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spk05: Good day, ladies and gentlemen, thank you for standing by and welcome to the new technology second quarter 2021 earnings conference call. At this time, all participants are in the listen only mode. Later, we will conduct a question and answer session and instruction will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I'll turn the call over to Mr. Jason Yang, Investor Relations Manager of New Technologies. Mr. Yang, please go ahead.
spk00: Thank you, Operator. Hello, everyone. Welcome to today's conference call to discuss new technologies results for the third quarter of 2021. The earnings press release, corporate presentation, and financial spreadsheets have been posted on New Investor Relations' website. This call is being webcast from companies on our website, and a replay of the call will be available soon. Please note today's discussion will contain forward-looking statements made under the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks, uncertainties, assumptions, and other factors. The company's actual results may be materially different from those expressed today. Further information regarding the risk factors is included in the company's public filings with the Securities and Exchange Commission. The company does not assume any obligation to update any forelooking statement except as required by law. Our earnings press release and list call include discussions of certain non-GAAP financial measures. The press release contains a definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial results. On the call with me today are our CEO, Dr. Yan Li, and CFO, Ms. Fionn Zhou. Now let me turn the call over to Yan.
spk03: Thanks, Jason, and thanks, everyone, for joining us on the call today. So in the third quarter, we have seen a strong growth again with our total sales volume reaching 397,000 units, a 57% year-over-year increase, making this our best quarter for sales in our history in terms of volumes. The sales volume in China market reached 392,000 units, a significant increase of 60% year-over-year, whereas the volume in the international market reached nearly 5,000, down 11% compared to last year, primarily due to the shipping issues that you are all aware of that continue to delay orders that we have received and manufactured, but cannot leave the factory and therefore cannot be booked at sales. In the first three quarters of the year, our sales volume totaled 800,000 units, an increase of 77% compared with the same period last year. Now, the strong Q3 growth in the China market showcases the strength of our growth strategy, which includes the expansion of our product portfolio to cover a wide range of electric scooters and the rapid expansion of our retail channels and geographic footprint. As mentioned in the last earning calls, Starting this year, we have launched five new vehicles under the new brand and five new vehicles under the Global brand, which enabled us to have a wide range coverage of the consumer needs from mid to high end. The new product design also takes into account preferences of both male and female customers, allowing us to attract a wider range of customer groups. In the electric motorcycle class, our entry model, Global G3, has a starting price of RMB $360 of 3,699 RMB, and our top of the range NQi GT has a price tag of RMB 20,299. We have a total of eight series and 22 electric motorcycle product offerings. For the electric bicycle class, we have our entry level Goba G-Zero with a price of RMB 2,499, and our top of the line model UQi Plus with a price of RMB 8,999. We have a total of 12 series and 42 product offerings. From the design style, we have three series, the G, S, and C, each with distinctive design style under the Gowa brand. And under the new brand, we have the N, M, and U series, each with a unique and elegant style. In terms of performance, we offer a drive range of 40 kilometers to 100 kilometers on one charge for both electric motorcycles and electric bicycles. Since the rollout of China regulations on electric bicycles over the past 2.5 years, we have quickly developed a full product portfolio to cover the mid to high-end market. The full coverage was the key to fast growth in Q3 and also set a solid foundation for future growth in 2022. As we continue to expand our product portfolio this year, we are simultaneously expanding our retail store footprint across China rapidly. Q3 is traditionally a peak season for sales, but a low season for store expansion. However, this time we were able to couple our best sales quarter ever while also adding another 320 new branded stores across China, which is 1.6x of the expansion pace compared to Q3 2020. As of September 30th, we now have 2,686 stores operating in China. We're well on track to have 3,000 stores in operation by end of 2021. These stores will serve as a foundation to drive sales growth for 2022. Now, moving away from sales for a moment, I'm very proud of a milestone we hit as a company last month. On October 11th, our more than 2 million users helped us reach the 10 billion kilometer riding mark. It