank you.
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Okay.
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And Kochi about pay downs.
Okay.
Alright. Thank you for your question now regarding our supply chain preparation for a piece of it and I'm definitely we experienced some challenges due to for example to supply chain and also for example, the the ups and downs of the pricing for N P and batteries, but right now we have a well prepare.
Parents, because for me and you know we already expect a ramp up in battery production capacity to supply. It you know to prepare for our deliveries a piece of an item. The feature now looking back for the past several quarters basically, though the whole industry experienced challenges in terms of estimating their deliveries and preparing.
For that kind of a market demands due to a number of factors, including the supply of different parts of the cost of different parts and also the overall environment of the industry. As a result, our you know starting from Q4 going into Q1. This year. We have actually started a series of policies in our guidance and also estimates that is more a cautious in research.
In order to work better with our suppliers to reduce the gap in between the estimates on the deliveries and the actual preparation of the capacity going forward. We also will do better in optimizing our you know the matching with the future delivery estimates with all suppliers in terms of <unk> and also our production capacity overall.
So that we can actually do better in integrated several aspects thank him.
Hey, Paul just to you know obviously your question on the Colorado piece of and I. Clearly you know, we our order momentum is far exceeds our capacity increases in the last couple of months. We think you can actually tell by the average wait time for the.
<unk> in our stores is extract to over six weeks or even longer we actually think ours now hopefully the supply chain are ramping up by June .
Leave be a some of these wait time pressure, which also in in time will help generate further momentum for the cells. So that's what we see today.
Oh, what people are going to see quite a go no go show Ponca or you've got to keep shelf, we've got to ensure that you've got one for you.
So long ago. So got a few questions I'll wrap up my son's excuses on so again to ensure wendell not sort of what kind of your younger ship from the winter do you guys give us a sense on when we get to without getting too deep.
I'll go back into ours. So it puts it at all and so until you go through with some that have all kinds of also I didn't see it until you go see you that you can quantify somehow a woman go you go shoot show Oh do you want <unk>.
Got you.
T O M. Two vehicles. So I'm sure you don't want your almost Oh you Johnson.
Ultimately under your Hydro doesn't go Yamana doses song Young Oh, no woman and she viewed some young consol booties are getting Shimko you Cook Archie chunky.
So my second question is regarding the blending needs a week understand ex palm is a pretty.
Popular among young people and right now we're seeing the young people, we saw unemployment rates over 20%.
And part of our demand and also when you come out with MTV unhealthy CEO .
Normally MTV idle for the commercial use or for the.
Oh the families are more mature families. So how shall we match the young Brian you can reach so far ex pump versus the MTV lungs.
Thank you.
Yeah.
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So it absolutely does hustled hits, such as home and beauty.
And two longevity Schussel female European Championship in March and it was helpful.
And insurance I don't know MTV, you're going into that so that you can fit a Hollywood and just as a woman to take us.
She's one P result, because I told them that usage and don't want them in Dallas.
Okay. That's helpful to them to resolve before it goes without saying well unless you tell me, what the medallion Shandong and Guizhou.
If you read the journals.
Yeah.
Alright. Thank you for your question no <unk> positioning is to really target young consumers, which is who was also tech oriented it's in our sweet spot is really consumers between 25 years old to 35 years old and right now I mean, if I remember this correctly.
Well that's been raised is really talking about fresh graduates from colleges that is over 20% I don't recall seeing I don't recall, a leading anywhere that it's a 20% unemployment rate for young people. So that's is the differentiation here I'd like to point out one other thing is that right. Now are you know among the targeted group of 25 to 35.
So we really don't see a lot of impact on ourselves towards this particular consumer goods are regarding the overall you know the market environment and the second thing are the second part of your question you know how do we really connect the seven seater MPV with younger consumers. This is very good question, we have done a lot of thinking and discussion internally and.
So the I mean by the end of this year when we launch the rollout. This new model. You know you can expect to hear about I'll answer by that time. Thank you.
Thank you very much thank you.
Thank you and our next question comes from Nick <unk> with J P. Morgan. Please go ahead.
Yes.
Okay.
It's only on the chip and the windshield.
Because it sounds like you don't see the long term.
Third the Tempe Shelton chocolate equivalent so it could take because you said you don't say no to.
She opinion when you went to the cheaters, sometimes introduce them to switch to the MPD system.
When she fell down to.
Let me give you just see that she sees that useful to turn call city because when she most people don't you see what we're marching to the country too.
