Q2 2023 XPeng Inc Earnings Call
Speaker 1: Hello, ladies and gentlemen. Thank you for standing by for the second quarter of the earnings conference call for XPeng Inc.
Speaker 1: At this time, all participants are in listen-only mode.
Speaker 1: After management's remarks, there will be a question and answer session.
Speaker 1: Today's conference call is being recorded.
Speaker 1: I will now turn the call over to your host, Mr. Alex Yeh, Head of Investor Relations for the company.
Speaker 2: Please go ahead Alex.
Speaker 3: Thank you. Hello everyone and welcome to XPeng's 2nd Quarter 2023 Earnings Conference Call. Our financial and operating results were issued by our Newswire Services early today and available online. You can also view the earnings price release by visiting the IR section of our website at ir.shopm.com.
Participants on today's call from our management will include co-founder, chairman and CEO Mr He Shao Peng, Vice-chairman and President Dr Brian Gu, Vice-president of corporate finance and investment Mr Charles Zhang, Vice-president of finance and accounting Mr James Wu and myself
Management will begin with prepared remarks and the call will conclude with a Q&A session. A webcast replay of this conference call will be available on the IAR section of our website. Before we continue, please note that today's discussion will contain four looking statements made under the Safe Harbor provisions.
of the US Private Securities Litigation Reform Act of 1995. Forelooking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is in-
not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that Expense Earnings Press Release and this conference call include the disclosure of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures.
Xpeng's 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. He Xiaopeng. Please go ahead. Thank you very much, Nicolas.
Thank you for your attention. Please remember to subscribe to our channel. Please subscribe to our channel.
Thank you for watching.
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Hi everyone, during the first half of this year, given the intensified competition and rapidly evolving environment, I led a set of reforms across business strategy, organizational structure, products, and marketing to tackle huge risks and challenges and forge significant comprehensive transformation within the short timeframe.
Today, I'm pleased to report that this transformational adjustments have generated better than expected results internally and externally and propelled expanse into the initial phase of a virtuous cycle.
The G6 has become the dominant BV model in the 200,000 to 300,000 RMB price market segment.
Tribal charging our self-growth momentum.
We've created meaningful breakthroughs in commercializing our industry-leading full-stack self-developed EV platform and intelligent technologies.
We have formed a long-term strategic partnership with VoseVagon.
As part of our partnership, we'll embark on broad-based collaborations to develop EV platforms and intelligence software technology, creating long-term value for both companies.
Moreover, an inflection point in user acceptance for ADAS is emerging faster and stronger than we expected.
We saw orders for the G6 max version accounted for 70% of total G6 orders in the first month of its official launch. Far exceeding our estimate.
Our MPS and OTA satisfaction scores improved continuously in the first half of the year, reaching an industry leading level as we prioritize customer centric transformation.
In addition, the changes at X-Pang have boosted Team Moral, owner engagement, and the confidence of suppliers and other external partners.
This provides a strong foundation for advancing organizational adjustment, cost saving initiatives, efficiency improvement, and new product launches.
This month just completed in a month of governmental welfare. In the year 2014, we determine how appropriate quality samples are, and evaluate cooperation of each application method. The research methods across exactlyens the ground requirements of the capital fields and private applications, which give data asking if largest SaaS offers the key bearings of the industry, which means we can create opportunities to infinite numbers numbering after 5 months. In addition we are also interested in market energy foam risks from Eso Group to reduce online releases. We are also interested in market energy foam risks.
This month marks the knife anniversary of our inception. Over the past nine years, we have been set-facely committed to advancing technological innovation.
This month marks the knife anniversary of our inception. Over the past nine years, we have been set fastly committed to advancing technological innovation. That commitment has never wavered.
We plan to advance full-stack technology innovation in core areas to make leading-edge smart EV products accessible to a broader range of customer cohorts across the globe.
As we grow to a larger scale, we'll build a sustainable business model underpinned by full-fat capabilities across hardware, software, commercial operations, and partnerships for empowerment.
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As we move forward with this recent transformation, I continuously remind myself and the team that in order to succeed in this growing competition, in the long run, we must consistently look beyond short-term financial performance as we tirelessly evolve and advance our underlying capabilities.
That said, I'm glad that our efforts to elevate our underlying capabilities across the board have begun to bear fruit.
Our vehicle deliveries have grown sequentially for six months straight and continue to grow.
