Li Auto Inc.

Hello, ladies and gentlemen. Thank you for standing by for Lee Otto's first quarter of 2021 earnings conference call. At this time, all participants are in listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Janet Zhang, Director of International Relations of the company. Please go ahead, Janet.

Thank you, Annie. Good evening and good morning, everyone. Welcome to Lee Otto's first quarter 2021 earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website. On today's call, we have our president, Mr. Kevin Yanan Shen, our CFO, Mr. Johnny Tie Li, and our CTO, Mr. Cai Wang, to begin with prepared remarks. Our founder and CEO, Mr. Xiang Li, will join for the Q&A discussion. Before I continue, please be reminded that today's discussion will contain forward-looking statements made under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain failings of the company with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that Lee Otto's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to Lee Otto's price release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. With that, I will now turn the call over to our president. Please go ahead, Kevin.

Thank you, Janet. Hello, everyone, and thank you for joining our call today. I will review the key highlights of the first quarter as well as our newly released 2021 LIH1, which offers best in class safety, efficiency, comfort, and intelligence. In the first quarter, we delivered 12,579 LIH1, up 334.4% year over year. which brought about total revenue of RMB 3.58 billion, 319.8% higher than the first quarter of 2020, and exceeding the top end of our revenue guidance by 11.2%. In the first quarter, our Liwan was the second best-selling new energy SUV in China. As our compelling product offering and the superior user experience continues to delight customers and enhance brand awareness, while the unwavering support of our direct sales and servicing network underpins our growth. We were also the only domestic brand ranked in the top 10 best sellers among all premium SUVs in the first quarter. In April, V1 remained the first among all new energy SUVs in China. In the rankings, including ICE cars, BEV, EREV, and PHEV, V1 ranked the second in the large SUV segment and the fourth in the premium SUV segment. On the profitability side, our growth margin stayed robust at 17.3%. Amid our ongoing efforts to enhance investment in R&D as well as to expand our direct sales and servicing network. Our expanding operating expenses increased by 238.6% year-over-year and 27.5% quarter-over-quarter. Despite the deliberate increase on the expense side, we continued with a disciplined cash flow management strategy. Our free cash flow remained positive at 570.2 million RMB. We also raised over US dollar 840 million in net proceeds through our successful convertible senior note offering in April, strengthening our capital base for future growth as we increase our R&D investment in leading technologies, prepared for new model launches, and gear up for further increase in demand. We view our direct sales and servicing network as an integral component of our closed-loop system that allows us to iteratively improve product features and add new functions for our users. By accelerating the expansion of our direct sales and servicing network, we remain committed to proactively serving our users and anticipating future demands for our pipeline vehicles. As of April 30, 2021, we had 73 retail stores covering 53 cities and 143 servicing centers. and the authorized body and paint shops operating in 105 cities. We are on track to reach our year-end target of 200 retail stores. We have also started reconfiguring our state-of-the-art Changzhou factory for our new model pipeline, especially the full-size premium SUV based on the next generation EREV platform to be launched in 2022. As a user-driven automotive and technology enterprise, we deeply value the tremendous trust and support our users bestow on us. During the 19th International Automotive Industry Exhibition in April, a large team of V1 owners came to our exhibition to volunteer as brand ambassadors, sharing their experience with the vehicle, their passion for it, and their acknowledgement of value V1 brings to their families' everyday life. One of them, a V1 owner for 11 months, said, Li Auto is not only a carburetor, but also a spiritual partner. It is an integral part of our lives now. We are so grateful to see our mission and vision being recognized and echoed by our users. As of April 30, our cumulative Li-1 deliveries have exceeded 50,000 units. We took only 17 months to reach this milestone from the first delivery of Li-1 in December 2019, creating the fastest record among all new energy vehicle companies. Our users have driven over 500 million kilometers with more than 65 million kilometers assisted by our ADAS solution at the daily active rate of over 30%. self-safety, over 800 million early warnings were triggered, preventing more than 10,000 potential serious accidents. While V1's extended range powertrain and ADAS solution that are a standard configuration enable a more free and safe travel experience for our users. Its intelligence cockpit featuring a comprehensive infotainment system is another