Q3 2023 Li Auto Inc Earnings Call
Hello, ladies and gentlemen.
Thank you for standing by for Lee orders third quarter 2023 earnings Conference call.
At this time, all participants are in listen only mode.
Today's conference call is being recorded.
I will now turn the call over to your host Honeywell the head of capital markets. Please go ahead Patty.
Thank you operator, good evening and good morning, everyone. We're commentary almost perfect sort of content for named her needs rate on its conference call.
<unk> financial and operating results were published in our press release earlier today.
Posted on the company's IR website.
Today's call, we will have our chairman and CEO, Mr. Shao, Lee and our CFO, Mr. Johnny Shirley became we've prepared with Max.
At present, Mr. Tang Wei MA and the senior VP, Mr. Jim Young changeover, where joining for the Q&A discussion.
Before we continue please be reminded that today's discussion will contain forward looking statements made on this.
Hello.
Our vision after you ask the private interests great.
Education Reform Act of 1995.
Forward looking statements if all the requirement to risk and uncertainties as such the company's actual results may be different from the fields expressed today further information regarding risks and uncertainties is included in certain company finally.
The U S.
S E T and the Hong Kong stock exchange the company it doesn't assume any relocation to update any forward looking statements is that they required under applicable law.
Please also note that the alcohol on its price.
Today's price and disease conference call include a discussion of <unk>.
August GAAP financial information as well audience now GAAP financial measure pace.
<unk> totally out towards is crucial to comment on the IR section of our website.
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What is that.
I'll now turn the call over to our CEO Mr. Shao Lee. Please go ahead.
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Hello, everyone and welcome to todays earnings conference call and.
In the third quarter of 2023, despite the intense competition in Chinas nev market, we maintained strong growth momentum propelled by our compelling product lineup and strong execution.
Total deliveries for the quarter surpassed 105000 vehicles almost four times the volume for the same period last year setting another new quarterly delivery record.
By the end of September we have delivered our 500000, the auto vehicles, becoming the fastest Chinese emerging new automaker to reach this benchmark.
Moreover, in October Lee auto achieved another new milestone with over 40000 monthly deliveries.
According to the insurance registration data of China, Automotive Technology, and Research Center Lee L. Nine maintained its position as the full size SUV sales champion during the quarter, while our seventh and eighth continues to occupy the first and second spots in the large SUV market respectively.
We remain one of the top three nev brass price over RMB 200000 in China, although market share continued to grow reaching a 15, 4% in <unk>.
Brent priced over RMB 200000 in China.
Compared with 10, 9% in the first quarter at 13, 7% in the second quarter we.
We believe that our L series robust growth momentum together with deliveries of our upcoming BV models next year will enable us to accelerate the large scale transition from traditional ICU vehicles in 2024.
Turning over to our financial performance, our rapid scale growth has driven continued cost reductions, resulting in steady improvements across multiple financial metrics.
Total revenues for the third quarter were RMB $34, $6 8 billion up 271, 2% year over year, our net income and free cash flow increased to RMB 281 billion.
Respectively, both a new historical high.
Notably our cash position reached RMB five 2 billion. After the end of the third quarter of healthy operations reaffirms, our strong operational capabilities underpinning our long term firm commitment to R&D.
Our market, leading charging capability for <unk> is just one great example of our achievements made through R&D investments.
With respect to production in October our Changzhou manufacturing base completed its capacity expansion and is now well positioned for a production increase in Q4 in terms of supply chain management, we continued to breakthrough.
Bonus supply chain bottleneck by the enhanced supply chain management strategies, and Bruce processes and more efficient collaboration with our suppliers. We expect total deliveries in the fourth quarter to be between.
225 to 128000 units.
Now I would like to talk about being back out.
Lee Mega campaign up to up to 500 kilometers of driving range with a 12 minute charge and features an industry leading silhouette. It is market reception has exceeded our expectations.
Lee make us extremely large interior space meets their travel needs of large training families. At the same time as unique body style and silhouette are intended to reach the perfect balance between interior space and energy consumption.
It is the most aerodynamic MPV in the world with a drag coefficient of only zero to five.
Based on our 800 volt BV platform Mega is capable of five C charging for the peak charging power exceeding 520 kilowatts higher than any other passenger vehicle production in the world.
Lee Mega is targeted for launch in December 2023 showroom vehicles are scheduled for debut at retail stores in January 2024, and deliveries will commence in February we were.
I'll share more details about.
Our product launch event this December.
In the meantime, we have been making progress with our five C. Supercharging network expansion to date, we have built and started operating 130 supercharged stations along highways nationwide. We expect to establish 300 highway supercharging stations by the end by the end of this year carbon for major economic zones, including.