Specifically, the P7i, our new product launched in March 2023, has been gaining great consumer traction. With its monthly deliveries surpassing 3000 units for two consecutive months since June , overcoming supply chain challenges.
As we enter the second half of this year, we believe we'll further ramp up the capacity and product competitiveness of the P7i model lineup to drive its continuous sales momentum.
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to your model built on Sep2.0, the G6, made its market debut at the end of June and has quickly become a phenomenal bestseller in the segment.
Guided by our separate 2.0 enable platform-based cost efficiency and a pricing strategy that prioritizes scale expansion, X-Ping G6 has been merged as the industry pioneer in introducing the most advanced technologies such as 800 volt SIC platform and full-scenario ADAS.
which is accessible to mainstream consumers of 200,000 to 300,000 RMB price market segment.
Furthermore, the G6 has become more popular across a wise range of consumers, including those in both higher and lower price assignments.
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Today, I want to extend my deep gratitude to those owners who are patiently awaiting delivery of their X-Pang G6.
We're making every endeavor with our supplier partners to ramp up our production output for the G6, especially for the max version.
We currently estimate that G6 delivery volume in September will grow significantly, feeling our monthly deliveries to reach over 15,000 units in total.
In the upcoming fourth quarter, we'll continue to accelerate G6 production throughput to capture the increasing market popularity that has followed its first batch of deliveries with a goal to deliver more than 10,000 G6 monthly.
With G6 Rampa and enriched configurations for other on-cell models, we'll strive for peak monthly delivery of 20,000 in the fourth quarter.
I believe the success of the G6 is just the beginning.
Moving forward, we plan to introduce an even wider range of separate 2.0 enabled top-selling models.
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In July , we announced our long-term strategic partnership with the VOTEWIEN Group. I believe that forming this partnership marks a milestone not only in next-panks business journey, but also in China's auto-making development. X-PANG and the VOTEWIEN Group are highly compatible in our underlying technological beliefs.
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Combining X-Peng's industry-leading smart EV technologies with low-vagance world-class design and demearing and supply-aching capabilities, our collaboration will begin with two B-class BEV models to bring best-in-class technologies.
top-notch products and a superior experience to all customers. Those wagon group will also make a long-term strategic equity investment in next bank for a total consideration of approximately $700 million US dollars.
We'll continually deepen our cooperation with the Rosebacken Group and build stronger synergies in the next generation EV platforms, software technologies, and supplying chain capabilities, sharing economies of scale.
I'm excited about this strategic partnership, which underscores the Vatican's confidence in an ever-commission of our in-house self-developed core technologies and groundbreaking capabilities.
Our corporation creates the globe, auto industries, first collaborative business model that integrate software and hardware full-stack technology and we're moving to capitalize on this opportunity to generate immense value for our shareholders.
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UN dynamic countries started making money from the immediate disaster, which surprised women and women in their homes. We developed many new initiatives for people currently in becoming more popular in a similar way. In affirmed on the development of cars,
As technology trends continue to evolve, I'm convinced that globally, the era of software-defined cars will conclude and will venture into a new era of AI-powered vehicles.
XPeng will be among the most active advocates of this evolution, where we expect to reap substantial benefits.
As we progress, I will establish an enterprise-level team taking charge of autonomous technology R&D, roadmap planning, and operations.
I'll personally be this macro-intelligent tech team, unifying the development planning for ADAS, Smart Cabin, electrical and electronic architecture functions, as well as the evolution of several innovative initiatives.
We're ready for AI to disrupt the existing automotive technology system as human machine co-pilot and AI power autonomous driving getter steam and reshape our driving habits.
I look forward to presenting our latest achievement and R&D Roadmap in Intelligent Technologies at our 2023 Tech Day on October 24.
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Over the second half of this year, we plan to make additional major breakthroughs in experiencing coverage with our XNGP ADAS to further drive customer acceptance and the adoption process.
Wattening the technology gap with our peers.
The development of our XNGP that does not rely on high position maps is speeding up and we just completed a number of professional media test drives with XNGP prototype versions across many districts in Beijing this week.
The media who participated gave overwhelmingly positive reviews on the XNGT-assisted driving because it did not rely on high definition maps or prior knowledge of the roads.
For our next OTA software update slated for October , we will roll out the XNGP independent of HD maps in the first batch of cities, along with other new features that we have yet to announce but are sure to delight XPeng owners.
