Q1 2025 Pony.ai Inc Earnings Call
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Operator: At this time, all participants are in listen-only mode. After the management's prepared remarks, there will be a question and answer session.
After the managements prepared remarks, there will be a question and answer session.
As a reminder, today's conference call is being recorded.
Operator: As a reminder, today's conference call is being recorded and a webcast replay will be available on the company's investor relations website at ir.ponyai.com.
Webcast replay will be available on the company's Investor Relations website.
At IR Dot Pony AI Dot com.
I will now I'll turn the call over to your host George Shao head of capital markets and Investor Relations at Pony AI. Please go ahead George.
George Schaal: I will now turn the call over to your host, George Schaal, Head of the Capital Markets and Investor Relations at Pony.ai. Please go ahead, George.
George Shao: Thank you operator, and Hello, everyone.
George Schaal: Thank you, Operator, and hello, everyone. We appreciate you joining us today for Ponyai's first quarter 2025 earnings call. Earlier today, we issued a press release with our financial and operating results.
Speaker Change: We appreciate you joining us today for todays <unk> first quarter 2025 earnings call.
Speaker Change: Earlier today, we issued a press release with our financial and operating results.
Speaker Change: Available on our Investor Relations website.
George Schaal: which is available on our Inventory Relation website.
Speaker Change: Joining with me today are Dr. James Huang Chairman of the Board co founder and Chief Executive Officer.
George Schaal: Joining with me today are Dr. James Peng, Chairman of the Board, Co-Founder, and Chief Executive Officer. Dr. Tiancheng Lou, Director, Co-Founder, and Chief Technology Officer. and Dr. Liu Wang, Chief Financial Officer.
Speaker Change: Dr attention low director co founder and Chief Technology Officer.
Speaker Change: And Dr <unk> <unk> Chief Financial Officer.
Speaker Change: They will provide prepared remarks, followed by a Q&A session.
George Schaal: They will provide prepared remarks followed by a Q&A session. Before we begin, please refer to the Safe Harbor Statement in our earnings release, which applies to this call as we will be making forward-looking statements. Please also note that we will discuss non-GAP measures today.
Speaker Change: Before we begin.
Speaker Change: Please refer to the Safe Harbor statement in our earnings release, which applies to this call as we will be making forward looking statements.
Speaker Change: Please also note that we will discuss non-GAAP measures today.
Speaker Change: Which are more thoroughly explained and reconciled to the most comparable measures reported under GAAP in our earnings release available on our investor relation website and filings with the ICC.
George Schaal: which are more thoroughly explained and reconciled to the most comparable measures reported under GAAP in our earliest release available on our Investor Relations website and filings with the ICC.
Speaker Change: I will now turn the call over to our chairman co founder and CEO Dr. James Huang. Please go ahead.
James Peng: I will now turn the call over to our Chairman, Co-Founder, and CEO, Dr. James Fung. Please go ahead. Thanks, George.
Speaker Change: Thanks George.
Speaker Change: This is James punk founder and CEO.
James Peng: This is James Peng, founder and CEO. 2025 is a year of scaling up for Pony.ai and we embrace it with strong growth momentum. before we dive into our business development.
Speaker Change: 2025 is a year of cleanup, while pony AI and we embraced it.
This strong growth momentum.
Speaker Change: Before we dive into our business development.
Speaker Change: I would like to highlight four key milestones.
James Peng: I would like to highlight four key milestones. Firstly, revenue from our RoboTaxi services doubled year over year for the first quarter 2025. with fair charging revenues grew approximately 8 fold. This is a landmark validating our commercial deployment readiness.
Speaker Change: Firstly revenue from our Robo taxi services.
Speaker Change: Year over year for the first quarter 2025.
Speaker Change: Fair charging revenues grew approximately eight votes.
Speaker Change: This is a landmark validating our commercial deployment readiness.
Speaker Change: Secondly, we launched our seventh generation autonomous driving system in the Shanghai Auto show.
James Peng: Secondly, we launched our 7th generation autonomous driving system in the Shanghai Auto Show. The Gen 7 system achieves a 70% reduction in bill of materials, basically bond costs compared with our last generation, the Gen 6. This showcased our technological advancement to effectively drive cost efficiency. Certainly we have secured the production capability and all the relevant components to grow our fleet to 1,000 vehicles by year end. which will significantly increase our fleet density across our operational network.
Speaker Change: The Gen seven system achieved <unk>.
Speaker Change: 90% of reduction in bill of materials.
Speaker Change: Basically bom costs.
Speaker Change: Compared with our last generation the Gen six.
Speaker Change: This showcased our technology called advancement to effectively drive cost efficiency.
Speaker Change: Suddenly we have secured the production capability and all the relevant components to grow our fleet to 1000 vehicles by year end.
Speaker Change: Which will significantly increase our fleet density across.
Speaker Change: Our operational network.
Speaker Change: Lastly, we've reached strategic partnerships with some key partners such as Tencent and over two four inch comprehensive ecosystems, both domestically and worldwide.
James Peng: Lastly, we reached strategic partnerships with some key partners, such as Tencent and Uber, to forge comprehensive ecosystems, both domestically and worldwide.
Speaker Change: Now, let me walk you through the details of our business progress.
James Peng: Now let me walk you through the details of our business progress. In late April, we showcased the Gen7 Robotaxi line-up at the Shanghai Auto Show. J7 is a game-changing breakthrough in autonomous driving technology. as 100% of the sensors, components, and all the add-ons are automotive grade. which means that Gen7 will have extended product life cycle, rock-solid reliability, and also next-level safety. Its modular architecture also enables rapid deployment across multiple vehicle platforms. starting with three RoboTaxi models we unveiled in the Shanghai Auto Show. through our strategic partnership with leading OEMs, including Toyota, BAIC, basically Beijing Auto, and the GAC, the Guangzhou Auto.
Speaker Change: In late April we showcased the Gen seven global taxi lineup at the Shanghai Auto show.
Speaker Change: <unk> is a game changing breakthrough in autonomous driving technology.
Speaker Change: As 100% of the sensors components and all the add ons.
Speaker Change: Automotive grade.
Speaker Change: Which means that gen. Seven will have extended them product lifecycle rock solid reliability and also next the level of safety.
Speaker Change: Its modular architecture also enables rapid deployment.
Speaker Change: Across multiple vehicle platforms.
Speaker Change: Starting with three Bravo taxi models.
Speaker Change: Unveiled in the Shanghai Auto show.
Speaker Change: Through our strategic partnership with leading Oems, including Toyota.
Speaker Change: AIC basically Beijing auto and the GAC the Guangzhou auto Gen.
Speaker Change: <unk> seven <unk> taxes will enter mass production in the deployment.
James Peng: Gen 7 robotaxis will enter mass production and deployment. and thereby growing our fleet size to 1,000 vehicles by year-end.
Speaker Change: Thereby growing our fleet size to 1000 vehicles by year end.
Speaker Change: Most importantly, I want to highlight that such technology advancement and the large scale production and deployment capabilities.
James Peng: Most importantly, I want to highlight that such technological advancement and large-scale production and deployment capabilities have driven a measurable increase in our efficiency. lowering both the capital expenditure and also operational costs.
Speaker Change: <unk> driven a measurable increase in our efficiency.
Speaker Change: Lower in both the capital expenditure and also operational costs.
The two key underlying drivers are.