was the first time 10 billion km has been recorded in two-wheeler industry history. To celebrate this awesome milestone, we launched a series of marketing campaigns with the slogan of Feel a Bit Proud or Feel a Bit New starting in September and will run through the end of the year. The brand of new represents style, technology, and freedom. Along those brand values, we have selected a set of representative new users and shared their story with new scooters over multiple channels. These users include photographers, travel enthusiasts, talk show hosts, and others. Each story showed how riding a new vehicle has helped them with their daily urban commute and make their lives a little better or feel a little bit pride or proud with new. These stories and videos have been broadcasted over social media channels like Weibo, WeChat, and our website. And of course, many of the KOLs and KOCs have also created their own content around the theme of feel a little bit proud, a bit new, just further amplifying our message and reach. In just a few short weeks of all those have achieved nearly 100 million views. More importantly, it helped to convey our brand value to our users and potential customers. The message positioned you not just as an electric scooter company, but also as a lifestyle brand. Besides the user stories, we also launched a social media video campaign with a feature video of Feel A Little Bit Proud. The video has been aired across social media offline and also has been even showcased in ads for the new James Bond film, receiving more than half a billion views. Now, considering Neo has more than 2 million users, we also engage our users with a treasure hunt location-based game on our app. Users receive a raffle ticket if they ride their Neo past a secret spot in their city. These tickets can be redeemed for various prices like accessories and also enter them into a lottery for 10 billion kilometer limited editions. In our initial rollout in 10 cities over the past month, More than 2 million digital raffle tickets have been collected by our users, showing just how engaged our users are with our brand, product, and services. All of those user-centric activities and marketing campaigns have improved our brand awareness significantly in the China market. And those campaigns especially resonate with the Gen Z users who are seeking brands that have deeper meaning and use commitment to style, technology, and freedom is something they value greatly. The combination of marketing campaigns with our continuous retail store expansion sets up for another quarter of growth here in Q4. Now looking at international sales for a moment here, our Q3 was a little below expectation as compared with the China market. But this is not a result of decreased demand. As many of you are aware, international logistics continues to create ever longer backlogs, and we're not immune from it. In fact, our book orders were 50% higher than what we actually shipped, and everything that's being shipped is typically on back order at any one of our point of retail across the globe. Despite the low season in Q3, we're in fact very optimistic with Q4 for the international market orders. We're excited about tomorrow, actually. On November 23rd, we will launch several new products at ECMA, the largest two-wheeler shows globally held in Milan, Italy. including our most powerful 125cc electric moped, the MQI GTEVO, our first 150cc hybrid moped, the YQI, and our upgraded e-bike, the BQI, and two additional KQI kick scooters, many of which will be shipped this quarter and in stores to kick off the sale season in February across Europe and America. First, in the electric motorcycle moped classes, we will launch the MQI GT EVO. EVO will be the mark of new performance line. The MGT EVO will be unveiled at ECMA, and it is the first product launching our new EVO series. It has been redesigned inside out with the top speed of over 100 km per hour and an exciting 0 to 60 km per hour track time in under six seconds, outstripping its gas-powered rivals. We believe that this is the first electric moped that can really compete on price and outperform on power and speed with its petrol competitions in the 125cc class of mopeds. In addition to the performance, the MGT EVO has added a number of features that include a keyless ignition, electric anti-theft locking, and an all-new TFT color dashboard, customizable via the user's app. We have already received several thousand orders to be shipped in Q4, and the MGT EVO will be in stores in Europe and America as early as February with a price tag of 5,000 euros. Besides the MGT EVO, we'll be also debuting our first 150cc equivalent hybrid moped, the YQi. The YQi combines the best traditional IC engines and the lithium-ion battery-powered electric motors. It comes with a 150cc IC engine coupled with 2.4 kW electric motors, providing accelerating acceleration that is much superior to even a traditional 250cc moped. The YQi is positioned as a gateway vehicle for EV for two-wheeler enthusiasts who have not made the transition away from petrol. It is still in development and will be available