Li Auto Inc.

Hello, gentlemen. Thank you for standing by for Lee Otto's Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Janet Zhang, the Relations Director of Lee Otto. Please go ahead, Janet.

Thank you, Rachel. Good evening and good morning, everyone. Welcome to Lee Otto's Third Quarter 2021 Earnings Conference Call. The company's financial and operating results were published in the press release earlier today and were posted on the company's IR website and the Hong Kong Stocks Exchange. On today's call, we have our president, Mr. Kevin Yanan Shen, 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 forelooking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forelooking 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 websites 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 Auto'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 Auto's press release and interim announcements which contain a reconciliation of 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, Jenny. Hello, everyone, and thank you for joining our call today. We are excited to be part of this once-in-a-century transformation from ICE vehicle to smart electric vehicles. We are also pleased to see user acceptance of NEVs reaching an inflection point. As reported by the China Passenger Car Association, the penetration rate of NEVs in retail sales rose significantly to 18.5% in October from 5.8% in 2020. Looking out to 2022, we believe the extended range system with a large battery capacity will usher in a year of explosive EREV sales. Against this backdrop and on the heels of the successful 2021 Liwan launch in May, we delivered strong results in the third quarter, achieving revenue growth of 209.7% year-over-year, underpinned by record-breaking quarterly delivery of 25,116 units and increase of 190% year-over-year. This growth, once again, highlights the underlying strength of our 2021 Liwan and its compelling appeal to family users. Thanks to the dedicated efforts of our team and supply chain partners, as well as continuous support from Liwan users, our October delivery was 7,649 units, increasing 107.2% year over year. Our order intake remains robust, hitting a new monthly record of over 14,500 units in October. The rapid development of the smart EV industry has magnified the effects of the industry-wide chip shortage, challenging each OEM's production and delivery schedule. While we are enjoying the strong user endorsement of our product, our delivery growth lacked our order growth due to the chip supply shortage, which has constrained our production. Despite the lingering impact of COVID-19 and extreme weather conditions in certain regions, we have resolved some of the chip supply problems by working diligently with our supply partners and also internal teams. We delivered the 100,000 Li-1 to our family users in this month and expect our deliveries in November to exceed 10,000 vehicles. In light of the ongoing industry-wide semiconductor shortage, we expect the total delivery in the fourth quarter of 2021 to be between 30,000 to 32,000 vehicles. As the development of the smart electric vehicle industry accelerate, we think the challenge to the overall EV supply chain facing the industry will persist into the future. Going forward, We will continue to take actions and find multiple measures together with our supply chain partners to mitigate the risk. Turning to the profitability, our gross margin stood at 23.3% in the third quarter, up 3.5% year-over-year, and 4.4% quarter-over-quarter. Our operating cash flow was RMB 2.3%. $17 billion or US$336.7 million during the third quarter, reflecting our consistent and relentless focus on execution and cost management. During the third quarter, we made notable progress in the expansion of our direct sales and service network, which not only serves as our user touchpoint for efficient sales and marketing, but also an integral component of our closed-loop integrated online and offline platform that helps us manage user feedback to continuously enhance our products and services. As of October 31, 2021, we had 162 retail stores covering 86 cities and 223 servicing centers and the auto authorized body and paint shops operating in 165 cities. We will continue to expand our coverage of lower tier cities while deepening our penetration in first and second tier cities to reach our target of 200 retail stores by year end, covering more than 100 cities in China. This will increase our brand awareness and prepare us for surging user demand as we launch new models. In terms of product optimization, we upgraded the in-car invoice assistant, Li Xiang Tong Xue, and launched a new application store via an OTA update in early September. The new Li Xiang Tong Xue is smarter and able to carry out smoother and more natural conversations. Li Xiang Tongxue can also take separate commands from four different rooms in the car, providing full coverage in-car voice control and creating a more fun and entertaining experience for families. The new application store offers a streamlined interactive design supporting an application ecosystem similar to that on smartphones. allowing user to upgrade their in-car application without the need of an OTA update. With these upgrades, our Li1 continues to evolve and grow. Meanwhile, we plan to release our NOA upgrade to 2021 Li1 users in December. We are confident that 2021 Li1 with NOA functions will provide family users with safe, enhanced, convenient, and effective ADAS functions. Following the NOA upgrade through OTA, all 2021 Li1 will be equipped with this feature. We are prepared to provide NOA to over 60,000 family users by year end, gaining a dominant leadership in this regard in China. In terms of HPC BEV, we are making good progress developing our technologies to support high-power charging. We have completed the 4C battery pack test on vehicles and demonstrated that it can support a driving range of more than 400 kilometers with only 10 minutes charging. With the proceeds raised through our dual primary listing, we will build upon our recent success and deploy R&D capital to drive parallel development in EREVs and BEVs and advancement in smart cockpit and ADAS technologies. Aiming to introduce more product catering to family users' needs and competing with both ICE vehicles and the electric vehicles, we also made headway in expanding our production capacity In October, we officially commenced the construction of our manufacturing base in Beijing. The manufacturing base is scheduled to be operational in 2023 and will serve as an important production base for our premium BEVs. Now, I will turn this call over to our CFO, Mr. Pei Li, to review our financial performance in the third quarter.