Li Auto Inc.

Thank you for standing by and welcome to the Lee Auto Inc. fourth quarter and full year 2022 earnings conference call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the start key followed by the number one on your telephone keypad. I would now like to hand the conference over to Ms. Janet Zhang, Lee Auto IR Director. Please go ahead.

Thank you, operator. Good evening and good morning, everyone. Welcome to Li Auto's fourth quarter and full year 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 founder, chairman and CEO, Mr. Xiang Li, and our CFO, Mr. Johnny Chieh-Li, begin with prepared remarks. Our President, Mr. Donghui Ma, and our CTO, Mr. Yan Xie, 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 company failings 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 price release and this conference call include discussions of unaudited gap financial information as well as unaudited non-gap financial matters. Please refer to Li Auto's disclosure documents on the IR section of our website, which contain a reconciliation of the unaudited non-gap matters to comparable gap matters. Our CFO will start a remark in Chinese for about five minutes There will be English translation follows after he finished all his remarks. With that, I will now turn the call over to our CX CEO, Mr. Xiang Li. Please go ahead.

Hello, everyone. Welcome to today's press conference. In 2022, the Chinese New South Wales motor market continues to show growth. More and more customers rely on New South Wales motor. According to the data of the Chinese Youth Conference, in the fourth quarter of 2022, The penetration rate of today's cars has increased to 31.7%. These data are 14.8% and 29% in 2021 and 3rd in 2022. Under this background, we continue to grow. In the past less than a year, Lianxi launched the ideal R9, R8, and R7 three-wheeled models, enriching the products, and achieving a comprehensive coverage of the family SUV market of 300,000 to 500,000 yuan, and further consolidated our leading position in this market. At the same time, We will further enhance the capability of developing supply chain and sales services. We will further upgrade the company's business process and organizational structure. We will prepare for the same time period and size expansion of the company. Regarding the delivery volume, in December 2022, our delivery volume exceeded 20,000. We have once again created the historic height of China's new car industry. We have established a solid foundation for the development of 2023. Since September 2022, Li Xiang R9 has continued to run the China's large SUV, Yuexiao Liang's Panhangbao. At the same time, Li Xiang R8 has also taken over Li Xiangwan's Xiao Liang Qiji and won the China's large SUV in December 2022. In the fourth quarter of 2022, we have delivered a total of 46,319 new cars. In 2022, we delivered a total of 133,246 cars. According to the data of the number of new arrivals, Li Xiang's car In December 2022, China's 300,000 to 500,000 SUV models and 300,000 to 500,000 new cars were all ranked first in the sales ranking, becoming the family's first luxury SUV. In the first quarter of this year, our orders for traditional sales units in the automotive industry are still very strong, fully manifesting the competitiveness of ideal cars in product service. We take this opportunity to sincerely thank all family users for their trust and support all the way. The company's 4G revenue has reached 176.5 billion yuan, which is 66.2% in total. In 2022, the total annual revenue reached 452.9 billion yuan, which is 67.7% in total. Due to our cost control and management quality, the 4G labor rate remains stable at 20.2%. The free cash flow reached 32.6 billion yuan. Regarding the product, On February 8th, we officially released the family 5-seat flagship SUV, the ideal R7. And on the 4th, the ideal R7 is equipped with excellent 2-seater space and comfort, as well as a variety of flagship-level configuration. It is equipped with our self-propelled self-propelled electric system. The total range of CRTC is 1,315 kilometers, and the acceleration of 100 kilometers is only 5.3 seconds. The ideal R7 is strictly based on the best performance of the 25% of the double-seater, 25% of the double-seater, and the best performance system. It also has sustainable intelligent space and intelligent driving. The R7 is equipped with the AirPro Max 3-wheel drive, which covers the front during the price range of 300,000 to 400,000 yuan. We also launched the R8L, which covers the price range of 300,000 to 350,000 yuan in the six seats of the R1. We will launch the delivery of the R7 Pro and Max in early March. The R7L and R8L will be delivered in early April of this year. With the emergence of these products and configurations, the product line of ideal R7, R8, and R9 was completed ahead of the 30 to 500,000 SUV market layout. After the release of the ideal R7, more users got to know the ideal car. Not only did the ideal R7 receive hot feedback from the market users, but our store also welcomed more diverse family users, and at the same time, it also increased the attention of the ideal R8. On December 16, Ideal 9 won the 10th XIYAN Awards for China's annual car awards. The XIYAN Awards are jointly created by the Chinese Car Review Magazine and the Australian EFS Car Enterprise Consulting Company, which is known as the Oscar of the Chinese car industry. Considering the continuous performance of Ideal 8 and Ideal 9 and the launch of Ideal 7 in the first quarter of 2023, This year, we will challenge all luxury S&P markets between 300,000 and 500,000, and take 20% of the market share. We expect the amount of delivery of Group B will be between 52,000 and 55,000. Regarding the supply chain, although the supply chain challenge continues to exist, Li Xian R9 and R8 broke 10,000 in the first half of the delivery. This is inseparable from the support of ideal cars, suppliers, and partners. It also reflects our more solid supply chain management and system capability. With the gradual improvement of the maturity of the industry and the gradual improvement