CBAK Energy Technology, Inc.

Good day, ladies and gentlemen. Thank you for standing by and welcome to CBAK Energy Technology second quarter and first half of 2021 Earnings Conference Call. We're currently all participants are in the listen-only mode. Later, we will conduct a question and answer session and instructions will follow at a time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now, I'll turn the call over to Terry Lee, Investor Relations Director of CBAK Energy. Mr. Lee, please proceed.

Thank you, operator, and hello, everyone. Welcome to CBAK Energy's second quarter and first half of 2021 earnings conference call. We released results earlier today. The press release is available on the company's IR website at ir.cbac.com.cn as well as from Newswire Services. A relay of this call will also be available in a few hours on our IR website. On the call with me today are Yunfei Li, who is our Chief Executive Officer, Mrs. Yuna Pei, who is our Chief Financial Officer, Mr. Xiu Juntian, our General Engineer, and Mr. Ding, our Interpreter. Before we continue, Please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Targeted Securities Litigation Reform Act of 1995. Forward-looking statements invoke enduring risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public firings with the SEC. The company doesn't assume any obligation to update any forward-looking statements except as required under applicable laws. Also, please note that unless otherwise stated, all figures mentioned during the conference call are in U.S. storage. With that, let me now turn the call over to our CEO, Mr. Yunfei Li. Mr. Li will speak in Chinese and I will translate his comments in English. Go ahead, Mr. Li. Thank you. Hello, everyone. Thank you and hello everyone. Thank you for joining our earnings conference call today. 2021

11,530 million yuan, respectively, increased by 27% and 33%. This not only reflects the strong market attraction of our leading electronic products in the industry, but also proves our effective strategic execution ability. In the first half of this year, our net profit reached 19.2% and increased by 16.6%.

We are very pleased with our solid financial performance for the first half of 2021, thanks to the robust sales growth for uninterruptible power supply batteries. Net revenues grew to $5.9 million in the second quarter and $15.3 million in the first half of 2021, up 27% and 33% year-over-year respectively. Reflecting the strong market of Pure for our industry-leading beta-reproducts and our effective business strategy execution, our growth margin increased by 16.6% from the prior year to 19.2% in the first half of this year.

In the first half of this year, we will continue to use advanced research efforts to create new products, and further expand our product range. Through the support of our customers, we successfully carry out business plans. For example, the expansion of production capacity. In addition, we carry out strategic control on the supply chain to achieve huge co-efficiency. Now, I would like to share with you more information about the recent business progress. These progress will further promote our early realization of becoming China's leading innovative energy solution program.

During the first half of 2021, we continue to leverage our advanced research and development capabilities to innovate our products, which then help us broaden product applications. With additional capital raised from new financing, we are well-positioned to execute our business plans such as capacity expansion, Moreover, we made a strategic consolidation across the supply chain for great synergies. I would like now to share with you more information on these recent developments, which have furthered our mission to become a leading innovative energy storage solution provider and lithium-ion battery producer in China. 首先,我来谈一下这段时间公司在产品创新方面取得的强劲进展与未来的发展计划。 First, let me dive into the remarkable strides that we have made for product innovations during this period and our future development plans.

We have successfully developed a 26650 formative battery that can be used in a super-low temperature environment. This formative battery is designed to be used in a super-low temperature environment from below 40 degrees Celsius to below 50 degrees Celsius, and can be used at room temperature

We have successfully developed a special 2665O battery, especially for ultra-low temperature applications. This new battery is designed to operate in temperatures as low as minus 40 to minus 50 degrees Celsius and discharge a maximum C rate of 63 at room temperature. On top of positive test performance results, the special 26650 battery is highly attractive for products used in extremely low temperature conditions, such as in China's northern region, harsh weather conditions, as well as for the aviation and aerospace industries. At this point, our clients have all given very positive initial responses. and we are anticipating mass production of the special 26650 battery at the end of this year, as well as expecting its meaningful contribution to production volume in coming years.

Meanwhile, we are actively developing a series of large cylindrical batteries for the LEB market.

The batteries for light electric vehicles have a capacity of nearly four times that of regular batteries and 20% lower in cost, making this product a perfect solution for the LEV market. We aim to be a major battery supplier for top LEV manufacturers and expect growing traction among an expanding customer base with our high price-to-performance ratios and strong ability to adapt to customer needs.

