Q1 2023 NIO Inc Earnings Call
Hello ladies and gentlemen, thank you for standing by and welcome to the NIO Inc. 1st Q23 Earnings Conference Call.
At this time, all participants are in a listen-only mode. Today's conference call is being recorded. I would now like to hand the conference over to your host, Ms Yif Tang from Capital Market. Please go ahead. Good morning and good evening, everyone. Welcome to the first quarter of the year, the first quarter of the year, the first quarter of the year, the first quarter of the year.
The company's financial and operating results were published in the press release earlier today and are posted at the company's IR website. On today's call we have Mr. Weilin Li, founder and chairman of the board and chief executive officer, Mr. Stephen Fong, chief financial officer, Mr. Stanley Chu.
Senior VP of Finance and Ms. Jade Wei, VP of Capital Markets. Before we continue, please be kindly reminded that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995.
forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain filings of the company with the US Securities and Exchange Commission.
Please also note that Niu's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to Niu's press release which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures.
With that, I will now turn the call over to our CEO , Mr. William Wing. William, please go ahead. Hello, everyone. Thank you for joining NEL's 2023 first quarter earnings call.
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In the first quarter of 2023, NIO delivered a total of 31,041 smart electric vehicles, up 20.5% year-over-year.
In April and May, NIO delivered 6,658 and 6,155 vehicles respectively. We expect the total deliveries in the second quarter of this year to be between the two
and other new models were confident in continuously driving up our delivery volume.
Next, I would like to share with you the recent highlights of our product, R&D, and operations. We would like to find out your presentation despite catalogue Upper Level Inv
On May 24, we launched the all-new ES6, an all-round mid-sized smart electric SUV, and started its delivery the next day. The product quality of the all-new ES6 has been widely acclaimed by the first batch of users.
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In May, we also started the user delivery of the 2023 NEO-ET7 and the flagship Coupe SUV EC7. Coming with more than 15 new features and enhancements, the 2023 NEO-ET7 continues to lead the change in the premium smart electric.
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New product quality and safety are also recognized by authoritative institutions. On April 24, new ET5 was rated good, the highest safety level by China Insurance Automobile Safety Index or CIASI.
In J.D. Power's 2023 China New Energy Vehicle Initial Quality Study released on June 1st,
NIO ES6 won first place in the premium BEV segment for the fourth consecutive year. Also in J.D. Power's 2023 NEV appeal study, which evaluates NIO energy vehicle's performance, execution and the layout. NIO ET7 ranked number one among premium BEVs.
Thank you for watching.
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We plan to launch the new ET5 Turing on June 15 and start the delivery in the same month. As the world's first smart electric tour, the ET5 Turing is designed to cover diversified scenarios for both individual and family users.
significantly improving over competitiveness in the premium family vehicle market.
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Besides new flagship SUV, the all new ES8 will also commence delivery in the new 10. The new EC6 of a second generation mid-sized smart coupe SUV will be launched and delivered in the third quarter.
As we proceed with the product platform transition, new complete NT2.0 lineup featuring eight different products will form a combined force to better cater to the diverse needs in the premium smart EV market and provide users with more experiences beyond expectations.
if you didn't enjoy the webinar and thought about the contributed links for doing this, please feel free to ask questions carefully online or visit our website.
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In June , Neel's smart system Banyan will be upgraded to version 2.0. This release includes over 120 new features and enhancements. By connecting Neel's products, services, and the community in a more seamless way, Neel Banyan 2.0 will deliver a one-of-a-kind digital experience.
let users plan for charging and swapping along the navigation route for long-distance trips with just one tap. www. delineating.com
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In terms of intelligent driving, NIO has released Navigate on Pilot Plus Beta or NLP Plus Beta to all NT 2.0 users. Based on in-house developed new intelligent driving technologies and closed loop data management NLP Plus Beta has made significant improvements.
in making users' journeys more reassuring, comfortable, and efficient. In Bang & 2.0, NLP Plus will be using Neo's proprietary BEV model and Occupacy Network for perception, and the large language model trained with large-scale datasets for planning and control.