Beijing, Tianjin Hebei economic about the Yenisei River Delta region, and the Greater Bay area in <unk> economic value.
Going forward, we will further accelerate the rollout to increase nationwide highway coverage. While also actively building urban supercharging stations, thereby greatly improving users' energy replenishment replenishment experiences across all scenarios.
Moving onto autonomous driving our city anyway and on our <unk> platform continued progress loosely we expect to push the official version of <unk> three point out by the end of this year with full scenario and only function.
While the 80 pro three point out was the official version will be released in the first half of next year.
By then part of eight Macs algorithm.
<unk> will also be available on the eighth pro or.
We're confident that Lee auto will become a market proven first tier player in the autonomous driving market in the first half of next year.
Turning to the development of our direct sales and servicing efforts as of October 31, 2023, we have 372 retail stores and 133 cities.
Moving to the fourth quarter, we will continue to accelerate our network expansion aiming to cover over 400 stores across 140 cities nationwide further increasingly autos market share in Chinas, new energy automotive market.
Last but not least I would like to share some details regarding our accomplishments in ESG.
In September our company has upgraded was upgraded to the highest AAA rating by MSCI ESG research, making <unk>. The first Chinese automaker ever could we receive risk ratings the rating validates our steadfast efforts across corporate governance product safety and quality clean Tech development and org.
<unk> and our organization and talent among other areas.
Moving forward, we will continue to uphold our value proposition of providing outstanding products and services that exceed our family users' needs as it constantly push the myth.
The limit for us with that.
We will turn it over to our CFO jonny for a closer look at our financial performance.
Thank you Hello, everyone.
I will now walk you through some of our 2023 third quarter financials.
Due to time constraints I will finish.
Financial highlights and encourage you to refer to our earnings press release for further detail.
Total revenues in the third quarter were RMB.
30 <unk> eight.
8 billion.
<unk> 75 billion U S dollar.
200 <unk>.
One, 2% year over year, and 21% quarter over quarter.
This included revenue from.
Vehicle sales.
Can be 30, 362 bidding all ballpark six 1 billion U S dollar.
271, 6% year over year and 'twenty two.
2%, Qatar will call here.
Mainly driven driven by increased vehicle deliveries.
Revenue from sales and services.
Revenue from other sales and services were RMB one <unk>.
Zero speeding all.
<unk> hundred 45, 7 million U S dollar so call here.
258, 7%.
Year over year, and 66, 2% cultural culture.
The increase was mainly due to the increased sales of accessories.
For resale services in line with a higher accumulated vehicle sales as well as increased sales of our targeting sauce in line with higher vehicle deliveries.
Cost of sales in the third.
Arthur was RMB.
<unk> thousand 700, 103 billion or $3 71 billion U S dollar.
Oh sure.
31.
3% year over year and plenty.
6%.
Also we will quarter.
Gross profit in the third quarter was RMB 762 billing all 1.05 billion U S dollar.
Growing.
546 points.
<unk>, 7% year over year.
<unk>, 6% cultural culture.
Vehicle margin in the third quarter.
Was 21, 2%.
<unk>.
12% in the same period last year and 21% in the prior quarter.
Excluding the impact of units probation on the losses on purchase.
Statements related to the U S. In the third quarter of 2022, new vehicle margins remain stable or.
Third quarter of 2022.
Gross margin in the third quarter was 22% comparable with <unk>, 7% in the same period last year.
'twenty one.
8% in the <unk>.
Last quarter.
Operating expenses in the third quarter were RMB three 1 billion.
$727 1 million U S dollar.
Growing 60.
2% year over year, and 15, 1% quarter over quarter.
R&D expenses in the so called here.
Were RMB two eight.
<unk> bidding all $386 1 million U S dollar.
50.
$56 one year over year.
The $16 one quarter over quarter.
Primarily driven by increased employee compensation as a result of our growing number of staff.
Increased expenses.
To support our product portfolio expansion and technology advancement.
SG&A expenses in the third quarter were RMB two five all billing all $348 7 million U S dollars.
68 eight.
8% year over year.
10, 2% quarter over quarter.
Primarily driven by increased employee compensation as a result of our growing number of staff as well as increased rental expenses.
Associated with our sales and service.
Everything network expansion.
Income from operations in the third quarter was RMB two points three 4 billion.
$326 million.
Compared with RMB 201, three beating.
Loss from operations in the same period last year.
And the growing 43 nine.
90% from RMB <unk>, six 3 billion income from operations in the last quarter.
Net income in the third quarter was RMB <unk> eight 1 billion.
385.
