Q3 2024 CBAK Energy Technology Inc Earnings Call
Unknown Executive: Good day, ladies and gentlemen.
Good day, ladies and gentlemen, thank you for standing by and welcome to that she'd be AK energy technologies third quarter 'twenty to 'twenty four earnings conference call.
Unknown Executive: Thank you for standing by, and welcome to the CBAK Energy Technology's third quarter 2024 earnings conference call.
Unknown Executive: Currently, all participants are in listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, we are recording today's call.
Speaker Change: Currently all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time as a reminder, we are recording today's call. If you have any objections you may disconnect. At this time right now I will turn the call over to East Young Chung.
Unknown Executive: If you have any objections, you may disconnect at this time.
Unknown Executive: Now, I will turn the call over to Yixuan Tian. I am a specialist of CBAK Energy.
Speaker Change: Especially since you'd be a K energy Michelle. Please go ahead.
Unknown Executive: Ms. Tian, please go ahead.
Yixuan Tian: Thank you, operator.
Yixuan Tian: And hello, everyone. Welcome to CBAK Energy's conference call for the third quarter 2024. And joining us today are Mr. Zhiguang Hu, or Jason, Chief Executive Officer of CBAK Energy, Mr. Thierry Li, Chief Financial Officer and the Secretary of the Board, our General Engineer, Mr. Xiu Jingtian, and Yifan, who will help with our interpretation, who will be joining us for Q&A section. We released our results earlier today. The press release is available on the company's IR website at ircbak.com.cn, as well as from the Newswell services. A replay of this call will also be available in a few hours on our IR website.
Speaker Change: Thank you operator, and Hello, everyone welcome to see Bacon and cheese and conference call for the third quarter 224, and joining us today are Mr Archibald who or Jason She's executed officer C. P. A T M. A G me. So do you really see a financial officer and Secretary.
Speaker Change: Off the board.
Speaker Change: The general engineer, Mr. Chau, Cheng Tien and even who will help with our integration well in January for Q&A section.
Speaker Change: We released our results earlier today. The press release is available on the company's IR website at IR CPA, Kate they'll come dose E. L F.
As well as from the Newswire services.
Speaker Change: A replay of this call will also be available in a few hours on our IR website.
Yixuan Tian: Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the US Private Security Education 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 expectation expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable laws.
Before we continue please note that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Education Reform Act of 1995.
Speaker Change: Forward looking statements involve inherent risks and uncertainties as such the company's actual results may be materially different from the expectation expressed today further information regarding these and other risks and uncertainties is included in the company's public filings with the S. E C.
Speaker Change: The company does not assume any obligation to update any forward looking statements, except as required under applicable laws.
Yixuan Tian: Also, please note that unless otherwise stated, all figures mentioned during the conference call are in US dollars.
Speaker Change: Also please note that unless otherwise stated all figures mentioned during the conference call are in U S dollars.
Yixuan Tian: With that, let me now turn the call over to our CEO, Mr. Zhiguang Hu.
Mr. Hu: With that let me now turn the call over to our CEO. Mr. Hu. Please go ahead Jason.
Zhiguang Hu: Please go ahead, Jason.
Mr. Hu: Yeah.
Zhiguang Hu: Hello, everyone. Thank you for joining our earning conference call for the third quarter of 2024. I'm pleased to report on the performance of our battery business for the third quarter and the first nine months of this year. Although the net revenue from our battery business slightly declined to $33.5 million in the third quarter, the overall revenue of the battery business in this first three quarters reaching $114 million. This is quite remarkable considering the general pressure and a downturn in the entire new energy industry. The main reason for the decline in the net revenue from our battery business in the third quarter was a one-month suspension of the production line of our Dalian facility in September.
Mr. Hu: Hello, everyone. Thank.
Mr. Hu: Thank you for joining our earnings conference call, what's the sort of cultural the 'twenty to 'twenty four.
Mr. Hu: I'm pleased to report on the performance of all battery business for the third quarter and the first nine months this year, although the loss of revenue from our battery business.
Mr. Hu: Italy declined to 30.
