Li Auto Inc.

Ladies and gentlemen, thank you for standing by for Lee Otto's second quarter 2023 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 Zhang, Investor Relations Director of Lee Otto. Please go ahead, Janet.

Thank you, Sarah. Good evening and good morning, everyone. Welcome to Lee Otto's second quarter 2023 earnings conference call. The company's financial and operating results were published in a press release earlier today and are posted on the company's IR website. On today's call, we have our chairman and CEO, Mr. Xiang Li, and our CFO, Mr. Johnny Tia Li, begin with prepared remarks. Our president, Mr. Donghui Ma, and other senior management 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 filings 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 matters. Please refer to Li Auto's disclosure documents on the IR section of our website. which contain a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. Our CEO will start his remarks in Chinese. There will be English translation after he finished all his remarks. With that, I will now turn the call over to our CEO, Mr. Xiangli. Please go ahead.

Hello, everyone. I'm Li Xiang. Welcome to today's conference. Regarding the current situation of the government, In the second quarter of 2023, the ideal car achieved more than 30,000 units of monthly delivery. In the second quarter, it delivered more than 86,000 units, which is three times the same as last year. The amount of delivery this year is also more than the total in 2022. In the beginning of this year, we delivered the 400,000th ideal car. Since the official delivery in December 2019, it has become the fastest in China to deliver 400,000 units in 24 months. It took less than four months to deliver 300,000 to 400,000 units. Our delivery volume in July is also at a new high of more than 34,000 units. The total delivery broke through 430,000 units. Thanks to our strong product power and the comprehensive improvement of organizational processes and management capabilities, the three models of the ideal L series have kept the sales lead in each air market. Since its release in June of last year, the total delivery has exceeded 200,000 units. According to the mid-term data, in the second quarter, Li Xian 27 is still the top seller of more than 300,000 large SUVs. Li Xian 28 is still the top seller of more than 300,000 SUVs. Li Xian 29 continues to be the top seller of all SUVs. Li Xian is becoming the top seller of Chinese luxury brands in the Chinese market. In China, we have more than 200,000 new car brands. The market share has increased from 11% in the first quarter to 14%. Our financial performance has continued to improve with the increase in delivery and better operation capabilities. In the second quarter, the company's income, net profit, and free cash flow, and other financial data have set a historical record. The total income reached 286.5 billion yuan, which increased by 228.1%, and the net profit reached 23.1 billion yuan. The free cash flow has reached 9296.2 billion yuan. I believe that the ideal car's outstanding self-sufficiency and abundant cash can firmly support us to invest in R&D, recruit talent, accelerate business expansion, and establish long-term competitiveness. In the third quarter of this year, the delivery volume of the ideal car can exceed 100,000 taels. This year, we are confident that we will exceed 10% to 20% of the year-end internal set goals and break through the annual revenue of 100 billion RMB. At the end of this year, we will hit 40,000 monthly payments. In order to achieve the goals of payment support, we will continue to increase the ability to coordinate production and sales, and continue to increase the ability to raise prices. By optimizing supply chain management strategies and upgrading management processes, we will increase supply capabilities. In terms of intelligent value, we have made rapid progress this year. In June 2023, we opened China's first city-wide and commuter OAs that are not dependent on high-altitude maps in the most complicated roadblocks in Beijing. We have also promoted the city-wide OAs to Beijing and Shanghai early bird users. In terms of perception, we use the new NPN characteristics and TNN network to strengthen the BV model. Real-time perception of complex road structures, understanding traffic rules, to identify various obstacles through dedicated networks. At the same time, in terms of regulation and control algorithm, we use imitation learning to make human-like driving decisions. The driving safety, driving efficiency, and input performance of real-time users and media show the ideal of ADMAX. In the second half of the year, we will open up city NOA and traffic NOA to more early-stage users, and make city smart driving available to more families. At the same time, Users are also becoming accustomed to the ease and convenience of the journey brought by high-speed NOA. So far, we have provided high-speed NOA functions for more than 380,000 household users. The high-speed NOA journey has exceeded 230 million kilometers. In terms of the type of car, we introduced the 800-hp high-pressure fast charge solution in June 2023. to optimize the battery and the battery heat management system of the high-pressure pure electric vehicles. The 5C charging ratio of the battery can be used more efficiently to achieve a charging power of more than 500 kilowatts. Charging for 12 minutes can carry 500 kilometers. With the 5C supercharged charging network designed by ideal cars, the energy-saving experience of ideal cars and pure electric vehicles is also very close to two-wheeled vehicles. Our first 5C pure electric supercharged flagship vehicle, the ideal mega, will be released at the end of this year. We are confident that the ideal mega will become the number one new product with a sales of more than 500,000. At the same time, we are also actively setting up a 5C supercharging network. So far, the ideal car has built 37 ideal 5C supercharging stations nationwide. We will accelerate the construction of the basic network. The goal is to build more than 300 at the end of this year. At the end of the second half of the year, more than 3,000 ideal 5C supercharging stations will be built. We will provide a fast and reliable charging experience for ideal cars and electric cars. We believe that the core technology of large-capacity and high-efficiency refueling is the best solution for large-capacity and high-efficiency refueling, as well as the high-pressure pure electricity technology that really solves the charging speed and the length of the charging port. The two routes are the best solution for large-scale replacement of two cars. In terms of sales and service, to support the rapid increase in sales, we accelerate the expansion of the online and offline integrated direct sales and service network. At the same time as the shopping center opened the mall, we increased the center of the car sales area and satisfied the shopping habits and needs of different users. We will further increase the flow of customers and order conversion rate. In the second quarter, we added 32 new retail centers and upgraded 18 existing stores by changing paper or expanding the area. As of July 31, 2022-23, Liqiang Car has already had 337 retail centers nationwide, covering 128 cities. We will continue to use continuous growth as the core power, continue to learn, continue to train, polish our two most important products, serve the automatic electric vehicles of family users and serve the process organizations of internal employees, and better support the development of ideal cars from 1 to 10.