<unk> 5 million U S dollar compared with RMB one six.
<unk> net loss.
In the same period last year, and increasing 21 point.
8% from RMB two three.
One billing net income.
Second quarter of this year.
And now turning to our balance sheet and cash flow.
Our cash position remains strong and is a stood at RMB.
88.
<unk> building.
All 12 points.
One 3 billion U S dollar.
As of September 32.
2023.
Net cash provided by operating activities in the third quarter was RMB.
14.51 billion.
199 billion U S dollar.
Free cash flow was RMB.
Our team.
Total billing all one eight.
Eight one beating U S dollars in the third quarter.
And now for our business outlook.
For the fourth quarter of 2003.
The company expects deliveries to be between.
125 sub debt and 128000 vehicles.
Representing an increase of 169, 9% to <unk>.
<unk> hundred 76, 3% from the fourth quarter of 2022.
The company also its tax policy.
Fourth quarter total revenues to be between RMB.
30 846 billion.
And RMB 39.38 billion.
Presenting a increase of 100.
17, 9% to 123, 1%.
The fourth quarter of last year.
This business outlook.
It reflects the Companys current and preliminary review only business situation and market condition.
They are subject to change.
This concludes our prepared remarks.
Now I'll turn the call over to the operator to start our Q&A session. Thank you.
Thank you. Thank you ladies and ask a question. Please press star one on your telephone and wait for your name to be announced.
Next to cancel your request please press star two.
If you're on a speakerphone please pick up the handset to ask your question.
For the benefit of all participants on today's call. Please limit yourself to two questions and if you have additional questions you can reenter the queue.
If you are a Mandarin speaker. Please ask your questions in Chinese first then followed with English translation.
First question comes from Tien.
Pardon me.
And salad MFS. Please go ahead.
Oh any changes or was it you weren't not yeah. So I think I can't correlate to send you to a new juice isn't it down here.
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Well listen we're kind of at the Citi two convenient sensibility Korean D D D.
She decided to them all the best Haynesville, which tissue Timothy Lynch.
So my first question is about the margin.
Despite the accordion March indeed.
He also has been scaling up to equal gets counted it seems kind of late in the quarter.
Most of the promotions seem to continue in fourth quarter I see them more.
Our competitive moat is coming to the waikiki in the following months and the team to take on the auto are with.
With the company consider to respond with more aggressive promotion, so let's pick up great hi to your.
Current lineup and would that affect the auto speaker margin in fourth quarter and beyond so ensure should we still consider 20% class a reasonable and sustainable level four vehicle gross margin against such a tough competition backdrop. That's my first question. Thank you.
Thank you Steve This is John I think.
But I recall turn every year, we will take a full consideration between sales and volume growth.
So gross margin we plan Palmer.
Our sales policy and promotion policy.
And also I recall her.
Our sales policy will also.
Uh huh.
Our.
Supply chain effort.
Based on some of the sales policy promotion.
So I still want to emphasize that come from.
Company's operation side.
Each quarter.
Every year, we want to keep our gross margin.
<unk>.
We believe that will be.
Healthy marketing to keep enough.
Okay enough money on hand to invest.
Either.
And also their service network expenses for the future.
Thank you.
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PV, so it sounds like with Jose to platelet Jose intact, because you're suddenly uncles to take quite some way to Jeanne Johns Hopkins, so to each and call Joe Viola, who kept home page, which was absolutely as you can tell why juicy shoutout Toyota whole Misadvise, which again you can change seat belt Haiti facility.
So my second question is about Tom is driving.
The auto I guess now attaching greater importance to 60000 of smart driving and planning to increase yields on investments.
So could management team help us to quantify the automatic investment plans in autonomous driving like how much you are going to spend in 2024, and 25 and how many people you're cleaning too high.
And in the meantime, what would be the best way for investors to track. The progress for example, when will the auto to activate it has been in no way a function to hold public users across the city and wherever you keep offering such function for free.
After more Susquehanna that spend this year. That's my second question. Thank you.
What should be the mankiewicz whenever an exit or indeed initial agenda, when we will see a future opex.
I'm sure that two two on tax reform.
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How much did that as of yet.
Mr Mountain way.
First of all on a strategic level. The company has always been very focused on investments in autonomous driving and the fall strategy summit of our company.
We had a thorough discussion around autonomous driving and reach consensus to make making smart card.
Driving leading in the market our core strategic goal. So the company will continue to increase our investments in autonomous driving.
At this point that are.
R&D team for autonomous driving is around 900 people and it's expected to reach about 2000 by the end of 2024 and over 2500 by the end of 'twenty five.
As the scale and our talent density of our R&D team growth.