50 cities by the end of this year. Through technology innovations, our work will also entail cutting XNGPs bond costs by about 50% by 2024, ensuring our models have the most advanced autonomous driving hardware as standard configuration.
We are simultaneously exploring flexible pricing models for our software subscription business.
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Next, we really appreciate it. Thank you all for listening. Thank you again for your attention. Now for next minute, we will be back. If you have pressing questions or ever We'll do it again.
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I am closely working with our president, Ms. Wang Fengying, to achieve the highest cost control level among carmakers in the world and China. And, power ties cost savings is one of the core goals for various business units including product design, R&D, manufacturing, and manufacturing.
of reducing overall costs by 25% by the end of 2024, with even better results in some other subdivisions.
These cost-saving initiatives will strengthen our product competitiveness and substantially drive gross margin improvement in 2024.
Interestingly, two years ago, I expressed my view that considering cost-effectiveness, no auto company could offer competitive autonomous cars to consumers at 150,000 RMB level.
But as we implement technology innovation and full-cycle cost reduction, I have changed my mind and formulated a clear plan to make autonomous cars affordable for the largest market segment in China, the 150,000 RMB price range. This will greatly promote the accessibility of intelligent autonomous driving.
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In terms of sales, marketing and service capabilities, under the leadership of our president, Wang Ying, we have continuously improved customer satisfaction and cross team collaboration.
Looking ahead into the second half of the year, we'll accelerate our business model transformation across our domestic and international sales channels.
To that end, our efforts will include optimizing our sales network drastically and partnering with more top dealers.
These initiatives will spur our expansion and help us gain market share across Tier 2 and lower tier cities.
Your tapes, the recording and recording was recorded. In the script it was edited and IIM went to measurements and S Webgen Vop Frontier.
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Regarding cash flow, our cash on hand at the end of the second quarter of 2023 amounted to 33.7 billion RMB.
With vehicle deliveries back on track for sequential quarter growth, we significantly narrowed our cash outflow from operations to around 1 billion RMB. Over the second half of 2023, with accelerating sales growth from the G6 and other new products, we expect our gross margin to rebound gradually.
and will continue to improve our operating efficiency. As a result, we expect our overall cash flow from operations to turn positive for the second half of the year.
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Now, moving to our guidance, we expect our total vehicle deliveries to be between 39,000 and 41,000 units in the third quarter of 2023, representing 68.1% of the total vehicle deliveries.
to 76.7% quarter over quarter growth and revenue to be between 8.5 billion RMB and 9 billion RMB.
Thanks to the proactive adjustment we made over the last several quarters, moving into the third quarter this year, we have seen ourselves, branding, team morale, and cash flow started to form a positive loop at XPeng. As the power of AI reshapes the automaking industry.
We expect our virtuous cycle to accelerate and cover more areas over the next two years.
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Thank you everyone. With that, I'll now turn the call over to our new VP of Finance, Mr. James Wu, to discuss our financial performance for the second quarter of 2023. By way of introduction, before joining XPeng, James held executive finance roles at both General Motors US and China headquarters.
and at Saik General Motors Wooley Auto. We look forward to tapping into his extensive experience in finance and operations management and his valuable insight into international business practices.
James' skill set is ideally suited to lead our finance and operations team, and we look forward to his contributions as we embark on our next level of success.
Thank you, Shopham. And hello, everyone.
Before I start, I'd like to say that I'm really happy to join Xiaofeng in this exciting time and look forward to our future interactions.
Now, I would like to provide a brief overview of our financial results for the second quarter of 2023.
I'll reference RMB only in my discussion today unless otherwise stated.
Our total revenues were $5.06 billion for the second quarter of 2023.
a decrease of 31.9% year-over-year, and an increase of 25.5% quarter-over-quarter.
Revenues from vehicle sales were $4.42 billion for the second quarter of 2023, representing a decrease of 36.2% from the same period of 2022, and an increase of 25.9% from the first quarter of 2023.
The year-over-year decrease was mainly attributable to lower vehicle deliveries and discontinuation of new energy vehicle subsidies.
while the quarter over quarter increase was mainly due to higher vehicle deliveries of the P7i.
Gross margin was negative 3.9% for the second quarter of 2023, compared with 10.9% for the same period of 2022, and 1.7% for the first quarter of 2023.
