Li Auto Inc.

Hello, ladies and gentlemen. Thank you for standing by for Lee Otto's second quarter 2022 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 Zong, Investor Relations Director of Lee Otto. Please go ahead, Janet.

Thank you, Jason. Good evening and good morning, everyone. Welcome to Lee Otto's second 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 Tie Li, 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 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 conflict'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 and the Hong Kong Stock Exchange. The company does not assume any obligation to update any forward-looking statements except as required under 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 Lee Otto's disclosure documents on the IR section of our website, 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. I will review the key highlights of the second quarter and discuss our flagship smart SUV, Li L9, which has received highly positive feedback from family users for its best in-class combination of drivability, safety, comfort, and intelligence. We witnessed the continued consumer adoption of EVs in the second quarter. China's retail sales of new energy passenger vehicles surpassed 1.17 million during this quarter, more than doubled year over year, according to the China Passenger Car Association, with penetration rates climbing to 27.1% from 21.8% in the first quarter. We believe it will continue to rise, supported by more NED model launches, continuous iterations of smart features, and the increasing user preference for clean mobility. We remain focused on offering state-of-art products to our family users. Despite the challenges posed by the COVID-19 resurgence across cities nationwide, from March to May, we delivered 28,687 vehicles during the second quarter, representing a 63.2% year-over-year increase. These strong delivery results contributed to a 73.3% year-over-year increase in total revenues, which totaled RMB 8.73 billion. Our deliveries in July reached 10,422, up 21.3% year-over-year. On August 1st, we proudly rolled the $200,000 off the production line at our Changzhou manufacturing base. It took us just 986 days to reach this production milestone. Once again, setting a record speed among China's emerging EV manufacturers, following our historic speed in reaching the 100,000th unit mark. V1 is also the first domestic branded premium model priced above RMB 300,000 to achieve this production milestone. Moving to our supply chain, the COVID-19 resurgence severely affected the auto supply chain in the second quarter. Currently, there are remaining disruption and difficulties, but we moderated, they moderated as the pandemic became more contained. Although we are cautiously optimistic that our supply chain will normalize in the second half of the year, we should highlight that potential volatility remains and requires us to constantly stay on high alert, especially given the ongoing pandemic. As we navigate the continuous unpredictability, we focus on reinforcing our supply chain system. strengthening our partnership with parts suppliers to tackle part shortage and cost inflation, and at the same time, redoubled our exercise on auto parts quality control. Now, moving to profitability. In the second quarter, we continued to see that the power of our product, our execution consistency, and our operational resilience enable us to mitigate the cost inflation that we have been experiencing along with the rest of the industry. As a result, our second quarter gross margin remained relatively solid at 21.5%, up 2.6% year over year. As we remain devoted to R&D and network expansion to fuel our future growth, our operating expense increased by 91.9% year over year. Meanwhile, we continued to optimize our cost structure and then manage our cash flow effectively. Despite the pandemic's impact, we achieved another quarter of positive operating cash flow of RMB 1.13 billion and free cash flow of RMB 451.7 million. As part of our efforts to accelerate growth and accommodate additional user demand with new model launches, we continued to expand our direct sales and servicing network. As of July 31st, we had 259 retail stores covering 118 cities, as well as 311 servicing centers and authorized body and paint shops operating in 226 cities. While the pace of our sales network expansion has been challenged by the COVID-19 resurgence, we will strive to further extend our reach to users by upgrading our existing stores. In order to optimize charging experience for our users, we also rolled out the charging map function in our LeeAuto application on August 17, The map covers over 30,000 charging stations and 300,000 charging poles in 31 provinces and over 300 cities from six main charging station operators, including State Grid, Star Charge, and others, providing convenient energy replenishment options for our users. On June 21st, we unveiled Li L9, our flagship smart SUV. Reflecting our intense focus on family users, we developed Li L9 to create a mobile home create happiness. Thanks to our relentless R&D efforts and outstanding product definition capabilities, Li L9 boosts cutting edge premium features to provide outstanding handling and ultimate comfort and safety. Every LEAD L9 comes standard with our flagship full stack self-developed autonomous driving system, LEAD ADMAX. It's enhanced functionality bolstered by upgraded perception and vehicle control capability was highly recognized by users in the test drives. As the first volume production vehicle with redundancy design applied to its powertrain, steering system, braking system, and the power supply system for the computing platform, it offers enhanced reliability and safety. Supported by a computing platform composed of two Qualcomm Snapdragon automotive-grade 8155 chips and our in-house deep learning-based multimode interactive technology, LEED L9 provides a smart interior space featuring five screen, three-dimensional interactions for family members for all ages. We have received positive feedback along with very strong order intake for LEED L9, particularly from our target family users. We will commence delivery of LEED L9 by the end of August. While we forge ahead with our new model launches, we also continue to pursue optimization for our existing product. In June, we released the OTA 3.1 update for Liwan, taking the Liwan user experience to the next level. This update feature, a highly anticipated remote vehicle control function. allowing users to move the vehicle forward and backward in a straight line through our mobile application. This remote capability greatly increases users' convenience and improves their ability to park in narrow spaces. The update also includes an audio equalizer function and further optimization of our fully self-developed NOA function with enhanced accuracy for recommended lane change and the ramp entry or exit. Furthermore, we are steadily working on our plan of launching high power charging BEV model next year. We're also working on deploying our HPC network to support our HPC BEVs. LEED L9 will be the first model in the industry to adopt the NVIDIA O-ring platform to deliver advanced autonomous driving features, including NOA function, showcasing our strong R&D capability with high efficiency. Our self-developed autonomous driving algorithms have won much public recognition internationally. For example, we ranked first in the 2021 New Things 3D Vision Detection and Tracking Task, and also won first place in the ICCV 2021 Workshop Interpret Challenges. We also have the largest number of autonomous driving users in China. As of July 31st this year, Users with access to LOA function exceeded 130,000. The technology knowledge and insights accumulated through the one give us the advantage by helping us enhance our R&D efficiency during the L9 development process, refine products, and further optimize the safety and performance of autonomous driving. In summary, we will continue to create happiness and value for our family users by honing our existing products and expanding our model line up while enhancing our brand recognition for family users. We will also execute on our technology roadmap to solidify our lead in EREVs and advance our HPCPEV development. With that, I would like to turn it over to our CFO, Johnny. for a closer look at our financial performance. Please go ahead.