The experience of NLPPlus will be further enhanced.
In the meantime, we have started to test our power swap pallet for highways at scale and will make it available for 40 power swap stations on highways starting from the third quarter this year. This feature will be gradually rolled out to more power swap stations with users.
with which users can enjoy more similars and navigate on pilot experience from point A to point B on highways.
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With respect to the sales and service network, we now have 365 new houses and new spaces in 136 cities.
and 359 new service centers and new delivery centers in 196 cities.
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On April 13, the first batch of a new PowerSwap Station 3.0 started operation. The PowerSwap Station 3.0 features the synchronization of the three operating positions, making it faster than the previous generation with higher service capacity and more intelligent experiences.
So far, NIO has installed 1,474 swap stations worldwide, including 119 third-generation power swap stations, and has completed over 23 million swaps for users.
NIO has also installed 7,000 power chargers and 8,800 destination chargers. Besides, overpowered map has also been connected to over 1.1 million third-party chargers globally.
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On April 17, new 500 kilowatt power chargers went online, completing the new generation of a power-up station, which is an integrated station featuring 500 kilowatt power chargers and the power swap station 3.0. There is efficient coordination between chargers and the swap stations.
On April 22, the fourth New User Council was established after the New User Council member election, which was actively participated by new users worldwide.
This year, new users' trust will continue their work centering on public welfare, user care and common growth.
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Further deepening our partnership with worldwide founders for Nature, WWF, Neil announced to join the science-based targets initiative and plan to set a science-based target within the next two years. With the goal of contributing to global sustainable development and living up to the future,
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In the face of the changing market situation, we will timely adjust our sales and marketing priorities to ensure the market competitiveness of our products and services.
In the second half of 2023, with the entire NT2.0 product lineup entering the premium battery electric vehicle market, and 1000 new power swap stations put into operation, NIO's product competitiveness, powered by our decisive efforts into developing full stack R&D capabilities.
Stephen. As always, thank you for your support. With that, I will now turn the call over to Stephen to provide the financial details for the first quarter. Over to you, Stephen. Thank you, William. I will now go over our key financial results for the first quarter of 2023.
and to be mindful of the length of this call. I will reference to I am the only in my discussion today.
encourage listeners to refer to our audience press release, which is posted online for additional details.
All total revenues in the first quarter were 10.7 billion RMB.
with an increase of 7.7% year over year and a decrease of 33.5% quarter over quarter.
All total revenues are made of two parts, vehicle sales and other sales.
Requal CL in the first quarter were 9.2 billion RMB representing a decrease of 0.2% EOE and a decrease of 37.5% EOE.
The decrease in vehicle sales year-over-year was meaningful to lower average selling price as the result of higher proportion of ET5 and 75 kilowatt hour standard range pathway packed device.
Pause to offset.
by increasing delivery volume. The decrease in vehicle sales culture was meaningful to a decrease in delivery volume and lower average shipping price.
as a result of higher proportion of ET5 and 75-quat-hour standard range back-to-pack delivery.
Other sales in first quarter were 1.5 billion RMB.
where there is an increase of 17.8% in your right ear, and increase of 11.3% quarter.
The increased the other sales year over year, was meaning due to the increased sales of accessories?
provision of repair and maintenance services, provision of auto financing services, sales of used cars, and provision of power solutions.
are the result of continued growth of our users. The increasing sales quarter by quarter.
Was it needed to the increasing provision of auto financing services?
of access rates.
provision of repair and maintenance services, provision of power solutions, and sales of youth cars.
as a result of continued growth of our yielders. And the part offset by a decrease in revenue from rendering of research and development services. The growth margin in the first quarter of 2023 was...
1.5% compared with 14.6% in the first quarter of 2022.
at 3.9% in the fourth quarter of 2022.
