Li Auto Inc.

Hello, ladies and gentlemen. Thank you for standing by for Lee Auto's second quarter 2025 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, Ms. Janet Zhang, Investor Relations Director of Lee Auto. Please go ahead, Janet.

Thank you, Darcy. Good evening and good morning, everyone. Welcome to Li Auto's second quarter 2025 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 will have our chairman and CEO, Mr. Xiang Li, and our CFO, Mr. Johnny Tianli, to begin with prepared remarks. Our President, Mr. Donghui Ma, and CTO, 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 company failings with the U.S. Securities and Exchange Commission and the Stock Exchange of Hong Kong Limited. 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 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 CFO will start his remarks in Chinese. There will be English translation after he finishes all his remarks. With that, I will now turn the call over to our CEO, Mr. Xiang Li. Please go ahead.

Hello, everyone. I'm Li Xiang. Welcome to today's press conference. In the second quarter of 2025, we will deliver more than 110,000 new cars and achieve a revenue of RMB302 billion. According to the data from the mid-term, this year's ideal car sales in the Chinese youth car market of more than 200,000 yuan has reached 13.4% and is one of the top sellers of Chinese car brands. As of the end of July, we have sold more than 1.36 million cars. Thanks to the recognition of 1.36 million families, and thanks to our partners, shareholders, and all our employees who have grown with us. In April, we launched the new ideal, MIGA HOME. The current monthly sales volume is about 3,000 units, far above the expected. After the release of Mega in March last year, it has been 14 months. Since May this year, it has become the No. 1 sales volume of NTD 500,000 or more. Since June, it has become the No. 1 sales volume of left-hand cars worth 600,000 or more. On the one hand, this success reflects the company's ability to quickly identify problems and self-reliance. On the other hand, it also bravely proved that the value of the product will be verified by the market and time. In terms of the R-series, in the first half of the year, we completed the smart change-up of all-season retail products. Since the 6th month, due to the adjustment of the sales service system and the influence of market factors, the sales volume of the R-series has fluctuated. Despite this, in June and July, we are still in the top three in the new and advanced car market of more than 200,000 yuan. We will continue to play an influential role in the ability of cars to grow in adversity, to complete the adjustment of the sales service system as soon as possible, including the ability to optimize sales and delivery, establish a front-line marketing system, and promote sales competitiveness. At the same time, we will focus on value, focus on users, and more effectively address market changes. On July 29, we officially released the Dream i8, and on August 20, we started to deliver it. The Dream i8 is an ideal car that redefines the pure SUV, and it is the most innovative product of the ideal car. It takes into account the full capacity of the passenger car, the handling of the luxury car, the comfort and comfort of the MPV, and other advantages. It is also one of the core reasons why users choose ideal 8. It is a good proof that we have developed through the positive direction to create a unique value for users. As a brand new product that re-designs and recharges SUVs, after the release of ideal 8, we are focused on gradually winning the reputation of users. We are very happy to see that the market value of ideal 8 is up to 97%. As users deeply experience the product, they fully understand and feel the value of the product, and the market response is gradually warming up. Since August 2, Since the start of delivery on August 20, the first user's experience with the ideal 8 has given a high evaluation. We are confident that by the end of September, we will be able to deliver more than 8,000 pairs of ideal 8s. I believe that through time verification, the ideal 8 can become a pure standard product in the price range like the ideal mega. In addition, the preparation work of our five pure electric ACV Li Xiang i6 is progressing smoothly. It will be listed and opened in September. It will further expand our product base and meet the needs of more and more users. With the introduction of pure electric vehicles, we have established the largest energy-saving system in China. As the fastest-growing vehicle in China in the past two years, Li Xiang i6 is dedicated to the experience of driving a car that is not anxious by pure electric users. At present, our self-built supercharger, We are confident that by the end of the year, In terms of charging speed, our energy-saving system has also reached the top of the industry. At present, our charging capacity is more than 250,000 watts. The ratio of 4C and 5C is more than 61%. Subsequent charging stations will all use 4C and 5C charging capacity to further improve our energy-saving system's supercharging capacity. In addition, we continue to explore and build a car charging service ecosystem. In June, we launched the first transverse supercharger station in Changzhou, which is the same as the gas station. Not only does it support the separation of people and cars, but it can also achieve multi-car supercharger at the same time, making the charging experience more convenient and efficient. We are also testing automatic charging machines, hoping that we can redefine intelligent charging in the future. We insist on continuous investment in research and development to further consolidate the industry leading position in the field of intelligent cars. We believe that smartization will increasingly become the key and key factor in the decision-making of user purchases. We will also rebuild the car industry and bring revolutionary changes to travel. We expect more than 6 billion yuan to be invested in artificial intelligence this year for infrastructure and product technology development. On August 20, our self-proclaimed VLA driver prototype and ideal class intelligent body will be officially launched with the delivery of ideal M8. Among them, the VLA technical structure will be the first car delivery in the industry and will be deployed to all ABMAX models through OTAs in mid-June. The VLA driver model combines space, language intelligence, and behavior strategy. It has a more accurate space detection ability, thinking chain reasoning and decision-making ability, the ability to communicate through language like a human driver, and the ability to generate and select the best route. By adopting a technology structure that is more like human intelligence, the VLA driver model can be used in the prevention of driving, stability, comfort, three-point turn signal, continuous tasks, and terrain formation, etc., to bring a significant experience improvement to the user, and can learn more and more through continuous learning. At the same time, the ideal student who is based on the EPC of the self-developed machine model class has also been upgraded from a language assistant to an ideal student. The improvement of its ability greatly expanded the service ecosystem of the vehicle. For example, you can You can use your life assistant to complete the delivery of food to the delivery app. You can use an outdoor camera and a GPS app to complete the cleaning of the parking lot. The ability of ideal students to remember not only increases the diversification of tools, but also makes them more emotional and individualized. In the future, we will continue to upgrade artificial intelligence technology and use the results of research and development to continuously promote the evolution of product generation. We will strive to become the bridge between the physical world and the digital world, bringing artificial intelligence back to every user. In addition to artificial intelligence, our research and development also focuses on electrical district technology and 5C supercharger and other core components. Our natural drive area, including the core of the carbon fiber technology chip, greatly improved the overall car performance and the performance of the car. Another development focus is the 5C battery. We self-proclaimed the power and heat management system to better support ultra-fast charge and long-term battery life. From 0% to 80%, it can maintain a high efficiency of more than 3,000W. In addition, the battery life is also excellent. Under the ultra-charge mode, after 1,500 full charge and full release, the battery's health can still be maintained at more than 80%, leading the industry. We will continue to take advantage of the self-proclaimed advantages. Through self-proclaimed and self-made, or technology self-sufficiency, joint production, etc., to build product experience and further optimize production costs. In terms of sales service network, through recent organizational structure adjustment, we strive to build the core of the user operating ability by building a door store, improve the ability to convert middle-end sales, and better pass on brand and product value. At the same time, we will continue to optimize the network structure, expand and upgrade the network coverage in the head car city and mall, and gradually increase the number of doors in low-end cities to reach more users. In order to better support the launch of pure electric cars, our opening rhythm this year is relatively poor overall. So far, ideal cars have operated about 550 retail centers in more than 150 cities around the country. The number of doors increased by 50 at the end of last year. The total number of cars in the country has also increased from 3,700 last year to more than 4,400. Dream Cars has always insisted on doing the right thing in the development process. From Zengcheng's Dream 1 and L series to 5C's Dream Mega and Dream i8, no matter what challenges we face, we will never change our intention to create better technology and better products. This year, we will continue to create the best Zengcheng and Zengcheng products and deepen the brand construction. In the future, we will continue to use technology innovation as a driving force to continue to improve the transformation of the industry. We hope that through our long-term efforts, we can provide a positive service and a happy company to our users. Next, let's welcome our CFO, Vichit, to introduce our financial performance in detail.