As our battery product quality is good and reliable, the company can easily increase the use of products. Earlier this year, we started to cooperate with Chengdu Yabi Xinyuan Car Co., Ltd. to jointly develop a battery replacement project for food delivery and logistics industry and a four-stage power supply project for traffic lights. Delivery service has become an indispensable part of modern life. Our battery replacement project is aimed at helping us solve the problem of battery overcharging, charging failure, and charging danger. And the non-stopping power supply project in traffic is used to ensure that the traffic lights in the middle of the road are maintained and the road safety is ensured. At present, the cooperation with Yajun is very smooth. This year, we will report this kind of

We were capable of broadening use scenarios by the support of our high-quality and dependable battery products. Earlier this year, we started cooperating with Chengdu Raja New Energy Automotive Technology Corporation to jointly develop a battery scrapping project for food delivery and the logistics industries, as well as an uninterruptible power supply project for traffic lines. as delivery services are becoming an increasingly indepensible part of life. The battery swapping project aims to provide solutions for delivery riders that suffer from more battery weight, as well as inconveniences and risks in charging. The UPS project for traffic lights, on the other hand, keeps roads safe by ensuring the traffic light stays on during power outages. So far, our cooperation with Raja went well and we will provide updates in the following quarters should there be any new progress.

In addition, the electric car market will also present a great opportunity. We are committed to enhancing energy, promoting product innovation, and continuously sharing, and building product development plans based on the market potential of new generation technology and clean energy. We have established a cooperative partner relationship in the development of hydrogen and lithium-ion batteries. These measures can help us maintain the industry advantage through technological innovation in the long term.

In addition, we also focus our R&D efforts on developing next-generation batteries to enable EVs faster acceleration and longer ranges in driving. The batteries will have lower loss rate and lower costs and present a huge opportunity in EV market. Our strong research and development capabilities are driven by continuous product innovation. Our product development roadmap is led by the new generation of technologies and market potential in the clean energy sector. We have established partnerships to develop hydrogen fuel cell and solid state batteries, and these initiatives will allow us to maintain the mid-long-term industry advantages through technological innovation. 展望未来,我们将继续扩大在国内的业务部级 Going ahead, we will continue expanding our operations in China and establish our foothold in the global market through an increased investment in R&D and the company's technical advantages in cylindrical batteries. Yeah.

In the ongoing growth of the target market, strategic production capacity expansion, continuous development of new products, and the increase of customer demand and orders, we are improving productivity. Currently, two major projects are under construction. The first project is the construction of a large-scale factory, mainly using products that can provide solutions. We will also raise RMB 50 million and 7.4 million yuan to increase the additional production line in Dalian Factory. The annual production capacity of the new production line is 0.4GW. It is expected to be completed by the end of 2021. At this time, the total production capacity of Dalian Factory will increase to 2GW. This expansion will allow the factory to produce 100,000 26650 batteries every day. The second project is to split into two stages of construction in Nanjing. The main one is the production products of Yiwei and RYY market. The first stage of the construction project is to occupy 10,000 square meters. We want to invest an additional 70 million RMB, about 11 million dollars, to build a production line. The initial production capacity is planned to be 0.7 GWh. Second, a strategic capacity expansion in the growing adjustable market.

With continued new product developments and increasing customer demand and orders, we are ramping up our production capacities. Two major projects are underway, the first being the target plant expansion, mainly for products used in energy storage sector. We plan to invest RMB 15 million, which is equivalent to USD 7.4 million, to add the additional product line in our target plant. The new production line has an annual capacity of 0.4 GWh and is expected to be completed by the end of 2021. The total annual capacity in Dalian plant will increase to 2 GWh in 2021. This expansion allows the plant to produce an additional 100,000 units of model 26650 batteries per day. Nanjing plant will be established in two phases to mainly produce products for the EV and LEV market. In phase one, we plan to invest a total of RMB 70 million, which is around USD 11 million in a 10,000 square meter space to develop a production line with an initial capacity of 0.7 gigawatt hour. Both projects are on the right track of expansion, and we are pleased with the progress. The USD 70 million we raised in February supports our business expansion strategies and accelerates the product to go to the market.

the share of 81.56% of the global limited company. HaiChuang LiJian is one of the major suppliers of China's leading 3-D materials and 3-D authentic materials, and is also one of the main suppliers of medium-sized energy. 40% of LiJian's production cost comes from authentic materials, so we believe that this purchase can help us achieve stable supply of raw materials, so that the company's business structure can be strategically supplemented. and want to support companies to produce and expand, and at the same time release the potential of capital control. Through the creation of a creative ecological system, further supplement and expand the business version of energy-saving energy. In addition, the acquisition of Haicheng Co., Ltd. can also further improve the multi-factor product strategy of the company. Through long-term tie-in to maintain market competitiveness, 3G transactions and partial exchange conditions need to be satisfied.