highlight of the vehicle. We pioneered the full-screen interactive in-car system that has been widely praised by our users for the smart space of mobility. It allows the users and each passenger offering private usage and voice-based interactive connections. users spend more than 40 minutes in our every day while the car itself is parked. Our in-car karaoke function, which was first released before the Chinese New Year holiday, provided on-demand karaoke for more than 30,000 times during the Chinese New Year holiday and more than 80,000 times during the May Day holiday, affirming our long-standing dream of creating extension of homes that bring happiness to the entire family. V1 is a proven success catering the needs of families in China. and has effectively addressed the current challenge to BEVs in terms of energy replenishment. The success of Li-1 demonstrates our extraordinary product defining capability, which lay a solid foundation for the development of our future models. We will continue to develop new NEV models with best in-class performance in parallel we are developing our next generation extended range platform and high power charging BEV platforms, both of which will be deployed with our proprietary autonomous driving technologies. We plan to introduce a next generation EREV platform in our new vehicles planned for 2022 and 2023. With next generation EREV technology, we aim to support longer range, higher energy efficiency, and better NVH performance of our EREVs. We are also investing in the research and the development of next generation electric vehicle technologies, including high C-rate battery, high voltage platform, and other ultra-fast charging technologies. Leveraging these technologies, we are developing two platforms, Whale and Shark, for our future HPC BEVs. Starting from 2023, we plan to launch at least two new HPC BEV models each year. Our development progress in these technologies has been on track, and we plan to unveil our milestone achievement in the 2022 Beijing Auto Show. We are very excited to officially release our 2021 V1 yesterday. The new V1 features comprehensive upgrades in areas such as the EREV powertrain, ADAS solution, intelligent cockpit, interior design for ride comfort, and exterior design for style. offering user premium features in a standard configuration at the flat retail price of RMB $338,000. Deliveries of the new Liwan will commence on June 1, 2021. We believe The new 2021 Li-1 is an outstanding product with advanced technologies and a very competitive feature for our target customer group. It has alleviated the extended range electric technology to a brand new level. It features an all-new three-in-one rear drive electric motor, offering high energy efficiency as its energy efficiency in fuel model is only 6.05 liter per 100 kilometers, based on the NEDC standard operational condition. Best in class among large size four wheel drive SUVs. With software and hardware optimization and its integrated powertrain system, the new V1 achieved an NEDC range of 1,080 kilometers and a WLTC range of 890 kilometers. We are very proud of our R&D team's successful effort to improve the range-extended technology. In keeping with the company's core belief that 50 should be standard, not optional. The new 2021-01 offers a full stack self-developed ADAS in a standard configuration. All existing Level 2 ADAS functionalities have been redesigned and optimized in-house by our own R&D team. We also launched the NOA system making the company the first OEM to implement full-stack self-developed NOA based on domestic application processors. The 2021 Li1 is also the first model in the world with NOA capability as a standard configuration. Li1 has been well loved been well loved by family users for its spacious six-seat interior layout. The new D1 enhanced its excellence in space, comfort, and intelligence by equipping the front and the second row seats with lumbar massage function. The legroom for its third row is increased by 41 millimeters. while its trunk can still hold a 28-inch suitcase or a large-size stroller. It also features a smarter in-car voice assistant, , providing a higher caliber and overall more spacious, more comfortable, and more intelligent space for family. We believe that 2021, newly won, is going to be a smart electric vehicle bringing happiness to all families it serves, with a powerful extended-range electric system that enables more pleasant road trips. ADAS in a standard configuration to ensure safety, safe travel for everyone, and the spacious smart interior layout that enhance comfort for every occupant in the car. We believe the new V1 will help us gain much higher market share than its predecessor. We have seen a very strong order intake just in the past 24 hours, taking into consideration of the production ramp and the ongoing global shortage of semiconductor. we expect our delivery for second quarter to be between 14,500 and 15,500. With that, I would like to turn it over to our CTO, Kai, for a closer view of our technology advancement and the new Rewind. Since Kai joined as CTO in September last year, we have made numerous breakthroughs in autonomous driving as well as intelligent cockpit technologies. Kai, please go ahead.