Hello, everyone. This is Vichit, and thank you for joining today's earnings conference call. In the second quarter of 2025, we delivered over 110,000 vehicles, bringing total revenues to RMB 30.2 billion. According to insurance registration data from the China Automotive Technology and Research Center, we captured a 13.4% market share in the RMB 200,000 and above NEM market in China, making yet another quarter where we have top segment sales among Chinese auto brands. As of the end of July, our cumulative deliveries exceeded 1.36 million vehicles, I would like to extend my sincere gratitude to those 1.36 million families who have placed their faith in us, as well as our partners, shareholders, and employees for being part of this journey. We launched Lee Mega Home in April this year. The sales results far exceeded our expectations, with approximately 3,000 units sold monthly. Fourteen months after launch in March last year, Li Mega has become the best-selling MPV priced above RMB 500,000 since May 2025, and then the top seller among all BVs in the same price range since June 2025. These achievements demonstrate our ability to quickly identify issues and grow, while standing as a powerful testament to our product value, as validated by the market and test of time. The refreshed Li L series that we launched in the first half of this year experienced sales fluctuations since June due to sales and service system adjustments and other market factors. Despite these challenges, in June and July, we maintain our top three positions in the RMB 200,000 and above NUB market. We will draw on Lee Auto's ability to thrive in challenging conditions and swiftly complete the restructuring of our sales and service system. This includes enhancing sales and delivery capabilities building an end-to-end marketing system, and boosting sales team morale. Meanwhile, we'll focus on creating value for our users to respond more effectively to market dynamics. We officially launched Leigh i8 on July 29th, with delivery starting on August 20th. Leigh i8 showcases our latest innovations and redefines best SUVs by combining the versatility of off-roaders the right handling of luxury sedans, and the comfort of MPVs. Its pioneering design is a key reason why users choose Leigh i8, validating our product philosophy. Since its launch, our focus has been on accumulating positive user word of mouth for this innovative product. We are especially pleased to see a test drive satisfaction rate of over 97%. As customers experience the product firsthand, Leigh i8 continues to gain momentum. Since deliveries began on August 20th, we received glowing reviews from the initial batch of customers. We expect cumulative deliveries of Li-I8 to exceed 8,000 units by the end of September. We're confident that over time, just like Li-Mega, Li-I8 will establish itself at the BEV benchmark in its price range. Additionally, preparation for our five-seat BEV SUV, Li-I6, is progressing smoothly. We plan to launch Li i6 and convince deliveries at the end of September. Li i6 will expand our product lineup to cater to a broader audience base. To support our B2B launch, we operate the largest charging network among automakers in China. As the automaker with the fastest growing charging network over the past few years, Li Auto strives to empower web users with a hassle-free experience. As of now, we have more than 3,100 charging stations equipped with over 17,000 charging stalls. Among these charging stalls along the highways, over 1,000 supercharging stations cover China's busiest nine east-west and nine south-north highway routes, a 150-kilometer interval on average. Additionally, more than 2,100 urban supercharging stations are spread across over 260 cities, with an average coverage radius of 3.5 kilometers and first and second tier states. We're confident that we'll reach our 4,000 station goal by the end of this year. Our charging network also leads the industry in terms of charging rate. Currently, all of our charging stalls support charging rates of 250 kilowatts or higher, with over 61% being 4C and 5C chargers. All of our upcoming charging stations use 4C and 5C charging stalls, further enhancing the ultra-fast charging capability of our energy replenishment network. Furthermore, we continue to explore and build a new ecosystem for our automotive charging services. In June, we launched China's first pass-through supercharging station in Changzhou, which functions like a gas station. It allows users to stay in the cars while supercharging multiple vehicles at the same time, making the charging experience more efficient and more convenient. We're also testing autonomous charging robots aiming to redefine smart charging in the future. We remain committed to ongoing investments in research and development to further solidify Li Auto's leading position in intelligence. We believe that intelligence is becoming an increasingly critical, maybe even the most critical driver of users' purchasing decisions. It will also reshape the automotive and mobility industry. We expect our AI investments this year to exceed RMB 6 billion, which will be allocated to infrastructure development as well as product and technology development. On August 20th, we officially rolled out our proprietary VLA large model driver and Li Xianglongxue agent with the delivery of VI8. As the industry's first VLA architecture to be delivered in production vehicles, The VLA driver-large model is scheduled to be deployed on all the ADMAX models via OTA updates by mid-September. The VLA driver-large model integrates spatial and linguistic intelligence with behavioral strategy. It boasts enhanced capability in precise spatial perception, chain-of-thought reasoning, and decision-making, natural language interaction just like human drivers, and route diffusion generation and optimal path selection. By adopting a technical architecture that more closely resembles human intelligence, the VLA driver large model significantly enhances user experience in areas such as defensive driving, smoothness and comfort, three-point turns, continuous task execution, and underground garage navigation. Furthermore, Through ongoing and reinforcement learning, it can become increasingly adept at understanding user preferences. Meanwhile, our proprietary foundation model, MindGPT-powered Li Xiang Tongxue, has evolved from a voice assistant into an intelligent agent. The agent's enhanced capabilities greatly expand the in-car service ecosystem. For example, it can act as a life assistant to connect with food delivery apps and pickup orders at restaurants. We'll activate vehicles' external cameras and make payments by scanning and paying fees at parking lots. Its memory capability not only increases the diversity of tools, but also makes this inclusion more emotionally resonant and personalized. Going forward, we will continue to build our AI capabilities and harness our R&D achievements to continuously advance product iteration and evolution. With the vehicle as a platform, we're committed to bringing the physical and the digital world, extending the benefits of AI to every user. Beyond AI, our R&D also focuses on core areas such as electric drive technology and 5C supercharging. For instance, our proprietary drive motors, including key components like silicon carbide power chips, have significantly boosted vehicle energy efficiency and range. Another key R&D focus is 5C batteries. we have developed in-house battery cells and a thermal management system that can better support ultra-fast charging and long driving range. The 5C battery can maintain a high charging power of over 300 kilowatts while it charges from 0% to 80% of SOC. Additionally, the battery lifespan is exceptional. Even after 1,500 full-charge discharge cycles in supercharging mode, battery health remains above 80%, which is industry first. We will continue to leverage our in-house R&D advantages to further bolster product competitiveness and optimize production costs by developing key technologies in-house and manufacturing in-house or through joint ventures. Turning now to our sales and service network, a recent organizational restructuring will empower us to build our store-centric user operation capability, which we believe will help boost sales conversion and improve how we communicate our brand and product value. Meanwhile, we will continue to define our network structure by expanding and upgrading coverage in major auto parts and shopping malls. We will gradually increase the number of stores in lower-tier cities to reach more user cohorts. To better support our bed launches, our store expansion schedule has been strategically front-loaded this year. As of now, we operate over 550 retail stores across more than 150 cities nationwide, with net additions of about 50 stores and 700 display spot since the end of last year. Throughout our journey, we have always believed in doing what we believe is right, even when it's difficult. From EREVs, V1 and VL series, to BEVs, VMEGA and VI8, our commitment to developing advanced technology and better products remains unshaken, no matter how much adversity we face. This year, we've demonstrated progress in dev innovation with offerings like Li Mega Home and Li i8. Looking ahead, we will remain devoted to creating superior EREVs and devs while strengthening our brand. We will continue to leverage technological innovation to lead industry transformation. Through our long-term, persistent efforts, we will aim to provide our users with cutting-edge technology extraordinary services, and meaningful companionship. I will now turn the call over to our CFO, Johnny, to walk you through our financial performance.