James Peng: The two key underlying drivers are on the vehicle economics. Our Gen7 RoboTaxi Total Cost Per Vehicle This includes actually both the vehicle platform and also the ADK, the autonomous driving kits bomb cost. Both have all been reduced. especially with the ADK's bomb costs coming down by 70%. The cost down is driven by multiple design optimizations, including an 80% reduction in autonomous driving computation. and also 68% reduction in the LiDAR cost. These efficiencies demonstrate the power of our system integration as well as scalable production approach. positioning us competitively against the industry benchmark.
Speaker Change: First.
Speaker Change: On the vehicle economics.
Speaker Change: Our Gen seven robo taxi total cost per vehicle.
Speaker Change: This includes actually both the vehicle platform and also the the ATK the autonomous driving kits.
Speaker Change: <unk> costs.
Speaker Change: Both have all being reduced.
Speaker Change: Especially with the ATK Bom costs.
Speaker Change: Coming down by 70%.
Speaker Change: The cost down is driven by multiple design optimizations, including a 80% reduction in autonomous driving compute patient.
Speaker Change: And also 68% reduction in the lidar costs.
Speaker Change: This efficiencies demonstrate the power of our system integration.
Speaker Change: Well as scalable production approach.
Speaker Change: Positioning us competitively against the industry benchmarks.
Speaker Change: Secondly on operational costs.
James Peng: Second, on operational cost. In this front, we have reached a remote assistant to driver ratio of up to 20. This means that one remote assistant can effectively monitor 20 vehicles. In addition, we largely reduced our insurance costs as our commercial insurance premiums stand at approximately half of the typical cost for traditional human-operated taxis. The aforementioned operational cost reductions are the result of our proven safety track record and also years of Robotaxi operational experience.
Speaker Change: In this front, we have reached a remote assistant to driver ratio of up to 20. This means that one remote assist assistant can effectively monitor 20 vehicles.
Speaker Change: In addition, we largely reduced our insurance costs.
Speaker Change: Our commercial insurance premiums stand at approximately approximately half of the typical cost for traditional human operated Texas.
Speaker Change: The aforementioned.
Speaker Change: Operational cost reductions are the result of our proven safety track record and also years of Robo taxi operational experience.
Speaker Change: Okay.
Speaker Change: Now moving to the operational expansion.
James Peng: Now moving to the operational expansion. This is another cornerstone that will empower our quick growth. with strong foundation in place for the future scaling of our total commercialized operational domains across Beijing, Guangzhou, Shenzhen, and Shanghai. now spans over 2,000 square kilometers. This is nearly 20 times larger than the city area of San Francisco. Our vast coverage includes some high-value transportation hubs such as central business districts, airports, and high-speed train stations.
Speaker Change: This is another cornerstone that will empower our click growth.
Speaker Change: With strong foundation in place for the future scaling our total commercialized operational domains across Beijing, Guangzhou, Shenzhen and Shanghai.
Speaker Change: Now I'll spend over 2000 square kilometers.
Speaker Change: This is nearly 20 times larger than the CD area of San Francisco.
Speaker Change: Our vast coverage includes some high value transportation hubs, such as central business districts airports and high speed train stations.
Speaker Change: Notably we secured China's first fully driverless commercial robo taxi license incentives <unk> district in late March this year.
James Peng: Notably, we secured China's first fully driverless commercial robo-taxi license in Shenzhen's Nanshan District in late March this year. Unlocking operations in the city's core economic and transportation hubs.
Speaker Change: Unlocking operations in the city's call economic and the transportation hubs.
Speaker Change: Yeah.
Speaker Change: Regarding the market adoption of our Robo taxi service.
James Peng: Regarding the market adoption of our RoboTaxi service the number of registered users. on our mobile app, basically the Pony Pilot app, increased by more than 20% quarter over quarter in the first quarter of this year. We continue to enhance the user experience through innovative operational models, product features and in-car infotainment systems. Our user growth trajectory will be further amplified by our new strategic partnership with Tencent. which enables us to integrate our RoboTaxi services into Tencent's Weixin mobility services. and also Tencent Max. As a result, we can tap into China's billions of user base. As we launch Gen7 Robotics later this year, we will expand our capability to meet the fast-growing user demand.
Speaker Change: The number of registered users.
Speaker Change: On our mobile App basically the pone pilot app increased by more than 20% quarter over quarter.
Speaker Change: In the first quarter of this year.
Speaker Change: We continue to enhance the user experience through innovative operational models.
Speaker Change: Product features and in car infotainment systems.
Speaker Change: Our user growth trajectory will be further amplified by our new strategic partnership with Tencent.
Speaker Change: Which enables us to integrate our robo taxi services into Tencent leasing mobility services.
Speaker Change: And also Tencent Max.
Speaker Change: As a result, we can tap into China's billions of user base.
Speaker Change: As we launch Gen. Seven robo taxi later this year, we will expand our capabilities to meet the fast growing user demand.
Speaker Change: This sets a solid foundation to drive our future fair charging revenues.
James Peng: It sets a solid foundation to drive our future fair charging revenues through optimized fleet utilization and enhanced customer experience. with faster pickup time, superior safety and premium comfort.
Speaker Change: Through optimized fleet utilization and enhance customer experience.
Speaker Change: With faster pickup time superior safety and the premium comfort.
Speaker Change: Now, let me share with you our global expansion progress.
James Peng: Now let me share with you our global expansion progress. And Pony.ai, our mission has always been... Since the day we founded, there has always been autonomous mobility everywhere. Our global footprint now spans across Europe, the Middle East, South Korea, Southeast Asia, and beyond.
Speaker Change: And Tony AI, our mission has always been.
Speaker Change: Since the day, we refunded has always being autonomous mobility everywhere.
Speaker Change: Our global footprint now expense across Europe, the Middle East, South Korea, Southeast Asia and beyond.
Speaker Change: Recently, we have achieved multiple breakthroughs in these areas.
James Peng: Recently, we have achieved multiple breakthroughs in this area. First, we have forged strategic alliance with key industry players. We recently partnered with Uber, which will enable users to access our Robotaxi service directly through Uber's platform. The partnership is expected to first launch in a key market in the Middle East later this year. with the goal of scaling deployments to additional international markets in the future.
Speaker Change: First we have forged strategic alliance with key industry players.
Speaker Change: Recently partnered with Uber, which will enable users to access our robo taxi service directly so hoover's platform.
Speaker Change: The partnership is expected to first launched in a key market in the Middle East later this year.
Speaker Change: With a goal of scaling deployment to additional international markets in the future.
Speaker Change: We are also collaborating with comfort DAU growth on.
James Peng: We are also collaborating with Comfort Delgro on a joint robo-taxi pilot program. Confidel Growth is one of the largest land transport companies headquartered in Singapore and operates in 13 markets covering Europe, China, Australia and others.
Speaker Change: I'll now joined Robo taxi pilot program.
Speaker Change: Cover their growth is one of the largest land transport companies headquartered in Singapore and operates in 13 markets covering Europe, China, Australia and others.
Speaker Change: Second we are pleased to see the ongoing favorable regulatory and testing programs.
James Peng: Second, we are pleased to see the ongoing favorable regulatory and testing programs. During the first quarter, we have secured an L4 Robotaxi testing permit. from Luxembourg's Ministry of Mobility. And we also started road testing in... Seoul's Gangnam district of South Korea. All these developments collectively demonstrate our platform's adaptability to complex global conditions.
Speaker Change: During the first quarter, we have secured.