Thank you, Kevin. Hello, everyone. Let me provide more details about our 2021 V1's other functions and other technical updates. As Kevin mentioned, The full-stack Level 2 Plus ADAS functionalities were self-developed by our own R&D team. Besides in-house perception algorithms and Level 2 ADAS functionalities, we also launched an NOA system. I'm very proud of our team, their effort, and their dedication. And the level we have reached in such a short time. The 2021 E1 comes equipped with two Horizon Robotics Journey 3 AI acceleration processors for automated driving. The two processors are dedicated to processing driving data, not only at a high efficiency, but also with redundancy backup for enhanced safety. The vehicle is the first production model in the world with an 8-megapixel front-view camera providing 4K definition. Compared with the mainstream today, the 8-megapixel camera has an effective visual range of 200 meters, wider lateral detection range, and a stronger perception ability on RAM and large load curve recognition. In short, it sees further. more clearly, more widely, and is therefore safer. In addition, the 2021 Li-1 has five fifth-generation millimeter wave radars made by Bosch that have a wider detection range, better resolution, higher accuracy, and improved range of recognition. It has a detection range of 110 meters and a 150-degree field of view. allowing 360-degree overall coverage without any blind spots in the system level. Supported by rich sensors and the redundant capable hardware, along with full-stack in-house software, the 2021 V1 can recognize traffic lights, traffic points, road curves, and other complicated objects it's supposed a more efficient NOA feature for on and off RAM, automatic adaptive acceleration, and lane change on certain limited access roads. It also supports fully automated parking assist feature known as FAPA, which is a vision-based automatic parking function. We are confident The 2021-E1 delivers a safer, easier, and more comfortable driving experience exemplifying our deeply held core value that safety should be standard, not an optional feature. As we roll out high-definition maps in cooperation with AutoNavi, the NOA will be made available to 2021-E1 users through OTA update, starting in the third quarter this year, and will gradually cover more roles and areas in China. In addition to other functions discussed above, the 2021-01 will also provide users with a more intelligent space, including a smarter in-car voice interaction system. Looking ahead, we will continue executing the parallel development of EREB and BEB, further strengthening of MDT, and developing cutting-edge technologies. Now, I will turn this call over to our CFO, Mr. Kelly, to review our financial performance in the first quarter. Please go ahead.