2018 units together Tobey its and so we'll see a slowdown.
Claims, where you'll see the TV shopping pumping something so when someone comes into the margin too.
And then the margin mix is going to ensure that you yourself opinion superchunk foodie creature soda.
When you shop with Lindsay I'll.
Just the first question.
Paul This is Marty.
No strategy, keeping you have the new mountain chiefly in the first quarter and also MTV starting to paint pumping for Q, Let me talk about the new product strategy. <unk>. Soon can you is that there are people on the answer.
And strategy and the second question is really about GP margin trend and I'll, let your second half I understand we can help with that.
But how should we think about the margin. They believe they can have given competition and keeping the old pricing and funding.
Strategy. Thank you.
Hum whenever that legal entity.
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Sure.
Alright. Thank you for your question, let me take the first one regarding the changes that have been brought about by a precedent one since end of January I mean, it has been really tremendous she joined US as of the end of January and its been about four months now and she's done a lot of changes for example, starting from the organization with groups.
The trading team and also the sales team together and we have also changed our Bacon middle office into a more swift and adaptable kind of a smaller a front office that allow us to be more agile and the second change is that we used to have multiple lines are running different operations and right. Now we have one big line of business, our operational team that actually cordoned.
Eight different projects and different lines of business that allow us to actually improve our net promoter score or NPS for several months in a row and another big change happened actually to our marketing team. We have been doing a lot of things to improve the overall efficiency by using multiple <unk> tools are you know doing different project base operation and also flatten out.
Organizing those organisational structure overall now also enjoy an hour south and we have done a lot of training you know what you are really improved the skill of our salespeople are especially in terms of introducing different skews and different variation of our models in the market. Another big change also happened in the or to be expected is on our channel.
<unk> sales channel and distribution you know both in China and also in the overseas market and in Q3, you could expect to hear more about those big changes to come and also in terms of our branding as well are you know we're going to actually it's still more of the warmth and all the other the also the youth are into our brands. So that you can hear more about you know X paying and you know be more clear.
About our positioning so overall I would say that you know definitely we have done a lot of changes overall and it all originated from all DNA of X thing, but at the same time. You know you are seeing a new sort of a face lift version of all brands as well.
And <expletive> this is Brian for your question on the margin.
So for the second quarter are we think.
Given the modest volume increase as.
As well as the older product mix continue to be and you know the.
Selling I think theres still going to be margin pressure. Despite some of the battery cost savings that Dennis mentioned, if I was the second half the increased delivery volume increase was P. Seven I G six as well as the new M. P. Deep at the end of this year, we think the overall gross.
And will improve gradually I was obviously changing of these product mixes, but the most significant margin increase will happen I think next year given all of these costs a reduction measures as well as the further volume and scalability coming into play that's why we see the trend.
Yes. Thank you.
Thank you and our next question comes from Rick <unk> with.
Please go ahead.
Okay.
Oh gosh.
Yes.
I mean, you can now hear you can you speak louder. Please.
Okay.
I'm talking about bodies.
Okay.
So as you know as I mentioned <unk> now.
As you listen to any size of the REIT out there.
So you just saw we lines is it the Broncos.
So good computing machine a hole to dig out you know, we like to kind of an etonian Jonathan how are you taking shape he did not know.
Womens merchandise.
Do you think a 10 to the Jack or does it go towards.
Steve jobs quite a few so you're going to get beat up you can find the pharmacist. She good kitchens. This isn't isolated tissue you only get to do the films to choose.
Dani Jonathan <unk>.
To go into that but what do you sense, you're going to do this thing installments on <unk>, Jonathan Zika shut in on time.
<unk> been all the way out with gene pool that you're going to get some jobs that they go.
And Tito.
First question is regarding the <unk>.
The expectation on the.
Reasonable lithium company that price.
The next one to two years.
Self pay is more than demand.
Will you consider to change you a battery repricing frequency too.
I'll follow closely to our spot raw material price and also how do you see your current.
What are your sales breakdown by <unk> do you think of the battery cells.
Cars will continue to increase because what the O N T shirt.
Yes.
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But she does have would normally shouldn't then Josh I'm sorry.
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Joe.
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Okay.
How did they told US it was this year.
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I'm not sure you talk to that just sort of some of the pre shutdown.
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Yes.
Thank you for your question, it's really hard to estimate the future of ups and downs of the lithium pricing, but in the short term I believe that the inflation of the lithium pricing should be temporary and by the second half of the year. We expect to have a lower pricing you know for this material, but what is going to be the target.