in Europe and America in late 2022. Now, with the addition of YQI-MQI-GTEBO and also the upgraded MGTS and the RQI, our quad motorcycle, we have provided full coverage of motorcycles from 100cc to 150cc, greatly expanding our traditional offerings of 50cc equivalent electric moped internationally. We believe this will further consolidate our leadership in the electric motorcycle market globally. Now, as we mentioned last earning call, we have entered the micro mobility market with the pre-sales of our kick scooter product, the KQi3, on Indiegogo on July 13th. After a successful run on Indiegogo, we then have received more than 15,000 orders by the end of September 30th. Tomorrow at ECMA in Milan, we'll bring two new kick scooter products to the market. something we call a KQi3 Max, which will be an upgrade of KQi3 Pro. It is equipped with a more powerful upgraded 450-watt motor and with a larger lithium battery capacity, which can easily reach a speed of 35 km per hour and have a dry range of 65 km. There is no mass-market product like this in the market right now, and we're excited about it. will be priced at 949 euros. We'll also bring an even more economical kick scooter into the family called the KQi2. The K2 takes many design cues of K3 and with more user customizable features. The K2 has a top speed of 25 kilometer per hour and the riding range of 40 kilometers. It will be priced at 499 euros. And with the sleek and stylish design, the K2 expected to become a favorite urban mobility commuter globally. The K2 will be shipped before the end of December 2021. Now with the K3 and the K2, we have a robust lineup of kick scooter products with price starting at 499 euros up to 949 euros. We have a portfolio of offerings that meets the budget of wide range of customers who are looking for affordable solutions for their urban commute. We have already received many orders and we expect to ship more than 20,000 units of kick scooters in Q4 to fulfill the first batch of orders. We will also expand our offerings into the e-bike market. Tomorrow at ECMA, we will launch our new e-bike product called BQI that has a stylish urban minimal design and is capable of extended ride range of 100 kilometers thanks to its two removable batteries. The BQI will be priced under €1,500, making it the most powerful and affordable commuter e-bike to hit the market in 2022. The continued growth for e-bike demand across Europe and America is an exciting growth spot for us in both those markets. And with products like BQI, we think we can quickly tap into the demand over the next 12 months. Now, with the kick scooters and e-bikes to cover micro-mobility market, we're also expanding our international sales channel. Besides the current 153 flagship and premium stores and 1,000-plus authorized dealers, we have also established our e-commerce presence on channels like Amazon and also offline channels, which will allow us to enter into consumer electronics stores like the media market in Europe and many across the U.S. Supported by the diversified product offerings and channel expansions, we're quite optimistic with our international sales in Q4 and in 2022 beyond. Now I'll turn the call over to Fian to discuss our financial results. Fian.
spk08: Thank you, Bian, and hello, everyone. Our press release contains all the figures and comparisons you need. and we have also uploaded Excel format figures to our IR website for your easy reference. As I review our financial performance, we are referring to the third quarter figures unless I say otherwise, and all that monetary figures are R&D unless otherwise noted. Our quarter three sales volume reached 397,000 units, representing a 58% year-over-year growth China sales volume increased by 60%, primarily driven by new product launches in the past two quarters, and the continued retail network expansion. One new e-bicycle model, C Zero, and one upgraded e-motorcycle model, G3, were available on the market in quarter three. These two models contributed around 16% of our total sales volume in the third quarter. We opened 750 new stores in China during the first half of this year. The newly opened stores not only contributed to our sales volume growth, but also played a critical role in promoting our brand and gaining our market share. We opened another 320 new stores in the third quarter, which will help us with further steady growth in the future quarters. International sales volume, however, decreased by 11% as a result of continued challenges from international shipping. With regards to product mix, N series accounted for 6% of total sales volume, M series accounted for 6%, U series accounted for 13%, and Gova products accounted for 75%. Out of the 75 from Gova products, 41% was from the low-price model G0, F0, and C0. Remaining 34% was from other Gova models with relatively higher retail price. The increased mix in Gova products was due largely to two reasons. First, the new Gova product launches in Q2 and early Q3. F0, C0, G3, and F4 have been very successful and drove quite a bit sales growth in quarter three. Second, during the third quarter, company provided