Speaker Change: For a robo taxi testing permit.
Speaker Change: Luxembourg.
Speaker Change: Ministry of liquidity.
Speaker Change: And we also started road testing in <unk>.
Speaker Change: <unk> came in district of South Korea.
Speaker Change: All this development collectively demonstrate our platforms adaptability to complex global conditions.
Speaker Change: While positioning Tony AI for future commercial scaling.
James Peng: while positioning Pony.ai for future commercial scaling.
Speaker Change: In summary.
Speaker Change: Think the mass production and large scale deployment of our Gen seven global taxes.
James Peng: In summary, I think the mass production and large-scale deployment of our Gen7 robo-taxis remain a top priority for us. Through continuous technical innovations, we are seeing accelerating production coupled with significant cost reduction. Given the structural efficiency advantages of the Gen7 Robotaxis, we have a clear line of sight to break even and long-term profitability.
Speaker Change: We remain a top priority for us.
Through continuous technical innovations.
Speaker Change: We are seeing accelerating production coupled with significant cost reduction.
Speaker Change: Given the structural efficiency advantages of the Gen 70, Robo taxis, we have clear line of sight to breakeven and long term profitability.
Speaker Change: With that I will now pass it over to our CTO Dr attention alone.
Tian Cheng Lou: With that, I will now pass it over to our CTO, Dr. Tianzhen Lao. Hello everyone, this is Tian Cheng. So it's a great pleasure to share with you the latest advancement and progress with technology. So when we showcased our Gen7 autodriving system during the Shanghai Auto Show in late April, I also shared the progress of our Pony world and hardware system. Pony World, as an industry-leading AI-powered world foundation model, has built a high-fidelity training environment and evaluation system. breaking through the limitation of imitation learning. Each week, Pony World generates test data exceeding 10 billion kilometers.
Speaker Change: Thanks, Tim.
Speaker Change: Hello, everyone. This is pinto.
Speaker Change: So it's a great pleasure to share with our latest advancement in the progress of our technology.
Speaker Change: So when we showcased our gen Thurman welcome driving system during the Shanghai Auto show in late April.
Speaker Change: Auto shared of the progress of our New award in the hardware system.
Speaker Change: Tony Award at the industry, leading AI powered award Foundation model had to build a high fidelity Youre training environment, any better and faster.
Speaker Change: Breaking through the limitation of an imitation learning.
At week 20 were generate pass data exceeding 10 billion kilometers.
Speaker Change: The breadth and the complexity of the data accumulated have fostered the data that the human driver caliber collect.
Tian Cheng Lou: The breadth and complexity of the data accumulated have far surpassed the data that a human driver can ever collect. This generates a world model. trains over proprietary virtual drivers, a full-stack system featuring integrated software and hardware, whereas virtual drivers in turn provide valuable human feedback. It fosters a virtuous cycle of continuous enhancement, accelerating the improvement in safety and reliability of over-surviving technologies. The virtual driver has demonstrated our proven L4 autonomous driving capability in the real world. successfully navigating the complex urban environment across all urban cities in China. operating through rush hour traffic and inclement weather.
Speaker Change: This generated a word model.
Speaker Change: Great.
Speaker Change: Growth rate, which were driver.
Speaker Change: First access to refrigerate integrated software and hardware with virtual driver interim provided valuable feedback.
Speaker Change: For Thursday, virtuous cycle of containers and Kathryn.
Speaker Change: The improvement in safety and reliability of our work of driving technology.
Speaker Change: The virtual driver has demonstrated our proven out for autonomous driving capability in the real world.
Speaker Change: Successfully navigating complex urban environment across all care about it in China.
Speaker Change: Openings operating through a rush hour traffic and the inclement weather.
Speaker Change: By the end of first quarter, we have accumulated over 6 million kilometers of dry based operation.
Tian Cheng Lou: By the end of first quarter, we have accumulated over 6 million kilometers of driverless operation. a clear validation of our technology's maturity and its readiness for large-scale deployment.
Speaker Change: A clear validation of our technology matures.
Speaker Change: Revenues for large scale department.
Speaker Change: Next let me elaborate how this advancement development and drive operational cost of the data across the board.
Tian Cheng Lou: Next, let me elaborate how this advancement drives operational cost optimization across the board. For a mass production perspective. Hardware cost reduction remains a fundamental challenge that no automaker has voiced. With respect to our Gen7 Robotaxis, our in-house developed Autodriving Domain Controller is the world's first to achieve full scenario Level 4 Autodriving built on Autogrid chip. featuring extended product life cycle and a mileage lifespan of 600,000 kilometers. regarding computing platform. We are the first player in the L4 industry to adopt an autonomous-grade SoC. This advancement has successfully reduced the domain controller size, weight, power consumption and cost, each by 50% to 80%.
Speaker Change: For a mass production perspective.
Speaker Change: Hardware cost reduction remains a fundamental challenge is that no automaker have boyd.
Speaker Change: With respect to our <unk>, Texas over in coffee value of our programming domain controller and the work its work to achieve fourth in areas that will drive it built our auto grade chip.
Speaker Change: Featuring extended the product lifecycle and the mileage lifespan.
Speaker Change: 600000 kilometers.
Speaker Change: Regarding computing platform.
Speaker Change: We are the first player in the outdoor industry to adopt.
Speaker Change: Panamax grade Sophie.
Speaker Change: This advancement has successfully reduced the domain controller size weight power consumption on the clock each by 50% to 80%.
Speaker Change: Our proprietary work Tony Award have also effectively improved company efficiency by three times through AI input authorization model distillation and other technological innovations.
Tian Cheng Lou: Our proprietary Warp Pony World has also effectively improved computing efficiency by three times through AI-influenced optimization, model distillation, and other technological innovations. As a result, we are able to adopt more cost-efficient computing power with a total capacity of 1016 tons. This cost-efficient approach enables us to meaningfully reduce overall costs and reach breakeven as we scale up our fleet in the future. In terms of light-up, we have also made significant improvements to software algorithms to adapt to cost-efficient light-up. For Gen 7 autonomous driving kit, we opt for highly cost-efficient semi-solid-state LiDAR solid-state LiDARs. While the choice may involve many trade-offs in individual sensor performance, we have compensated through advanced software algorithms that reduce the noise point by up to 30 times, ultimately resulting in enhanced overall system performance and a 68% cost reduction compared with the previous generation.
Speaker Change: Significantly outperformed the broader <unk> industry.
Speaker Change: As a result, we're able to adopt more cost efficient accompanying power with a total capacity while the second half.
This coffee pizza approach enables us to meaningful reduce overall cost and to reach breakeven at withdrew our faith in the future.
Speaker Change: So in term of lineup.
Speaker Change: We have also made significant improvements to suffer I would limit to adopt to coffee picture lineup.
Speaker Change: Photo seven auto driving kit.
Speaker Change: We're up four highly coffee fitness dermatology lidar solid state Lidar.
Speaker Change: Detroit May involve many trade off in individual center performance, we have compensated through at work staff were able to reduce the nice part about 235.
Speaker Change: Automate here without pain.
Speaker Change: Has the overall system performance and.
Speaker Change: 8% cost reduction compared with the previous generation.
Speaker Change: Therefore centers more broadly we have achieved significant performance improvement through upgrading not just the hardware, but also the aggregate.