Next, through a strategic consolidation across the industry supply chain, we are pursuing remarkable synergies which will further drive the company's future growth and expansion. As a part of this strategy, we decided to buy 81.56% of HIT's equity interest via our subsidiary, Dalian CBAK Power Battery Corporation. Hytrance is a leading developer and manufacturer of ternary precursors and castle materials in China, and is one of Seabed Energy's key suppliers. In the production of lithium-ion batteries, the cost of castle materials accounts for about 40% of the total cost. So we believe this acquisition for a reliable raw material supply will place Hytrance as a strategic and complementary addition to fuel the continuous expansion of Seabag's production and unlock potential for cost control. It will complement Seabag Energy's business portfolio, forming an innovative ecosystem across all our businesses. This move will also advance the company in diversifying product strategy and support continued improvement iterations to maintain our market competitiveness. This transaction is still subject to certain closing conditions and is expected to complete in the third quarter of 2021.

Our creative ability to promote the promotion of products, and to promote growth in the target market through new products, we are confident that by expanding the new business field, we can better serve our customers. By issuing core advantages and actively deploying new products, we are very confident that SMEs have the ability to grasp the rapid growth of the battery market.

Above all, our goal is to build an innovative ecosystem-based solution to power electric storage facilities and electric vehicles. We are moving forward to drive profitable growth as we increase our investments in expanding our capacities and R&D capabilities. Our innovations further strengthen our existing product portfolio and drives growth in our addressable market with new products. We are confident in taking our business into new areas that will better serve our customers. By leveraging our core competencies and deploying new products, we are well-positioned to ensure rapid growth in the battery market. Now let me turn the call over to our CFO, Yuna Pei, who will provide details on our financial performance.

Thank you, Mr. Rinfei Li and Terry, and thank you everyone for joining our call today. I will now go over our key financial results for the second quarter and first half of 2021. For the full details of our financial results, please refer to our earnings press release. Our solid financial performance demonstrated strong market resonance to our high-quality quality and reliable batteries. Compared to the same period of last year, our net revenues increased 27% year-over-year to $5.9 million in the second quarter of 2021 and 33% to $15.3 million primarily driven by growing demand in batteries and our ability for an interruptible supply. Fueled by the increase in the sales volume, our cost of revenues grew to $4.8 million in the second quarter and $12.4 million in the first half, up 6% and 10% year-over-year, respectively. Compared to the revenue growth, we still generated positive operating leverage of 21% and 23%, respectively, reinforcing our confidence in our growth strategy. Driven by higher sales volume and cost management efforts, our profitability also increased. Growth profit was $1.1 million in the second quarter and $2.9 million in the first half, an increase of 1,148% and 899% year-over-year respectively. Also, on a year-over-year basis, our growth margin also increased by 1,670 basis points percent in the second quarter and 1,660 basis points to 19.2 percent in the first half of the year. The margin increase is primarily driven by higher utilization of plant capacity and optimization of manufacturing engineering. Total operating expenses were $3.8 million in the second quarter, and $5.7 million in the first half of the year increased 283% and 79% from the previous year, respectively. We increased our research and development expenses by $100,000. 71% year-over-year to $1 million in the second quarter and 124% to $1.5 million in the first half of the year. The increase was primarily due to the expiration of Chinese government's COVID-19 relief policy aimed to evaluate corporations' social insurance burdens and the increase in talents in RMD. In addition to that, the company increased the research expenditure into new model of batteries for live electric vehicles, electric vehicles and batteries for ultra-low temperature environment. The sales and marketing expenses were $0.5 million in the second quarter and $0.8 million in the first half an increase of 435% and 288% year over year respectively. Our general and administrative expenses were $2.3 million in the second quarter and $3.7 million in the fourth half, up 209% and 96% respectively. Apart from the aforementioned exploration of Chinese government's COVID-19 release policy, the increase in GMA expenses was also a result of increased employees of the new plant construction in 2019. As the 1961 project and additional product line in Dalian will be completed and in production by Q4 of 2021, We expect to ramp up the production with customer orders and the generated sales volumes. We continue to manage and improve customer relationship and the quality of our customers. Our recovery of sales flow accounts was 0.1 million in the second quarter of 2021. compared to 0.2 million in the same period of 2020. In the first half of 2021, the recovery of doubtful accounts was 0.3 million, compared with a prevision for doubtful accounts of 0.4 million in the previous year. Our change to flat value of volume was $5.8 million in the second quarter, $34.2 million in the first half year compared to both meals in the prior year. Supported by rapid growth in revenue, improved growth margin, the positive change in value of volume, we were able to generate mass income of $2.7 million in the second quarter and $32.3 million in the first half. compared to net loss of $1.2 million when there's $3.6 million in the same period of 2020. As C.J. Lee mentioned earlier, in February, we successfully raised $17 million in direct offering of ordinary shares to finance our business plan and working capital. As of June 13, 2021, Our cash and cash equivalents reached $33.3 million compared to $11.7 million as of December 31, 2020. With strong cash position and an improvement in financial results, we remain confident that we are on the right path for accelerated growth. Let's conclude our prepared remarks. Let's now open the call for questions. Operator, please go ahead.