promotional activities for the Goba series products in order to encourage faster adoption of compliant e-bicycles in China. Total revenue increased by 37% to 1.2 billion slightly lower than guidance we provided earlier, primarily due to the lower than expected sales from international markets. Revenue from China e-scooter sales remained strong and increased by 45%. The accessories, spare parts, and service revenue from China market also increased by more than 40%. The decrease in international markets we believe is short-term, and we are looking forward to positive growth in the future quarters. Our ASP in quarter three declined by 13% year-over-year. Let's look at the details. In China market, the scooter ASP decreased by 90% year-over-year, chiefly due to the sales from low-price models G0, F0, and C0, which accounted for 41% of total sales volume compared with 27% in the same time last year. In international markets, the Scooter ASP decreased by 18%. As mentioned in the last two quarters earnings call, the depreciation of US dollar and the change in the way distributors place orders are the key reasons for the decrease. Compared with quarter two, our international Scooter ASP increased by 5%. If we take out the impact from kick scooters, the ASP increase is around 14% quarter over quarter. The ASP of accessories, spare parts, and services was 267 per scooter, a 29% decrease mainly because of the decline in sales from international market. Gross margin was 20%, 0.9 percentage points lower than this time last year. as a consequence of weaker international sales. This has reduced RO margin by around 1.1 percentage point. However, 0.2 percentage point decline was offset by the increasing margin and increasing proportion of accessory spare parts and services revenue from China market. Therefore, net impact was 0.9 percentage point decline. Our total operating expenses, excluding share-based compensation, were 143 million, increased by 46 million, or 48% year-over-year. The increase was caused by 25 million higher branding and advertisement in sales and marketing expenses, 11 million higher depreciation expenses of new store openings, and 13 million higher staff costs. As percentage of revenue, our operating expenses excluding share based compensation was 11.7%, 0.9 percentage point higher than quarter three last year, mainly due to higher branding and marketing expenditures. Our net income was 92 million, a 15% increase year over year. The adjusted net income was 102 million, and the adjusted net margin was 8.3%, 1.8 percentage point decline compared to the same period last year. As mentioned above, due to the 0.9 percentage point gross margin decline and increase from operating expenses as 0.9 percentage of revenue. Turning to our balance sheet and cash flow, We ended the quarter with RMB $1.6 billion in cash deposits and short-term investments. Our operating cash flow was positive $402 million, much higher than our net income. Our quarter three capital expenditures was around $76 million, mostly related to capacity expansion of $26 million and new store openings of $50 million. And now let's turn to guidance. We expect the first quarter revenue to be in the range of $840 million to $908 million, an increase of 25% to 35% year-over-year. With that, let's now open the call for any questions that you may have for us. Operator, please go ahead.
spk05: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. Once again, if you wish to ask a question, press star and the number one on your telephone keypad. Your first question comes from the line of Vincent Yu of NeedAM and Company. Please ask your question.
spk04: Thank you, Ms. Guan. This is my question. I have a few questions. First, I would like to follow up on what you just mentioned about the influence of overseas sales, that is, the influence of sea transport. We think that these backlogs will probably be in the next quarter and the next year. How do we represent this in this outlook? Or how do we think this overseas business will develop? The second question is about the supply chain. In terms of supply chain, we look at our raw materials. How much will it affect our operations? The third question is actually about the industry. I want to hear from Guan Yicheng about the development of the replacement cycle. Especially now, I feel that overall, in terms of the overall situation, the consumption has been greatly affected by the epidemic. How is the development of the replacement cycle now? Thank you. I will translate it myself. Hi, management. Thanks for taking my question. I have questions on these three topics. One is our overseas business. How do we think about the shifting constraints will continue to impact our revenue in the next quarter and how we think this backlog will be realized in the next few quarters? And our second question is on the supply chain. How do we think about these riding costs and the parts costs impacting our operations? And the third question is, I would like to manage and share some insights on the e-scooter replacement cycle, especially under current relatively soft macro condition. Thank you.