We will develop technology as well as product at the same time.
On the one hand, we will continue to deploy our <unk>.
Products across multiple vehicle lines.
Across multiple scenarios are deployed.
Multiple scenarios on the other hand, we will continue to invest in AI algorithms.
Tom is driving as well as other cutting edge technology.
In terms of investments, we will continue to increase the amount of investments in vehicles and testing.
<unk> power and personnel.
Our ample cash reserves and cash flow will be a very strong support for our continued investments.
In terms of progress as Lisa mentioned earlier, we plan to deploy.
Deploy.
<unk> three <unk>.
Soffer on all of our Max.
Our vehicles equivalents with 80 Max.
Providing full scenario NOI features using the same BV architecture, and we will also be adding valet parking feature to our AE Max users.
At the same time in the first half of 'twenty four.
We'll be releasing 80 pro three point out to our pro users.
Part of the eight Macs algorithms will be deployed on 80 pro.
And our capability of autonomous driving will also be significantly and Brooke, we're confident to become one of the top.
Top tier player tier one players in the market that's proven by the market.
In terms of.
Product lineup of strategies, we will continue to make 80 standard on all of our vehicles.
Which allows us to have the largest trading fleet.
Contracting vehicles in the country and also.
More training mileage.
Which will accelerate the deployment.
Iteration of our foundational model algorithms.
Okay.
Thank you very much for sharing all the details super helpful. Thank you.
Your next question comes from Tina Hu with Goldman Sachs. Please go ahead.
Hi, guys. Good morning, Hello, Cecilia, Yeah, well situated with accounting.
You will not win T J Dandy lunches.
C element.
So I'm going to shoot.
Two questions.
Okay.
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So im telling you, how John and Dan choices.
Hi, Holly.
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So all told me in alcoholic books or do you think she told it's tight.
Hello, Lin Keisha, Guangxi, Chicago, EMEA, well, let me jump in there you see aquila.
Willingham with Henkel, you near the 10 am Cynthia Chipotle eating lunch and teacher.
Why has that been going in camping, you'll meal Luke L. G T y.
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Thank you.
Okay. So thank you management for taking my question and congratulations on very strong set of results. So I have two questions. The first one is as we are expanding our footprint into more and more cities. So how does management view the different type of customer need or demand in higher tier cities versus lower tier city.
For both E. R E V product as well as PV product and how does the auto plan to adjust our marketing and sales strategy to better capture these that differentiate it demand. The second question is regarding your supply chain as well as cost reduction plan. So I'm wondering if.
Our supply chain bottleneck has been completely resolved at this point and how do we going forward how do we how do we best manage the supply chain Q on Q to be able to fulfill our growing demand.
Regarding related to that is do we have any cost reduction plans and target over the next few years and lastly is yeah over the next two years, what is our capacity plan as well as our Capex guidance. Thank you.
Yeah.
Okay Tina.
Tina This is James and I will take your first question.
And.
In the SUV market price to over 300000 M B a.
Market share in all.
Where do you put up a cts reached.
50%.
Some of the cities, while our average market share across the whole market is less than 20%, which means there is plenty of rooms for our future growth.
Overall, we will continue to focus on.
First two new two new first tier second tier cities.
Aiming to increase our market share.
In these top tier cities.
Currently we Havent reached.
Market saturation in first and second tier cities, and we will have huge growth potentials in those cities.
In the 300000, renminbi and higher SUV market.
Most of the sales of BBA.
Approximately 55000 units in total.
And if we can see the second Q premier.
And automotive brand, which he including BP and other brand.
Iran 90 sells in the unit, which means we have ample room to achieve our next stage of growth.
Additionally.
We have we have begun to accelerate our deployment in third tier cities and speed up hours store openings. It seems certain key.
<unk>.
And let me give you some numbers as of today, we have more than 300 retail stores nationwide among.
Among beach, they are more than well have already more than 100 retail stores deployed in the third and fourth tier cities.
According to our current progress we expect to have more than 100.
And the Tam retail stores in third and fourth tier cities by end of this year.
I hope I have answered your first question I will hand over to Mr month towards the second one.
When I say don't know Hock Atwood <unk>.
Okay. That's helpful Matt.
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Thank you.
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Sure. Thanks, all hung up.
First of all regarding supply chain bottleneck all of the issues that we haven't encountered before have all been successfully resolved.
As opposed to be regarding new models and our sales target for next year, we have.
Ample preparing preparations across not only whole vehicle production per cap capacity, but also parts supply we have made medium to long term supply chain strategies.
Make sure that our supply chain is resilient overtime.