Thank you. Ladies and gentlemen, if you wish to ask a question, please press star on the bottom left of your telephone keypad, followed by the number 1. If you wish to cancel your request, please press a pound or hash key. Please stand by while we compare the question and answer roster. Once again, there's still one full question. Our first question comes from the line of Carl Berkenfield from American Trust. Please go ahead.

Good evening, management there. Does CB8K business involve sensitive technology? that might cause the Chinese government to terminate its export listing status in the U.S. And I have a few more questions to ask.

Thank you. Thanks for the question. And I'm translating your question to our management issues at this moment. Thank you. Now, our gentleman has a question. For us, Chinese energy companies, is there any sensitive technology involved in the development of this business? Especially, the Chinese government may cause or not allow some sensitive technology output in the relationship with the U.S. in terms of export. Thank you. Mr. Tian, please go ahead, and I will add to it later.

Okay, thank you. The technology we are working on now is in the field of new energy and battery.

In this field, the technology of the whole world is public, and the Chinese government is not closed to this technology. Thanks very much for the answering. And actually, as the director mentioned, actually what we are dealing with is the industry of the new energy.

In this term, all the relevant technologies open to the public around the world and actually these there's nothing related to the sensitive technologies and also on the other hand the Chinese government is giving the largest support to the development of the new energy and the relevant development of the business globally so we don't have to worry about any sensitivity to in terms of the technology. Thank you. And we will have another director to also add some more information for reference. Thank you.

Thank you for putting all my investors at ease. I have other questions here.

Just a moment because we have another manager to add more information in this term. OK, great. Thank you. Thank you.

Sorry, pressure. OK, great. Thank you. Sorry, pressure. OK, great. Thank you. Sorry, pressure. And also, additional information for your kind of reference, actually in August 11, the Chinese Central Committee, the Central Government issued a very important file. In this file, there are some several key points

are taken into the key considerations and the monitorings in terms of the cross-border business. They are like big data, fine tech, cloud computing, and the relevant business. And we have to say the new energy, what we are dealing with now, is not included in those businesses which are under very strict monitoring of the Chinese central government. So that's also additional information for our kind of reference to where you could totally be relieved from any government level monitoring or sensation.

Thank you. Thank you very much for putting us at ease here. Who are CBEX direct competitors, peers in each business segment? The battery materials, electric cars, LEVs, and batteries for ultra-low temperature applications.

Okay, thank you.

Both domestic and foreign. Domestic and foreign.

Domestic and foreign, okay. Thank you.

Mr. Tian, please answer this question.