Mr. Hu: <unk> $333 million in the third quarter. The overall revenue of the battery business in the sport stakeholders are.
Mr. Hu: <unk> achieved a year on year growth of H important for percentage.
Mr. Hu: Reaching $114 million GP is quite remarkable considering the general price her in a downturn and the entire new entity adopts Creek.
Mr. Hu: The main reason for the decline in the net revenue from all battery business in the third quarter was a one month so it's fashion.
Mr. Hu: In light of our Italian trusted D T in September.
Zhiguang Hu: As the production line has been operating at a full capacity since the beginning of the year, the continuing operating production line resulted in an exceptionally high energy cost and needed to be suspended for refurbishment.
Mr. Hu: Is the production line has been operating at full capacity since the beginning of the year to continue operating production line results resulted in.
Mr. Hu: Exceptionally established.
Mr. Hu: Separately, the Delhi high under the cost and the need needed to be so it's bounded for rave refurbishment, we will like to provide a closer look at the revenue breakdown in our battery business the revenue from battery for under these storage.
Zhiguang Hu: We would like to provide a closer look at the revenue breakdown in our battery business. The revenue from battery for energy storage sector reached $33.46 million, a 25% decrease compared to the previous year. EV battery contributes. $333,000, a decrease of 17% compared to the same period last year. Battery for light electric vehicles, including two-wheelers and three-wheelers, brought in $4.9 million, a year-on-year increase of 341%. Overall, our battery business remains focused on the energy storage market. supplemented by our endeavor to continue exploring the light electric vehicle market. With the increase in order from our Indian and Vietnamese customers, we believe that the revenue proportion of light electric vehicles will gradually increase.
Richard: Sector Richard.
Richard: So the 33 point $46 million a tonne do you file puts on T. A decrease compared to the previous year.
Speaker Change: You eat battery condo builds.
That's 300 searches we sold in dollars.
Speaker Change: There is some 10 percentage compared to the same period last year.
Speaker Change: Battery for a lot of electric vehicles, including two wheelers and three wheelers relatively in $4.9 million a year on year increase of 341 person he'd overall all battery beliefs remains focused on energy.
Speaker Change: Take market.
Speaker Change: Suddenly mounted bi alloy.
Speaker Change: That work to continue exploring the large electrical vehicle market.
Lisa in Crazy Alder from our India, and we'd not me Catherine words, we believe that the revenue probe Barton our light electric vehicles will gradually increase.
Zhiguang Hu: Our battery business has maintained a high gross profit margin, reaching 34.3% in the first three quarters of this year. an increase of 15.2 percentage point compared to the same period in 2023. This growth margin figure is higher than that of most competitors, including some well-known industrial giants. This year, our battery business achieved a net profit of $11.68 million in the first quarter, $7.89 million in the second quarter, and once again created a net profit of $2.04 million in the third quarter. When our competitors are suffering industrial-wide downturns, we managed to make three consecutive quarters of net profit of approximately $21.6 million.
Speaker Change: Our battery business has maintained a high gross profit Marty Ricci.
Speaker Change: 34.3 percentage in the fourth three cultures are this year.
Speaker Change: An increase of 15.2 proton teed point compared to the same period in 2023.
Speaker Change: These girls Martin trigger figure is higher than most.
Speaker Change: Most competitors, including some well known industrially against this year, our battery business achieved another perfect you'd have importantly, $58 million in the fourth quarter Southern Pond 89.
In dollars in the second quarter and once again created a near perfect.
Speaker Change: Two part and there are $4 million in the third quarter.
Speaker Change: Our competitors are suffering in downstream.
Speaker Change: That's pretty wide downturn.
Speaker Change: Remind you did too.
Speaker Change: Three.
Speaker Change: Cotton Socrates callers are not perfect.
Speaker Change: Proxy markedly plenty $1.6 million.
