Li Auto Inc.

Hello, ladies and gentlemen. Thank you for standing by for Lee Otto's third 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 Jang, Investor Relations of Lee Otto. Please go ahead, Janet.

Thank you, Matt. Good evening and good morning, everyone. Welcome to Li Auto's third quarter 2022 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. 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, together with our senior management Mr. Donghui Ma and Mr. Yan Xie will join for the Q&A discussion. Before we 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 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 Liado's disclosure documents on the IR section of our website, which contain a recalculation 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 our third quarter key highlights. In the third quarter, we navigated our model succession and launch cycle, as well as the challenging micro environment and supply chain constraint. Against this backdrop, we delivered 26,524 vehicles, up 5.6 percent year over year. Despite a supply chain bottleneck, we delivered over 10,000 Li L9s in September, the model's first full month of production. This marked the first time that a Chinese-branded premium model priced over RMB 400,000 achieved monthly sales of more than 10,000 vehicles, demonstrating Li L9 as the top pick among full-size SUVs for family users. This success was due to the exceptional strength of our team. their outstanding management of the Li-L9 ramp-up process, and their skillful collaboration with our supply chain partners. As Li-L9 continues to surpass user expectations with class-leading features in drivability, safety, interior space, passenger experience, and smartness, demand remains robust, providing constantly strong order inflow for the model. Li L9 has been the sales champion among full-size SUVs in China since its delivery started. Benefiting from Li L9's strength, our total delivery in October reached 10,052, representing a 31.4% year-over-year increase. This followed by a record-breaking 15,034 vehicle deliveries in November. As always, we would like to extend sincere gratitude to our over 200,000 Li-1 users. We will continue to adhere to higher-than-industry service standards and continue to improve the performance of Li-1 through OTAs. On September 30, we launched Li-L8, a six-seat premium family SUV that succeeded Li-1. We also unveiled the L7, a seven-seat flagship family SUV, on the same day. We commenced the deliveries of the L8 in November. Let me provide more details of this vehicle. The L8 employs our new generation all-wheel drive range extension system and boasts over 100 features in their standard configurations. It's available in two trims. PRO and MAX, providing users with flexible choices of smartness. The two teams are harnessed respectively with the AD PRO and the AD MAX autonomous driving systems. PRO is powered by the Horizon Robotics Journey 5 chip with 128 tops of computing power, while MAX is powered by the DUO or RingX chips with 508 tufts of computing power. In addition, the two trims are equipped with innovative smart space system, SS Pro and SS Max, featuring a first row full screen interactive system and a five screen three dimensional interactive system, respectively. These packages bring a new level of driving and entertainment experience to smart electric vehicles. We are pleased that the Li L8's numerous class-leading features have delighted its first batch of users, and we believe that their satisfaction for the vehicle has broadly exceeded their expectations. We are confident that the Li L8 will stand among the finest options for six-seaters priced over RMB $3,000 300,000 RMB, and together with Li L9, the sales champion of full-size SUVs in China, and the Li L7, which we believe will be a top choice among five-seat SUVs priced over RMB 300,000, we expect to captivate a broader range of family users with differentiated needs and gain a larger market share in the RMB 300,000 to RMB 500,000 price segment. We are encouraged by LiL9's continued strong sales performance and the solid demand for LiL8. But considering the ongoing supply chain uncertainty, we expected fourth quarter deliveries to be in the range of 45,000 to 48,000 vehicles. We will continue to collaborate closely with our supply chain partners to react quickly to changes and to mitigate potential risks. During the third quarter, we continued to demonstrate our strong commitment to vehicle safety. According to the vehicle safety evaluation results released on November 4th by the China Insurance Automotive Safety Index, or CIASI, Lee L. Nye obtained the G rating, the highest safety rating, in three out of four evaluation categories, occupant safety, pedestrian safety, and assistance safety. In the category of crashworthiness and repair economy, Lee L. Nye received an M rating. one of the top results received by premium vehicles tested by CIASI since 2017. In addition, it was the first domestic full-size SUV tested for 25% frontal offset impact on both the driver and passenger sides and achieved the G rating for both tests. Thanks to its ultra-high strength body structure, Li-L9 also demonstrated class-leading performance with the ability to withstand a peak force of 116,475 newtons in the roof strength test. Its roof can withstand a weight of 11.8 ton on the side, effectively preventing cabin deformation and the safeguard a relatively large headspace for drivers and passengers to survive in case of accidents. We continually improved our vehicle's performance and features through OTA after their delivery. In early November, we released our OTA 4.1 upgrade for the L9, further enhancing user experience with our upgraded the AD, autonomous driving system, and smart in-car voice assistant, ,, as well as improved smart space interactions and entertainment experiences. In particular, the vehicle's three 15.7-inch 3K automotive-grade OLED screens can now project the same events and all game from the three different camera angles. transforming the L9 into a great sports lounge for families and friends to watch games, such as the ongoing FIFA World Cup. To create successful products, we have two core goals. Firstly, for consumers, we choose to exceed their needs rather than merely meeting them. Secondly, as a company, we aim to achieve healthy growth margin and self-sustaining cash flow. which will allow us to continually invest in our due growth engine of R&D and business capabilities. Specially, our R&D efforts will be directed more comprehensively across products, platforms, and systems, with the long-term goal of growing into a world-class technology company. Our business capabilities include commercial, supply, and organization capabilities. With continued investment in R&D and business capability, supported by our healthy growth margin, we will continue to pursue product and commercial success and foster a healthy long-term development model. This flywheel has been the strategic focus since our founding, and we believe will remain our strategy going forward. By