Thank you, Sean. Hello, everyone. I will now walk you through our second quarter financial performance. Given time constraints, my remarks today will be limited to some key financial results. All figures will be quoted in RMB unless otherwise stated. For further details, including the corresponding US dollar amount, we encourage you to refer to our earnings press release. Total revenue in the second quarter were RMB 30.2 billion, down 4.5% year-over-year, and up 16.7% quarter-over-quarter. This included RMB 28.9 billion from vehicle sales. down 4.7% year-over-year, and up 17% quarter-over-quarter. The year-over-year decrease was mainly due to lower average selling price caused by product mix changes, customer interest subsidies, and higher sales incentives, partially offset by increased vehicle deliveries. The sequential increase was mainly due to the increase in vehicle deliveries. Cost of sales in the second quarter was RMB 24.2 billion, down 5.2% year-over-year, and up 17.3% quarter-over-quarter. Gross profit in the second quarter was RMB 6.1 billion, down 1.8% year-over-year, and up 14.1% quarter-over-quarter. Vehicle margin in the second quarter was 19.4% versus 18.7% in the same period last year and 19.8% in the prior quarter. The year-over-year increase was attributable to lower average cost of sales mainly due to cost reduction partially offset by lower average selling price prior, caused by production exchanges, customer interest subsidies, and higher sales incentives. Vehicle margin remains relatively stable over the prior quarter. Gross margin in the second quarter was 20.1 percent, versus 19.5 percent in the same period last year, and 20.5 percent in the prior quarter. Operating expenses in the second quarter were RMB 5.2 billion, down 8.2% year-over-year, and up 3.8% quarter-over-quarter. RMB expenses in the second quarter were RMB 2.8 billion, down 7.2% year-over-year, and up 11.2%. 8% quarter-over-quarter. The year-over-year decrease was primarily due to decreased employee compensation. The sequential increase was mainly impacted by the pace of new vehicle programs and higher expenses to support our product portfolio expansion and technology advancement. As T&A expenses in the second quarter were 2.7 billion, down 3.5% year-over-year, and up 7.4% quarter-over-quarter. The year-over-year decrease was primarily due to decreased employee compensation, partially offset by increased marketing and promotion activities. The sequential increase was mainly due to increased marketing and promotion activities. Income from operations in the second quarter was RMB 827,576.7% year-over-year and 204.4% quarter-over-quarter. Operating market in the second quarter was 2.7% versus 1.2% in the same period last year and 1% in the prior quarter. Net income in the second quarter was RMB 1.1 billion, down 0.4% year-over-year, and up 69.6% quarter-over-quarter. Diluted net earnings per ADS attributable to ordinary shareholders were RMB 1.03 in the second quarter, versus RMB 1.05 in the same period last year, and RMB 0.62 in the prior quarter. And now, turning to our balance sheet and cash flow, we maintain a robust cash position of RMB 106.9 billion as of June 30, 2025. Net cash used in operating activities in the second quarter was RMB 3 billion, versus RMB 429.4 billion in the same period last year, and RMB 1.7 billion in the prior quarter. Free cash flow was negative RMB 3.8 billion in the second quarter, versus negative RMB in the same period last year and negative RMB 2.5 billion in the prior quarter. And now for our business outlook. For the third quarter of 2025, the company expects the delivery to be between 90,000 and 95,000 vehicles and the quarterly total revenues to be between RMB 24.8 billion and RMB 26.2 billion. This business outlook reflects the company's current and preliminary view on its business situation and market conditions, which is subject to change. That concludes our prepared remarks. I will now turn the call over to the operator to start our Q&A session. Thank you.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, please limit yourself to two questions. And if you have additional questions, you can re-enter the queue. If you are a Mandarin speaker, please ask your questions in Chinese first, then follow with English translation. Your first question comes from Tina Hao from Goldman Sachs. Please go ahead.