Zhiguang Hu: As usual, we will also provide an update on the announced clients. As of November 1st, 2024, the total amount of orders received by Nelliot delivered at our major production bases in Dalian and Nanjing reached RMB 59.61 million, approximately $38.38 million. As of November 1st, 2024, our accumulated order amount with PowerAuk has reached approximately RMB 80.65 million, about $11.35 million. Our auditors with Wismar Group have reached up to Euro 213 million. about $233 million. As for Jin Peng Group, our accumulated orders value has reached approximately RMB $67.01 million, about $9.42 million. In addition, our important client Hunter has made order of RMB 321 million, approximately $45.12 million since our collaboration.
Speaker Change: As Euro we will also provide an update on the announced kilotons.
Speaker Change: Of November 1st 'twenty 'twenty for the total amount of Alder received.
Speaker Change: Now they did they work at all major production bases entirely a 90 rated RMB 59.6.
Speaker Change: So if you want me to.
Speaker Change: All proxy markedly.
Speaker Change: Eight pardon $38 million as old in the lumber for 'twenty 'twenty four hour accumulated alder amount with power Hawk has rooted all proxy Luckily RMB 80 155 million.
Speaker Change: About 11.
Speaker Change: $35 million.
Speaker Change: Our elders Reis with my group has ratcheted up to euro.
Speaker Change: 213 meeting.
About $233 million.
Speaker Change: As for Tim pump group, our accumulated orders while it has reached all products all proxy Martyrly RMB.
67.01 meeting.
Speaker Change: About nine pardon $42 million.
Deason, our important clients.
Hunter.
Hadn't made alder of RMB 321 million.
Speaker Change: All policy of Mortlake, 45 point $12 million since our per lap a reason there's customer how stable relationship with us and some of them are encouraging and are pushing us for the establishment of our overseas factories.
Zhiguang Hu: These customers have a stable relationship with us, and some of them are encouraging and pushing us for the establishment of our overseas factories and are willing to place orders in advance to help facilitate our move to expand overseas. Our Dalian facility has long been profitable. In Q3, we are pleased to see our manufacturing also achieved profitability. The manufacturing we started operation and manufacturing the new model 32140 large cylindrical battery at the end of 2021 have only been in business for less than three years. Originally, we anticipated that manufacturing would have to suffer net losses for three years period.
Speaker Change: And are willing to place older Yeah, I'll want to help the Tate our move to expand overseas.
Speaker Change: Oh Italia for the D. T has long been profit profitable in Q3, we are pleased to see our 95 three also achieved profitable ability the 19 factory where it started.
Speaker Change: Our operation in our manufacturing to the new model three to 140 large seem to go battery at the end of 'twenty to 'twenty one.
Speaker Change: Only been in business for less than three years.
Speaker Change: In Italy, we anticipated that 19 factory would how the two stopper now the lovely for three years parrot.
Zhiguang Hu: Thanks to the hard work of our team, the manufacturing facility has successfully become profitable ahead of schedule. More importantly, The production line and our manufacturing are currently operating at a full capacity due to high demand prompting us to accelerate our capacity expansion plan. As of now, we have signed a procurement contract with equipment suppliers and plan to add a new production line that will enable compatible production of Model 32140 and 4135 batteries in the second phase of manufacturing. With an estimated capacity of approximately 1.5 gigawatt hour for Model 32140 and 1.5 gigawatt hour for Model 4135, we anticipate equipment installation in the fourth half of next year, followed by mass production in the second half.
Speaker Change: Science to the hard work of our team the 90 importantly, T hazard thoughtful so suddenly become profitable how though the guy too.
Speaker Change: More importantly.
Speaker Change: So product in line at all in our New factory are currently operating at full capacity due to high demand Pearl, prompting us to.
Speaker Change: Okay.
Speaker Change: Accelerate our capacity expansion plan as of now we have assigned a procurement contract with the equipment supplier.
Speaker Change: <unk> to add a new product line that will enable.
Speaker Change: Current pod turbo production of model three to 140, and 41 75 battery and the second phase of 90 New factory.
Speaker Change: And if.
Speaker Change: He made it for a biopsy of a proxy Luckily one file G by the hour for model three to 140, and one quantify out to you about our full model 41 30 file we anticipate equipment is is tall listen in the first half one last year.
Speaker Change: Followed by mass production in the second half.