Tian Cheng Lou: For full sensors, more broadly, we have achieved significant performance improvement through upgrading not just the hardware but also the algorithms. A key component of overcost is related to remote assistance. Unlike remote control, our system features request-based remote assistance providing suggestions to autonomous driving vehicles, rather than direct intervention because Overcome technology allows us to achieve industry-leading remote assistance to vehicle ratio of 1 to 20%. compared with 1, 2, 3 for the same period of last year. We expect this trend to continue and improve as our technology advances. Over-Virtual Driver enables smarter navigation and advanced monitoring capability.
Speaker Change: A key component of our cost is related to remote assistant.
Speaker Change: Unlikely we would control over system features.
Speaker Change: Kraft pay through more than 6% providing suggestions.
Speaker Change: Two autonomous driving vehicles.
Speaker Change: Other than direct integrated control.
Speaker Change: Overcome technology rollout to achieve industry, leading remote assistant to veeco ratio of one to 2000.
Speaker Change: Compared with 123 for the same period of last year.
Speaker Change: We expect this trend to continue and improve our technology advantages.
Speaker Change: Over virtual drivers enabled Martin navigation and advanced monitoring capability for instance in scenario like traffic traffic police gesture recognition no additional cumulative partly required.
Tian Cheng Lou: For instance, in scenarios like traffic police gestural recognition, no additional human support is required. Similarly, during passenger pick-up and drop-off, there is no need to manually confirm passenger status and inspect the vehicle's cabin. This allows us to operate robotech service with a high-efficiency remote assistance-to-vehicle ratio, significantly reducing operational costs. This metric also shows how far we have advanced beyond industry standards. Moreover, our technical innovations have significantly enhanced the safety of our logotactic fleet, leading to a more favorable insurance economics. As James mentioned, our commercial insurance premiums are approximately 50% of typical costs of traditional government-operated tech companies.
Speaker Change: Similarly during passenger pickup and drop off there is no need to manually confirm passenger et cetera that may affect the vehicle cabin.
Speaker Change: This allows us to operate overhead serve it with a high efficient remodel season.
Speaker Change: Two week two vehicle ratio.
Speaker Change: Significantly reduced operational costs.
Speaker Change: This metric also show how far we've added back the industry standards.
Speaker Change: Moreover, our technical innovation have significantly enhance the safety of our of our locomotive fleet.
Speaker Change: Leading to a more favorable interest economic.
Speaker Change: Jim mentioned over commercial in for the premium approximately 50% 50% of typical cost of traditional equipment are protected.
Speaker Change: This is actually the result of thorough actuarial assessment by insurer providers, who have worldwide, our exceptional low incident and the claim rate.
Tian Cheng Lou: This reduction is the result of through accrual assessment by insurer providers who have verified our assessment log incident and claim rate. This continued decrease in insurance costs is a direct outcome of over-safety performance and a testament to the reliability of our driving system.
Speaker Change: This continued decrease in insurance cost is that direct.
Speaker Change: The outcome of over 50 performance and are Testament to.
Speaker Change: <unk> the reliability of our work of driving system.
Speaker Change: Moving forward we should.
Speaker Change: Have significant room to further solidify and extend our technological leadership and is thereby go up for future commercialization Department.
Tian Cheng Lou: Moving forward, we still have significant room to further solidify, expand our technological leadership and thereby scale up for future commoditization deployment.
Speaker Change: Before I conclude I want to recap the tremendous effort, we have made over the past few years to prepare for mass production.
Tian Cheng Lou: Before I conclude, I want to recap the tremendous effort we have made over the past few years to prepare for mass production. both on software and hardware front. Our Pony World platform leads the industry in areas such as methodology and model training. On the hardware side, we have optimized the key components required for robotics operations, including sensors, LIDARs, and domain controllers. not only through traditional cost reduction measures, but also through parallel software driver enhancement that significantly boost overall system performance.
Speaker Change: Both our software and hardware front.
Speaker Change: <unk> rewards platform.
Speaker Change: The industry areas, such as methodology of the model training on the hardware side, we have optimized the key component required portable type of operation.
Speaker Change: Centered lidar domain controllers.
Speaker Change: Not only through traditional cost reduction measures, but also through a parallel software driver enhancement, that's significantly boost our awarded and performed.
Speaker Change: This concludes my prepared remarks.
Leo Wang: This concludes my prepared remarks. I will now pass the call over to our CFO, Dr. Leo Wang, for a closer look at our financial results. Leo, please go ahead. Thank you, Tianchen. Hello everyone, this is Leo.
Speaker Change: I will now pass the call over to our CFO Dr. <unk> Chang for a closer look at our financial result, Please go ahead.
Leo: Thank you attention Hello, everyone. This is Leo.
Speaker Change: Before reviewing our first quarter financial results.
Leo Wang: before reviewing our first quarter financial results. I would like to reiterate that as we enter this pivotal year for scaling up the Gen7 Robotaxi fleet, we remain fully committed to disciplined investment in mass production and deployment. We will ensure strong operational momentum while maintaining solid financial resilience or to create long-term value to our shareholders. Moving to our financial performance for the first quarter of 2025. We started this year with a strong note. demonstrating solid execution of our go-to-market strategy. Revenues totaled at 14 million U.S. dollars, up $11 billion. 0.6% year-over-year. mainly driven by rapid growth in robo-taxi services.
Speaker Change: I would like to reiterate that as we enter this pivotal year for scaling up the Gen seven robo taxi fleet.
Speaker Change: We remain fully committed to disciplined investment in mass production and deployment.
Speaker Change: We will ensure strong operational momentum while maintaining solid <unk>.
Speaker Change: Financial resilience all to create long term value to our shareholders.
Speaker Change: Moving to our financial performance for the first quarter of 2025.
Speaker Change: We started this year with a strong note.
Speaker Change: Demonstrating solid execution of our go to market strategy.
Speaker Change: Revenues totaled at $14 million up 11%.
Speaker Change: 6% year over year.
Speaker Change: Mainly driven by rapid growth in Robo taxi services.
Speaker Change: The quarter over quarter volatility was primarily due to the variation in revenue recognition of project based engineering solution services and product sales.
Leo Wang: The quarter-over-quarter volatility was primarily due to the variation in revenue recognition of project-based engineering solution services and product sales. a trend consistent with historical patterns. In the first quarter, RoboTaxi's service revenue was $1.7 million. growing significantly at 200.3% year-over-year. This growth was driven by both fair charging and project-based engineering solution services, with fair charging revenues achieving faster growth rates. increasing by roughly 800% year-over-year. The strong growth rate was attributed to the expansion of our public-facing fare-charging robo-taxi operations in Tier 1 cities in China, as well as our optimizing operations for diverse user groups. RoboTruck's revenue grew by 4.2% year-over-year to $7.8 million for the first quarter, primarily driven by contributions from new clients.
Speaker Change: Trend consistent with historical patterns.
Speaker Change: In the first quarter.
Speaker Change: <unk> service revenue were $1 7 million U S dollars.
Speaker Change: Growing significantly at 203% year over year.
Speaker Change: This growth was driven by both fair charging and a project based engineering solution services with fair charging revenues achieving faster growth rate.
Speaker Change: Increasing by roughly 800% year over year.
Speaker Change: The strong growth rate was attributed to the expansion of <unk>.
Speaker Change: Our public facing fair charging robo taxi operations in tier one cities in China, as well as our optimizing operations for diverse user groups.
Speaker Change: <unk> services revenue grew by four 2% year over year to $7 million for the first quarter.