Okay, I'll answer it briefly. Okay. The main business of our department is divided into several aspects. One aspect is the energy storage aspect. The other aspect is the electric travel, electric travel aspect. Including the ultra-low temperature, which we just mentioned, is another special application area. In these areas, I always say that you always help me translate. Okay, no problem. In terms of domestic production, we have one or two main competitors. For example, Shandong's Jinggong and Dongguan's Lila. These are our main competitors in this field. Okay, Dongguan and Lila. Yes. But if we compete with them, we still have a lot of exports. Thanks very much for your question. Our director is going to give you the answers from three main aspects. The first one is the storage energy.

as one of the key pathways for our business. The other one is also the transportation. And the third one is the ultra-low temperature. And our director just gave the answer for the first point, that is the storage energy. In terms of storage energy, domestically or globally, there are two competitors The two competitors are both from China. The first one is Shandong Jingong. The other one is Dongguan Lila. But though we have the two main competitors, but our output, which means our output or shipment, is larger than them in terms of quantity. And also, our business, the CBAK's business, is largely connected to the global market, and we have many Fortune 500 partners and customers and key accounts, for example, Schneider. So with the solid foundation of the global key accounts, we are surpassing the two main competitors, as I just mentioned, in terms of output and business. Thank you. This is the first one in terms of storage, energy storage. And we are going to share with you about point two. 您可以讲到下一点,谢谢。 OK, 下一点的话是电动出行这个领域。 那么我们这块主要涉足的话是LEV市场。 这个市场的话主要竞争对手有像新恒电源,还有天能超微。

And for the second one, that is about the power or electric power driven transportation.

that is many actually L.E.V. as we shared before and in this term globally or domestically there are two main competitors the first one is Xinheng the other one is Tianan Chaowei and also the two are actually local their business in China and comparing to them our more main competitiveness is that first one our products is more easy to use or to be installed because we are producing the cylindrical battery that is the lithium-ion phosphate. And comparing to the competitors' prismatic batteries, it is more easier to use or to be installed. And because we are using the lithium-ion phosphate and also its design, we are safer than the competitors' products. So our main competitiveness is flexibility and safety. Thank you. And we are moving on to the third point. 领导,您可以讲到下一点,谢谢。 Okay.

And 31 is the ultra-low temperature application. And our main or key markets is first one,

is the extreme cold areas in the American area and also the European area. And also the other key market is in the north part of China, which is very cold, especially in winter. So we are facing these main markets and also our technology developed by ourselves. We could say currently has no avarious competitors in this term, domestically or globally. Thank you.

Great. Now my next question and my last question is actually my next to last question is the CPAC has announced numerous business partnerships and investments in factories and new products. What is the capital expenditure required to meet the commitments in 2021? How much has CBAC invested so far? And how much does it plan to invest? What are the expected sales and revenues that they expect to get from this additional investment in their wealth?

Thank you. The central energy sector is rapidly developing and expanding its capacity, including the construction of new factories. Is it convenient for the leaders to share how much investment we have made in the new factories? How much investment do we plan to make in the future? And how much revenue can the construction and future investment of our new factories bring to us? Thank you. Please answer this question, Mr. Pei. Thank you, Mr. Pei. Okay. So far, we have invested about 100 million RMB in Nanjing and Dalian.

Then we expect that this year there will be a new investment of less than 500 million to 100 million RMB used in Nanjing. And thanks very much for the

clarify the explanation and as you may already heard from the previous introduction that we have put into the construction the plants in Nanjing and plants in Dalian cities and now we have invested almost 100 million RMB and we plan in this year to invest another around 50 million RMB to 100 million RMB and we expected the two factories are going to be put into the operation in the third or at least in the fourth quarter of this year and we expect to generate the revenue or profits in the next year in 2022 when the two factories capacity are put into the full usage

during a certain time of operation thank you okay my my final question is uh does the company have a plan to raise capital again and what's the estimated size of the raise and when will it be used and for what purpose thank you

Thank you. Okay, thank you.

The capital investment we are planning for the expansion of Nanjing 1st and Dalian Factory and the investment of mobile funds, we have enough funds. The source of this is the financing we are doing this year. The mid-term financing also satisfies our financing needs this year. Then we will evaluate the investment of this year's product situation, market acceptance, and all aspects to evaluate the investment of our Nanjing II project to determine the scale of the investment of the II project and the model of the product. Then this specific amount still needs to be evaluated after the investment of our Nanjing and Dalian I projects is reached. Okay, thank you.