Zhiguang Hu: Furthermore, with respect to our R&D efforts, we are steadily advancing the development of new battery model. As just reported, we will soon be able to produce a model 4135 large cylindrical battery. The model 4135 large cylindrical battery have a strong market demand in applications such as large electric vehicles and energy storage. Additionally, we successfully developed the tablet model 26500 cylindrical battery and started the mass production in Dalian. The product has a characteristic of 25C discharge rate and performs really well in applications that require Rapid Energy Release. Besides, the tablet 2600 cell can be charged from 0% to 100% in just 15 minutes, which is a great practical significance for applications that require fast charging and discharging, such as drones, desktop power supply, and a data center.
Speaker Change: Well do more with respect to our to our R&D efforts. We are Dudley odd one thing so development a new battery model at Delta reported we will soon be able to map pretty of the modal 41, 35 largest cylindrical battery.
Speaker Change: The model 41, 35 largest cylindrical battery.
Speaker Change: Strong market demand in applications, such as lots of electric vehicles and energy storage.
Speaker Change: Ali we successfully the well about the tablet model 26, with Algeria cylindrical battery.
Speaker Change: Started mass production in Thailand.
Speaker Change: The product has.
Speaker Change: Character characteristic of 'twenty policy, you Todd rate and performed really well.
Speaker Change: Application that required.
Rapid entity release, besides the tablet 20 safety without zero cell can be charged from zero to 100% in just 15 minutes, which is great practical significance for applications that require fast charging and discharging such as Jones.
Speaker Change: The adult power supply and the data center.
Zhiguang Hu: Currently, we are one of the few companies in the market with the ability to might produce these tablets model 26,000 battery.
Speaker Change: Currently we are one of the few companies in the market will be the ability to mass produce these tablets model 25th salads or a battery.
Zhiguang Hu: Overall, we successfully maintain the strong momentum in our battery business. by maintaining a high growth profit model and sustaining net profit. considering the current high demand for our Model 32140 cells. produced at our Nanjing factory and newly added capacity for our new model 4135 cells. We will accelerate the pace of capacity expansion to drive continued revenue growth.
Speaker Change: Overall, we successfully maintained the strong momentum in our battery business.
Speaker Change: By maintaining a high girls perfect Marty so.
Speaker Change: So turning not perfect.
Speaker Change: Considering the current high demand for our model so the 214 T cells.
Speaker Change: <unk>.
Our Nanjing factory and the newly added capacity for our new model 41 35 cells.
Speaker Change: I could accelerate the pace.
Speaker Change: Capacity expansion to drive continued revenue growth.
Jiewei Li: Now let me turn the call to our CFO, Jiewei Li.
Speaker Change: Now, let me turn the call to our CFO Jeff.
Speaker Change: Do you have any I D.
Jiewei Li: Thank you, Jason, and thanks, everyone, for making time to join our earnings conference call today. Since Jason has introduced our key financial metrics, in the interest of time, I will not be duplicating the presentation of the numbers. We encourage you to refer to our press release issued earlier today for complete details.
Jeff: Thank you, Jason and thanks, everyone for making time to join our earnings conference call today.
Speaker Change: As Jason has introduced our key financial metrics in the interest of time I would not be duplicating. The presentation of the numbers. We encourage you to refer to our press release issued earlier today for complete details.
Jiewei Li: In the third quarter, our battery business experience has slowed down. As Jason mentioned in his remarks, this was primarily due to a one-month suspension of production at our Dalian factory. For the first eight months of the year, the factory operated at full capacity without any break. which led to a significant increase in energy costs. To mitigate these costs and enable upgrades, we paused operations for a month. During this period, we optimized energy usage and upgraded one production line to support the production of our new tabless model 26650 cells.
Speaker Change: In the third quarter, our Patriot business experienced a slow down.
Speaker Change: As Jason mentioned in his remarks. This was primarily due to a one month suspension of production at our Italian factory.
Speaker Change: For the first eight months of the year. The factory operated at full capacity without any breaks which led to a significant increase in energy costs.
Speaker Change: To mitigate these coast and enable upgrades, we paused operations for months.