spk03: Hey, Vincent. If you don't mind, I'll answer this question in English. I think first one with the shipping backlog, I think Q3 has been a bit tough. Obviously, for international Q3, also you look at it's actually historically has been low season because whatever we ship in Q3 is actually going to be arriving in Europe and America in sort of Q4. It's actually... Actually, the winter season, it's actually low sales. We actually expect the Q4 shipping start to improve, especially October and November is still a bit tough, but we start seeing actually capacity start to empty out starting like November and also in December. So we actually have a lot of orders in backlog, and they're supposed to go on the ship in December, both from the motorcycle point of view, electric motorcycle, and also the 20-plus thousand electric scooters. So I think that's for the international sales team tomorrow's shipping backlog. It wouldn't be necessarily a block issue in Q4. Because demand side, we still see a strong demand for both motorcycles and also for the kick scooters. Now, on the supply chain issues, I think early this year, the supply chain issues was really a shortage of chipsets. especially the imported chipsets. We had that impact a little bit on our business, but not significantly. And then we were able to actually redesign our MCU with all this stuff, actually use the replacement, the domestic China chipset to replace some of the imported ones. And that actually helped to reduce the impact. Right now, it's actually the Q3 is nothing too much. I think, really, we're looking at Q4, and maybe next year, there might be pressure in terms of raw material prices in terms of lithium batteries. Early, you know, first half of this year, we actually see the pressure, not from lithium batteries, but from, like, all other stuff, like copper, steel, so that actually impacts the the cost for our chassis, also the cost for tires, all this stuff. So we actually increased the product price basically in April this year to offset the raw material price increases. Now, going into 2022, we actually think there might be a change, there might be a case that the lithium battery price will go up a bit. which many of you guys already observed in the market because the EV industry in China is actually booming. And so that actually will create cost pressure on our side. And the remedy to that would be we're looking at potential solutions to increase the product retail price as well as the exit factory price in early 2022 to offset that. And this is not really new to us. So, in fact, you know, you follow new for a number of years. Every year, we increase our product price by somewhere around 3% to 5%. Even though the average ASP sometimes declines because the product mix, but you look at the individual product-wise, the price actually goes up. A lot of times it's because, you know, because of CPI, also because we're actually used to offset the cost increases. The last thing with the... the policy induced the replacement volume. So we're actually seeing some of the impacts start to kick in. For example, it starts city by city. Early in the years, we see some provinces, now like Beijing. Beijing actually, in November 2018, they start to issue what they call the temporary licenses. until the April of 2019. And then that temporary license is only good for three years. So actually start in November 1st this year, CDL Beijing actually will disallow the temporary licenses, the yellow licenses. If you actually drive a yellow license electric scooter on the street, your scooter will get confiscated and then you actually got like a thousand RMB fine. So that actually drive a bit retail sales in October, as well as I think going forward, even the winter season for Beijing wouldn't be that cold in terms of sales, because a lot of people actually need to buy replacement scooters. And we start seeing for Beijing, now then the second we start seeing for the entire Zhejiang province, they're rolling out something similar. that will actually, will probably be impact, you know, starting this, you know, basically this winter season, last until the next spring. So, obviously, you know, you're not going to see a huge jump, like 4X or 3, you know, 3 or 4X jump into my retail demand, but it will still impact, I think, the overall market demand. I think this is one of the reasons that even in Q3, we roll out quite a bit Gova products, And actually, during our call, you see the gold product represents 75% of our sales in Q3. A lot of times, because those replacements, a lot of those replacements are not extremely high-end, many of them are mid-end products. That's why our mid-end product offerings start to really take up some of the market share starting in Q3. Hopefully, that addresses your questions.
spk04: Yes, very helpful. Thank you.
spk05: Your next question comes from the line of Jing Chang of CICC. Please ask your question.
spk06: Hi, Jason. Hi, Yen. Thank you for your communication and congrats to Fionn on taking office. I have two questions. The first is about the average selling price of accelerates. So we can see that the average selling price of accelerates and services fluctuated great different quarters. So I wonder how much of the average enterprise comes from overseas battery tax and how much of it from the subscription service fee and also other accelerates. And also how do we anticipate on the fourth quarter and also the future. And my second question is you can see that the sales volume of NM and U series decreased a lot in the third quarter compared to last year. So if, as planned, our new product launches next year, I'm going to focus on high-end models. So first, how to look at the competitiveness of our new high-end products, and also if our peers' products keep low prices, and in addition, how to see our sales growth momentum and their such product next year.