understanding this business model, you will understand Li Auto more. Our supply chain remains one of the most significant variables with respect to our deliveries. We are accelerating supply chain deployment and optimization to build our resilience for fluctuations and support our rapid growth sales. Importantly, we are committed to extending our in-house development and the manufacturing capability vertically along our supply chain. Through our forthcoming self-owned manufacturing base and the majority-owned JVs, we expect to be able to self-produce both range extenders and the five-in-one electric drive units that can support our EREV delivery targets. On the BEV side, we have commenced construction of a semiconductor manufacturing base in the high-tech zone of Suzhou Jiangsu Province in the third quarter. It will focus on R&D and production of automotive grade power module based on the third generation semiconductor material, silicon carbide. The power module is the core component of our self-developed eight volt electric drive system. Alongside our dedicated investment in supply chain, we continue to expand our direct sales and servicing network, and increase our brand awareness with upgraded brand image to fuel our business expansion. As of November 30th, 2022, we had 276 retail stores covering 119 cities, as well as 317 servicing centers and the auto authorized body and paint shops operating in 226 cities. During the third quarter, we also started to open retail stores in places other than shopping malls, such as automotive theme parks, to diversify our locations and reach more varied target users. The retail stores we opened at Hangzhou T-Car Auto Theme Park in September is a good example. Featuring our new design language and warm colors, it creates a welcoming interactive space for visitors. It also enjoys strong food traffic due to its excellent location and word-of-mouth publicity. In addition, this store also offers customers a comprehensive and convenient experience with combined showroom and delivery center functions. The expansion and upgrade of our direct sales and servicing network have boosted both our brand recognition and our ability to fulfill user demands. for our compelling products, which we are confident will drive meaningful sales growth going forward. We will continue to innovate new retail formats, finding new ways to attract more users while providing them with better services and experiences. Moving to R&D, we believe R&D capability lies at the core of product competitiveness as we scale our company from 1 to 10. Therefore, we insist on full-stack self-development of core technologies such as electric drive, intelligent space, and autonomous driving system. We have spared no effort in solidifying our leadership in the EREV space with continued investment in our new generation range extension system. In addition, We are actively self-developing the key building blocks of our 8-volt HPC BEV platform, including the power chip, power module, electronic control unit, electric motor, and transmission system, aiming to be one of the first automakers to roll out HPC BEV vehicles. We are also proud to lead the industry in smart space R&D, for example, we self-developed our smart space, the AI system, powered by MimoNet, a six-zone human voice enhanced network, and MVSNet, a multi-view vision fusion network. The AI can help create accurate sound perception in a complex acoustic environment and identify complicated gestures, enabling an unparalleled in-car entertainment and entertainment interactive experience with respect to autonomous driving as of november 30th more than 170 000 family users have enjoyed our highway oa feature we have further enhanced our vehicle's ability to perceive dynamic obstacles and the static road structures in a complex environment as well as their ability to forecast traffic participants' action. We were the first in the industry to extend the concept of 3D hypothesis, 2D verification, to multi-mode sensor, and Li-L9 was the first to realize highway NOA based on an NVIDIA O-ring SOC chipset. Meanwhile, we have partnered with Tsinghua University and MIT to complete the world's first public project to construct high-precision maps in real time. Intelligent manufacturing is another core competence for any successful automaker and another area in which we excel. First, we have industry-leading manufacturing equipment. Our fully self-developed manufacturing management software, LiMOS, can greatly improve production efficiency and quality with precision control during the entire automotive manufacturing process. This system will be implemented in all our future factories, shortening new factories' deployment cycle by more than three months. Our R&D efforts are not limited to building a grid car, but also how to make it. We use vision sensors and algorithms to precisely control the workflow of hardware equipment in order to realize flexible production and intelligent inspection. As we strive to enhance our R&D and manufacturing capabilities, we also aspire to make a positive environmental and social impact through our sound government structure and the dedication to sustainable development. In September 2022, we received an MSCI ESG rating of AA for the second year in a row, maintaining our leadership position in the automotive industry in terms of ESG performance. Moreover, following the earthquake in Luding County, Sichuan Province, on September 5th, we made a donation to help the affected people and to support disaster relief efforts. We hope to play our part as a corporate citizen and a member of the community by helping people in need. We look forward to sharing more of our ESG endeavors in our next ESG report, which we expect in the first half of next year. In addition, we are pleased to be included as a constituent stock in the Hengsheng China Enterprise Index. effective December 5th. This is a strong recognition of our underlying strengths and investment value. Lastly, as you may have seen from today's press release, from January 1st, 2023, I will no longer serve as the company's president. I will spend more time to support the company's new round of organizational upgrades to prepare for its future. In the future, Our CEO, Li Xiang, will take over the responsibility of sales and services. Our newly appointed president, Mr. Ma Donghui, will be responsible for the overall closed-loop management from product R&D to procurement and supply, production and manufacturing, and quality. Xie Yan, our new CTO, will lead the company's R&D team to explore the most advanced underlying technologies in the smart electric vehicle industry. I would like to thank our investors for the support and trust they have placed in Li Auto and myself. I firmly believe that Li Auto will continue to achieve great results under the leadership of the new management team. and continue to lead the smart new energy vehicle industry in China. With that, I will turn the call over to our CFO, John, for a closer look of our financial performance. Please go ahead.