And thanks very much for the detailed explanation in terms of the final question. And actually, as we mentioned, the Nanjing and Dalian plants is going to be put into the operation around the third and the fourth quarter of this year. That is going to be the fifth one plants. And with the fifth plants in Nanjing and Dalian are going to be put into the operation, And we could say currently, according to our calculation, the fund raised before have been enough to cover our phase two construction and operation in both Nanjing and Dalian. And we expect to do more analysis about the quality of our products, capacities, and also the acceptance of the market of our products manufactured from the new two new factories in Nanjing and Dalian and with all this data to be collected after two factories put into the operation we could understand that how the phase two in Nanjing's factory is going to be expanded and how much funds need to be raised and so basically we will need the two factories to be put into the operation and collect more information through the operation and give you all this data you are interested in. Thank you.

Thank you very much for supplying me with full disclosure and a concise description of your intentions.

Thank you. My pleasure. 好,非常感谢,非常感谢各位领导对于我们问刚才的所问的问题详细的解释以及精准的回答,非常感谢。 Thank you. Our next question comes from the line of Howard Yu from Aledon Capital. Please ask a question.

Okay.

Thanks very much for your question. And we have a question about that when reading the report issued that the CBAK have established a cooperation, a partnership with JSA by signing an agreement. And according to this agreement, it's going to be a three-year partnership to develop new products. And the question is about how much revenue could be generated through this cooperation and also if there is any further commitment in this agreement for the partnership, like the financial commitment. And third one is that in terms of the IP for the co-designed or developer products, who is going to be the owner of the IP? Thank you.

Mr. Tian, please answer this question. Okay.

Then for this form of this co-development of this model, it is now relatively hot, this model 46580, this model, then this model, it belongs to us for the battery end of this autonomous production power. Then this battery, we are not only facing Jianghuai, but also facing other car manufacturers. There will also be this Thanks very much for the direct answer for this question. And we first of all have to mention that

this cooperation with the GEC by CB8K is now on the right track of the R&D or development stage. But one thing we'd like to point out is that this cooperation is focusing on the development of a vehicle. And a vehicle, it generally needs at least two years for the R&D to be finished. And now we are on the right track and in the process of the R&D development. And also from the current progress, we say JSA is very satisfied with it. And also the product we are co-developing is also a hard product that is the 4680. And this product is, its IP is owned by us. And also this product is not going to be only to be supplied to JSA. It is also only going to be provided to other vehicle manufacturers and producers. And I believe that it will help us to generate the profits in the long run. And currently, we could see in conclusion the development or the partnership is on the right track. Thank you.

好的,非常感谢。我们第二个问题是,我们刚才这个听到我们公司将会去收购一家叫这个Hytrans的做上游礼店的这么一个公司。这家公司的规模和收入能简单介绍一下吗?然后订购以后,他们会整合进CBAK还是独立运作吗?谢谢。

Thanks very much for your question. And also from the previous introduction, we come to notice that CBAK is going to acquire a company called Hytrans, which is an upstream manufacturer for the lithium batteries. So would you like to share with us, if available, the skill or the revenue of this company, the Hytrans that we are going to acquire? and after acquisition merchant acquisition if high chance is going to be integrated into cba case who business map or it is going to operate on its own serve thank you uh

Okay. First of all, if HITRON is successful, then HITRON's entire management system, financial control system is managed by listed companies. But in terms of management, we have retained its management team and technical team to run its independent management team and technical team. As for the financial data, as we are still in the middle of the period, we expect to complete the period in the third quarter. We will share more detailed financial data with investors in the next quarter's press conference.

Thank you, Fizong. And thanks very much for Ms. Pei's very detailed explanation in this term for this question. First, that after Merchant Acquisition to be finished in terms of the general management and the finance and also the risk management of the HITRANS is going to be integrated into the CBA case who management and operation management scheme. But on the other hand, we are going to leave the HITRANS after Merchant Acquisition or certain independence in terms of the business development and the business operation that is going to be many administered by their previous technology team and management team for business and business operation. So that is going to be a good complimentary of our support and also their long years experience and technology accumulation. On the other hand, in terms of the financial and finance data, and because we are still in progress of finishing the exchange and the transaction with them. So I think we are going to share with you the detailed data and information in the next times meeting at a conference for your reference. Thank you.

Thank you.

Thank you. Our next question comes from the line of Laura Liu from Stone Street Group. Please ask your question.