Vehicle margin was negative 8.6 percent.
for the second quarter of 2023, compared with 9.1% for the same period of 2022 and negative 2.5% for the first quarter of 2023.
The year over year and quarter over quarter decreases were explained by first the inventory write downs and losses on inventory purchase commitments amounting to $0.2 billion related to the model G3I Its management lowered its forecasted sales
due to stronger than expected market amounts for newly launched vehicle models, with a negative impact of 4.5 percentage point on vehicle margin.
Secondly, increased sales promotions and the expiry of new energy vehicle subsidies mentioned above.
R&D expenses were 1.37 billion for the second quarter of 2023.
representing an increase of 8.1% year-over-year and an increase of 5.5% quarter-over-quarter.
The year-over-year and quarter-over-quarter increases were mainly due to higher expenses related to the development of new vehicle models as we expand our product portfolio to support future growth.
SG&A expenses were $1.54 billion for the second quarter of 2023, representing a decrease of 7.3% year-over-year, an increase of 11.3% quarter-over-quarter.
The year-over-year decrease was primarily attributable to the reduction of commissions paid to franchise stores and lower marketing and advertising expenses.
The quarter-over-quarter increase was mainly resulting from higher marketing and advertising expenses to support new product launches.
As a result of the foregoing, loss from operations was $3.09 billion for the second quarter of 2023, compared with $2.09 billion for the same period of 2022, and $2.59 billion for the first quarter of 2023.
Net loss was 2.8 billion for the second quarter of 2023, compared with 2.7 billion for the same period of 2022, and 2.34 billion for the first quarter of 2023.
As of June 30, 2023, our company had cash and cash equivalents, restricted cash, short-term investments and time deposits in total of $33.74 billion.
To be mindful of the length of our earnings call, I would encourage listeners to refer to our earnings press release for more details on our second quarter financial results.
This concludes our prepared remarks. We'll now open the call to questions. Operator, please go ahead.
Yes, thank you. If you wish to ask a question, please press the star key followed by the number one in your telephone keypad.
Yes, thank you. If you wish to ask a question, please press the star key followed by the number one in your telephone keypad. To cancel your request, please press star then 2.
For the benefit of all participants on today's call, if you wish to ask your questions in management in Chinese, please immediately repeat your question in English. For the sake of clarity and order, please ask one question at a time and management will respond, then feel free to follow up with your next question.
And the first question comes from Tim Shaw with Morgan Stanley .
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So my first question is about the improvement of the component supply. Because I experienced a third-quarter volume guidance that suggests continuous improvement of the component supply. However, the longer waiting time has adversely affected the new order momentum of G6 lately. So just want to know when to expect the bottleneck could be fully removed.
or stable monthly run rate. And will X-ray consider to add or replace with the new supplier for the upcoming model to avoid such bottleneck from relapsing. Thank you.
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Thank you for your question. First of all, we are very confident of G6's future sellers and it's definitely going to be very competitive. And right now, looking at G6 among the 200,000 to 300,000 RMB price range, definitely it is one of the top players and definitely we expect the orders to continue to go up.
But we are seeing the ramp up of the supply of the parts since August and going into September and October we expect the same ramp up momentum to continue as well. So definitely going into Q4 we expect to achieve at least 10,000 monthly deliveries for G6. And right now we have done actually a lot of work on the supply of the parts.
the 2.0 platform, not only can we reduce the overall production cost of our future models, but we can also reduce the reliance and dependence of our supply chain as well. So in the future, our supply chain will be much more, which will be much easier to manage and it will be much more straightforward as well. In the future, we will have much more models that are built on separate 2.0, which means that
compatible on the platform that can support the development of a lot of our future models. So overall speaking, given what we observed from G6 so far and thanks to the development of our technology, we believe that our supply chain constraint is getting resolved. Thank you.
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So my second question is about the pricing competition. So I just want to learn more about the management's view on the potential impact on the new wave of the price war, along with the competitors like Tesla's upcoming new model launches in September . Does Tesla need to get more aggressive with its pricing or promotion?
thereafter. We effectively pass through the cost pressure to our supply chain. So that's my second question. Thank you. Hey Tim, it's Brian . Let me address your question. First of all, the recent price movements of our competitors have not really impacted our sales, especially the growth trend.
the resulting momentum is actually intact. But before I address the pricing as well as gross margin trends, I want you to underscore that our strategy right now is to make sure that we regain growth and scale. I think that's the.
momentum, we actually now are forecasting returning to our historical high in terms of revenue, quarterly revenue rates. That actually will help us in the long run to gain a scale economy as well as efficiency. Another priority that we actually also as a company would want to achieve for the second half of this year is to gain very strong cash flow. As you heard
So I think that's also important for us to build a momentum into improving economy. So on the growth margin trend, I'll hand over to James to give you some sort of a trend estimate, but I think that's something that clearly we cannot give guidance to.