The decrease in gross margin year over year and quarter of culture was mainly attributed to the gross vehicle margin.
More specifically, legal margin in the first quarter was...
More specifically, legal margin in the first quarter was 5.1%.
Compared with 18.1% in the first quarter of 2022 and 6.8% in the fourth quarter of 2022. The decrease in vehicle margin over year.
was mainly attributed to changes in product mix and increased average cost per unit. The decrease in vehicle margin code of culture was mainly due to changes in product mix and increased average cost per unit.
and increase promotion discount for the previous generation of ES8, ES6 and EC6.
which were partially upset by the inventory provision, accelerated depreciation on production facilities, and losses on purchase commitments for the previous generation of ES8, ES6, and ES6.
which were partially upset by the inventory provisions, accelerated defecation on production facilities, and losses on purchase commitments for the previous generation of ES8, ES6, and ES6 in the fourth quarter of 2022.
Hardly expenses in the first quarter were $3.1 billion. Representing rate of $3.1 billion.
74.6% year over year, a decrease of 22.7% code of code.
The increase in research and development expenses year over year was a meaningful attribute to increase personal costs in research and development functions and increase share-based compensation expenses, recocalizing the first quarter of 2023.
The decrease in research and development expenses culture reflected fluctuations due to different design and development stages of new products and technologies.
As Gen X translated in the first quarter were 2.4 BN1B, representing an increase of 21.4% over a year and a decrease of 37% of the culture.
The increase in S-CHNA expenses year-over-year was primary due to the increase in personal costs related to sales and general corporate functions, and increased expenses related to the company's sales and service-style work expansion.
The decline in SGA Extension's quality culture was a minute due to decline in sales and marketing activities and professional services.
Last, for operations in the first quarter was
From pressure in the first quarter was 5.1 billion RMB
represent an increase of one hundred thirty three point six percent year over year a decrease of open one percent quote unquote.
Last in the first quarter was 4.7 billion RMB representing an increase of 165.9% year and a decrease of 18.1% code of code.
Let's last, in the first quarter was 4.7 billion RMB, representing an increase of 165.9% year-over-year, and a decrease of 18.1% quarter-by-quarter. Let's last.
to the nearest ordinary shareholders in the first quarter was 4.8 billion RMB, representing an increase of 163.2% year-over-year and a decrease of 17.8% year-over-quarter.
Our balance cash and cash equivalents restrict cash, short-term investment and long-term deposits was...
37.8 billion RMB as of March 31, 2003.
Now, this concludes our prepared remarks. I will now turn the call over to the operator to first lead our Q&A session.
Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for a name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question.
For the benefit of all participants on todayís call, please limit yourself to two questions. And if you have got more questions, you can re-enter the queue. Your first question comes from Tim Zhao from Morgan Stanley . Please go ahead.
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So my first question is about model cost control. Because I know it has been investing more aggressively since 2021 on new models, sales marketing and energy replenishment network.
So in light of the challenging industry of the macro outlooks, would NEO consider streamlining the model portfolio and cutting back on investment in some projects like smartphone, battery, chipset, and refocus resource on a few flexure models. And separately does NEO still stick to its regional schedule?
to launch our mass market brand Albus next year. So that's my first question. Thank you.
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Thank you, Tin, for your question. As you have mentioned, the market competition is intensifying and we do face a lot of changes in the market dynamics.
For the new technology platform 2.0, we are about to show the whole lineup of the eight products based on the NT 2.0 and these eight products will enter the market in the near term gradually. The current focus of us is to make sure we have the new organization structure.
to have a more targeted sales strategy and marketing strategy for all the aid products to reach its own target user groups. Because when we design those products, we do have a specific positioning of different products in their specific segment and target group.
So the current challenge for us is to make sure our marketing and the sales team can be more dedicated on these eight products. In terms of showroom layout and the product region, the marketing reach and the distribution of the resources at.
the sales and marketing teams. We want to make sure for each product we have a dedicated team to take responsibilities in terms of sales and marketing efforts. Of course for those key products we will put more resources to make sure we can reach much better sales performance.