Speaker Change: During this period, we optimize energy usage and upgraded one production line to support the production of our new tablets modules to $6 655, Oh sales.
Jiewei Li: As for Nanjing factory, now in its third year, it has successfully transitioned into a profitable production center with a steady flow of orders fully booking its capacity. Currently, we face a supply shortage of approximately 5 million cells from Nanjing, underscoring the strong demand. Looking ahead, although our growth margin has been exceptionally high, we anticipate a gradual return to more typical levels, yet still higher than industry competition. In summary, our dialing factory has long been a key contributor to our net profits, while our Nanjing facility initially incurred losses due to construction, setup of new production lines, and the promotion of new battery models.
Speaker Change: As for Lunching factory now in its third year. It has successfully transitioned into a profitable production center with a steady flow of orders fully booking its capacity.
Speaker Change: Currently we face a supply shortage of approximately 5 million sales from 19 underscoring the strong demand.
Speaker Change: Looking ahead, although our gross margin has been exceptionally high we anticipate a gradual return to more typical levels, yet still higher than industry competitors.
Speaker Change: In summary, our Italian factory has long been a key contributor to our net profits while our 19 facility initially incurred losses Q2 construction set type of new production lines and the promotion of new bakery models.
Jiewei Li: Now that Nanjing has turned profitable, we expect that both factories will drive our financial growth. With the expanded capacity in Nanjing next year, we remain optimistic about the company's performance.
Speaker Change: Now that <unk> has turned profitable we expect that both factories will drive our financial growth in the future with.
Speaker Change: With the expanded capacity in 19 next year, we remain optimistic about the Companys performance.
Unknown Executive: Thank you and we will now open the floor for the Q&A section.
Speaker Change: And we will now open the floor for the Q&A section operator. Please go ahead.
Unknown Executive: Thank you.
Unknown Executive: To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again.
Speaker Change: Thank you.
To ask a question. Please press star one one on your telephone.
Speaker Change: Wait for your name to be announced.
Speaker Change: <unk>. Your question. Please press star one on one again.
Unknown Executive: We will now take the first question.
Speaker Change: We will now take the first question.
Brian Lantier: From the line of Brian Lantier from SAC Small Cup Research, please go ahead.
Speaker Change: From the line of Brian <unk> from Zacks small cap research. Please go ahead.
Brian Lantier: Good morning, everyone. I appreciate all the updates. You're navigating a difficult environment, and having success is good to see with some of the new products.
Speaker Change: Okay.
Speaker Change: Good morning, everyone I appreciate all the updates.
Speaker Change: Youre navigating a difficult environment and.
Speaker Change: Having success and it's good to see with some of the new products.
Brian Lantier: I guess the first question is just around some of the weakness that you're seeing in the battery business. Is it principally derived from pricing pressures from competitors, or is it more on the demand side from some of your clients in Europe?
Speaker Change: I guess the first question is just around some of the weakness that youre seeing in the battery business.
Speaker Change: Is it principally derived from pricing pressures from.
Speaker Change: Or is it more on the bank side for some of your clients in Europe.
Speaker Change: Okay.
Brian Lantier: First of all, thank you for your update. I am very happy to see that we have had a good success in the industry and we have also launched some new products. The first question is, does more pressure come from our competitors or our existing customers in Europe?
Speaker Change: Yeah.
Speaker Change: Diego <unk>.
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Speaker Change: No Chad.
Speaker Change: <unk> gotten slightly over that hurdle.
Speaker Change: To say what the cohort.
Zhiguang Hu: 关于我们定价的压力的问题 We have received a lot of questions about pricing pressure.
Speaker Change: Yeah.
Speaker Change: So when you take our Wilmington, Canada Yodlee the wind team will now who don't know cleanup.
Zhiguang Hu: 我们让胡总来回答一下 We will let Mr. Hu answer. Regarding the price pressure, we have two main aspects. The first is through Quanjin Technology. 来这个提升我们这个倍率型产品就是来 to the floor. Very good profit chain I'll talk to you later. I'll talk to you later.
Speaker Change: Yes.
Speaker Change: The quiet period took a childhood the Elliott well.