Yeah, so I just wanted to add, as Brian mentioned, our focus is very clear in terms of gaining volume and scale, which obviously will help improve our gross margin as well as we've seen our manufacturing cost. As mentioned in the earlier script,
We've got some EOP impact from the G3I in Q2. I just want to note that we still have some level of production scheduled for G3I in the third quarter. There will be another portion coming through in the third quarter. As we increase volume in Q3 and into Q4, we will have a higher level of production scheduled
we expect our gross margin to improve over time. And as we sell better mixed products in the second half, we do expect our gross margin to become positive in the fourth quarter of this year.
And lastly, I just want to echo that Brian mentioned, from a cash flow standpoint, as we increase volume in the second half, we've already seen some pretty big improvement in the second quarter in terms of cash flow, and into the second half.
we are pretty confident that we will be achieving positive operating cash flow and have a really healthy cash balance towards the end of the year. Thank you.
Thank you very much Brian and James for the detailed sharing. Thank you.
Thank you. Thank you.
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Thanks management for taking my question. The first one is in terms of the distribution network building. As management mentioned, there will be a lot of changes.
So should we expect a higher level of sales and marketing expenses accordingly in the second half of this year as well as 2024? Thank you.
to a higher level of sales and marketing expenses accordingly in the second half of this year, as well as 2024. Thank you.
I think you're right. We're actually making changes to our sales channel and strategy. We are envisioning more partners to be our store investors and sales agents.
And that effect, I think, will lead to a better penetration of lower tier cities, as well as, I think, optimize the sales performance. Because we actually simultaneously will weed out weaker performers on the sort of stores, both in terms of our current channels. Interestingly, actually, this actually, we envision will lead to a more efficient...
achieved with our current model. Also, we actually have not partnered with enough high quality and efficient operators. So with renewed focus on partnership and also higher standard setting for our sales partners, I think will lead to high efficiency. That's actually we envision more efficient and lower sales marketing ratios.
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So my second question is regarding the operating level break-even point. Since management mentioned that the growth margin will start turning positive into Q4 this year,
operating profit for a given point. Thanks.
Yeah, thanks Tina. I think for guidance on overall company break even, as well as more cash flow forecast, we actually maintaining our current view that by 2024, we will achieve quarterly Stay hope.
free cash flow positive. So that's something we're confident next year we can actually hit. And then for the overall breakeven year, we still maintain sometimes the 2025 will achieve breakeven for the whole company.
Thank you. The next question comes from Paul Gong with UBS.
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autonomous driving without HDMAP, I can understand it could offer more coverage of the applications in terms of cities. How does the cost compare with the previous version with HDMAP? And to achieve that, what are the key challenges we have to overcome?
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First of all, we're all 2012- porous kingdom and midrange kingdom all over the world. We're all looked up and par We're allLocal Knowledge Survival and I hope you will enjoy this video. If you have any questions, please leave them in the comments. Thank you for watching.
I hope you enjoyed this video. If you have any questions, please leave them in the comments. If you have any questions, please leave them in the comments. Thank you for watching.
Thank you for your question. This is slightly technical. I'll try to provide a simple and straightforward answer. When we are equipped with high-definition maps, it's very easy for XNGP to be guided because you will know when to expect to change lanes before turning left or right. However, without the high-definition maps, things will get much trickier.
For example, it will need to be equipped with the hardware sufficient for it to actually identify dotted lines on the road or solid lines on the road or signs and characters that says that this is a left turn corner or right turn signal. This is just like when a person visits a new environment you will need some time to get acquainted.