But just like I mentioned, the focus for us now is to make sure we can have more dedicated resources for the eight products separately and to make sure they can achieve good market share in terms of their specific segment.
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Yes, of course we need to be more agile in terms of face the challenges of the changing market situation to ensure our competitiveness in terms of the products and the services. We are also discussing the topics of the R&D projects.
Of all speaking, we would like to insist on offer big directions in terms of the R&D project. In the short term, yes, we do have some pressures, but we think it is really important and necessary for us to focus on those R&D capability building to build over long term competitiveness.
But at the same time, based on our resources and the priorities of the company, we can adjust the pace of the investment for all those different R&D projects.
For the question regarding Outpost products, over timing for Outpost brand is still the same, that is the second half of 2024, where we plan to launch the Outpost products at that time, and we will choose the specific timings for those different products. However, at the same time, we wanna make sure for the Outpost products that we can have a much faster
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So my second question is about the new ES6. The second quarter guidance can be stronger than market expectation, which could be true to go to like a 3,000 to 4,000 units of additional sales of the new ES6. So could you share a little bit more about the older in-tech of the new ES6?
since its launch today? And is there any bottleneck to the delivery of new ES6? In the meantime, are you still expecting the sales aggregate of ET5, ES6, and the upcoming ET5 touring to achieve 20,000 a month? And when do you expect to achieve that volume target? So that's my second question, thank you.
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Thank you, Qing. ES6 is very well received by the users and also received very good feedback in the media. We think the order performance has reached our expectations and the test drive conversion rate of ES6 actually reached a record high in the history of NIO.
the production and delivery. We're very confident to achieve this target in July . And the supply chain team, manufacturing team, and other teams are making all sorts of appropriations to make sure we can achieve this objective. Regarding the ET5, the ET5 Turing, and the ES6.
overall volume, we believe that there is an opportunity for us to still achieve 20,000 units in one month. The big challenge for us right now is more about the EJ5 because if we look at the EJ5's pricing...
We can see that last year we still have around 12,000 RMB subsidies for the users. At the same time, users can get home chargers free of charge last year, but now users will need to pay for the home chargers for the EG5. So Nat speaking properly for the EG5, if we make the app...
the ET5, but just like I mentioned, we're going to launch the ET5 touring on June 15th. This is going to help us to improve overall product competitiveness because we believe the ET5 touring can cater to the diversified needs of individuals and family users and this can help us to boost our competitive.
of our product competitiveness in this specific market segment.
Thank you, your next question comes from Bin Wang from Credit Suites. Please go ahead.
Thank you. I've got two questions. Number one is about the margin outlook. When you reach the 10K per month for ES6 in the third quarter, so what's the gross margin expectation we can hide for the third quarter and the second half? That is number one question about gross margin guidance. I think the question is about the margin outlook. When you reach the 10K per month for ES6 in the third quarter, so what's the gross margin expectation we can hide for the third quarter?
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Hi, this is Danny. As William mentioned, with the delivery of our NT2 product with higher price from Q2 and Q3, the average selling price and gross profit margin.
per car will recover. So we are confident that the growth profit margin will start to recover to double digits in Q3 and over 15% in Q4.
Thank you a great. My second question about any further foundread ments. I need it because to wr people, what are about your net cash petition, which is qui quite F? And so you provide some happy about your potential found reading. Especially, we want not New York China, ipo- I was with the open national come up.
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Thank you, Bing, for your question. Yes, for this year, if we look at the first quarter and the second quarter, because of the delivery performance, which is actually less than that of the fourth quarter last year. So this has affected over operating cash flow. But.