Thank you, everyone. So my question is about the revenue growth for different business segments. So can you tell us more about a strategy for growth going forward? And also what's the rationale behind it? Is it going to be merger or launching new technologies?

Sorry, can I confirm with the last point, you mean the rationale of the strategy and the big quarter signal issue? I'm not quite catching up all the information, especially the last sentence. Thank you.

Yeah, sorry about that. Yeah, so what's the rationale behind that, the growth strategy? Because I saw the company will do some mergers and maybe potentially launching some new technology. So what is the major one between these and also behind the growth? Thank you.

Thanks for your clarification. Thank you. Or will we use the development of technology as the main line and main stream of our development? Please, Mr. Ken, reply to this question.

Thank you. We will ask Mr. Tian to answer this question and then Mr. Pei will add to it.

OK. Our enterprise has been deep-rooted for many years. Therefore, we will firmly use the technical route as the main development route of our company. first that uh because we will have another director to also answer your question and the first missed direct team share his answer to your question is that in the long run that is definitely

CBAK is going to be focusing on the technology-driven business, and especially for the batteries, new technologies, update, and development. We like the merger acquisition as kind of support. So this is our main strategy and rationale. And of course, we will have some niche markets, but because of time limit, I do not expand upon here. Thank you. Thank you, our other leaders. Okay.

To add on, our development, as Tianzong said, is based on the development of our battery technology. It is also a kind of introverted promotion. The reason why we acquired HaiChang is also based on the development needs of our battery business to integrate the key materials on the industrial chain. Therefore, the main force is still focused on the development of the battery industry. Thank you.

Thanks very much for the further explanation and added information. And also, because as we mentioned before, we are a technology-driven company, and it is also our main stream for the development. And also, the merchant acquisition, for example, the Haichuang, case is also because they are the ones that could help us to provide stable supply of the key materials for our batteries. It is of great importance strategically. So that's why we issued this merchant acquisition case. And so we could say this is not just a merchant acquisition. We are not just taking it as a driving force for our business. It is because it could add up to our technology-driven strategies to further strengthen our foundation in technology. Thank you.

Okay, great. Thank you. That's my question. Thank you.

Thank you.

Thank you. Our next question comes from Uzi Liu from Valuable Capital. Please go ahead.

Good evening. Good morning, everyone. I have a question about the EV and LEV market. At present, all major battery manufacturers are seeing their production capacity expansion, while CBAK just decided to return to the EV and LEV market. Is any sort of leg?

Hello? You can move on. Hello?

Hello.

Hello. Oh, sorry. Yeah, we can hear you. We heard that you're talking about the EV and EV, and there are also a lot of the players have been expanding their capacity. But on the other hand, maybe CBAK is just entering into this business, and then the signal lost.

Oh, okay. Let me repeat the question again. Thank you. At present, all major battery manufacturers are speeding up their production capacity expansion, while CDIK just decided to return to EV and LED market. Isn't it sort of late?

It looks like you disconnected from the call.

Hello?

Hello. Sorry for the signal issue.

OK. Let me answer the question again. Sorry, maybe the signal is not good.

No problem.

At present, all major battery manufacturers are speeding up their production capacity expansion, while CDAK just decided to return to the EV and LE market. Isn't it sort of late?

Or do you think it's possible for this person to type in his question automatically or what?

This is the audio operator. Maybe I can repeat the question. It's about whether it's too late to enter the LEV market.

Okay. We are more focused on the EV and LEV market. Then, is it possible to say that there is a slight protection in this action? Mr. Tian, please answer this question.

Is it too slow for us to take action in the LV market? OK, let me answer this question.

For these two markets, in fact, we have been drugged in the early stage. In the early days, the selective withdrawal was based on a certain environment. One is the political environment of the country, and the other is a major influence. In the previous period, we chose to grow in the energy market, and this market is our profit product. Thanks very much for the detailed explanation. Actually, one thing I would like to clarify is that

We are not a newcomer to EV and LEV market. Actually, we are back, just like the very famous quote, we are back from this market because years before, we strategically decided to exit the EV and LEV market because at that time, we analyzed the policies of the government and also the timing. We thought that was not quite supportive for us to develop our business or generate profits in EV and AIO EV. And that's why, at that time, we decided to put more energy into the development of the energy storage market, which do generate profits for us to sustain our development. But on the other hand, now, with the continuous understanding of the market, we say it is a good time for us to re-enter or back to the EV and L-EV market. So we say we already have the accumulation no matter of the technology or the experience in this term. Thank you. And Ningxua.