Speaker Change: Primarily driven by contributions from new clients.
Speaker Change: Licensing and application revenues were flattish year over year at $4 5 million U S dollars.
Leo Wang: Licensing and application revenues were flattish year over year at 4.5 million U.S. dollars. We saw increasing orders and delivery for ATOM's Domain Controller ADC cells. primarily driven by new robo-delivery clients. The total cost of revenue was US$11.7 million, up 17.9% year-over-year. in line with revenue trends. Our gross profit reached US$2.3 million, resulting in a gross margin of 16.6%, down from 21% in the same period last year. This decrease was mainly due to the change in revenue mix on increased ADC sales for new robo-delivery clients in the first quarter. That being said, we are actively working on initiatives to reduce gross margin variability for the coming quarter.
Speaker Change: We saw increasing orders and the delivery for accounts domain controller ADC sales.
Speaker Change: Primarily driven by new robot delivery clients.
Speaker Change: The total cost of revenue was $11 $7 million up seven 7% nine 717, 9% year over year.
Speaker Change: In line with revenue trends.
Speaker Change: Our gross profit reached $2 3 million U S dollars.
Speaker Change: <unk>, a gross margin of 16, 6% down from 21% in the same period last year. This discrete this decrease was mainly due to the change in revenue mix increased ADC sale.
Speaker Change: <unk>, new robot delivery clients in the first quarter that being said we are actively working on initiatives to reduce gross margin variability for the coming quarters.
Speaker Change: Total operating expense were $58 $4 million.
Leo Wang: Total operating expenses were 58.4 million U.S. dollars, an increase of 56.3% year-over-year. excluding share-based compensation expenses. Non-GAAP operating expenses were US$49.3 million, up 35% year-over-year. The increase was primarily due to investment in the mass production for Gen 7 and one-time expenses associated with share awards settled upon the completion of IPO. Additionally, we increased employee expenses in the first quarter to strengthen our R&D capacity for concurrently developing three Gen 7 vehicle models. Reflecting the investment preparing for our upcoming production of Gen7, net loss was US$37.9 million compared to US$20.8 million in the first quarter of 2024.
Speaker Change: An increase of 50 to 56, 3% year over year.
Speaker Change: Excluding share based compensation expenses non-GAAP operating expenses were $49 3 million U S dollars up 35% year over year. The increase was primarily due to investment in the mass production for Gen seven.
Speaker Change: And one time expenses associated with share awards settled upon.
Speaker Change: Completion of IPO.
Speaker Change: Additionally, we increased employee expenses in the first quarter to strengthen our R&D capacity for concurrently developing three gen seven vehicle models.
Speaker Change: Reflecting the investment preparing for our upcoming production of Gen. Seven net loss was $37 $9 million.
Speaker Change: Impaired to $28 million in the first quarter of 2024.
Speaker Change: non-GAAP net loss was $28 4 million U S dollars compared to $25 7 million U S dollars in the first quarter of 2024.
Leo Wang: Non-Gap net loss was US$28.4 million compared to US$25.7 million in the first quarter of Turn into our balance sheet, our combined cash and cash equivalent. restricted cash, short-term investments, and long-term debt instruments for wealth management was 738.5 million U.S. dollars as of March 31, 2025, compared to 825.8 million U.S. dollars at the end of 2024. The cash outflow was primarily driven by our Gen7 R&D effort and supply chain preparation. in which the procurement of some key components kicked off ahead of the mass production. With the imminent scaling up and commercial deployment, we believe our current cash reserve is sufficient for our future goals and will continue to explore more opportunities to ensure sustained support.
Speaker Change: Turning to our balance sheet, our combined cash and cash equivalents restricted cash and short term investments and long term debt instruments for wealth management was <unk>.
Speaker Change: $738 $5 million as of March 31, 2025.
Speaker Change: Compared to $825 $8 million at the end of 2024.
Cash outflow was primarily driven by our Gen seven R&D effort and our supply chain in preparation.
Speaker Change: In which the procurement of some key components kicked up ahead of the mass production.
Speaker Change: With the imminent scaling up and a commercial deployment. We believe our current cash reserve is sufficient for our future growth and will continue to explore more opportunities to ensure sustained support.
Speaker Change: Looking ahead, we are thrilled to embark on a chapter in our journey towards mass production and deployment aiming.
Leo Wang: Looking ahead, we are thrilled to embark on a chapter in our journey towards mass production and deployment. Aiming at scalable commercialization. With our core technological advancements as the foundation, we will continue making disciplined investments to strengthen mass production capability and drive long-term cost and operational efficiency. Our robust go-to-market strategy will also allow us to gradually reduce financial volatility and build a more predictable path to growth.
Amy: Amy at scalable commercialization.
Amy: With our core technology advancements as the foundation, we will continue making disciplined investments to strengthen mass production capability and drive long term cost and operational efficiencies.
Amy: Our robust go to market strategy will also allow us gradually reduced financial volatility and build a more predictable path to growth.
Speaker Change: I will now turn the call over to the operator to begin our Q&A session. Thank you.
Operator: I will now turn the call over to the operator to begin our Q&A session. Thank you. We will now begin the question and answer session. To ask a question, you may press star 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2.
Amy: Thank you.
Amy: We will now begin the question and answer session.
Amy: Ask any question you May press star one on your telephone keypad.
Amy: We're using a speakerphone please pick up your handset before pressing the keys.
Amy: To withdraw your question. Please press Star then two.
Amy: So the benefit of all participants on today's call. Please limit yourself to two questions and if you have any follow up questions. You may reenter the question queue.
Operator: For the benefit of all participants on today's call, please limit yourselves to two questions. And if you have any follow-up questions, you may reenter the question queue.
Amy: If you ask your questions in Chinese please review them anyways.
Operator: If you ask your questions in Chinese, please repeat them in English.
Sean Lee: Today's first question comes from Sean Lee.
Ming Sung Lee: Today's first question comes from Ming Sung Lee with B of A. Please go ahead. Thank you, James, Tien-Cheng, and Leo. Congrats for the first quarter results and also your launch of Gen7 Robotics product. So I have one question. As you mentioned, 2025 is a year of scaling up. How should we assess your progress throughout this year? Is there any color or pipeline for 2025?
Speaker Change: With Bofa. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Jim's Tianjin and.
Speaker Change: Congrats.
Speaker Change: First quarter results.
Speaker Change: Also your lunch of Gen seven robot taxi product.
Speaker Change: One question.
Speaker Change: As you mention 2025.
Speaker Change: We're also scaling up.
Speaker Change: Should we understand your progress through.
Speaker Change: This year is there any color or pipeline for 2026.
Speaker Change: Okay.
James: I'll take this question this is James.
James Peng: I'll take this question. This is James. We actually have a very clear pipeline for the Gen 7 RoboTaxi mass production. As I mentioned, this remains to be our main focus for this year. J7 will enter mass production for the second quarter and thereby bring in the total number of our fleet size up to 1,000 vehicles by year-end. In addition, the large-scale deployment will ramp up gradually throughout the second half of the year.
Speaker Change: We actually have.
Speaker Change: Very clear pipeline for the Gen seven robo taxi mass production.
Speaker Change: This will as I mentioned this remains to be our main focus for this year.
Speaker Change: We expect.
Speaker Change: Gen seven will enter mass production for the second quarter and thereby bringing.
Speaker Change: The total number of our fleet size up to 1000 vehicles by year end.