Together with our delivery volume ramp up in the third quarter, we believe that operating cash flow will also improve. Currently, we believe our cash is sufficient to support the company's business development. As a public listed company, we make very prudent management of our cash positions and at the same time, we do have all the different channels to...
do the fundraising in different markets. But this year, we have made some adjustment in terms of our cash spending. For example, we have delayed our CapEx investment and we have also delayed some R&D projects. At the same time, in terms of our global market expansion, we believe it's more important for us to focus on the markets that we have already entered. For example, now I'm five to seven and we will call the transitionalbrand. But maybe should beakers. So I'm just going to mixer that right in there. Just going to think about, this is a general fund,
from your FA. Thank you. Please go ahead.
Thank you, William and Stephen. So I also have two questions. My first question is, what is the battery price decline in first quarter and how much does the battery price to help gross margin in first quarter? And also, could you also comment the second quarter to rightwoman?
lead some carbonates decrease a little bit from Q1. So this leads to a certain increase of our gross profit margin. Regarding amount wise, I think the 2.5 thousand paper market changes.
But recently I think we can also see the lithium carbonate price also recovered a little bit to 310,000 per ton. What the total change has been between 2002 and Hopefully 2021
Li-Seng price will bring uncertainty to our gross profit margin. That's generally the impact of Li-Seng.
I think you, Stanley. My question is regarding your latest CapEx and operating expense guidance because I think Willian just mentioned that you are starting to control some investment, especially for some long-term investment. But are you able to give some new guidance?
tooling and production facilities for our new models. We will well control the cadence of those investments. At this moment, I don't think we can give clear guidance of CapEx investment for this year.
Yeah, we will make adjustments dynamically in line with the spending and also the status.
Yeah, also any guidance on operating expense, sorry. Okay, regarding operating expense, one is for the R&D expense. The upcoming years remains to be the crucial stage for our R&D and also
mass production of our core technology as new models. So on average in each quarter of 2023, the non-GAAP R&D expense will be kept at 3 to 3.5 billion per quarter. Yes, we will also manage spending.
and also keep improving our system efficiency. And for SG&A experience, we can see a decline in Q1. The main reason is because of the reduced market activities and also seasonality impact of Chinese New Year.
Along with more marketing events like auto show, road show and also launch of new models, the FGMA total amount will increase from Q2 but the efficiency will be improved from Q3 since all NT2 products.
will be launched and more water will be realized. Hi, Ming. That's the guidance for OPACs of next quarter.
be launched and more water will be realized. Jaime, that's the guidance for the OPACs of next quarters. No, thank you, Stanley. Thank you.
Thank you, Min.
Thank you.
Hi, operator. Next question, please. Thank you. Your next question comes from Yi-Cheng Ding from HSBC. Please go ahead.
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by lower price and lower content to access more volume. And the second question, we talked about the dial down a little bit on OPEX, but generally does that also affect all postpone or break even point of the year? pronunciation.
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Thank you, Yuchen, for your question. We understand that there are many different kind of pricing movements in the market. But regarding the EZ5, we don't think it's reasonable for us to have a budget version of the EZ5. Because of our philosophy that we believe
The different configurations or the important configurations should come as a standard for our NT2 products. For example, the dual motors, AD suites, and other important functions and features. We believe those standard package philosophy can serve the long-term interest.
to our users. But at the same time we do have some flexibility in many other different approaches. For example, user rights, such as the free battery swapping. When we make those kind of considerations and adjustments, of course the important thing is to make sure we can put the user's interest first.
So when we decided to make those kind of adjustments, we also need to consider the interest of our install base. For the second question regarding the breakeven point, according to the current situation, we do think probably we need to delay our breakeven point.
to within one year and we think this is probably a reasonable assumption.
Thank you, Yuchen. Thank you. Your next question comes from Nick Lai from JP Morgan. Please go ahead. You're welcome.
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push back the R&D expense and so on. And I'm more curious about 24, 25 planning. How should we expect the CAPEX or cash burn into 24 and 25? Would that be flat or up or down compared with 2023? Thank you.
