Li Auto Inc.

Hello, ladies and gentlemen. Thank you for standing by for Lee Otto's first quarter 2022 earnings conference call. At this time, all participants are in the listen-only mode. Today's conference call is being recorded. I'll now turn the call over to your host, Ms. Janet Zhang, Investor Relations Director of Lee Otto. Please go ahead, Janet.

Thank you, Amber. Good evening and good morning, everyone. Welcome to Li Auto's first quarter 2022 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 T. Lee, 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 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 U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required in the applicable law. Please also note that Li 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 Li Auto's press 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, Jenny. Hello, everyone, and thank you for joining our call today. In the first quarter of 2022, the EV boom continued. According to the China Passenger Car Association, or CPCA, retail sales of new energy passenger vehicles in China reached 1.07 million in the first quarter of 2022, representing a year-over-year increase of 146.6%. NEV's penetration rate climbed to a record high of 28.2% in March 2022. As a leader in the new energy vehicle market, we are excited to be one of the driving forces behind the industry's continued innovation and evolution. Thanks to our Li-1's outstanding feature and the compelling appeal to family users, we delivered 31,000 716 D1s during the quarter, aiming industry-wide supply chain challenges up 152.1% year-over-year and achieved a total revenue of RMB 9.56 billion, 167.5% higher than the first quarter of 2021. The past several months was undoubtedly a difficult period for all of us given the headwinds caused by the COVID-19 pandemic. We have been no exception to the supply chain disruptions and rising material and logistics costs that challenged the entire auto industry. Our Changzhou manufacturing base is located in the center of the Yangtze Delta region, which is home to over 80% of our parts suppliers, especially in the city of Shanghai and Kunshan. The COVID-19 resurgence in this area since late March has incapacitated some suppliers in Shanghai and Kunshan. Some of them completely shut down their production and delivery, making it impossible for us to maintain production after exhausting our parts inventory. This materially affected our production in April, resulting in delayed deliveries to our customers. As a result, we only completed 4,167 deliveries in April. In light of the encouraging signs of recovery from the pandemic in the Yangtze Delta region, we expect our total deliveries in the second quarter of this year to be between 21,000 to 24,000 vehicles. We should note there are still uncertainties with respect to the pace of the recovery. Well, we are doing everything in our power to increase our production and overcome supply chain constraints, aiming to shorten the delivery waiting time for L1 users while meeting all pandemic prevention and containment requirements from the government. To help offset the sharply rising raw material cost, particularly the battery cost, we raised the price of V1 by RMB 11,800, effective April 1st this year. Moving to the profitability, in the first quarter, Our gross margin remained robust at 22.6%. Our R&B expenses increased 167% year-over-year to R&B 1.37 billion, accounting for over 14% of our total revenues. As we continue to enhance our strategic investment in autonomous driving, intelligence cockpit, and electrification. The increase in R&D together with our direct sales and servicing network expansion resulted in a 151.5% increase in our operating expense year over year. Despite the deliberate increase in expenses to drive growth, our net cash flow from operations was positive for the eighth consecutive quarter. at RMB 1.83 billion, thanks to our outstanding manufacturing and operational efficiency. In addition to propelling growth, our expanding direct sales and servicing network serves as an important and efficient interface for us to gain insight into our users' needs and desires. We think like a user. This perspective informs and motivates us as we strive to continually please users with updated features, product designs, and services. As of April 30, 2022, we had 225 retail stores covering 106 cities, and the 292 servicing centers and the Lee Auto authorized body and paint workshops operating in 211 cities. Going forward, we will continue to grow our sales network at the cadence that accommodates both our objective to capture market demand and the risk related to the ongoing pandemic. With respect to R&D, since we released our OTA 3.0 to introduce our full-stack NOA in December 1st last year, and become the third automotive OEM globally to develop a full-stack self-development NOA. More than 100,000 2021 L1 users have enjoyed NOA-assisted driving as of the end of April. We are pleased to see our self-development process contribute to the consistent improvement in our NOA's safety and functionalities. Its penetration rate has reached to 61.3%, which means that 61.3% of our users utilize NOA on the highways once it's available. The data gathered from the NOA mileage in real-life driving scenarios will play a crucial role in our future ADAS development and facilitate our ultimate goal of full fully autonomous driving. The NVIDIA Orin X chipset and the LiDAR on our next full-size SUV, the L9, will further improve our vehicle's autonomous driving capabilities. Our R&D efforts to develop our range extension system, chassis, and the domain controller in-house are also bearing fruit. These R&D trends, among others, will be unveiled in our second production model, the L9. That leads us to our update on products. Our first model, Li1, has been a proven success catering to the needs of families in China. After Li1 emerged as one of the industry's best SUV choice for family users, we built on our strengths and are getting ready to launch our second production model, the L9. Despite a few pandemic-related bumps in the road, we are forging ahead with our plan to commence the delivery of the L9 in the third quarter. The L9 is a flagship SUV for family users based on our new generation EREV platform, offering best-in-class combination of performance, safety, and intelligence. As just mentioned, It features our fully self-developed range extension system, chassis control system, and central vehicle domain controller, which empower its outstanding dynamic performance and drivability. In keeping with our fundamental belief that safety should always be standard, not optional, every L9 is built to our strictest safety standards and come equipped with our upgraded autonomous driving system, LI-AD Max, capable of all scenario NOAs for enhanced driving safety and convenience. The L9 also comes standard with first class premium features such as the sumptuous seat, a high performance audio system, and an all new three dimensional interactive experience. Above all, The L9 aims to meet the needs of more family users and delight users by proactively satisfying desire that they may never knew exist. Since we released the teaser information for the vehicle, we have received a great deal of positive customer feedback. And we can't wait to deliver our L9 and amaze our users with all its features and benefits. In parallel with our EREV development, we are also investing in R&D for next generation electric vehicle technology, including high C-rate battery, high voltage platform, and ultra-fast charging technology, with the goal of building an end-to-end BEV and charging ecosystem that can support a driving range of more than 400 kilometers with only 10 minutes charging. As a leader in the new energy vehicle industry, we are dedicated to leading the future of mobility while also making a positive impact on the environment of our society. On April 19, we released our first ESG report, which marks yet another step forward in our sustainability journey and underscore our resolve to operate responsibly. In addition, we are pleased to report that our Class A ordinary shares were included in the Shenzhen and Shanghai Hong Kong Stock Connect programs on March 14th and April 25th this year, respectively. This allows us to access a broader investor base and share our growth trajectory and further success with users, partners, and investors in mainland China via the financial market. Looking forward, we will continue to create the right product for family users, persevering through challenges with a laser focus on operational and financial efficiency, propelling progress and inspire happiness along the way. With that, I would like to turn it over to our CFO, Johnny, for a closer look at our financial performance. Please go ahead.