Cost reduction our overall view is that Oems should establish a long term and stable partnerships with our suppliers to achieve a mutually beneficial relationship for.
Two sides for the short term or short term.
Cost reduction measures will mostly be focused on.
Business measures.
Through <unk>.
<unk> <unk>.
Volume aggregation and cost accounting to drive our procurement cost to a reasonable level for the medium to long term, we will look at the entire value chain from end to end to find.
Ways to increase efficiency and reduce costs, including from product R&D technology and innovation.
Drive down cost at the same time, we'll also work with our suppliers to help them digitize and.
Industrialized to increase the efficiency in the production process.
And reduced quality related costs.
In terms of overall vehicle production capacity, we have choosed, a manufacturing base in Beijing in Changzhou three production lines in Changzhou dedicated to.
RSV models L. Nine eight and now seven as well as our fix which will be launched next year in Beijing. There is one production line dedicated to our PV products our production capacity is.
Efficient to meet the needs for sales and deliveries for the next two years.
Yeah.
Hey, John.
Thank you very much management for the fear answers.
Your next question comes from John <unk> with Barclays. Please go ahead.
Thank you very much for taking my question and congrats on the very strong results.
I mean competition has been on the pulp off of the mind for many investors.
With reason to launch <unk> in auto.
After sort of a larger Suvs and Suvs also E. R E V and also the tens.
Why does standout brand is launching some of the large suvs as well.
Wondering could you share with us your thoughts around competition around customers buying behavior, you're talking about market share earlier are you seeing any impact yet.
Our market share and.
And on your market positioning.
Same to you.
The thing is how about the ones that you acquire teams in.
Huawei, Oh Gee that's M cheat.
<unk> seen the time Ping and Doritos zendo fees on dancing with a day, how do we take our genes in Gucci, who quickly the woman the challenge.
So you're going to say that she is here.
Okay John.
James I will take your questions.
Yes.
So although.
Although this year the competition in the new energy vehicle market is relatively intense we once again achieved an impressive sales results.
Model Repand strong sales momentum.
<unk> blockbuster till now the delivery of all four modules, including <unk> nine.
<unk> seven <unk> has reached exceed exceeded 100 yourselves in unit.
And tested that yesterday.
Our iOS seven.
<unk>, the 100 or so do you need to invest in best in 10 months because this product launch.
March March.
March this year.
Oh and also our sales have achieved a steady continuous growth while our shoe into annual remarketed priced above 200, <unk> continued to rise from 10, 9% in the first quarter to 15, 4% in the third quarter.
And and I can't give you another number is lacking.
Last month's October.
Our market share is already more than 17%.
At present, the penetration rate of the new energy vehicle market had exceeded 35% across <unk>.
The innovation diffusion gap to entering the early mass period.
The concentration.
In fact, a leading auto companies.
We are becoming increasingly evident and alright.
Cumulated of user base and the market issue will support a further increase in delivery volumes and the market share gains.
And I hope I answered your questions.
Thank you very much James.
Thank you.
Your next question comes from <unk> Securities. Please go ahead.
Hi, Bonnie.
You were you guys well know Cowen <unk>.
Can you go into you know this is a question mark.
Condoleezza soon honeymoons that sounds just with any changes you've noticed your counsel normal zircon from Richardson.
Any change to your question Michelle.
<unk> Nikko, Gwen Chicago that you've seen shall feature like you're holding them conduct cinemark aquilino marketing digital marketing for <unk>.
Please don't ask which room idea.
My first question is how we balanced the technology advanced Atlantic.
Especially we mentioned about a low draggy drecky fish coefficient.
The balance between consumer recognition for marketing management, especially for Alder.
And what I would argue with you Lisa.
To make up that <unk> Ok.
<unk>, Yeah, Oklahoma Hedger of who we are.
Jack can you put a huge oil window to increase although you didn't yet.
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<unk> <unk> to book.
Sure Bengal will know that when we finish here Doug also without <unk>.
So you could tell us what your thoughts and I'll go back.
But it is easier.
The audience Shaquille, Indiana to book.
Tier two.
Hi, Thiago. This one unusually formulation also attended those Alex's point, DVA, Chile, Colombia and other <unk>.
All you could give me at.
At that point I'll, just ask are you that you can get it up there.
<unk> triangle.
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<unk>.
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Yeah.
Does that should start you know to go well.
So the 20 nanometer that's also going shortly.
<unk> you can look at here, who does the NPV.
Sure.
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Can you tell us how quickly we tender soldier clearly yet for that didn't have to get them trained.
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Trulia.
And gender.
Yes, you got it.
And again, it's all of them.
Almost all the clean and healthier, though junky answer just that little hard again.