感谢管理层接受我的提问。 我这边有两个问题。 第一个是跟咱们销量相关的。 就我们看到今年其实L系列的销量还是有下滑。 所以想问一下今年咱们整体销量的目标是 thanks for taking my question i have two questions the first one is regarding our sales volume because this year we've seen the l series their sales volume has been declining. So how does management plan to achieve our four-year target through product marketing as well as channel strategies going forward? And then the second question is regarding our self-developed chips. Can management give us some update on this front? Thanks.

My name is Ma Donghui. Let me answer the first question. Everyone is more concerned about sales. As you all know, we have the product side. We also have the stock side. As for the stock side, we will use the smart side to consolidate the basic version. Ideally, as the leader of the stock technology, we will strengthen the competitiveness of the product through the depth of the core of the smart service driver. In September, we will upgrade the VLA smart driving support to the full-size AD Max model. At present, the VLA Preview version has been delivered to users with the ideal i8. And driving performance improvement is very significant. If it is a comparison, it is like the GTP 4.0 compared to the 3.5 generation breakthrough. And then the new version of the model will be up to 4 billion The model of the corner to the corner before the foot is more than ten times higher, which is equivalent to the expansion of the brain capacity. Direct words bring two core experiences of upgrade That in the case of a car, the smoothness and comfort are significantly improved Then our users reply that it is already difficult to distinguish whether it is a support driver or a human driver In terms of charging, VLA's long-range call and VLA's automatic charging function have also received high recognition. It can solve the actual user's pain points and also get a better use experience. From the perspective of the industry, the VLA architecture is highly in line with the logic of intelligent evolution of humans. And now more from the industry has also joined the VLA's research and development team. Next, the competitive core of support driving is the delivery speed. The key is to strengthen learning. The ideal car has been built and started up to support strengthening learning. The core is to rely on world models to realize the reconstruction and production of scenarios and data. The follow-up will be through this system to promote the fast delivery of VLA models to maintain the top of the industry. In terms of charging models, The ideal pure electricity product line will form a seven-stage dynamic pattern to open up new growth spaces. The ideal mega monthly sales have been stable at more than 3,000 units, continuing to contribute to the basic plate of pure electricity sales. The ideal i8 is very good after the launch of the electronic terminal. At present, it is pushing the production capacity climb. At the end of September, it is expected to reach 8,000 to 10,000 units. Translating for Mr. Ma here, there has been a big focus on sales recently, and because our products consist of BEVs and ERAVs, so I will answer this question on

from two perspectives. First of all, on the EREV front, we will solidify our market position through intelligence. As a leader in range-extended technology, we're enhancing product competitiveness through major upgrades in assisted driving. Starting in September, all V80 MAX models across our EREV lineup will receive the VLA assisted driving system. We delivered the VLA preview version to users alongside VLA delivery The performance improvement that VLA brings can be compared to the improvements from CHAT GPT 3.5 to 4.0. The VLA driver large model has four building parameters over 10 times higher compared to our previous end-to-end model. This is analogous to an increase in brain capacity. This has significantly improved experiences in two core areas. In daily driving, it delivers substantially improved smoothness and comfort. Many users comment that it's now very difficult to tell apart whether it's the car driving itself or the human driving. In addition, in terms of parking, users have praised our newly introduced VLA summon function and parking functions as it actually addresses pain points while at the same time giving them better experience. From the industry perspective, we believe the VLA architecture is going to be highly aligned with human intelligence evolution. We're seeing more and more industry participants recognize and join the VLA camp. We believe that future competition of assisted driving will hinge on iteration speed, for which reinforcement learning is the key. The simulation environment required for reinforcement learning has been built and is now operational. The core technology behind this is the world model, which is used to reconstruct and generate the scenarios and data required for reinforcement learning. Moving forward, we will leverage this system to rapidly iterate the VLA model so as to maintain its industry-leading position. That's our EREVs. On the BEP front, this year our line-up with Detnus will be released over time through two major models, gradually opening up new growth opportunities. LIMEGA has steadily achieved monthly sales of over 3,000 units, stabilizing our BEP sales foundation. Since its launch, our VI8 has received very positive feedback from test drives. We're now ramping up production capacity and striving to deliver between 8,000 to 10,000 units cumulatively by the end of September. In September, we will launch VI6. The model has very attractive design. It drives very well. It balances comfort and sportiness and has excellent space experience. It precisely meets the needs of younger consumers and has the potential to become our sales driver in the best segment.

The second point is that we emphasize regionalization at the marketing end. Then, according to the different regional markets, the policies are precisely defined. The sales system has been adjusted to manage 23 regions in total. The core logic is to question and then set policies. The northern region focuses on the promotion and focus on the transmission of heavy-duty vehicles, and the advantages such as stability of the winter travel route. In the southern region, the heavy-duty electric vehicles China China China China China China At the end of the channel, we will optimize the combination of stores for 1, 2, and 3-line cities, and improve the transfer of goods and customers. The core is to optimize the storage of stores. Adjusting the selection of stores for stores with low location and insufficient customer traffic is extremely important to ensure the efficiency of stores. At the same time, we will balance the type of store to sort out the number of stores in the mall and the center, and use the advantage of high goods and customers in the mall to attract customers. We rely on the ability of high-transformation of central power to meet the demand, form a currency ring that converts goods and customers, and improve the efficiency of offline operation. In addition, we will speed up the coverage of low-end cities, and use a light-weighted mode of anti-star power to increase capacity. Compared to traditional door stores, the investment of anti-star power is less, and the opening period is shorter. We can quickly integrate into the core scenarios of four or five-line cities. By increasing the density of door stores, we can improve the exposure of brands. On the marketing front, we'll be adopting tailored strategies for different markets.

