Li Auto Inc.

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

Thank you, Annie. Good evening and good morning, everyone. Welcome to Lee Otto's second 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, and our CFO, Mr. Johnny Tia Li, to begin with prepared remarks. Our founder and CEO, Mr. Xiang Li, and our CTO, Mr. Kai Wang, 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 U.S. 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 filings of the company with the U.S. Securities and Exchange Commission and announcements published on the website of the Hong Kong Stock Exchange and the company. 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 press release and interim results announcement, which contain 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. First of all, we are proud that our Class A ordinary shares started trading on the main board of the Hong Kong Stock Exchange on August 12th, opening a new chapter for our company. We are honored and also humbled by the support we received from all investors. With the Hong Kong due primary listing, we significantly strengthened our equity base with over 1.5 billion U.S. dollars of net proceeds raised. This will provide strong financial support for our R&D initiatives and the direct sales and servicing network extension, as well as enhanced protection for our shareholders. We will continue to take the responsibilities associated with being a publicly treated company seriously. work to build out our long-term vision and create value for our users, shareholders, and our employees alike. Next, moving to the key highlight of our second quarter result. Our 2021 LII has been an exceptional performer since its debut on May 25th. Our 2021 LII boosts and enhanced the NEDC range of 1,000 and 80 kilometers, optimize the mobility comfort, and a more intelligent cockpit. It has received rave reviews and strong user endorsement for its outstanding features and performance. Our second quarter deliveries achieved 17,575 units, increasing 166% year over year. Our July deliveries reached 8,589, hitting a new record. In July, Liwan topped sales chart in the new energy SUV and large SUV categories, according to new car insurance registration data reported by China Automotive Technology and Research Center. It is a powerful testament to Liwan's highly competitive product features, making us a leading domestic NEV manufacturer in China. While these rankings and Liwan's strong performance and popularity are exciting achievements, yesterday's home run do not win today's game. We will continue to be disciplined and dedicated, and we will strive to constantly surpass ourselves in products and services to earn the support, trust, and the loyalty from our users. Our record high deliveries would not have been possible without cooperation and the assistance of our supply chain partners. They have been helping us navigate the ongoing semiconductor shortage. Turning to the profitability, our gross margin reached 18.9 percent this quarter, up 5.6 percent points year over year. and 1.6 percent quarter-over-quarter. Our operating cash flow was RMB 1.4 billion, or $218 million during the second quarter, demonstrating our consistent high operating capability. In the second quarter, we aimed to further broaden and deepen CT coverage to address increasing demand from prospective users across China. and prepare ourselves for our new model launches in 2022 and beyond. Thus, we accelerated the expansion of our direct sales and servicing network. As of July 31st, 2021, we had 109 retail stores covering 67 cities and 176 servicing centers, and the Lee Auto authorized body and paint shops operating in 134 cities. We are on track to reach our year-end target of 200 retail stores. We have expanded our footprint to lower-tier cities in China. In August, we opened a retail store in Lhasa, Tibet. This has taken us direct sales and servicing network, geographical coverage of provinces, autonomous regions, and the centrally administered in mainland China to 100%. The industry-wide semiconductor shortage has affected our monthly deliveries in recent months, resulting in undelivered backlogs. As our new order exceeded 10,000 in June, we tried our best to utilize our tournament alternative solutions to enhance our flexibility and acquire industry sources. Going forward, we'll continue to collaborate closely with our supply chain partners to mitigate the semiconductor shortage and minimize the impact on our production. Given the proven success of our Li-1 catering to the needs of families, we are working to diversify our product portfolio to appeal to an even broader family user base. We have three platforms under development, the X platform for our next generation EREV with the first model to be released in 2022, and the Whale and the Shark platform for our BEV models to be launched in 2023. The development of these new platforms are progressing smoothly, and we are confident to launch new vehicle models on time. In July, we also signed a MOU with a local company for collaboration in reconstruction and expansion project of an automobile manufacturing plant in Beijing. This will further expand our production capacity and support the increasing vehicle sales volume with future models. On August 27, 2021, We also signed an investment agreement with a wholly owned subsidiary of Xincheng China Power Holding Limited to form a new company in Mianyang, Sichuan Province, China, to develop and manufacture our next generation extension system. We firmly believe that smart EREVs will be a superior replacement to ICE vehicles. and increase the overall EV penetration rate in the medium to long term. We continue to view it as one of our core strategic development directions. The cooperation will leverage the R&D and the production capabilities of both companies to provide high-quality products and further expand market share of smart ER EVs in the domestic market. With respect to international market, we will keep our strategy to always make plans before taking actions, as we want to be a winner, not just a mere participant in the global market. To win much share overseas, a car company has to develop the right product to attract customers with tastes and requirements that are different from domestic customers. We have set up a team dedicated to the overseas market and we are meticulously working on the plans to find a winning formula. As a corporate citizen, we are proud to have passionately engaged in social relief activities to help people in need. In July, in response to the flood in Henan province, we organized the emergency relief with donations to support the affected people, including our users. We also mobilized all trailers we have access in the adjacent provinces to join the rescue effort. In addition, we provide our users with service such as warranty extension for replacement parts, free replacement of flood damage charging poles, and free vehicle inspections for all disaster-stricken vehicles. We made our efforts to reassure them and help in any way possible for a smooth transition back to normalcy. Lastly, we achieved a AA MSCI ESG rating in April, making us a leader in ESG among 40 rated automotive companies. Going forward, we will continue to undertake social responsibilities and view this as an integral part of our mission to build smart electric vehicles that make families happier. Now, I will turn this call over to our CFO, Mr. Kelly, to review our financial performance in the second quarter.