Speaker Change: No problem, Yeah theater, where trends are weak.
Speaker Change: Lie to the T cell and molecular tourism timeshare tours of your life.
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Okay.
Zhiguang Hu: You first. So first of all, as we are using the tabless design for our 36650, then we can increase the cigarette performance of the cell. So this will help us to like more easily to let our product to be used in the startup battery business, especially the startup battery for the new energy vehicle and also the combustion engine vehicle as well. So from this new business, we can get a reasonable profit. Secondly, we have improved the capacity of our energy-type batteries. We are the highest in the entire industry. We get higher prices and profits through our high cost-effectiveness.
Speaker Change: Sure.
Speaker Change: So first of all as we are using their tablets designed forward 36, 650, then we can increase that see great performance of the cell. So this will help us too.
Speaker Change: Right.
Speaker Change: More easily too.
Speaker Change: So until that kind of.
Speaker Change: Product to be used in the startup battery business, especially the talked about battery for new energy vehicles and also the combustion engine vehicles as well. So from this new business, we can get to a written that are appropriate.
So thiago just for women Nelson Indenture will mirror T cell in Lithuania.
Speaker Change: So as you point.
Speaker Change: Yes, we've been gold metrics, we call them.
Speaker Change: On the call assumed IP like what's you can go the charterer Leland.
Speaker Change: Yeah.
Zhiguang Hu: So secondly, for our energy product, then we gradually increase the capacity of our product. So in terms of the industry, then compared to our competitor, we have more energy density from ourselves, so which makes our product more compatible.
Speaker Change: Secondly for our energy products than we are gradually increase the complexity of our product so in terms of the industry compared.
Speaker Change: Compared to our competitor we have.
Speaker Change: More energy at SP from ourselves, so which makes our product more competitive.
Zhiguang Hu: Okay, that's all I have to say. To summarize, that's all the answers. for myself.
Okay, you sound a little later.
Speaker Change: To summarize Thats order okay.
Speaker Change: For myself okay.
Brian Lantier: Great.
Brian Lantier: Sorry, I'll jump back in with another question if that's okay. How frequently do you anticipate doing maintenance shutdowns like you did at Dalian? Is this an annual process or you know every three to five years? that you would do this.
Speaker Change: Alright, great.
Speaker Change: Sorry, I'll jump back in with another question if that's okay.
Speaker Change: How frequently do you anticipate doing.
Speaker Change: Shutdowns like you did at Valeant as I say, an annual process or every three to five years.
Speaker Change: But you would do those.
Zhiguang Hu: The second question is, how often do we temporarily shut down our factories in Dalian? Is it every year or every 3-5 years? This question is mainly about our Dalian factory's suspension of production in September. The company is mainly due to the high energy consumption.
Speaker Change: Dirk Lewinski peripheral woman Dicey thing I think that's your new Wade gentlemen, identical in consensus and that.
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Speaker Change: Two the windshield washer quietly a woman starring Colin transaction with <unk> channel shifting amongst with J P. Andrew I'll assure you. We hope we'll call those are the wins, we've seen tangible and IGT to Ashish.
Zhiguang Hu: Let's ask Mr. Tian to explain in detail. So this question is for you. In order to update our products, we have upgraded our original 26650-capacity products with the addition of the Quanjie-2 backup type products. In this process, we have to shut down the production line in order to carry out such an upgrade. This kind of upgrade is in line with the market demand.
Speaker Change: So there's lots of news.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Well listen I'll, then comes from the moment that handset.
Gentlemen.
Speaker Change: I wanted to ask Juan Sanchez.
Speaker Change: Chunky.
Speaker Change: Thank you Keith.
Speaker Change: Can you just touch and Sean you got now.
Speaker Change: So I think the quadrant.
Speaker Change: What measure piece, you, David Barton gym Quentin.
Speaker Change: Can.
Speaker Change: Hey, guys. Thank you guys.
Speaker Change: So we're going to send you guys thought on our financial.
Zhiguang Hu: There is no certain regularity. In the first half of this year, we have made this plan and implemented it in accordance with the plan.
Okay.