Thank you, Kai. Hello, everyone. I will now go over some of our financial results for the first quarter of 2021. To be mindful of the length of this call, I will address financial highlights here and encourage you to refer to our earnings press release which is posted online for additional details. Total revenue in the first quarter of 2021. 2021 were RMB 3.58 billion, or US dollar 545.7 million, representing an increase of 319.8% from RMB 841.7 million in the first quarter of 2020. This included RMB 3.46 billion or US dollar 528.7 million of vehicle sales in the first quarter of 2021. Representing an increase of 311.8% from the first quarter of 2020. The increase in vehicle sales was mainly attributable to the increase in vehicle deliveries with the continuous expansion of our sales network. On a quarter-over-quarter basis, total revenues and vehicle sales decreased 13.8% and 14.6% respectively, primarily due to the seasonal factors related to the Chinese New Year holidays. as well as the localized COVID-19 outbreaks in northern China in February 2021. Revenues from other sales and services were RMB 111.5 million or US dollar 17 million in the first quarter of 2021. Comparing with RMB 10.8 million 6 million in the first quarter of 2020 and RMB 89.2 million in the fourth quarter of 2020. The increase in revenue from other sales and services over the first and fourth quarters of 2020 was mainly attributable to the increased sales of charging stores. accessories and services in line with higher accumulated vehicle sales. Cost of sales in the first quarter 2021 was RMB 2.96 billion, or US dollar 451.6 million, representing an increase of 277.6% year-over-year. and a decrease of 13.5 percent quarter over quarter. Vehicle margin in the first quarter of 2021 was 16.9 percent, comparing with 8.4 percent in the same quarter of 2020, and 17.1 in the fourth quarter of 2020. The increase in vehicle margin over the first quarter of 2020 was primarily attributable to lower material cost and the lower unit manufacturing overhead cost derived from the increased production volume. The slightly decrease in vehicle margin from the first quarter of 2020, from the fourth quarter of 2020, was primarily due to the lower average selling price cost by promotional activities launched in the first quarter of 2021, partially offset by the decreased material cost. Our gross margin in the first quarter of 2021 was 17.3% compared to 8% in the first quarter of 2020, and 17.5% in the first quarter of 2020, which was mainly attributable to the change of vehicle margin. Operating expenses in the first quarter of 2021 were RMB $1.02 billion, or US dollar $156.4 billion, representing an increase of $238.2 billion. 6% year-over-year and an increase of 27.5% quarter-over-quarter. Research and development expenses in the first quarter of 2021 were RMB $514.5 million or US$78.5 million, representing an increase of 171.2% in the first quarter of 2020, and an increase of 37.5% in the fourth quarter of 2020. Excluding share-based compensation expenses, non-GAAP research and development expenses were RMB 397.9 million, or US dollar 60.7 million, representing an increase of 109.8% year-over-year and an increase of 7.8% quarter-over-quarter. The increase in research and development expenses over the first and fourth quarter of 2020 was primarily attributable to First, increased share-based compensation expenses derived from incremental share options granted with higher fair value in January 2021. While no share-based compensation expenses were recognized for stock options with service condition and the performance condition related to our IPO in the first quarter of 2020. Second, the increased R&D activities for the company's next vehicle models. And third, increased HICOM. Citing general administrative expenses in the first quarter of 2021 were RMB $509.9 million, or U.S. dollar $77.8 million, representing an increase of 52% in the first quarter of 2020, and an increase of 18.8% in the fourth quarter of 2020. Excluding share-based compensation expenses, non-GAAP selling general and administrative expenses were RMB $449.8 million, or US $68.7 million, representing an increase of 298.8% year-over-year, and an increase of 5.4% quarter-over-quarter. The increase in selling general and administrative expenses over the first and fourth quarter of 2020 was primarily driven by increased marketing and promotion activities. increased HICOM and rental expenses with the expansion of the company's sales network, and increased share-based compensation expenses. Losses from operations in the first quarter of 2021 was RMB 407.7 million, or US dollar 62.2 million, representing an increase of 74.1%. in the first quarter of 2020, and an increase of 416.7% in the first quarter of 2020. Excluding share-based compensation expenses, our non-GAAP loss from operations was RMB 224.8 million, or US dollar 13.8 million. 34.3 million, representing a decrease of 4% year-over-year, and an increase of 216.2% quarter-over-quarter. Net loss was RMB 360 million, or US dollar 54.9 million in the first quarter of 2021, comparing with RMB 7.1 million net loss in the first quarter of 2020 and RMB 107.5 million net income in the first quarter of 2020. Now that net loss was RMB 177 million or US dollar 27 million in the first quarter of 2021. compared with RMB 253.4 million net loss in the first quarter of 2020 and RMB 115.4 million net income in the first quarter of 2020. Turning to our balance sheet and cash flow, our cash and cash equivalents restricted cash time deposits and the short-term investments totaled RMB 30.36 billion or US dollar 4.63 billion as of March 31st, 2021. Our trading cash flow in the first quarter of 2021 was RMB US$926.3 million or US$141.4 million. Free cash flow was RMB570.2 million or US$87 million in the first quarter of 2021. And now our business outlook for second quarter of 2021. the company expects deliveries to be between 14,500 and 15,500 vehicles, representing an increase of 119.6% to 134.7% from the second quarter of 2020. The company also expects second quarter total revenues be between RMB 3.99 billion and 4.27 billion, or between U.S. dollars 609.0 million and 641.7 million, representing an increase of 104.6 percent to 19% from the second quarter of 2020. I will now send the call over the operator to the Q&A session. Thank you.