For this, especially for the L-EV market, our country's, now it's the national standard, before when we identified it, it was the national standard. Then we are the important starting unit of this standard. So we are very familiar with this market. As for Yiwei, we are also in this market, it is the domestic power battery market that entered this field first. But the previous market development, because of some national policies, some influence, during that time, this field was not profitable. So I think So based on the existing technology and the existing trend, we are now able to find profits from products and seek development from profits. In addition, there will be a segment market. In the segment market, we will avoid current investment companies, such as CB Corporation. They use cars that are more than A type as their main battlefield. And now, in terms of the market, there will be a larger market share of A00-class passenger cars. And the carbon-acid steel cylinder-type battery we are currently making is just right for A00-class small passenger cars, as well as LED electric two-wheeled cars. It has both safety and flexibility. It's just right for this. So based on the advantages of our products, So we think this is the right time.

Okay, thanks. And also one thing I would like to emphasize is that now we are back to this market. It is because we have the strategic understanding about the market. So the first way I would like to share with you some additional information. Actually, previously, years before, before we exit the EV and LEV, we were the ones taking part into the standard making up for the EV and LEV. But at that time, we only had the standard for the industry. But now we have China's national level standard. And we are also one part of it, the standard making up and also years before we saw that EV and LEV though grew very fast the industry is hard to make profit so that's why we decided to temporarily exit from that market but focusing on business that can generate profits and sustain our long-term development so that is our actual policy or for the development, that is, find the right business or industry to generate a profit. With the profit, we can take steady steps to move forward. And following this policies, we now see the whole market after years development has been more mature. And so that's why we decided to go back. And also, we're not just back to a market to compete with those top level players focus on a be a big player but they are more focusing on the a tap a model cars but we choose another niche market niche market there's a zero zero model and also the area we manage the two bears vehicles which which means we focus more on to the light and the light type and model vehicles and We focus on a different niche market comparing to other key players. Thank you. This is it.

Thank you. Wesley, do you have any follow-up questions?

Yeah, I have a second question. The company receives government subsidies, and what's the regulation and incentives for battery space?

Sorry, the signal is not quite good. Would you like to repeat it again? Thank you.

The company receives government subsidies. What are the regulations and incentives for battery space?

We know that our company should receive subsidies from the government. In terms of batteries, do you have any subsidies, or any support and encouragement for this policy, or any information on this? Can you share it with us? Thank you.

Mr. Qian, please answer the main question, and Mr. Pei will add to it. Okay, thank you. Okay.

This is for the new members. The subsidies in the policy area may have affected everyone's understanding. Thanks very much for your question. I think maybe because

We are in the new energy market, so we are currently affected or impacted by the general image that the Chinese government is giving a lot of subsidiaries or incentives for the new energy business. And actually, there is no incentive or subsidiaries in China on the government level to battery manufacturers. This is one thing I'd like to clarify. But on the other hand, We are a provincial-level high-tech enterprise, so we do receive some incentives from the local provincial government. This is one thing I'd like to clarify.

好的,那么就是说虽然在电池行业的领域是没有这个行业性质的补助,但是我们目前收到的一些补助是政府针对于CBAK的比如说这个生产线的升级改造而给的一些定向的补助,这个补助是这个国家给这个政府给我们CBAK定向的一些补贴。

and also as we mentioned before that we are the provincial level high-tech company and we do see a receive incentive from them for example that the local government give us the found that is could only be specially especially used for upgrading and expansion of our production lines and our capacities and So we do receive some subsidiary incentives from the government for the special purpose. This is also one thing we'd like to clarify with you. Thank you.

Thank you. Lucy, do you have further questions?

Thank you. Thank you for the answers and that's all my questions. Thank you.

Thank you. Pleasure.

Thank you. Seeing no more questions in the queue, let me turn the call back to Mr. Yunfei Li for closing remarks.

Thank you, Operator, and thank you all for participating in today's call and for your support.

We appreciate your interest and look forward to reporting to you again next quarter on our progress.

thank you all again this concludes the call you may now disconnect