Thank goodness.
Speaker Change: Alright, Thank you guys.
Speaker Change: Mr Cheng.
Speaker Change: Yes.
Speaker Change: How are you.
Speaker Change: Sure.
Yeah sure.
Zhiguang Hu: All yours, sir. And so the shutdown from Balian factory is mainly because we are upgrading our product from the energy battery cell to the high sale rate battery cell. So it's an optimization and also the upgrade of our production line. So this is in order to carry on this optimization, then we need to shut down the cell to do this. And the reason why we are doing that is also decided by the market trend. And also for this shutting down, we have already planned it in the first half of this year. So this is the normal operation at planning from the start of the year.
Speaker Change: Yeah.
Speaker Change: And so the shutdown from Valeant factoring is mainly because we are upgrading of our product from the energy battery cell to the highest day rate battery cell. So it's our optimization and also the upgrade of our production line. So this is in order to turn around this optimization then we.
Speaker Change: We need to shut down the cell to try to do this and.
Speaker Change: The reason why we are doing that it's also decided by the market trend. So and also for this starting now we have already planted in the first half of this year. So this is.
Speaker Change: The normal operation at planning.
From the start of the year.
Zhiguang Hu: Yes, and also, as we just mentioned in our remarks, the other reason for the suspension of production at Dalian for one month is simply because the Dalian factory has been operated since the very beginning of the year until September without any breaks. So the energy cost was so high at the moment that we decided that we can suspend the production to reduce energy cost. At the same time, we have time to upgrade our production.
Speaker Change: Yes, and also as we just mentioned in our remarks. The other reason for the suspension of production medallion four one months simply because.
Speaker Change: Thailand factory has been operated.
Speaker Change: Since the very beginning of the year and Hugh September without <unk>, so to energy costs with so high at the moment.
Speaker Change: We decided that we can suspend production to.
Speaker Change: To reduce energy cost on the same time, we have.
Speaker Change: Time to upgrade our production lines.
Brian Lantier: Okay, great. The LEDs are obviously a bright spot right now. Is that principally coming from Vietnam and India?
Speaker Change: Okay great.
Speaker Change: The Ltvs are obviously, a bright spot right now.
Speaker Change: Is that principally coming from Vietnam and India.
Speaker Change: Okay.
Brian Lantier: Sorry, can you repeat your question? Sorry, the LED business, the light electric vehicles, is that demand principally coming from customers in India and Vietnam?
Speaker Change: Sorry can you repeat your question.
Speaker Change: Sorry, the led business for light electric vehicles.
Speaker Change: Is that demand principally coming from customers.
Speaker Change: Customers in India and Vietnam.
Speaker Change: Thanks.
Brian Lantier: The next question is about the business of our light vehicles. Is it true that most of our existing customers are from India and Vietnam? Yes, because the two-wheeled vehicle market has increased a lot recently.
Speaker Change: And Charlie Lynch is quite a few of them that she is encouraging.
Speaker Change: Sure.
Speaker Change: Ms Super sustainable cohort go laterally.
Speaker Change: Andrew Hi, Ole.
Speaker Change: So anyway. Thanks.
Thanks, Alicia Chung that soon at some point in time, we don't see actually.
Zhiguang Hu: Mr. Hu, please explain. Currently, in Southeast Asia, including India, Vietnam, and some other countries, such as Indonesia, we are all implementing electrification. Because in Southeast Asia, a lot of batteries cannot be produced on their own. They are mainly imported from China. And our products are the most stable. So now our orders are increasing faster than expected. Yes, so the main business for the LEV is mainly Southeast Asia area. So that includes India, Vietnam, Indonesia, etc. So for these countries, they cannot produce the battery by themselves. So they rely on to import the battery from China.
Speaker Change: Sure.
Speaker Change: Sure.
Speaker Change: Yeah.
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Speaker Change: Each of your clients.
Speaker Change: Yes, so the main business for <unk>, it's mainly southeast Asia area. So that includes.
Speaker Change: India, Vietnam, Indonesia exactly.
Speaker Change: So for these countries they cannot produce the battery by themselves. So they are rely on to imports the battery from China.