Or the right range, our price range for this material, it's very hard to say, but personally I believe that within a 200000 or ibs should be every cent ball or arrange for it now right. Now we are working with our supplier partners in a very flexible manner, meaning that a we actually taking into consideration consideration the inflation or the fluctuation of our you know raw material.
Pricing in the market before determining the so I think price of our products, which can really help us to optimize our cost structure going into the future definitely we will launch a serious of technological innovations do you actually would use the use of batteries, but supporting a wider or a longer driving range, which means that we're going to use them.
More of a L F P or at a symbol of batteries technologies in order to reduce our overall raw material costs, while increasing or enhancing the safety of our products and driving up the driving range of our products to a satisfactory level of our customers.
Okay.
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<unk> G P O knowledgeable pushout cutting detour.
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It's all of the tissue machine uptime, sitting exactly pizza and a quiet no affiliation with the Thiago N T.
Second question is regarding.
Our new software to accent G P. A.
Our help to increase.
I'll feel more bullish or more foot traffic to your stores.
Since you mentioned that.
You are really excellent GB service tool.
More than 10-C T see second half this year. So do you think you can I also got the approval from <unk>.
See the government a very quickly or are there still could be some potential bottleneck.
Yeah.
Uh huh.
Yeah, I'll, let you ask the question.
First of all I think as you know we launched the city on G. P. In three cities in China and at the end of March ER, namely, Shenzhen, Guangzhou and Shanghai.
So I think that's why I think actually if you feel visit our stores in those cities right now they're all our customers can all drive the F. N. G. P. And also we heard that there are also customers actually requested to test drive the X N G P.
Which drive up the penetration rate of the of the Max stream of our P. Seven the island Jeannine ER to ER to more than 50% in those three cities.
Hum in April and we believe that the way we are rolling out F. N G P to more cities.
And also we Oh and also we continue to improve our axon Gpus.
Customer experience every quarter and we continue to see the upside of the penetration rate of them extreme of the Oh in your models.
To answer your second half of your question I think all our clients to decouple, our ex N G. P from HD map starting from the.
So starting from the end of Q3.
So therefore, I think that because the way our ability to do a couple of wax in GB from the X T map. So therefore, I think that the we are able to roll out all at X N. G. P without the requirement of the government approval et cetera. So therefore, I think that we are expecting that the towards the end of the year and we can offer <unk> services, probably in a few of the other cities in China.
And most of these over the next couple of quarters.
Yeah.
Thank you Charles.
Thank you and our next question comes from <unk> with C C.
C P I see securities. Please go ahead.
I got to check when I talk to you. Once you go out not really brooklynese without you know actually it doesn't tell you opportunity to pick up again.
How do you actually hope he does there seem to like that Nemo, what else is out there. So I'll, let you kind of take out quite well and I think that this year are doing well and I wish you. All you should know that I saw Jacob yes, downtown elements I'm kind of Jacobs top hung Dodge Alexander.
I too wish also to that though Josh I don't know a three times she thought Gee I forgot to do that Chicago Yada, you strip away all the <unk> that you said you don't get that.
Thank you for that question and I have a question for.
Tom it's driving and a lot of Chinese and flooring, Oh, Yeah, I'm, sorry, Julian the research Ah and it's hard to plug produce utmost autonomous driving how do we see the leadership all are excellent and also we know that our data is very important and well do a show.
Term sales pressure, our boys and Oh boy it in all our technology improve next thank you.
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Sure.
Yeah.
Alright. Thank you for your question one thing that I would like to make clear is that for ex N. G. P. When it's used within a city and urban scenario, it's actually quite different than highway N. G. P. When it's used on a highway setting, especially you know within the cities, we're talking about areas without high definition maps now so it's very hard to really judge how much.
Has you know in the competition, we are compared to our peers because right now within the industry. We only see a couple of companies that are able to you know claim that have they have similar technologies, but you know there really limited to scenarios, where there is a high definition maps available, whereas four X paint we are actually able to rollout our ex N G.
P software in areas without high definition maps and our you know we also have the capability to actually rollout. It further to 50 to 200 cities.
Cities are so that is definitely there their events. That's the only thing I can say and typically it takes about 12 to 18 months to be able to use the X MTP similar functionality from the you know the testing and testing phase of the Greyscale testing to the actual rollout so it's quite a challenging to reach that miles.