of the supply and demand situation of upstream and downstream oil, we remain confident in the zero-fuel supply of 2023. At the same time, we also further strengthen the strategic perception and planning of the supply chain, risk management and cost management, and actively respond to the potential supply challenges and risks. Ideal T-car carries out modular management of the supply chain and maintains While closely cooperating with each other, we also actively strengthen the core products related to smart electric vehicles. Self-reliance and industrial chain vertical integration work In order to achieve a good balance between upstream costs and risk control In the past three years, the company has begun to build a factory self-construction of electric motor assembly and core components To ensure the stability of quality and supply Regarding sales network, in the fourth quarter of 2022, we will continue to strengthen the construction of direct sales and service networks, improve the visibility of users and brands, enhance our business capabilities, and promote the rapid growth of sales. As of January 31, 2023, Li Xiang Motor has 296 retail centers in the country, 123 cities in the country, and 322 retail centers in the country, and 222 cities in the country. Last year, while we continued to expand our sales network, we also focused on upgrading the scale of retail centers. upgrade the storefront to support multi-segment layout, and show more products to more families. In the next few seasons, with the improvement of our brand performance, integrated stores are also an important choice for us. After more than three years of commercial certification, the user experience is better, and the management system with lower sales cost is a long-term choice for us as a high-end brand positioning. In 2022, our sales cost has been lower than the development cost, In 2023, we will continue to improve the cost-efficiency ratio in terms of revenue. In terms of R&D, R&D has always been the core for us to create value for family users. The outstanding R&D capabilities not only make us stand out in the new energy car market, but will ultimately make us a leading smart technology enterprise around the world. In 2022, our investment in R&D has made significant progress. In terms of electric motors, we have developed a new generation of Zengcheng Electrical System 2.0 in the LiDAR series, Our self-developed 1.5T self-propelled motor has a heat efficiency of more than 40.5%. This self-developed 5-in-1 electric drive system has achieved a significant optimization of the NMVH of the self-developed system. We are self-taught to master the ideal mass-produced air suspension with the core technology of software components, and have achieved the integration of the level of input and control stability of home-used SUVs. Among them, the self-taught XU central control unit can handle complex car information at high speed, and achieve accurate control of the car in milliseconds. The smart space is continuously evolving. The ideal class has now evolved into a new generation of modular one-piece structure. It is already on the line in all models of the L series. It has become our self-reliant, face-to-face car storage scene. The three-engine Lisa-RT can support stronger and more complex algorithms in the car. In addition, our self-reliant algorithms are progressing very well in language and world communication. On the language level, the innovative MIMO-NITE algorithm can achieve the accurate separation of multiple sound areas. Combined with the self-proclaimed language recognition algorithm, MSDNet, the wake-up rate of ideal students in real-time test scenarios has been increased to 98%. In the face of the challenge of high noise in the industry, and the three important scenarios of children and children, the wake-up rate of ideal students is more than 90% accurate. In terms of the world, based on the self-proclaimed MMSNet algorithm, it can realize the accurate recognition of the hand movement of the passenger in the car. Combined with the innovative hand wake-up technology, to make hand-to-hand use more free and natural, so that the whole family can enjoy the joy of superpowers out of the blue. In terms of intelligent value, we have combined the mixed BEV algorithm proposed by Tsinghua University and MIT, which can be flexibly deployed in the ADMAX and ADPRO two sets of sensor and hardware combinations. Our自然的高速NEO預測算法 provides a comfortable auto-change and additional speed experience. Currently, more than 220,000 family users can use the high-speedNEO function. The range of high-speed NLA navigation support driving has reached nearly 100 million kilometers. Within a week of the Spring Festival in 2023, the range of high-speed NLA driving has reached nearly 8 million kilometers. This year, we will also further expand the ability of navigation support driving to urban scenarios. In the fourth quarter, we plan to launch early bird user testing of urban NLA on the ideal AD Max. In addition, our self-proclaimed AEB algorithm has added the application of laser on the AD Max. and launched the first integrated laser A and B function in the industry. The safety and long-term calculation of laser algorithms is expanded from cars, drivers, pedestrians, and other major traffic participants to irregular obstacles and night scenes including cars. In the future, we will continue to combine the full-time resources of power generation and high-pressure pure electricity core technology to continue to improve the level of automation of products. In product development, platform development, and system development, we will continue to invest resources. to promote the long-term growth of ideal cars. Finally, our long-term success involves continuous investment in our research and business capabilities, as well as the creation of new luxury models to enhance the brand value and continue to enhance the wheel effect. 2023 will be another year of high-speed development for the new car industry, especially ideal cars. We believe that Hi, everyone, and thank you for joining our call today.