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For the Outpass brand, basically the project is moving forward according to our plan. For the production site, we believe the current production capacity is sufficient to support the needs of the new brand and Outpass brand.
So it means that in terms of production facilities and capacities, there's no need for big capex investment. In the market front, we believe starting from this year, we should have sufficient power swap stations to support both brands to share the power swap stations.
Previously we mentioned that probably for the go-to market of Alpus brand, we do need to make some investment in terms of CapEx and OpEx, but we would like to control the pace of the go-to market cadence to make sure we can have much faster movement and cadence and have a much ideal mode to operate the go-to market.
channels in terms of the R&D and US dollar capital markets. So for us we think cash is not going to be a big issue for the company but at the same time we still need to make a refined management of our cash and also the working capital of the company.
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Hi Nick, regarding the volume percentage of 85 terrain, ESSEC and ECC, I think from the long run the percentage will be 80%
the cost advantage brought by the in-house technology capability and also the innovative supply chain development. The NT2 product growth profit margin target will still be 20% from the long run.
Yeah, thank you. Thank you. Thank you. Your next question comes from Paul Gong from UBS. Please go ahead.
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We will continue to work on this. Thank you, Paul, for your question. Last year, we launched three products, ET7, ES7 and ET5. To be honest, in terms of the recent performance of these three products including the second quarter, we understand that the market performance of these three products are largely based on how they were performed began in TI Security granted. ThisIII, the first product, enacted in mind on E3 E3 E3 and in the audience Ford F-150. So, in my opinion, this is an fin ministries report on the
is lagging behind of our expectations. If we look at the factors that are affecting the performance of these three products, just like I mentioned before, last year for the users to purchase those three products, they have more user rights and benefits and they can enjoy the national subsidies.
But this year, for the users purchasing these three products, Apple to Apple comparison, the cost increase is around 10 to 20,000 RMB. So at the same time, if we look at the micro environment, we can see the market competition is also getting intensified.
So some users are choosing probably some other new brands or some traditional brands over products. This is one factor. And another factor is internal cannibalization or competition. For example, some ES7 users may decide to choose...
to make some of the adjustments in the near term in terms of over sales channel and network as well as over organization structure and over sales and marketing strategy and policy.
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But for the five new products based on the new technology platform 2.0 that we launched this year, we do not have this concern. The first product we launched this year is EC7. After the delivery of EC7 we can see the demand is actually quite stable.
all the new products that we launched this year, including the S8. We're about to start the delivery of the S8 in the near term and currently we can see that the reservation order performance is actually higher than our expectations. We believe right now the current pace of our product
Recently, we have also launched the 2023 ET7. After the delivery of ET7, we believe it can also meet our expectations, and the auto-performance is also quite stable.
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If you have any questions, please feel free to contact us.
So, thank you very much.
Thank you for your question. Regarding the brand positioning, I believe right now is a very chaotic period for the brand positioning. For the users, for most of the users, the majority of the times that they choose a product based on the price.
Right now, in terms of our product, our service, as well as our technology and experience, we believe we are much better than others in those different areas. But the values of our product and services and technologies are not reflected in the perceived value and the price of the products. This is the reality that we're facing right now. But we believe, for the long run, we're going to help a bigger bulk of consumers andève significantly improved safety and Wink-Vworking And how we're going to achieve our ad hoc
around 20% vehicle gross margin. At that time, we believe if the leading carbon net cost goes back to a reasonable level, we should still have a chance to reach 20% of vehicle gross margin. In the long term, we believe in terms of the economies of scale and the efficiency improvement, as well as the vertical integration of our core components and the-
So for Alpis, it's more about finding the best solution in the specific segment that Alpis brand targets at. For us, if we look at the market, we see some companies, they sell the product at a price of around 200,000 RMB, but they can still achieve over 20%.
for us to lower the cost on those components. And this will affect us in terms of lowering the price of our products. But for outputs, it's different. When we define outputs as products, of course, the target of us is to achieve reasonable vehicle cost margin. And we believe it is reasonable and is possible for us to achieve that.