Speaker Change: In addition, the large scale deployment will ramp up gradually throughout the second half of the year.
Speaker Change: We are especially.
James Peng: We are especially working on the following three areas to ensure a quick ramp up. First, we are working very closely with OEM partners, such as Toyota, GAC, and BAIC, for the mass production across the component sourcing, pre-installment, and the final assembly, thereby ensuring that each Robotaxi meets the highest industrial standards of quality and safety. The second thing we're working on is our agile and flexible approach to sourcing the key components allows us to rapidly adapt to the changing demand, ensuring our stable supply chains and supporting the efficient execution of our mass production plan. Lastly, our years of collaborations with the central and local governments have established a proven track record.
Speaker Change: Working on the following three areas to ensure a quick ramp up.
Speaker Change: First we are closely working very closely with our OEM partners, such as Toyota Casey and Bac for the mass production across the component sourcing pre installment and the final assembly.
Speaker Change: Thereby ensuring that each robo taxi meets the highest industrial standards of quality and safety.
Speaker Change: Thank you. This thing we're working on is.
Speaker Change: Our agile and flexible approach to sourcing the key components allows us to rapidly adapt to the changing demand.
Speaker Change: Ensuring our stable supply chain and supporting the efficient execution of.
Speaker Change: Our mass production plants.
Speaker Change: Lastly, our years of collaborations with the central and local governments have established a proven track record.
Speaker Change: Of our superior safety level and the operational capability.
James Peng: of our superior safety level and operational capability. This enhances our credibility and positions us to secure the required licenses. paving the way for commercial deployment of our Gen7 RoboTaxi. with aforementioned three things that we are working on. We will focus on reinforcing these critical foundations to realize robust growth momentum of our flea size. ensuring a scalable and sustainable expansion.
Speaker Change: This enhance our credibility and positions us to secure the required.
Speaker Change: Licenses.
Speaker Change: Paving the way for commercial deployment of our Gen seven global taxes.
Speaker Change: With the aforementioned three things.
Speaker Change: Things that we're working on.
Speaker Change: We will focus on reinforcing this critical foundations to realized robust growth momentum of our fleet size.
Speaker Change: Ensuring a scalable and a sustainable expansion.
Speaker Change: As for year 2026, I think our scale up will be even more accelerated.
James Peng: As for year 2026, I think our scale-up will be even more accelerated. We will produce more autonomous driving vehicles and then deploy them in China and also the international market.
Speaker Change: We will produce more autonomous driving vehicles, and then deploy them in China and also the international markets.
Speaker Change: With this back to the operator.
Operator: With this, back to the operator. Thank you.
Speaker Change: Thank you and our next question today comes from things song Goldman Sachs. Please go ahead.
Ting Song: And our next question today comes from Ting Song at Goldman Sachs. Please go ahead. Thank you. Congratulations on the results. I have two questions. And the first one is, while you emphasize China's first strategy last quarter, we have now seen some progress on global markets. I'll agree more on your involving global. and to what extent does the China market remain a core focus on advocacy?
Speaker Change: Thank you congratulations on the results I have two.
Speaker Change: Two questions and the first one is Oh Wow, you emphasize China strategy last quarter, we have now seen some progress on global market at this time.
Speaker Change: Oh great.
Speaker Change: Involving global strategy and to what extent does the China market with my phone.
Speaker Change: At this stage.
Speaker Change: Yes.
Speaker Change: Sure. This is James again, I think I'll take this one.
James Peng: This is James again. I think I'll take this one. As I mentioned in my prepared remark, Pony.ai's mission has always been autonomous mobility everywhere. While we currently prioritize the China market, given its relatively mature regulatory environment, We believe our established ecosystem, technological advancement and the scaled operation in China have empowered us to enter new markets with proven capabilities, experiences, and proven business models. At this stage, we are aiming for markets with strong mobility demand, advanced infrastructure, and welcoming regulations. While the commercialization of these international markets is still at an early stage. We relentlessly work hand-in-hand with our global partners.
Speaker Change: As I mentioned in my prepared remark.
Speaker Change: <unk> mission has always been.
Speaker Change: Panamax mobility everywhere.
Speaker Change: While we currently prioritize the China market, giving its relatively mature regulatory environment.
Speaker Change: We believe our established ecosystem technology advancement and the scale of the operation in China.
Speaker Change: Have empowered us to enter new markets with proven capabilities.
Speaker Change: Clearances.
Speaker Change: And <unk>.
Speaker Change: Proven business models.
Speaker Change: At this stage, we are aiming for markets with strong mobility demand advanced infrastructure and welcoming regulations.
Speaker Change: While the commercialization of <unk>.
Speaker Change: This international markets is still at early stage.
Speaker Change: We relentlessly worked hand in hand, with our global partners.
Speaker Change: To showcase the technology readiness.
James Peng: to showcase the technology readiness. Move forward, local commercial driverless regulations. build momentum for public acceptance. and generate revenues along the course. This approach actually mirrors our achievements that we have already established in the tier one cities in China over the recent years. which we believe our successful track record in China will also help foster greater confidence for this new market. Recently, we have formed strategic partnerships with key global players. One of them is Uber, with plans to launch our robo-taxi service on their platform, starting in a key market in the Middle East this year, and expanding to other international markets.
Speaker Change: Moving forward local commercial driverless regulations.
Speaker Change: Build momentum for public acceptance.
Speaker Change: And generate revenues along the course.
Speaker Change: This approach actually mirrors our achievements.
That we have already established in the tier one cities in China over the recent years.
Speaker Change: Which we believe our successful track record in China will also help foster greater confidence for this new market.
Speaker Change: Recently, we have formed strategic partnerships with key global players one of them is luber with plans to launch our robo taxi service on their platform starting in a key market in the middle East this year and expanding to other international.
Speaker Change: Market.
Speaker Change: Another partner is comfort outgrow one of Singapore's largest transport companies operating across 13 countries, including Europe, China and Australia.
James Peng: Another partner is Comfort Agro, one of Singapore's largest transport companies operating across 13 countries, including Europe, China and Australia. We also continue to make regulatory and testing progress globally. having secured an L4 robo-taxi testing permit from Luxembourg and also initiated road testing in Seoul's Gangnam district in South Korea. These successes have provided us with valuable experience as we explore. future opportunities beyond the China market.
Speaker Change: We also continue to make a regulatory and testing progress globally.
Speaker Change: Having secured alpha robo taxi testing permit from Luxembourg, and also initiated road testing in self scan and district in South Korea.
Speaker Change: These successes have provided us with valuable experience as we explore.
Speaker Change: Future opportunities beyond the China market.
Speaker Change: With this back to the operator.
Operator: With this, back to the operator. Thank you.
Speaker Change: Thank you.
Speaker Change: A quick question.
Leo Wang: And my second question... Pleased to see you. My second question is, you deliver very impressive revenue growth in RoboTaxi. What factors are driving behind this quarter, and do you believe this is sustainable in the upcoming?
Speaker Change: Please proceed.
Speaker Change: Yes.
Speaker Change: Okay. My second question is on <unk>.
Speaker Change: Valerie.
Speaker Change: Revenue growth in global taxi with Baxter without fighting behind this this quarter.
Speaker Change: Believe this is sustainable in the upcoming quarters.
Leo: Yes. This is Leo and I will take this question.