Our sales servicing system is now built around one headquarter and 23 provincial regions, with the core principle being localization with strategies tailored to local markets. For example, in the northern region, we will be focusing on promoting EREV models, because of their advantages in range and performance in winter. And in southern regions, we're prioritizing that model, highlighting selling points like energy efficiency, spacious interior, and smart features, aligning closely with the local consumer preferences. We'll increase marketing investment, moving away from our previous assumption of great products will sell themselves. We'll fully embrace digital operations building a sophisticated digital marketing platform and to track and optimize the entire consumer journey, from audience targeting and lead generation to opportunity conversion. This enables precise decision-making on online marketing investments and significantly improving campaign effectiveness. On the channel side, for Tier 1, Tier 2, and Tier 3 cities, we're optimizing our store portfolio to improve consumer acquisition and conversion with a core focus on optimizing existing resources. We'll optimize store locations. We're proactively relocating stores in suboptimal positions for lower traffic areas to ensure higher consumer reach and operational efficiency. Meanwhile, we'll balance store mix. We're refining the ratio between mall-based stores and central stores in auto parts, leveraging mall store strings in high consumer traffic areas to attract visitors while utilizing Central Store's high conversion capability to close sales, creating a seamless acquisition to conversion loop and enhancing overall offline operational efficiency. To accelerate our coverage in lower tier cities, we're adopting a lightweight model called StarPlan to deploy stores to unlock new growth potentials. Compared to traditional stores, these StarPlan stores require lower investments and have a shorter setup cycle enabling rapid development in core locations within tier 4 and tier 5 cities. By increasing store density, we'll boost brand visibility and fully tap into the potential of lower tier markets and inject fresh momentum into our overall sales growth.

This is Yan. Let me share some information about our in-house design chip. The chip successfully taped out and returned at the beginning of this year. and it is currently ongoing in-vehicle testing and everything is in good shape. We expect to deploy it on our reflection models and deliver it to users next year. It takes about three years from setting up the project and to its shipment. As far as I know, it is the fastest among similar efforts. The performance is quite satisfactory compared to the most powerful chips on the market. It could provide 2x performance when running GPT-like large-language models and 3x when running vision models like CNNs. We designed a novel data flow architecture in which model computation is mostly driven by data, not instructions like other architectures. And in this way, the chip could achieve higher parallelism at the runtime, and we believe it is more suitable for large neural networks. The data-driven logic is orchestrated by our in-house design compiler, allowing the hardware to be more efficient and running at a higher frequency than most comparables in the market. Quite different from other AI chips on the market, we adopted a truly a true hardware software co-design approach. The chip, the compiler, the runtime system, and the Halo operating system are designed together from the beginning. So we can vertically integrate these hardware and software modules to a more powerful AI inference system and more easily. And it could keep on scaling in the future. With the landing of VRA models, on vehicles, we observed that computing power increase could translate to Ada's performance increase better than before, which means higher the computing power, the better the performance, and it is more predictable. We have very strong confidence our innovative architecture as well as the full stack development capability could become our continuous differentiated capabilities and grow even stronger in the future. Thank you.

Thank you. Your next question comes from Tim Hiziao from Morgan Stanley. Please go ahead.

Hello, Mr. Guan. I'm Tim from Morgan Stanley. Thank you for answering my question. I have two questions. The first question is about the change in the ideal sales system. So my first question is about adjustment to the sales system. What's the current progress of the adjustment to the auto sales system? Would you comment on the rationale behind the adjustment and the result you expect to achieve? In the meantime, could these changes adversely affect short-term sales performances and the pace of the new model launches? That's my first question. Thank you.

I'm Ma Tonghui. Let me answer the first question. The ideal sales system has been optimized in August. After the optimization, it is the general sales, and then it only manages 23 areas, and it has newly added two departments, sales operation and market marketing, and reorganized the selection team of stores, strengthened the training academy, and strengthened the delivery team. At present, the new structure has been adjusted and has entered a normal operating stage. That's why our thinking behind the scenes is like this. The adjustment of the sales system, we adopted the internal policy of our company. Then determine the user of this adjustment is a first-tier sales expert. Then set the three major needs of a first-tier expert. At the same time, implement the company's first goal of leadership experience. There are three needs of a first-tier expert. The first one is to hope to have a competitive income in the industry. Then we know that the income of first-tier sales experts and orders and clues are closely related. So we set up a marketing department in the marketing system of the market. And in order to increase the online clues, we reorganized the selection team of stores in order to increase the number of clues under the store. The new sales strategy of the retail period is also to do sales policy for the closer first-tier. We strengthen the training academy in order to provide good products, transmit materials and tools to the first-tier. Help the first-tier to convert orders. The second requirement of the first-tier is growth. We target the first-tier experts. We will build a professional and management series of dual channels. We will carry out professional training of the manager. Then clearly develop long-term prospects. Improve the stability and combat capability of the first-tier. The third requirement is to improve efficiency. Therefore, we have reduced the number of reports and carried out the decision-making. And our quality management team has also established a dedicated feedback channel to ensure rapid response. The problem of one-way feedback can be heard and can be valued. Play a leading role to solve the problem of one-way. Finally, I would like to explain that the change in the sales system this time is not a passive adjustment. It is to actively meet the needs of the first line In order to keep up with the advantageous action In the short term, although there is a gap, but in the long term It will continue to improve our experience and the combat power of the team Then about the launch of the new car The adjustment of the organization will not affect the rhythm of the launch of the new car On the contrary, the support will be stronger That ideal car new car launch plan Both will be promoted according to the specific product plan The I-8 has been successfully released at the end of July. The first batch of delivery has begun on August 20th. The factory is currently in full operation. At the end of September, it is expected to deliver more than 8,000 units and launch a challenge to 10,000 units. In September, the ideal I-6 will also arrive as scheduled. The changes in the sales system are providing more powerful support for new cars to be listed. Improving sales and service processes, Thank you.