Zhiguang Hu: So in terms of all of the cell manufacturers in China, our products are the most stable. So that's why you can see a dramatically increase of our demand.
Speaker Change: In terms of all of the cell manufacturers in China. Our products are the most stable. So thats why you can see.
Speaker Change: Domestically increase of our demand.
Speaker Change: Okay.
Brian Lantier: Great. The last one for me is, I think I heard you mention the prospect of overseas expansion. If I heard that correctly, any details on that, where you're looking, timelines, things like that.
Speaker Change: Okay great.
Speaker Change: Last one for me is.
Speaker Change: I think I heard you mentioned the prospect of overseas expansion.
If I heard that correctly.
Speaker Change: Any details on that where youre looking timelines things like that.
Brian Lantier: Thank you. The next question is about our overseas expansion. Can you give us some information? For example, where are we going to expand? Any similar timelines?
Speaker Change: Thank you sorry.
Speaker Change: <unk> Squalamine diabetic Roadrunner, Tricia will calculate Halloween <unk> JD within our Quadro places easier to gain share.
Zhiguang Hu: I will answer this question. I will directly respond to your question, Brian. At this moment, the only information we can tell is that this is simply client-driven. We have certain big clients coming to us saying that we need to accelerate the setup of the overseas factory. So with that demand, we are actually looking... for some places that fit our best of interest. Certainly US is under our consideration, but we have not yet decided which country that we are going to build our production lines. And also we will not do it solely by ourselves. We are actually looking for domestic partners that can help us manage the daily operations and also some government issues, applications, management, something like that.
Speaker Change: Joe.
Speaker Change: Our directly respond to your question Brian.
Speaker Change: At this moment the only information we can carry is that this is simply kai and treatment, we have certain declines coming towards saying that we.
Speaker Change: We need to accelerate.
To setup of Oversea factory, so with that demand we actually are looking.
Speaker Change: For some places that fits our best of interest.
Speaker Change: Certainly usa's under our consideration, but we have not yet decided.
Speaker Change: Each country that we are going to build.
Speaker Change: Our production lines and also we would not do it solely by ourself. We actually are looking for domestic partners that can help us manage the daily operations and also some government issues application management.
Speaker Change: Management, something like that so it's still in the early stage, but the.
Zhiguang Hu: So it's still in the early stage, but the management take this issue as one of our routine job. Right now we're having very serious discussions with a lot of parties.
Speaker Change: Management take this issue as.
Speaker Change: As one of our routine jobs, we are happening right now we are having very serious discussions with the other parties.
Zhiguang Hu: This is the only thing we can review. And as we mentioned in our remarks, our clients are very willing to place orders in advance to push us to build up this factory.
Speaker Change: This is the only thing we can review and as we mentioned in our remarks, our clients are very willing to place orders in advance.
Speaker Change: To push us.
Speaker Change: To be would have this factory.
Brian Lantier: Okay, great.
Unknown Executive: Thank you very much. Thank you.
Speaker Change: Okay, great. Thank you very much.
Unknown Executive: As a reminder, if you wish to ask a question, please press star one one on your telephone. That's star one and one if you wish to ask a question. Thank you.
Thank you as a reminder, if you wish to ask a question.
Speaker Change: First star one one on your telephone.
Speaker Change: Our one on one if you wish to ask a question.
Zhiguang Hu: Seeing no more questions in the queue, let me turn the call back to Jason for closing remarks.
Speaker Change: Thank you no more questions from the queue, Let me turn the call back to Jason for closing remarks.
Zhiguang Hu: Thank you, operator, and thank you all for participating in today's call and for your support. We appreciate for your interest and look forward to reporting to you again next quarter on our program. Thank you all again.
Jason: Thank you operator, and thank you all for participating in today's call and for your support.
Jason: We appreciate your interest and look forward to reporting to you again, that's called or all progress.
Jason: Okay.
Unknown Executive: This concludes the call.
Speaker Change: Thank you all again this concludes the call you may now disconnect.
Unknown Executive: You may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
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Speaker Change: Okay.
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Speaker Change: Yes.
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