Leo Wang: Yeah, this is Leo, and I'll take this question. So the revenue growth in RoboTaxi segment was driven by both fair charging and project-based engineering solution services. with fair charging revenues achieving at a much faster growth rate. increasing by roughly 800% year-over-year. The strong growth rate was attributed to the expansion of our public-facing fair charging robot taxi operations in Tier 1 cities in China. We also optimized our operations to cater to diverse user groups such as interactive reward features.
Leo: So the revenue growth in Robo taxi segment was driven by both fair charging and project based engineering solution services.
Leo: With fair charging revenues, achieving at a much faster growth rate <unk>.
Leo: Increasing by roughly 800% year over year.
Leo: Our strong growth rate was attributed to the expansion of our public facing fair charging and robo taxi operations in tier one cities in China.
Leo: We also optimized our operations to cater to diverse user group such as interactive rewards features.
Leo: I would also like to take this opportunity to explain our robo taxi revenue structure.
Leo Wang: I would also like to take this opportunity to explain our RoboTaxi revenue structure. Our revenue are currently generated from two main streams. The first stream consists of engineering solution services. which are recognized upon the achievement of Project Milestone. Hence, this is project-based and could fluctuate among quarters. The second stream is recurring revenue, primarily from our virtual driver operations. such as our RoboTaxi fare charging service. while the project-based revenues currently make a large portion in our total RoboTaxi revenue. We believe the non-recurring revenues we are generating from partners such as ride-hailing platforms, OEMs and other parties are very critical to enhance and advance our recurring revenue streams. These collaborations also further pave the way for a robust long-term monetization model.
Leo: Our revenue are currently generated from two main streams.
Leo: The first stream consists of engineering solution services, which are recognized upon the achievement of project milestones.
Leo: Hence this is project based and it could fluctuate among quarters.
Leo: The second stream is recurring revenue primarily from our virtual charter operations, such such as our Robo taxi fair charging services.
Leo: While the project based revenues currently make a larger portion in our total robot taxi revenue.
Leo: We believe the non recurring revenues, we are generating from partners such as ride hailing platforms Oems and other parties are very critical to enhance and advance our recurring revenue stream.
Leo: These collaborations also further paved the way for a robust long term monetization model.
Leo: As a result, we anticipate some natural volatility in revenues from quarter to quarter in this segment.
Leo Wang: As a result, we anticipate some natural volatility in revenues from quarter to quarter in this segment. That being said, we will gradually reduce financial fluctuations and are very confident to deliver a strong growth trajectory in the long term.
Leo: That being said, we will gradually reduce financial fluctuations and are very confident to deliver a strong growth trajectory in the long term.
Speaker Change: I'll get back to the operator.
Operator: I'll get get back to the Thank you.
Leo: Okay.
Speaker Change: Thank you and our next question comes from BMO with Deutsche Bank. Please go ahead.
Ben Wong: And our next question comes from Ben Wong with Deutsche Bank. Please go ahead. Thank you for taking my question.
Speaker Change: Thank you for taking my question My small polo technology perspective, you mentioned that in the ATK pricing, what the kind of dramatic.
Tian Cheng Lou: My small for a technology perspective, you mentioned that in the ADK pricing was declined dramatic. Did you need to upgrade your software to fulfill this ADK cost reduction? In particular, what's the improvements you're doing for the computing power? You also mentioned that you actually were declined 48% of the cost for computing power. Thank you.
Speaker Change: Should you need to upgrade your software.
Speaker Change: Fulfill this SDK cost reduction in particular.
Speaker Change: The improvement between Fuller computing power you also mentioned that you're actually with the kind of 40% cost per computing power. Thank you.
Speaker Change: Thank you I will take this question.
Speaker Change: So this is tinto before.
Tian Cheng Lou: I will take this question. Before I answer your question, I would like to say that we believe in the field of upon-driving technology. Pony.ai is a point to represent China's leading company in embracing the deep-seated moment. so by optimizing our Pony world and enhancing engineering capabilities. So we have a desire to cost-effective hardware and software systems. This enables us to significantly improve inference performance while reducing associated cost, even with autogrid SoC and the lower precision lidar sensors. So for instance, the online Pony world has effectively improved computing power efficiency by three times through AI-influenced optimization, auto-distillation, and other innovations.
Speaker Change: Before I answer your question I would like to say that we believe in the field of driving a technology Potently AI is point to represent China's leading companies increasingly seek moment.
Speaker Change: So by optimization of optimizing our Pone award and enhancing engineering capabilities.
Speaker Change: We'll have a designer coffee factory hardware software et cetera.
Speaker Change: This enables us to significantly improve influence performance, while reducing associated cost, even with auto grid apathy and the lower precision lidar sensors.
Speaker Change: So for instance.
Speaker Change: <unk> had effectively improved computing power efficiency by three times through AI input authorization.
Speaker Change: Installation and other innovations.
Speaker Change: Significantly underperformed the broader <unk> industry.
Tian Cheng Lou: significantly outperformed a broader airport industry. As a result, we are able to adopt more cost-efficient computing power with a total capacity of 1,016 toffs. compared with industry pairs typically range from 2,000 to 5,000 tons. In terms of inference computing, we have implemented numerous optimizations, such as optimizing operators in the AI model, increasing computational parallelism, and improving model memory efficiency to enhance inference performance. So all these efforts help us to improve cost efficiency without giving up performance. proving that we are able to realize the cost-effective and scale L4 drive-based autonomous driving. Thank you. I will get back to the op- Thank you.
Speaker Change: As a result, we're able to adopt more cost efficient company power with a total capacity of 1000 fixing pump.
Speaker Change: Compared with industry peers typically around from 2000 to 5000 pounds.
Speaker Change: In terms of the influence of computing.
Speaker Change: We have implemented numerous operations such as optimization optimizing operators.
Speaker Change: Model, creating.
Speaker Change: Creating competition of parallelism, and improving model memory efficiency to enhancing performance.
Speaker Change: All of these efforts help us to improve cost efficiency without give our performance.
Speaker Change: Proving that we're able to realize the cost effectively and at scale and our four drivers of driving.
Speaker Change: Thank you I will get back to the operator.
Speaker Change: Thank you and our next.
Speaker Change: Next question today comes from Julien.
Tian Cheng Lou: And our next question today comes from Chui-Young Lee with Hightower Securities. Please go ahead. Thank you for taking my question. So, congrats on your expansion in RoboTaxi service. We noticed that the Ministry of Industry and Information Technology of China has recently issued some regulatory requirements regarding driver assist. So I just wonder that could this potentially have an impact on Pony.ai?
Speaker Change: Hunter Securities. Please go ahead.
Speaker Change: Thank you for taking my question. So congrats on that expansion Robo taxi services.
Speaker Change: We notice that the ministry of industry and information technology of China.
Speaker Change: Any issue.
Speaker Change: The regulatory requirement.
Speaker Change: Adding drivers so I just wonder could this potentially have an impact.
Speaker Change: Thank you.
Speaker Change: Yes. This is <unk> I will take this one.
Tian Cheng Lou: Oh yeah, this is Tian Chen, I will take this one. So I think a lot of people mistakenly equate L2, driver assist, with L4, autonomous driving. Recently, the Ministry of Industry and Information Technology, MRIT, issued a notice clearly stating that L2 is not equal to L1. The key requirements from MRIT include, first, the manufacturers or solution providers must avoid using misleading terms, such as autonomous driving, intelligent driving, when promoting L2 driver-assist systems. Second, manufacturing solution providers are required to clearly define the capabilities and safety measures of driver-assisted systems. Terms like zero takeover or hands off must not be used.