Talk about Mega and all of our PV products in.
In terms of traditional.
Values, including safety features and comfort.
Mega will continue to focus on families needs and make sure that we will we will be the absolute best or among the absolute best in the industry.
On top of that all of our PV products will have three three breakthroughs. The first one is breakthrough on charging experience. It can provide up to 500 kilometers of range with call minutes charging and we will also be deploying large scale.
<unk> stations on major highways in China, So any consumer can buy one of her BV vehicles.
Our confidence about their charging experience.
And secondly, as a breakthrough on interior room.
Our high voltage pure electric architecture.
Completely redesigned vehicle architecture to make sure. They have the interior space of our products are always the biggest mondor segments.
Even reaching the level of next segment up.
Which provides the best interior experience for family users.
And certainly all of our products will have a breakthrough in terms of styling and body style.
All of our styling will be redefining each one of the traditional categories, whether MPV Suvs versus sedans, we will be bringing design language from decades down the road and to launch them our existing vehicles as if they are.
They're only contract vehicles, but there actually production vehicles.
Launch into the market.
Through these three breakthroughs will be able to provide very unique value to our customers first.
The first one is the sense of safety from charging or the experience of charging and the second is the sense of value from a very large insurer space and third is the sense of longing for.
Very exciting styling.
And all of our PV products will be following these three principles.
Okay.
Thank you Jonathan wanted jago into tissue.
Yes.
So just taking that Glenn how do you see there the CCR boosted tweaks without.
Excuse me can you touch on that.
Welcome to welcome Donaldson.
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Joe could.
Could you help me.
Thank you Anthony.
Gentlemen, thank you for me she comes from the line of banking.
Welcome to the tenants.
We will tell you from Jonathan Sanjay Joshi, Guang Ah <unk>.
Sure.
Washington State your question that yes, sure he'll Schumacher.
Thanks again.
The chocolate Vishal.
My second question is how we see.
We see that the EBIT product become more and more hmm oxygenation.
Larger screens more smart and actions on the controls.
We make ebay product mark differentiation.
Thank you.
Yeah.
What else would I do in the year.
T J will cause I saw that your intention.
No.
The ruble in the notes that you all put it differently.
It's Andrew Hayek oil of agenda pushes well igo.
Hey, Glenn this is Tim where do you see it.
Yes.
It's easier for you guys can drill at neutral you will contain the Jaguar <unk> take a little Patria.
<unk> will go into the Ghana.
While Mr nationally.
No that sounds good.
Yes, the answer is yes.
<unk> consolidated debt.
That will get you get unusual because you don't have that.
What was it that won't yet.
Well, let's jump between gasoline in the country, but don't see new development.
And your actual well ministry of diesel so traveler and the whole year.
How that industry vertical.
Oh sure element to neutralize you go changing color that you can look at.
When did it gives really unusual shows you. The 10-K, you have a particular target it's hard tissue that Google <unk>.
Welcome to the Egencia will get closer to that notion with you.
I think our my earlier response covered a lot of your question.
Just wanted to emphasize that our focus has always been our core user valley was what makes the most creates the most value for our users.
I think with the intense competition as you mentioned.
Incremental changes are definitely taken for granted whether it's lower price whether it's more features or more screens. These are things, we will definitely do well in but.
When we think about competition, we think to really the weighted stand out is to compete on entire dimension and to create.
Really focus on the three values that consumers care about most and taking five fee charging as an example.
In our real time real world testing.
Even when the battery fade of charge reaches 85%. It can still have a charging power of over 300 kilowatts, which is even higher than the maximum charging as rate of many other competitors. This really establish a new standard for the industry and that is only the result of years of innovation through product and R&D.
In our efforts and that is something that we will continue to invest in and continue to improve and create value for our users.
Yeah.
Based on consistency with anthem.
Okay.
Your next question comes from <unk> <unk> with BMO. Please go ahead.
Okay.
Oh no.
Would it be.
I'm going to go into here.
Okay.
Jumping, but it's something we've been doing.
Oh goodness.
Please go ahead.
Thank you Keith.
Some of them.
John would you Cleveland well.
Some key.
No question.
Awesome.
Depending on future.
Okay.
Good evening.
Wanted to go.
Okay.
Uh huh.
Oh two.
A lot of Chinese patients.
Oh, well, how do you see a difference.
Charlie just initiated or are we seeing a C T.
Hi.
And in terms of that.
Charging technology in wholesale.
Stephens Inc.
How do you want to finish it.
Okay.
Okay.
Thanks for your question and <unk> will take your question.
At present, the urban in urban areas, whether it is.
Public charging or home charging consumers.