First of all, you don't need high definition maps, which means that you can go wherever you want as long as you have, for example, the conditions and the hardware that comes with XNGP. And basically, theoretically speaking, as long as your phone can guide you there, our XNGP without the mapped reliance can also guide you.
high-definition maps. And also another big benefit is that you actually lower a lot of the maintenance costs because it is by default of the XNGP to actually recognize any sort of road conditions. For example, there might always be construction going on on the roads that might not be indicated in high-definition maps and you need to be able to adapt that kind of changes.
environmental elements including words and characters, signs and signals, pictures and basically all of the traffic, all of the vehicles and other kinds of road participants that are surrounding you and you have to actually make decisions based on that ahead of time.
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calculate more, think more, so that it requires even more calculation power on the chips. And regarding the cost down of autonomous driving hardware heading towards 2024, you mentioned you are going to cut the cost by 50%. Does that mean you are going to use smarter software to reduce the requirement of the calculation power or should we maintain the cost?
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I hope you enjoyed this video. If you have any questions, please let me know. Thank you for watching.
Thank you for your question. Definitely when we need to adopt multimodal perception fusion and use higher level algorithms, definitely it will require more computing power. However, we were already very successful with our CMGP, even using 30 tops computing power and nowadays we actually have 512 tops computing power.
year on October 24th. And one of the key things I'm going to talk about is how we can drive down our production costs using technological innovation and management innovation as well on an operational level. For example, in terms of computing power, we are actually right now thinking about how to utilize.
the electronic and also electric architecture to drive down our, to improve our efficiency by using maybe one PCBA and also two SoC to do everything together. This is just an example and you can expect to hear actually hear more on our Tech Day. Thank you.
Thank you very much, quite helpful. Thank you.
Thank you. The next question comes from Ben Wong with Credit Suisse.
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new products. It's also mentioned that you will be producing one self-driving car in the pricing range around 150,000 MB. This is going to be a product slightly lower than the G6, for example, called G5. Thank you. Hey, this is Brian .
We have planned for two new models launched next year, but specific science will not be providing this moment, obviously, but we envision those will be large volume drivers for growth as well, likely to be launched in the second half.
Thank you. Thank you. And the next question is from Jinqi Yin with CITIC Securities.
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Now, what I find out what is relevant to you. So my question, my number one question is about our guidance on the product pipeline on the second class. So when will be the exact release date of the MTV X9? And could you provide more information on the MTV in details, for example, the price, the size and the cruising.
ranges, et cetera. And my number two question is about the strategic collaboration. So apart from Fox-Wagon, is or will there be any other OEM that are looking forward to have collaborations with Xiaopeng and what is our attitude for the potential collaboration opportunities in the future? Thank you.
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Let me take the first question. First of all, the development of our upcoming seventh year has been going really well. So we expect to follow our original plan, which is to build a car in Lake Kew for. We don't expect to deliver it in a mass scale by the end of the year, but starting from next year we expect to have mass deliveries and we definitely will.
not able to give you too much information. However, several things I can talk about here. First of all, it's supported by the SEPA 2.0 platform, which means that in terms of its intelligence and also the whole car integration is of the same logic as G6. And the second benefit of this car or selling point is its spaciousness. It is huge, especially
Another big advantage to it is its handling and drivability. It offers top-notch driving experience. That's all I can say for now. Thank you.
Hi, Xin Chih. This is Charles here. I will address your second question. So first of all, our strategy partnership with Volkswagen Group is a long-term and a win-win partnership, and we see we have highly complementary strength to bring to this partnership.
Our collaboration on the G9 is only a start and we see there are other opportunities that we can collaborate in the future. We believe that we actually created the first of its kind, like a collaboration business model on the full stack platform and software technologies.
So I think that in terms of the collaboration with potentially with other parties, I think that we remain open-minded. But also in the meantime, we will be very selective. We will look into the strategic value and also commercial value that can bring to us and also bring to our partners.
Thank you. And the next question comes to Ngyuen Ding with the HSBC. Hi, everyone. Thank you so much for joining us today. Thank you.
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The first question is to ask when the management would think would be the iPhone 4 moment for the time driving. It looks like the big data would exhaust the corner case eventually, but to fully achieve hands-off and eyes-off and minds-off, does that require regulatory support or the technology just naturally mature to no engagement per million miles?