I don't have the actual rollout and so I believe that definitely for X span, we have very solid technology, you know in our architecture that actually support multiple self cycle, including data our data cycle. What are the the Exxon G. P software itself and so I would say you know X and U P. On averages leading ahead of competition.
By about 12 months' time and the second part of your question is about the significance of gatehouse to the actual performance of the technology now I would say data definitely means a lot and it's very valuable to autonomous driving I have a right now you know based on our current south scale and adoption rate and also the deliveries are in the near term we believe that the data.
Here is not going to cause the bake a issue or a b you know really post a lot of difference because right. Now we are still doing vision based or vision centric all kinds of data gathering and then in the future. We expect to have actually more data coming from for example language processing language input and that will also help US do you actually have a better performance in the soft.
We're in execution and I think that I think that right now all capabilities to support that kind of data processing. It's sufficient are definitely in a longer term you know data that will really means a more you know when you have more autonomous driving cars on the road that can also contribute to your dataset, but it's a in a much longer.
And so right now, it's very hard to say where or when the inflection point will be thank you.
Is there something that you think so.
Thank you and our next question today comes from John Chang will see ICC. Please go ahead.
Hum.
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Okay.
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How much less you don't you can achieve.
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I hope you're all doing what you're doing the type of things you can't do it.
Sean Good opinion Murphy, who are the people that you can't you don't what types of other people Schweitzer.
Sure.
Okay.
Yeah.
So my first question is about.
Right.
Hum.
That's helpful and I have just mentioned that we hope to sell.
More than 20000 units.
Per month in the first contract. So can you help us to breakdown.
Our major a modem.
Our structure, including yourselves as a percentage of G. T G.
So what do we see the absolute.
It sounds volume Oh.
Do you think and how to further improve the sounds about fulfillment seventh midnight.
And my second question question, you Stumped me have harsh are.
To explain further explain the product Fannie by 225, so how many motto I'm, saying.
Our our strategy I know Nathan price range, and what our new ideas about the opinion market about 300000, RMB and I'm happy to do a 150.
Thank you.
Okay.
She hated it once you get below a fit on the E <unk> and since you don't play that he went to jail I'm going to hold me that's another way.
That's what you do are what's in and show me knows that was old and sure.
No watch it also could my shoulder about ethos that you deal with the shutdown.
P. She traveled to the shout out there.
So although much of that is that you deal with Eagle that'd be jail hooklet at Tulsa.
Sure that'd be shall we say that you are going to go topo Chico.
She doesn't want it because of a tightening of Hollywood Your boy.
The city that shall chicken.
Well, then shouldn't aging once and Oh, they all will end up.
Well wait and Gorgon initials finish out Oh quota ego.
Women.
Tony European ties to circle.
Cause that to go outside that Oh, yes.
Yeah.
And that's just looking at Homeaway central.
Doug.
Hi.
Uh huh.
Because the truth is that already all within a shovel into the selling season will tell you that.
So quite a sort of a shadow to the churches Thomasville woman. She wants it and then go into a phase how how does tend to go up a little hard to quantify.
Toward either Jack a little hard to show that our shuttle sensual elegant woman to us one shot and satisfy yourself saldana Patrick that's one.
And truthfully at Borgata.
So it sounds like at Lake Tahoe.
And we'll go geez.
Thank you for your question, but it's really hard to provide a very definitive.
Definitive or clear answer since it has something to do with all our future planning well I can only say about Q4 is that I think I would only be satisfied if we can achieve for example, if a G. G. Six deliveries are we expected to be at two times of P. Sevens and also we expect to wrap up allergy nice deliveries as well.
So right now we really cannot provide a clear sales breakdown you know for the monthly sales target of 20000 now going forward you know into 2025, we definitely already have the pipeline in place we have a very clear plans for our future portfolio them. What I can only say for now is that we're going to optimize our cost structure.
And also we're going to a lot of module is that we're going to launch a lot of our module is sort of development on the same platform and we expect to have about you know 10 models in our 2025, our lineup and we will.
So really powers highest D 200000 between 2000, RMB price range and that will be our main market.
Market segment, and we will have very limited number of offerings in below 200000, and also above 300000 RMB price segments.
Thank you.
Okay.
Thank you. This concludes our question and answer session.
I'd now like to turn the call back over to the company for closing remarks.
Thank you once again for joining US today. If you have further questions. Please feel free to contact <unk> Investor relations through the contact information provided on our website or the Pearson finish communications.
Thank you. This concludes today's conference call you May now disconnect your lines. Thank you.
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