Thank you. As a reminder, to ask a question, you need to press star 1 on your telephone. To withdraw your question, please press the pound or hash key. And please stand by while we compile. the Q&A roster. Once again, please press star one for your questions. And for the benefit of all participants on today's call, please limit yourselves to two questions. And if you have additional questions, you can re-enter the queue. If you're going to ask a question in Chinese, please follow the English translation. Once again, it is star one for your question. Our first question comes from the line of of Morgan Stanley. Your line is open.

Please go ahead. Hi. Thanks for taking my question. So I've got two questions. The first question, could you please update your effective capacity at the moment? With output of new V1 models suffer from greater impact for the component bottleneck, for example, of chip and chip shortage and the battery time. or any other key components. And if that's the case, when do we expect the output of New Lee 1 to get back to a more normal level? My second question is, how's the gross margin of the New Lee 1 compared to the previous version? With a $10,000 price hike, could it be more than enough to offset the cost increase from the feature upgrade and road material inflation and further advance second quarter gross margin? First of all, I would like to ask about the current production capacity. At what level is it? Is the production output affected by the current new model? When do we expect the production output to return to a more normal level? The second question is about the new model. Thank you, Tim. This is Kevin. I will answer the first question.

Of course, as we all know, the whole industry is suffering from the shortage of the semiconductor. Right now, in terms of capacity, our Changzhou factory with two shifts already ready, we can do more than 500 per day. But of course, due to the ramp of the newly one and also some of the timing issue of the the volume cannot achieve that high. We expect, starting from September, we expect our monthly production will be more than 10,000. And I will ask Johnny to answer the gross margin.

Hi, Tim. For the gross margin, in the long run, The BOM remains at the same level as the current one, with some additional hardware, as you may know, for the NOA parts, and also some savings from some traditional parts, like the rear motor. It's a net-net. And for the second quarter, I think it will be a net of April, May, with some promotion

And also with one month with 10,000 RMB sales price over half. So it will be a mix.

Got it. Thank you. Thanks for the answers.

Thank you. Our next question is from the line of Goldman Sachs. Line is open.

Please go ahead. Thanks, management, for the opportunity. I have two questions. First, about your store number. So you reported 52 stores by the end of 2020, and then you reported 73 stores by April, and then you guided 200 stores by year end. So what that means is that you have added 21 stores in the first four months of the year, but you plan to add 130 stores in the next eight months. Is that the right way to look at it? And also, 130 stores in eight months is not something that we've seen before. So is there any execution risk with regard to that? Second is about pricing. Now, you've raised prices in the phase lift, which is obviously very different from some of your competitors or other EV manufacturers who have lowered prices over time. So does that mean that LiAuto plans to move further into the premium segment in the forward product cycles? Thanks. Let me translate it for you. Let me explain it to you. At the end of last year, there were 52 stores in the company. At the end of April, there were 73 stores. At the end of this year, there were 200 stores in the management. This means that the number of stores that will be added in the next eight months is actually more than six times that of one to four months. This speed is actually very amazing. There is no risk. Okay. Thank you, Fengfei. I will answer your question. So as of today, right now, we have 75 stores. And in the first quarter, because of the impact of the

Green Festival and some areas have COVID-19 outbreaks. The pace of opening new stores was a bit slow than our expectation. However, we have been making very good progress in site selection. In fact, right now we have another 50 stores in our pipeline actually under construction. So therefore, for the whole year, the 200 retail store targets remain unchanged. We are just a little bit behind the track. We think we'll catch up in the second half. And for the pricing strategy, the methodology we took is to price our product based on its value to the customer. And the V1 is very, very competitive and delivered a lot of value. And with more feature functions, we added into the new V1. We think just 10,000 RMB higher price is very fair. And the new V1 will be even more competitive than its predecessor.

Yeah, thanks for the comment.

Thank you. Next question is from the line. We'll name soon both our securities. Nine is open. Please go ahead.