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All right, thank you for that question. It's a bit tricky. I'll try to answer it to the best of my capability. My short answer is that 2025 or 2026 will be the iPhone 4 moment for autonomous driving. Now there are several influencing factors to it. The first one is the full area coverage. When I mentioned full area, I'm actually referring to covering 95% of China roads including not just...
twofold. The first one is the safety profile and the other is the overall driving experience. As you mentioned, the takeover rate definitely matters. So we expect to actually have, for example, in the coming two to three years, which are level of having zero to one or one takeovers within 1,000 miles, 1,000 kilometers and maybe on the highway we have already achieved that, which is to have one.
smartness and also its driving efficiency. Now personally speaking, I expect to reach that point of iPhone 4 moment in 2025 because thanks to the rapid development of LMM, we believe that it's actually bringing up the schedule. Otherwise, it could be 2026. Thank you. Uh, what's that one? Oh, the G theoretician. Hi.
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So, we are not sure if the new product cycle will be limited to the new product cycle. But the comment did talk about the pricing spectrum to be arching between 150k to 350k. So we see the mid-sized G6 targeting 200k to 250k and the comeback...
and how do we position within the pricing spectrum we want to target. Any color will be useful. Thank you.
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All right, thank you for the question. Actually, this is a topic that we have discussed internally multiple times. And unfortunately, I cannot give you all the information. However, what we can say is that we expect that by the second half of 2024, XPeng is going to launch multiple new models as well as multiple Facebook versions of previous models based on the same platform.
market needs or demands or user demands for different price range and different models. They could be individual use or for smaller families and big families. And between 250,000 to 300,000 RMB level, definitely the space is very crowded and is very, very, very competitive. And there are different use or different demands. It could be individual customers, small.
models meeting different demands in the market in a very high efficient manner using very low cost as well. So definitely a lot to look forward to in the future. Thank you.
Thank you. And the next question comes from Ming-Hsuan Lee with Bank of America. Thank you.
To to the So and so to go the nongap SS. How of enscy cash also be to non gap loss? shaan, say Shan your MOT on to the nongap petitive item. So my questions is related to your second quarter, of course margin. So besides the, a certain discount and also selfales contribution.
Is there any non-cash item? Yes, there is a deal with it.
Is there any non-cash item?...
Thank you. This is James. I'll answer this question. So you're right. In Q2, as mentioned earlier, there's a portion of the G3I EOP impact that we have booked in Q2. And I just want to emphasize that a majority of the impact is non-cash.
because that's because of the acceleration of the unamortized toolings that we have booked because of the decision. Excluding the EOP impact, we still have a slight lower gross margin versus Q1.
That is mostly because of the increased promotional spend on some of the older models that we have. That is partially offset by lower battery cost that we've seen in the second quarter. And to your question, we have seen a pretty healthy, improved number of older models.
cash flow in Q2 and we will continue to see that in the second half. Other than the profitability impact, a big impact will come from the working capital impact because as we increase volume, we will improve our collections from a delivery perspective and we will clear our payables.
in a stacked basis. So as we increase volume, we will have considerable working capital gain in the second half, which will help to improve our operating cash flow.
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on your G9, you already start to sell the 4C SCM battery on your G9, but at the time, the sales portion is very small, probably because the battery is expensive, and also the supercharging station is still not comprehensive enough. So since recently, there are some fast charging...
in the future of your product to lower your cost. Ah, sheeshit.
Yeah, thank you Ming, this is Charles. So first of all, when we mass produce the G9, we already provided the customers with the 3C NCM and also LFP battery as a standard configuration. And at the time of the mass production, it's already the best in class.
and most of the fast charging technology in the market. And I think it's still, at this point, it's still the best in class.
fast charging technology in the market as well today. So I think that from the consumer perspective, first of all, we believe that the 3C LFP and NCM battery present a very cost competitive and also fast charging product. And it is still very competitive in the market this year. And to answer your question regarding the charging experiences, I want to clarify.
fast charging technology on our 480 kilowatt supercharger. But I think I also want to clarify that even though on the standard charging pulse, I think 90 percent of the charging pulse in the market also support 800 wattage.
and also can support fast charging to our 800-voltage and a 3C battery powertrain technology.
can support fast charging to our 800 voltage and a 3C battery powertrain technology.
Thank you. And as this does conclude the question and answer session, I would like to turn the call back over to the company for any closing comments.
Thank you once again for joining us today. If you have further questions, please feel free to contact Expense Investor Relations through the contact information provided on our website or the Pearson Financial Communications.
Thank you. This concludes today's conference call. You may now disconnect your lines. Thank you.
Thank you. This concludes today's conference call. You may now disconnect your lines. Thank you.