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So can you share more of your understanding of subscription charge? And also in the second class of this year, we can see that highway navigation function to swapping station will be further launched. So what do we think of the improvement of customers experience with this new function?
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So it's a little bit actual. So if I'm in one moment, I'll let you get to lose your knowledge and teaching. Thank you for your question. I will answer the NLP plus related question. And Steven is going to address the question about the PowerSwap stations. For the NLP plus, right now we have over 50,000 users using the NLP process services.
This year we're going to accelerate the test of the NLP Plus in the city use cases or the urban use cases. When it gets ready, we will also release this feature to the users. Based on our internal evaluation right now, we are very confident regarding the performance of the NLP Plus in the urban scenarios.
At the same time, regarding the NAD, we're also doing some tests and if in the future the regulations and the laws are in the right place for the NLP Plus release, then we will release the NAD for our users when the regulations are in the right place.
We believe that this is probably right now all the R&D of our NOP plus and NAD is basically on track and according to our schedule. My second question is about the battery swapping station. You can see that you have gotten nearly 1,500 stations at present.
And nearly we can see 200 set of stations have been added since this year. So have you seen that the answer of our battery-solving stations network has been built and is quite good for ourselves of our new models, especially for our penetration of lower tier cities.
I think the short answer is a very clear yes.
We see we have seen a very clear flywheel effect between the PowerSwap station network and our sales growth. As has been mentioned, we have already deployed 1,500 power supply stations across China and at the end of this year.
the number of power source stations will rise to around 2,400. And every day we offer around 70...
60 to 70 thousand times of passwords to our users. So in average every day one password station offers 40 to 50 times of passwords to our users. So that means on one hand our users rely on participation as their favorite site, the charging method. On the other hand, our users rely on participation as their favorite site. So on the other hand, our users rely on participation as their favorite site.
The power source stations are very efficiently utilized. So that's why we see a clear flywheel effect. And that's why we are determined to accelerate our power source station deployment. And also we are very confident that more power source stations will lead to more sales growth. And actually in the Yangtze-Dia River and some tier one cities, some of the most future H Emily dabersare seeing today is supporting theRadical welcoming
We have seen that after all the charging insurance improves, our sales volume also grows. So that's why we are very confident that with one or more possible change penetrates into the low-tier cities. Naturally, new sales will lead to a very strong momentum or a solid growth.
in the low tier cities. Last but not least, I think looking forward, as more and more OEMs seriously look at power storage stations, as it more or less stands away, the power storage stations will become a more convenient way for more and more EV users.
Thank you. Thank you. Your next question comes from Vijay Rakesh from Mizuho Securities. Please go ahead. Hi, just a quick question. Given…
what the expectation is on second half to first half deliveries.
Thank you Vijay for your question. Of course, the target for the second quarter of this year is to deliver over 20,000 units every month and we are very competent to achieve this target. Got it. And just one other question. As you look at some of the subsidies for the subsidies.
If you look at some of the subsidies moving to tier 2 cities, could that be a challenge for Neo Q1? You don't have enough swap stations etc. on tier 2 cities etc. Thanks. Sisay. dependencies you don't have to scan it can happen.
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This year our target is to deploy 1,000 additional power swap stations. And the full majority of those power swap stations will be deployed on highways. And some of them will be installed in the tier 3 and the tier 4 cities. We believe that this is going to directly boost the sales performance of our products.
Actually, in April , we started the deployment of the PowerSwap Station 3.0 and we accelerated the deployment in May. In June , we believe we're going to deploy around 100 PowerSwap Station 3.0 and we believe gradually from now on we're going to speed up the deployment.
again for joining us today. If you have further questions, please feel free to contact the New Investor Relations team through the contact information provided on our website. This concludes the conference call. You may now disconnect your line. Thank you.
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