Have good access to charging facilities that provide these and charging experience therefore bvs.
We must first tech are the most critical pinpoint and the focus on fulfilling a need for rapid and let you read plainly spent doing highway long distance travel.
So it was a construction of large scale charging stations along the highways coupled with experience of charging for <unk> to suppose 500 kilometers driving range, we strive to eliminate consumers' worries everyone BV purchases. Furthermore.
With the launch and the delivery of the be raised next year, we will also start to construction.
[noise] charging stations in cities.
In addition, with respect to the experience that we will consider both the hardware and.
And the source of AOS a whole products for example, when the New York New York Tokar Onerous is looking for a charging pi to states herself chugging gun and the charging pio can be checked.
On the infotainment system in the car, we also provide Prague and play.
Possible for repayment.
Among those services.
To provide the best experience for our users and for B you based the batteries can be remotely created we think.
From user experience perspectives aiming to help all of our users have a better charging spirits.
Okay. This is my answer.
As noted in the theater.
Oh great.
Good.
Susan.
Okay.
Oh Gee dosage sizes.
Thanks.
Oh I see.
Uh huh.
Susan.
Yeah no problem.
Jonathan.
No Jason.
That's funny.
Yeah.
Okay.
Thank you James.
Okay.
John.
Thank you Judy.
To achieve that.
Okay.
Hmm.
No problem.
Yeah.
No worries.
So.
No.
On the first generation.
In China.
More and more.
Competitively P.
To enter the market for example.
Okay.
Oh partners in China.
It's not to bring some coupons.
Xiaomi.
Once you're in your car.
Oh, sorry.
For the longer term.
Because you know our market dynamic in China.
Oh sure.
Oh total company Hungary hopefully.
Oh absolutely.
Okay.
Most of them.
Okay.
Although what Lisa Hawala whenever that theyre going to be about Oh, what do you think you got to do it.
Yeah.
Part of it is having to go into the Ginger.
Well the neighborhood that interest in that geography.
Let me add.
<unk> seen that.
So everybody should interest rate here.
Sure.
Sure Okay.
Thank you.
Additionally enabled.
You go through not only that you can.
So obviously that <unk> gone to yet.
It will be more digital.
Yeah, There you go.
You go down the Hudson Haynesville Bogeyman usual rohde <unk> initiated a kidney biopsy tissue.
Linda.
What additional mutation that you're getting that debt Hello.
But in India.
Well the name with a hot oxygen, which until now.
Sure.
We will now that India <unk> you Melissa.
Teachers are siloed from yes, the hull.
How much of the <unk>.
Now I'll bet you they are conscious of the Baja.
Hello, Chilean law, or whether you're walking pad how limited she agenda.
I'll, just add something else here, but with you yes.
Yes, with our feet on the hub.
The other thing Shlomo based on sell through to the year with home Baja woman tell anybody ever when they start to look for a.
We're not going to push us up not just I hope I'm going to see it.
You also have the feet on the wall.
Now this idea that could easily be done.
Sure Jojo will mean that conversion OTC, that's Angela now Paul how women.
Oh, Dear Oh, Tom Holden, It's hard you are going through the year.
So that you will read about icon, yes, I'll do that.
Tugging antibody violent agreement.
Let's just go through a goodyear tissue.
You can bundle in Geneva form yet.
We'll go to the hall, we just hadn't NGO Oh, sorry go ahead.
The Albania.
John Thank you.
Gulf of genotype.
Yes, we did just have one entity that you guys continually heringer.
First of all I think when many people are really asking is how do we look at the competition from highway and this is actually a question we have broad consensus across the company when we look at <unk>.
80% of our thinking.
Do we learn from them and to 20% is really respect.
And there are zero complaint in fact.
Because as we become a company that has.
We're still a startup company and as we reach the 100 billion revenue benchmark.
Wrote milestone, we're actually very lucky and impressed to have a role model, which has done business is on the <unk>.
Scale of one trillion RMB. So we're very excited to have far way along the way.
And when we look internally in terms of how we want to.
Whether the storm and stand out and intense competition, we look at really nine areas across three broad categories. The first category is really the consensus across the company that includes culture brand consumer brand and strategy and the second category is our business operations, which covers from <unk>.
Sales and services supply chain and manufacturing and lastly, as back office.
Functional functions, which includes HR and organization.
It and processes in finance and operations and <unk>.
<unk> become a company that can really handle 100 billion RMB revenue, we really need to excel in all areas and there can be any one shortcoming.
That will be the core funded foundation for any company that wants to reach the scale of 1 million unit sales annually.
Okay.
Okay.
Okay.