spk08: Okay, then I will answer the first question. And actually, in quality 3D accessory and spare parts revenue was $90 million, and services revenue was $50 million. And, you know, as we mentioned, the accessory And services revenue increased a lot in the China market. And this quarter, we lose the international market. And that's why the accessory and services revenue declined in the international market. But with the recovery of the international sales in quarter four, as Ian mentioned, and those kind of other revenues, you will recover with the same line as the international sales. So we still rely on quite strong increase in the future quarters of this kind of revenue.
spk03: OK. And I think for your second question, yes, I think for Q3, as I mentioned, that the NMU, basically the new branded products, which we group the NMU and the new branded products, actually the volume actually did decrease, partially because really in Q3, On the second half of the Q2, essentially the May and the June, we roll out like five new global products. And with the marketing campaign, really try to gain market share in the mid-end product replacement customers. So I think that actually, and if you look at our, because our business is not exactly direct to consumer, Our business goal is actually we sell to distributors, and distributors sell to retail stores and retail stores to consumers. So along those lines, there are capital being used by the distributors and capital being used by the retailers. To some extent, you can understand that as we have more new product in Gova, if there are my distributors and retailers, they only have limited capitals. Right, so some of their capital will be occupied by the global product. I think that's where it's actually create a, the capital drain is done by the distributors on the global product, less on the NMU, that actually create a temporary decrease on NMU. Second is actually, we haven't done too much in term of, in Q3, I haven't really rolled out the, you know, a new, what we call the new product for NMU, except the M2S, which is an upgraded version for M2. So I think that also creates a little bit of drag on NMU products. But going forward, I think in 2022, we have planned actually quite a number of new products under the NMU series. And that will actually help to increase not only the percentage and also increase the sales volume. of the NIMU product. So we're actually, you know, quite promising and quite hopeful about 2022 for the NIMU series.
spk06: Okay, thank you.
spk05: Once again, if you wish to ask a question, you will need to press star 1 on your telephone. Your next question comes from the line of Ben Wang of Credit Suisse. Please ask your question.
spk01: Thank you. I got two questions. Number one is about your service income. Is that linked to your low-end version of the GoBud series, which means the GoBud series literally has a less revenue income. That's why revenue growth has been lower compared to the scooter growth. Just want to know the different products related to revenue, we see any difference. That's number one question. Number two is about can you elaborate a little bit about your market dynamic offering new category because we are very familiar with the kick scooter and your upcoming hybrid products. You mentioned about CC is a hybrid. It means you will have an engine and just an electronic scooter. Different names. Thank you.
spk03: All right, so Bing, I think I'll address those two questions. One with the service income, yes, so some of the global products are not, doesn't have the smart IoT devices. So to that extent, we're not going to see what you call the connectivity income from those global products. But it's not all global products doesn't have the connectivity. There are a portion of global products will have what they call add-on boxes posted, you know, at a store. So those Google products actually, we're still able to charge, you know, the users still pay a connectivity fee along the Google products. So, you know, that maybe address some, you know, some of the concerns here. Second, we didn't mention explicitly But really starting this year, we start getting service revenues from our sharing scooters. We're getting about $10 per month per scooter, not entirely on the entire fleet. Some operators haven't paid yet, but practically on half the fleet. So as we have more sharing vehicles deployed globally, you're going to see that revenue stream coming nicely. I think that's two part of services. Now, on the new categories, I assume you are asking about the hybrid product. Yes, the hybrid product is our first attempt. We'll debut this product actually tomorrow at ECMA. You're going to see the news on the design. It's actually a beautifully designed product. What we see is actually there is one part of motorcycle categories that we are not able to attack. That's actually around the 150cc to 250cc motorcycles. That part of motorcycles still represent roughly about 30% of the market in Europe and the United States. But the reason being that it actually requires a longer drive range. If you simply just do electric, it will be too expensive for users to buy, unless you go with the sort of, you know, the industry product like Zero, which is like 10,000 euros, even more. So what do we have is, this is actually a completely internal design technology that actually combines a combustion engine with the electric motor. and even with a battery into it. So actually, it will allow users to have unlimited driving range, well, limited by the gas tank. But at the same time, when you do a city commute, we'll use more of the electric motors such that it will actually give you a more environmental-friendly internal usage, internal gasoline usage per kilometer. But this product will be probably available towards the second half of the 2022. So in ECMA, we're going to show the concept design and some of the technologies and the products still in development and will be ready in the second half of 2022. Thank you.