Translating for Mr. Ma here. In August, we went through a major reorganization of our sales team. Now, currently, the headquarter directly manages 23 regions. We also established new departments for sales and service operations and marketing. We've also restructured the store site selection team strengthened our training academy, and enhanced our vehicle delivery teams. The new organizational structure is now fully operational and operating smoothly. In driving the sales system transformation, we adopted a four-step approach in internal methodology. The frontline experts clearly are identified as the key stakeholders. We focused on addressing three core needs of the frontline experts. while aligning with the company's goal of delivering the best direct sales store experience. So the first need we're trying to address is to ensure the frontline experts earn a competitive income. The income of frontline sales experts is directly hinged upon two things, order volume and sales needs. We have established a dedicated marketing department to generate more online needs and restructure the site selection team to boost offline food traffic to stores. We now give authority for sales strategy development during non-paid periods. We've also strengthened the training academy, equipping our experts with high quality product message and materials and tools to improve order conversion rates. Second, we will provide them with growth opportunities. We've built a dual track career management path for frontline staff, offering both specialist and managerial tracks. We've launched targeted training programs for store managers clearly defining long-term career pathways. This enhances team stability and strengthens frontline execution capability. And thirdly, we will enhance efficiency. We've reduced reporting layers and adopted a flatter and faster decision-making structure. Now feedback channels, dedicated quality and operations teams have been established, ensuring frontline concerns are heard, addressed, acknowledged, and acted upon. This leverages our direct sales model to quickly resolve on-the-ground challenges. The sales system transformation is not a reactive adjustment, but is a proactive strategic move to better align with frontline needs and further strengthen our direct sales advantage. While there may be some short-term adaptations, in the long run, it will continuously enhance both user experience and team effectiveness. Regarding new vehicle launches, Our timeline remains unchanged, and the support is now even stronger. Li Auto's new model rollout is progressing strictly according to our established product roadmap. VI8 was successfully launched at the end of July, with deliveries beginning on August 20th. Our production facilities are currently operating at full capacity. By the end of September, we expect to cumulatively deliver over 8,000 units of VI8 and aiming to challenge the 10,000-unit mark. Looking ahead, VI6 will also launch as scheduled in September. The sales system transformation is designed to provide stronger support for these new launches, optimizing sales and service processes, elevating the consumer purchase experience, and ensuring smooth new model launches and driving rapid sales growth. Thank you.

Thank you. Your next question comes from Yingbo Zhu from CITICS. Please go ahead.

好的,感谢管理层。 我有两个问题。 那第一个呢,就是i8上市以后呢,其实它对这个配置有这个调整和精简。 那么后续呢,公司的这个产品的这个和SKU的这个思路是不是也有一些变化和调整? So I have two questions. The first one is that I-8 has adjusted some of the configurations. What's our future strategy for the product and SKU for future models? And my second question is that how do we see value at the gross margin level under the consumption of the third quarter's sales and revenue guidance?

Thank you. Hello, I'm Misha. Let me answer the first question first. Are we sure that the number of IPO will decrease? return to the era of ideal 10,000 and R9 each car and then make one configuration consistent and then provide our users with the strongest productivity and performance on the other hand, on the technology platform and product update we will speed up the delivery speed according to our previous plans now the problem we encounter is that we give out one card and our colleagues will give out two cards so our entire delivery frequency is equivalent to let our colleagues look at our cards and we play cards First of all, we will be for sure reducing the number of SKUs.

Back to the time of V1 and DL9, we'll be focusing on a single SKU and making sure its competitiveness is maximized and providing customers with the best product and value for money. In terms of technological platform and product, we will be iterating faster. The issue we're facing today is by the time we play one hand, our peers have played two hands. The pace of iteration changes. is equivalent to letting our peers see our cars while we're playing. So we must increase the pace of iteration of both product and technology and to make sure that we can play faster. We're confident that by 2026, both in terms of vehicle products and AI, we will be having a stronger lead compared to the time of L9 back in 2022. Thank you.

This is Johnny for the third quarter cross-marketing. I think with the current volume sales volume and revenue guidance, we expect to maintain our cross-marketing at about 19%, just as the second quarter and first quarter. Thank you.

Thank you. Your next question comes from Paul Gong from UBS. Please go ahead.

感谢接受我的提问。两个问题。 第一个是关于i6的。 能否还请管理层多分享一下i6的产品定位、 上市节奏、传播计划、 在一个可分享的信息范围之内更多的一些信息吧。 The second one is about the latest plan to go out to sea. I don't know what the latest ideas are. So my two questions. The first one is regarding I-6. Within the allowed scope, can you please share more regarding the product positioning, the launching timetable, as well as the marketing plan? My second question is regarding your overseas strategy. I'm not sure what is your latest thought, and I would appreciate if you can share more comments on it. Thank you.

Hi, I'm Li Xiang. Li Xiang i6, we are confident to make it the most competitive product among the five-seat chargers in China. It has a unique design, and it has the same level of space and comfort. It has a long-lasting battery life, and it has the most important battery life efficiency. It is also the most popular LVAC model in our industry. It is also the best-selling product we have used so far. In the ideal i6, we will also adopt a new way of transmitting closer to the user, to make it easier for users to understand the value of the product and the user experience. For i6, I'm pretty confident that the i6 will become a most competitive product in the

large five-seater VEV SUV market because it has a unique exterior design. It has industry-leading space and comfort at a very long range and one of the best real-world range. It would also be equipped with our industry-leading VLA driver large model. It will also be the best handling LEAuto product till today. On LEA i6, we'll be taking a more user-centric, a new way of marketing. We'll be speaking to our product value and experience in a way that users can understand more easily. And for sales, deliveries, and services teams, the training will also be more effective. And lastly, we will seriously take PR defense We'll make sure that problems are addressed before they're extended.

I'm Ma Donghui. Let me answer a question about a plan for the overseas market. As you all know, the first product of the ideal car, the ideal car, will be sold in early 2020. We see 2020 to 2024 as the first stage of the development of the ideal car. We focus on domestic market and competing products. In the second stage, from 2025 to 2027, the sales market will officially expand from domestic to overseas, and the products will also become steam and water. In the third stage, after 2027, it will be the product stage of L4 automatic driving and more new intelligent products. So 2025 is the year of the ideal car overseas. For R&D, we have established a research center in Germany and the United States. In terms of sales channels, we began to formally build overseas sales and sales service systems, build overseas teams, and establish all kinds of IT systems. In terms of product tests, the new products that we are talking about, the new products that will be launched in 2026, will consider overseas legal regulations in advance. In terms of the entire market planning, we have also set up an advanced rhythm. We will focus on the Middle East, Central Asia, and European markets. Translating for Mr. Ma here, when our first project, V1, was delivered

I was back in the beginning of 2020. We look at 2020 through 2024 as the first stage of development for Lee Auto, where we focus on the domestic market and on ERAD products. The second phase is from 2025 to 2027. The markets we sell in will be formally expanded to global and domestic markets, and products extended to electric vehicles. And the third phase will be after 2027, where we will be focusing on all four, autonomous driving and new form factors of AI agents. 2025 is the initial year of our global strategy. On the R&D front, we have built development centers in Germany and the US. On the sales channel side, we are formally starting to build overseas and after sales and after sales organization and building an overseas team as well as a range of IT systems. And on the product front, all of the products that we're developing to be launched in 2026 will be taking into account global regulations. And in terms of product roadmap, in terms of marketing go-to-market strategy, we also have solidified our product overall plan to focus on Middle East, Central Asia, and Europe. The overseas market is both an opportunity and a challenge. For example, overseas, the auto is not a very well-known brand, just to name a few of the challenges. So the overseas market expansion will take time and effort, but we have enough patience and resolution. And in fact, the overseas market expansion has been one of the top medium to long-term strategies for Lyoto.