Your next question comes from Cheng Cheng with CIBC. Please go ahead.
Yeah.
Hey, Thank you Jason.
I don't know if he didn't that wasn't that Glenn.
Similar to my comments from Citi Your question properly.
Sydney Nishu.
At the atrium.
Okay.
T J dantonio not cool.
I wouldn't tie does from truck.
Sure Michael can you talk about the capital call and well be talking.
With that I'll call.
Hum.
Cleveland T J P E.
Why aren't you taught them how do you see between photonics tissue.
Your host Dr. Glenn tissue, playing Youtube question, Andy but he children.
So what you're seeing with the nimbleness sequentially.
Sure Michael.
One is the focus.
Yeah.
Hi.
Got it.
That's helpful any comment on that.
I'll conclude with <unk>.
That's helpful communication.
Thank you all for Michigan.
Relationships.
Alright, thank you.
So my first question is about Showtime.
Regarding the production ramp up and possibility of Mega.
As our thinking VEB platform will be put into production along with the launch of like how long do we expect.
Got it.
Two of the study capacity and warehouses.
<unk> profitability level of America.
Will it be a correct.
Correct I'm tracking problem, our gross profit margin.
The first and second quarter next year.
And my second question is about our new product pipeline next year.
Especially for the BV models, we know that there are two platforms, we were in shock and the former Barnes corresponds to maybe larger more expensive models.
You have any any more information.
Out their product positioning.
And the other two.
Mark.
Tiny after delivery.
Oh Gosh model update.
Hi, Tycho Hottie ovens.
Actual initial demonstration.
In the meantime.
Instead of harsh environment <unk>.
And shouldn't that.
Hum.
I would hope that that should all have a meal.
Obviously with you if I may ask everyone. When we have mentioned.
One as you saw.
I would you know women's that just few penetration conjuncture, putting downhaul Cumulus inlet now she gets two.
Angela <unk> suffered obviously peak when we at the moment.
Junior Alterra.
Olive Garden Hershey's, all women's polo, Linda <unk> political, but if you truly do with TV.
Sure Shlomo.
Upwards and downwards.
Now no matter what that hung in the heartworm <unk> Keith.
Ah patient.
Mitchell.
Number one chip all matter.
So neither hockey portal published sharpshooter hockey Shanghai.
No idea because you might have.
Sure.
Not that whole, China, twitchy pop up on Laguna law.
Yeah.
Thank you.
Do you hold a lot of money with a combustion engine.
Yeah.
Speaking of challenge Mega will be our very first BV the vehicle and also.
The debut of our <unk> platform.
Also in our new factory in Beijing, as well as new production line. So there is definitely challenges.
At the same time, we think there are many opportunities for us to overcome the challenge first of all we have plenty of experience in rapid production ramp up the <unk> nine and <unk> seven all of these three vehicles have ramped up pretty rapidly and reached very high numbers within a short period of time.
And as we look back at these experience we have accumulated a lot of great experience rapid production ramp up at.
At the same time, we've also worked with our suppliers to work through our <unk> parts, namely new unique different and difficult. We have created very detailed quality control and production ramp up our plants in terms of personnel, we will frontload, our recruiting and training to prepare for the start of production.
Overall, we are pretty confident that the ramp up of Mega will be relatively successful and it will be able to reach volume immediately after coming to the market and.
After it will be able to be delivered immediately after the product launch and reach volume.
<unk> and <unk>.
First delivery.
<unk> will give officially launch in December.
At the beginning of a production ramp up we would expect to be a slight impact on gross margin, but we believe that as production rates studies.
Gross margin will very rapidly recovered to a very healthy level.
Or is it.
Harley chime.
Kevin.
I would ask in the animals.
Pablo could you also sort of an NDA.
So the interim engineered Ho champions if over the year.
Without asking you something yet.
So let me go.
Sundar judging that what I calculated.
Seven year heavily with sunglass plenty of that time yet.
Helpful.
<unk> could you help with the DSO question.
Sure.
Yeah.
Mr. Li <unk> answered the question on product lineup next year, we will be launching four new completely new models.
Which creates a record for sensor companies beginning in the first half we will be launching another large SUV product cater towards younger families coffee fixed and in the second half we will have three BV models.
The rate and the method of launch will be very similar to the successful experience from our previous products.
Thank you Daniel.
Yeah.
As we have seen the end of our conference call now I'd like to turn the call back over to management for any additional or closing comments.
Yeah.
Thank you once again for joining US today, if you have any other country based feel free to contact the gold coast IR team. Thank you have a good one.
Bye bye.
That does conclude our conference for today. Thank you for participating you may now disconnect.
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