Speaker Change: So I think a lot of people mistakenly it correct.
Speaker Change: Al to drop assets with airport will drive it.
Speaker Change: Recently, the ministry of industry and information technology.
Speaker Change: Issued a notice clearly state that <unk> helpful.
Speaker Change: The key requirement from <unk> include first the.
Speaker Change: Factors, our traditional providers mark avoid using misleading in terms such as auto driving intelligent driving when Brent promoting <unk> driver.
Speaker Change: Sure.
Speaker Change: Second manufacturer and provider are required to clear defy the capability the 50 megawatts of driver Ics for fiserv.
Speaker Change: Current lag of aerotech over our hands off mark not be used.
Speaker Change: And the responsibility of the driver for continuous more into it must be emphasized.
Tian Cheng Lou: and the responsibility of the driver for continuous monitoring must be emphasized. So we believe this is a clear beneficial for Pony.ai as it helps foster a comprehensive and clear understanding of distinctions between L2 and L4 for the public. That's also the reason why we consistently emphasize that L2 and L4 are fundamentally different in value add to the customer. Be more specifically, only L4 can truly fulfill user's need in the situation where they are looking for relaxation or even wish to take a nap while autonomous driving system is on.
Speaker Change: So we believe this is a clear beneficial for Pony AI as it helped foster a comprehensive and a clear understanding of distinction between <unk> and <unk> for the public.
Speaker Change: That's also the reason why we consistently emphasize that <unk> and therefore, <unk> and <unk> are fundamentally different in value add to the customer the more specifically only <unk> can truly fulfill our users' need in a situation where they are looking for black relaxation, or Eva which take a nap wow.
Speaker Change: <unk> system at all.
Speaker Change: So I would like to go into more detail about the tech packing non Nikola difference between <unk> and our core systems.
Tian Cheng Lou: So I would like to go into more detail about the taxidermic non-equivalent difference between L2 and L4 systems. So L2 systems widely use imitation learning, the AI drivers learn by copying human behavior from real-world driving data. The limitation of imitation learning is that AI driver cannot understand the reasoning behind the driving behavior. As a result, it is not safe enough to handle ever-changing traffic scenarios. For L4 system, we use the reinforcement learning and our generative PonyWord. So under PonyWord, our virtual driver teaches itself through a large amount of generative data. This allows our virtual drivers to understand why, by analyzing the outcome of every action, teach them to make smarter decisions in different scenarios, and eventually surpass the safety of human drivers.
Speaker Change: Throughout this and widely used imitation learning to AI drivers learned by copying human behavior from real world driving data.
Speaker Change: The limitation of imitation learning that driver cannot understand originally behind the driving behavior.
Speaker Change: As a result.
Speaker Change: It is now safe enough to handle ever trend in traffic scenarios.
Speaker Change: <unk> will use the reinforced maloney our agenda to appoint a word so on the pony word or virtual gravity itself through a larger amount of generative data.
Speaker Change: This allowed our pone or virtual driver to understand why buy analysis in the outcome of action to treat them to make smarter decisions in different scenarios and eventually surpass the safety of human driver.
Speaker Change: So overtime for our virtual driver trained under Pony were developed with advanced skills needed for complex tasks, such as lowering navigating urban areas handily unpredictable traffic scenarios are safely operating for 500000 hours without any human intervention.
Tian Cheng Lou: Over time, the over-virtual driver trained under Pony World developed advanced skills needed for complex tasks, such as multi-navigating urban areas, handling unpredictable traffic scenarios, or safely operating for 500,000 hours without any equipment. More importantly, the key compatible edge differs significantly between the two approaches. So imitation learning requires a large amount of data, while reinforcement learning relies heavily on AI model capability. This underlying distinction creates a considerable barrier, making it challenging to transit from one to another. It basically requires companies to start over and build the whole team of Excelite. which means it cannot be simply accelerated through prior experience.
Speaker Change: More importantly, the key competitive at different significantly between the two approaches.
Speaker Change: So imitation learning required larger mom data well, while reinforcement learning relies heavily on mobile capabilities.
Speaker Change: This underlying distinction creates a considerable barrier, making it challenging to transit from one to another.
Speaker Change: Typically require a company to start over and build the whole team from exercise of extracts.
Speaker Change: Which means that cannot be simply authority ratio through apparel et cetera.
Speaker Change: Yes. Thank you I'll go back to the operator.
Operator: Thank you. I will go back to the operator.
Speaker Change: Thank you and our next question comes from Saree <unk> with Jefferies. Please go ahead.
Xiaoyulei: Thank you. And our next question comes from Xiaoyulei with Jeffries. Please go ahead.
Speaker Change: Uh huh.
Speaker Change: Okay.
Speaker Change: Hi, Thanks for taking my question. My question is regarding the U S. China tariff issue, which appears to be easing at the moment.
Leo Wang: Hi, thanks for taking my question. My question is regarding the U.S.-China tariff issue, which appears to be easing at the moment. But I'm still wondering, will it have – do have any potential negative impact on the operations? How many materials are you sourced from the overseas market? Thank you.
Speaker Change: I'm still wondering well.
Speaker Change: Have you had any potential negative impact on the operations how many materials.
Speaker Change: So from the OSV market.
Leo: Thank you and this is Leo I'll take this question.
Leo Wang: And this is Leo. I'll take this question. We believe the potential impact from the terrorist issue will be very minimal to our operation. First, the majority of our supply chain is domestically sourced. Second, over the past few quarters, we have enhanced our supply chain resilience in response to the evolving geopolitical landscape. This includes diversifying suppliers and also increasing inventories when necessary. As a result, we are well prepared to manage this. In addition, I would like to highlight that our Gen 7 mass production plan has also been reflected with these assumptions and also uncertainty. Therefore, we are confident that our full-year target of deploying 1,000 unit fleet size is on track and will not be affected by the changing trade environment.
Speaker Change: We believe the potential impact from the tariffs issue will be very minimal to our operation.
Speaker Change: First the majority of our supply chain is domestically sourced.
Speaker Change: Over the past few quarters, we have enhanced our supply chain resilience in response to the evolving geopolitical landscape.
Speaker Change: This includes diversifying suppliers and also increasing inventories where necessary.
Speaker Change: As a result, we are well prepared to manage this risk.
Speaker Change: In addition, I would like to highlight that our Gen. Seven mass production plan has also been reflected with these assumptions and also uncertainties. Therefore, we are confident that our full year target of deploying.
Speaker Change: 1000 unit fleet size is on track and will not be affected by the changing trade environment.
Speaker Change: I will now cut back to the operator.
Leo Wang: I will now get back to the operation. Thank you.
Speaker Change: Thank you <unk>.
Speaker Change: A question and answer session I would like to turn the conference back over to management for closing remarks.
Operator: This concludes our question and answer session. I'd like to turn the conference back over to management for closing remarks. Thank you once again for joining us today. If you have any further questions... please feel free to contact our IR team. We look forward to speaking with you in the next quarter. Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Speaker Change: Thank you once again for joining us today.
Speaker Change: If you have any further questions. Please.
Speaker Change: Please feel free to contact our IR team.
Speaker Change: We look forward to speaking with you in the next quarter.
Speaker Change: Thank you. This concludes today's conference call.
Speaker Change: Thank you all for attending today's presentation.
Speaker Change: You may now disconnect your lines and have a wonderful day.