Thank you.

Thank you. Your next question comes from Jing Chang from CICC. Please go ahead.

Hello, Director Guan. I have a few questions for you. First, in the second quarter, we saw that in terms of the overall trend, the economic trend and the free trade trend have improved significantly. I would like to ask what the reasons are, including how we might view the situation of the post-economic trend. The question is about inflation. I have two questions. The first is, we have seen that our operating cash flow or net cash flow outflows further expand in the second quarter. So may you explain what the main reasons and how should we view the subsequent cash flow situation in the field? And the second question about the autonomous driving. So we can see some key changes in our autonomous sector, and also we see the Will that affect our future development and also our iteration and also deployment of our new VLA functions?

This is Johnny. I will take the first question. By the end of last year, it was three months to four months. So basically, we have paid off most of the payables of last December, November, and January, February, basically. So this is why the second quarter, we have some negative operating cash flows. And as you may know, we have already adjusted supplier's payment terms to 60 days to respond to the regulatory requirements and the industry trends. So basically, in the third quarter, the operating cash flow the operating cash flow used will be enlarged in the third quarter. And we expect that will improve the cash flow in the fourth quarter if we can have a better sales volume guidance in the fourth quarter. Thank you.

I'm Ma Dongwei. I'm here to answer the second question. Since this year, there have been several human resources movements in the ideal smart driving team. However, the flow of talent is normal in the smart driving industry that is developing rapidly, and the number of people is very small. I would like to express my sincere gratitude to Mr. Li Zhi for his hard work during the ideal period. We have jointly created a number of first-hand products in the industry. From the perspective of the team, the ideal of this team is to have a clear management process. The talent team is complete, and the talent reserves are also very abundant. For the recent changes, we have selected new managers. These new managers are younger. They have accumulated rich experience in their past work, and have an internationalized technical career, and can be introduced to new ideas by the team, and have a strong brand influence and good development prospects. It also continues to attract excellent talent to join the industry and continuously add new vitality to the team. As for the delivery of the product, we are still moving forward. At present, we have delivered the VLA preview version of i8 and Mega. Next, we will bring the completed version of Master Li's home button plan to all AB Max users in September. At that time, we will also add the control function of VIA to provide users with a more convenient and intelligent driving experience. In November of this year, there will be an important version of the car, which will continue to create value for users. Regarding the upgrade of the parking control, I think it is essentially an important opportunity for the industry to develop healthily. Ideal Motor has also been the key element of safety and regulation for the technology. In the process of fulfilling the requirements of supervision, we continue to optimize our own technical testing and quality management system. In the development process of VLA, we also focus on the bottom line of user value and compliance, to find the balance of dynamics between security verification and experience innovation. We have the confidence and ability to ensure the continuity of VLA development, and the certainty of sending to the ground. Thank you.

Translating for Mr. Ma here. So to directly answer the question, yes, our assisted driving team has seen a few departures recently. But some level of talent movement is not uncommon in this blossoming industry. And the percentage of people involved are actually very small. So we'd like to extend our sincere thanks to those who have left for their contribution and beyond. And together we have truly delivered many great products and experience for our users. Our current assisted driving team operates with a very clear organizational structure, a well-developed talent pipeline, and strong strategic reserves of talent. In light of recent changes, we have appointed new leaders who bring a more useful energy to their roles. They carry extensive experience from their past work and offer an international technical perspective. We have the kind of innovative thinking that will drive the team forward. And to add to that, Li Auto's strong brand appeal and promising prospects continue to attract outstanding talents from across the industry and bringing fresh energy to our team. We're steadily advancing our VLA product delivery. The VLA preview version we have already delivered featuring VLA driving, VLA parking, and VLA selling capabilities. We expect to roll out a complete version with Xiaoli Shifu to all BD Automatics users. in September, adding the VLE command functions to deliver more convenient and intelligent assisted driving experience. We also have another major update scheduled for October to create additional user value. The increased regulatory focus on assisted driving really represents an important step towards healthy and orderly growth for this industry. From our perspective, a stricter regulatory environment helps the truly capable companies technical expertise to stand out. At V Auto, safety and compliance have always been our top priority when developing new technologies. As we adapt to these evolving standards, we've been strengthening our testing protocols and quality control systems. This not only improves VLA's technological maturity and reduce potential risk, but also helps us to deliver a safer and more reliable assisted driving experience for our users. Throughout VLA's development, we've maintained focus on user values and compliance boundaries, constantly striking a balance between safety validation and experience animation. We're confident and fully capable of maintaining consistent progress in VLA's development and ensuring it's timely rollout. Thank you.

Thank you. Your next question comes from Ming Sun Lee from Bank of America. Please go ahead.

Thank you for giving me the opportunity, Mr. Guan. I also have two questions. The first question is, because we now have a lot of 5-speed supercharger, in the future, will it be open to other brands to use? How to operate? If it is open to other brands to use, will it affect the user experience of this brand? My second question is, So right now, Lyoto already built a lot of 5C supercharging station. In the future, will you open your charging station for other brands? How will you operate the charging station? if you start to give other brands to use, will it impact your own brand car owner's user experience? And my second question is regarding to the autonomous driving technology. So right now you have a very good VLA technology, but after VLA, how do you expect the development direction of autonomous driving and the technology iteration? Thank you.

Hello, I'm Ma Donghui. Let me answer the first question. For ideal car owners, the experience of using an ideal car supercharger is always the best. I will use four words to describe how much it costs. More refers to the number of superchargers we build, which is definitely low in the car industry. Compared to Tesla, the pressure ratio is more than 1.5. You will not be able to find our chargers anywhere. We have implemented the G318, the whole line of the village, the whole line of the canal, and the nine lines of the nine lines of the nine lines of the nine lines of the nine lines of the nine lines of the nine lines of the nine lines of the nine lines of the nine lines of the nine lines of the nine The smart experience of the car and the installation, including the smart charging plan, the pre-ordered charging machine, and then the single-handedly mentioned light-weight charging case, are very friendly and friendly to female users. What does that mean? It refers to electric cars compared to other brands. Ideal car owners will have a special discount, which will save money, and the points of ideal car owners can deduct the cost of charging, etc. These are not only the numbers on the paper, Translating from Mr. Ma here, for the auto vehicle owners, I can assure that the experience with our charging stations will always be the best.