Hi, good evening. So I have two questions. The first question is regarding your new supplier of your processor, which is Horizon. So we know that Horizon should be able to give you a better exposure to the data you collect. Could you give us more details regarding your strategy to choose the Horizon for your processor supplier? And in the longer term, will you continue to take use of Horizon, or will you also consider some other foreign brands? That's my first question. And the second question is, actually regarding the detailed roadmap of your autonomous riding. Currently, you already gave a very detailed explanation about your new N08 system to be launched by the end of this year. Could you give us some pipeline for 2022 or 2023, what kind of the new autonomous riding function you will provide in the next two years? Hello, Mr. Guan. I have two questions here. The first question is about the new supply chain that we have chosen to switch from the previous Mobileye to Horizon. I would like to know, in addition to the use of data, what other considerations are there? And the second question is that I would like to know about the new features of our network map for next year and the year after that. Thank you, Mr. Guan.

Thank you, Mr. Lee. Kai, do you want to take these two questions? Thank you.

Yes. OK. Thank you. So basically, we have five criteria for SOC selection. So basically, that can explain why we choose Journey 3 from Horizon or Box as our SOC supplier. So the first one is the performance, of course. where we define the feature we want to achieve, then the performance of the chipset must meet the requirement. And from that perspective, Journey 3 is enough for the target. The target is level 2 plus functions with, for example, NOA features. And then the second criteria is the openness and the flexibility. So for example, our previous generation, we used Mobileye, so it's not very flexible for our own algorithm developments. So from that perspective, both Olin and Journey 3, they are more open than we can use our own algorithm there. So the third criteria is about the support. We need a very solid support from our supplier so that we can keep our high-speed, let's say, development and also the phase of iteration. So Journey 3 is from Horizon Robotics. Their headquarters is also in Beijing. So from that perspective, they can provide the best service or support locally. So the interaction between two companies is much more convenient. The fourth criteria is regarding the SOP timing. So the chipset, they will evolve every year. There will be new chipsets available from the market. So from the timeline, we, SOP, our 2021, we want. So journey three is better. So the fifth, but not the least, criteria is the price. So the price, so journey three can offer capable performance, but at the same time, the price is affordable. So basically, overall, these five criteria, eventually we come up with the idea that it's journey-free here. Regarding the roadmap of our autonomy, so we already mentioned in the previous talk description that we will right now just right away launch our in-house algorithm to support with our own perception, our own prediction, planning, execution software. And then the fourth quarter, we will provide NOA because we need some time for the adaptation of the HD map covering more and more roads and areas in China. And then the next year, We already introduced, let's say, the next generation platform on Business Notebook already. And that one will provide even much more processing power among even richer businesses that we suppose more features have. So hardware-wise, we can even up to a level four. But software-wise, of course, we need to step-by-step That's the plan in general. Thank you.

Thank you, Wang.

Thank you. Next question is from the line of Bin Wang of Credit Suisse. Please go ahead.

Thank you for taking my question. First I want to go to the price about the top-sharing sub-bio. In the register, they said that there will be no payments. But they actually raised the price by around $10,000 million. Can I actually try to elaborate with that? Is $10,000 million actually the price for the sub oil? Can I have this kind of explanation about that? That's number one. And number two, actually, I found one company called Hongjing Zhijia. Hongjing Zhijia actually . a media that actually has been involved in your R&D about a level three. The products have been launched last night. So basically, it's the same product as the new one on 2021 version. If this company is one of your supplier, you actually see that it's full stack in-house design. But actually, what's the role of in this project? The price of the car has also increased by 10,000 yuan. Can you explain that 10,000 yuan is the cost of the software? To ensure that our research and development will not suffer any additional losses. This is the first question. The second question is that we see that the company is on the rise. We are self-employed, and we have done our own development. But we see that there are many media reports that we are the top company. It is said that it is the ideal version of our company. OK. Thank you, Wang Bing. I will take the first question. Actually, the 10,000 RMB is not specifically for NOA or for any new feature of the new one.

As I explained, this is overall our pricing strategy, and Mr. Li Xiang already stated that the safety is standard, not optional. Therefore, we make all the new data solutions a standard function without any charge to our customers. The second question, I will ask Kai to comment. Kai.