I can summarize the experience with four words, coverage, speed, experience, and value for money. First of all, coverage. We're absolutely number one among all automakers in terms of the number of supercharging stations. We have about 1.5 times the number of charging stations compared to Tesla. Wherever our users go, they can easily find our charging stations. We completed the coverage along the G318 Southron to Tibet highway route. and core sections of the 9x9 highway network in China. We now operate the largest urban and highway supercharging network of any automaker in China. Second, speed. Our charging network supports 500 kilometers of driving range with only 10 minutes of charging. Just the time of buying a cup of coffee. It's really, really fast. And experience. Our charging network provides a very integrated experience between the vehicle and the charging stall, and with very intelligent charging planning, charging reservation, and plug-and-charge functionality. Combining that with a lightweight charging pole designed to be easily handled with one hand, and especially user-friendly for female users. In terms of value for money, compared to the owners of other EV brands, the auto vehicle owners enjoyed a dedicated preferential electricity charging rate, saving on every charge. And in addition to that, our owners can use their loyalty points to offset our charging costs. These aren't just numbers on paper. They translate into real everyday charging experience that our users can provide positive feedback on every day. Our 2C and 4C charging stalls have been open to vehicle owners of other brands, but those other owners won't be able to have the same level of experience as our vehicle users because the best experience requires seamless integration of the vehicle as well as the charging stations. Thank you.

Hi, I'm Li Jiang. About VLA, I'll tell you my opinion. In 2025, the entire service value industry will encounter a critical moment. The progress and slowdown of related technology and experience in the first half of the year will also face challenges from the management. But I think this is the darkness before dawn. VLA is a clear path to L3, L4, and even L5 automatic driving. Because it's the same way of working as people. We predict that it will be 100 times stronger than humans in the future. VLA is a real third-stage intelligent body of AGI. Its ability to improve comes from two aspects. First, it is to achieve the same level of human experience as humans through human data and physical models. It is similar to a master in the land. It can be used in the same way as SMT and RHF. More importantly, it can strengthen training through the environment generated by the world model. It is also called RLAF. However, RLAF is not used to train the robot model. Instead, it is used to train the intelligent body directly. For example, recently, we often see that L4 vehicles have lost their workmanship and are in the pit of the scene. But in the human world, this kind of data is very limited, and it is not easy to train. But in the world model, we can turn this pit into a data asset, and generate countless data for the car to fall into the pit. Thus, by strengthening training, the intelligent body can easily solve this kind of problem. That is to say, the model of the world has more difficult, comprehensive, higher quality and more challenging data and countermeasures than the real world. In this way, it solves the impact of the human world's data allergy, data division disorder, and the inability to remove dirty data from the intelligent body. We believe that with training, generation and growth, the VLA can reach more than 10 times the human driving safety in the next two years. And the challenge behind this is that the intelligent system needs a stronger brain and a stronger heart. The brain is the scale of the model. The scale of the model is 300 million. Although our VLA is already 400 million in scale, it is still very deficient compared to the human brain. The expansion of the model size will lead to a significant improvement in the ability to release. And for the expansion of the model size, it also needs to deploy stronger computing power at the end. Computing power is equivalent to the heart. Through continuous blood supply to the brain, a larger model is carried out. On the other hand, at the level of world models and RL-AIF, we may need 10 times more theoretical computing power than before. Used to solve the environment and data needed for RL-AIF training. And in fact,

beginning of 2025 has really been the most challenging period for assisted driving. With technological and experience progress slowing down, at the same time, regulatory pressures have grown. However, I see this as the darkness just before dawn. The VLA represents a clear pathway towards L3, L4, and even L5 autonomous driving. As it operates really in a way like human, Only we can expect it to perform 10 times or even 100 times better than human drivers in the future. VLA is a true agent in the third stage of AI, and we build its capabilities in two ways. First, it acquires human experience by learning from human data and the foundational model through large-scale operation of SSE and RLHF to achieve performance on par with human drivers. It's like an apprentice learning from a master. But more importantly, it undergoes reinforcement training within environments generated by a world model using RLAIS to train agents. For example, we many times see L4 vehicles in China as well as overseas falling to traps of, for example, construction zones. And this kind of data is very limited in the real world and cannot be used for training. However, with the world model, we can generate countless variations of CARF falling into these traps and enabling the agent to learn rapidly and resolve these issues effortlessly through reinforced practice. The world model provides data that is more difficult, more comprehensive, and higher in quality, and more challenging than real-world data. This approach effectively addresses critical issues in real-world data such as under-representation, in balance distribution and the impact of unavoidable polluted data on agent. We believe that ongoing iterative training and development, the VLA will achieve a level of driving safety at least 10 times that of a human driver within the next two years or so. The challenge behind this lies in equipping the agent with both a more powerful brain and a stronger heart. By brain, we refer to model scale. The end-to-end model has 0.3 billion parameters, while our VLA model has four billion parameters, which remains far inferior to human capabilities, and expanding this scale will substantially enhance generalization capability. Scaling the model will also require significantly more computing power on the device side, which acts as the heart. to supply the brain with the necessary resources to supply larger models. And in the meantime, in the realm of world models and RLAIS, we will likely require at least 10 times more computing power for reasoning than before to generate the environment and data necessary for RLAIS training. We anticipate that with the enhancements in reinforcement training, model scale, and computing power, the speed of our progress will far exceed anything we've seen with our previous approaches. I believe that in the next three to five years, the largest application of agents in the digital world will be programming, coding, while in the physical world, it's going to be autonomous driving. And I believe that level four autonomous driving will be achieved by 2027. Thank you.

Thank you. As we are reaching the end of our conference call now, I'd like to turn the call back over to the company for closing remarks. Ms. Janet Zhang, please go ahead.

Thank you once again for joining us today. If you have further questions, please feel free to contact Liado's Investor Relations team through the contact information provided on our IR website. This concludes this conference call. You may now disconnect your lines. Thank you.