Yes, so regarding the role of home team drive, it's our hardware tier one provider. So the role of home team drive is mainly about product validation and also design coordination together with our team and then the final production. As we already mentioned, actually, for our ADAS team, we have run about 300 people right now covering both hardware and software design. So software-wise, we already explained it's a full-stack in-house software development, including the low-level software like OS and also the middleware and all application software and closed-loop edge-to-cloud environment completely for hardware parts. Actually, we also designed the hardware part to ensure that we have the complete transparency of the design so that we can react if there is something wrong with our design during the lifecycle of the product. So we are also responsible for the complete hardware design simulation and design validation. including both electronics and mechanics. But the role of Hongji Drive, they will participate with the hardware design because from efficiency point of view, we would like to leverage the outsourced resources to ensure we keep that in a very high level. So overall, they will do the coordination, the product validation and then the production which we on purpose we don't want to touch because that will lower the overall efficiency. And also that's the part actually here what could have a better efficiency compared with OEM. So thank you. Okay, thank you so much.

Thank you. Next question is from the line of Paul Gong of UBS. Please go ahead.

Yeah, hi, thanks for taking my question. Two questions. The first one is you have switched from the mobile IQ4 to this Jelly 3 and you're going to switch to NVIDIA or Win next year. How do you see the data format of all these three systems? Can you freely use the data connected in the previous system and use now and further develop for the virtual ADAS function? since this transition. The second question is regarding your BEV plan for 2023. You mentioned the wheel and the Shark platform. How do you think, after seeing the Shanghai Auto Show with so many new BEV models, would this change a little bit of your timeline, your roadmap? Would you accelerate the process a little bit? In view of the rising competition in the market. Thank you. 第一个问题来说的话是 我们从这个Mobile IQ4到了这个地平线的增程3 然后又要到这个英伟达的这个Orin 就从数据的一个通用性来说 他们是同样的一个格式嘛 然后在不同系统上面 whether we can make a seamless connection and a smooth use of existing data. The second part is that we see that there are some new changes in the Shanghai Auto Expo, and new vehicles are also joining in. How does this affect your plan for the development of electric vehicles? Is it the same as before, or is it still the same as in 2023? Thank you. Okay, maybe I take the first question. So, regarding different platforms. So, actually, that's the reason why we like to do the in-house design. So, when you have control the algorithm development, there are cores of the algorithms. Basically, we utilize the same mechanism behind. So, when you're developing something, And then you can really, based on different hardware, make a kind of a record software. Then you can support different containers, basically. That's our idea behind. And from compatibility point of view, there are really lots of common areas you can reuse. And also, on top of that, so you can see the current development, we do have the Edge part and also the Cloud part. The cloud part, we utilize math computing power for training. So both Journey 3 platform and our platform, we have the same NVIDIA solution behind for training. So you can see right away, there are already a bunch of common stuff you can share. we don't have any problem. Of course, if you support more, then you need, let's say, more effort for adaptation between platforms. So we will lower that, of course, then there is, you know, smart selection, as we mentioned. That's the reason why we have a very strict criteria for SOC selection. Thank you.

Yeah, Paul, this is Kevin. Let me take your second question. Of course, we all see a lot of new car models launched in Shanghai Auto Show. However, as we reiterated many times, we think a charging solution is the key competitiveness advantage we need to gain to compete in the BEV arena. Therefore, we will stay on our track to develop our shark and whale platforms with ultra-fast charging capability. We think that's the key to win the future competition. So therefore, we will not alter our plan. We'll stay very focused. Of course, with more resources, we, of course, want to accelerate the R&D process for sure. But right now, the outlook is still... in 2023. Thank you very much.

Thank you. As we are reaching the end of our conference call, I'd like to turn the call back over to the company for closing remarks. Ms. Janet Zhang, please go ahead.

Thank you once again for joining with us today. If you have further questions, please feel free to contact Liado's investor relations team. And that's all for today. Thank you and have a good one.