spk05: Your next question comes from the line of Wei Shen of UBS. Please ask your question.
spk07: Good evening, Jason and Yvonne. Thank you for taking my question. The first is about the margin. Investors are concerned about the price war this year and which was most severe in the third quarter. We noted from mid-November, Yadier and EMA have raised price by 5%. So can I have your view on the price war and the impact on margin trend in 2022? This is my first question.
spk03: I'll mention first, and then I'll have Sian to talk a bit more on the margin part. To be honest, I think those two players have been involved in price war. And we are not engaged in the price war, but we did a bit of marketing promotion on our global product in Q3. Because a lot of price war happened in the really low end. Even with our global entry product at $24.99, we're still like a mid-end product. We're not even at low end yet. So to some extent, you see our margin is still much, much higher than Yadi's and IMA's margin. And obviously, you know, they start to raise price in September. We haven't done that yet. The reason we haven't done that yet, because we did a little bit in April that helped to observe some of the cost, and we also carefully observed the market to see when's the right time to increase the price. But as I mentioned earlier, with what we observed, you know, the trend of lithium battery prices, there's likely that we're going to increase price in early 2022. And we usually do that during the holiday season, while the Chinese New Year season will have less impact from the retail. Yeah, I think that's my comment.
spk08: Yeah, I think you already transformed the factors.
spk07: Okay. Also, because the margin, I know there are a lot of moving parts, including the price wall and also the commodity prices. So what's your general view on 2022 margin? Because I see there's some margin pressure in third quarter. And what's your view on the fourth quarter and 2022? Thanks.
spk08: So maybe I can give some insights, and then Yan will add extra comments. As Yan mentioned, actually, even though we consider about the retail price increase in early 2022, we're still facing the higher raw material cost problem. And luckily, we have made the cost optimization, and those initiatives began to show positive effects. That's why you didn't see the huge margin loss in this quarter. Those cost optimization initiatives will bring benefits in the future quarters. With the strategy that we may increase the retail price with around 3% to 5%. which will not bring the inactive feedback from the customers. I think we can still remain the good growth margin. And Yan?
spk03: Yeah, I think that's about it. Really, on one hand, I don't see we're going to see a margin decline next year. But on the other hand, I think we'll see a stable margin with a slight increase.
spk07: Okay, thank you. And my next question is about your new product. You just mentioned that you have prepared a lot of new products, including the kick scooter, the electric motorcycle in 2022. can because we are not really familiar with these new market segments can you give us more color like the sales guidance in 2022 or 2023 which product line will become a significant contribution in terms of revenue in the next two to three years thank you because because I think some of the products are mainly For brand building, it's not for volume sales. Correct me if I'm wrong. Thank you.
spk03: Yeah, I think, let me put it this way, right? So I think it's too early for us to give out guidances, but I think there are three categories. One, we're looking at the kick scooters. The kick scooter, the entire market does about, you know, I think from what I read, you know, probably like six to eight million units per year, depends on whether you include some of the kids ones or not. And, you know, this year, so $6 million to $8 million, mostly in the United States and Europe. So those two markets where we do have a strong brand in terms of urban mobility, and I think this year we initially have our K3 market. And now with the K3 Max and K2, and potentially next year we're going to have a couple more kick scooter products that will give us a wide range of products that help us to cover the entire product range span for that 6 million units of the entire market. The entire market is 6 million units. So we're actually quite optimistic with our growth in smart kick scooter. Now the e-bike. eBike is also about 6 million units a year, roughly about 80% or actually, yes, about 80% in Europe and about 10% to 15% in the United States. So we have two eBike products so far. We have our EOB01. We launched last year, started to make some sales this year. and we have our BQI to be launched at ECMA tomorrow, but that product wouldn't be available for sale until Q1 or early Q2 of 2022. But as we will actually start to actually generate more product along the e-bike categories. Both the kick scooter and e-bikes, we have two dedicated teams for it, and we're actually committed to those two product categories. So I do think they are volume or revenue generators. Now, with the other motorcycle product, put this way, if you just look at the European market, not just look at the electric, the entire European market, it's about 1.5 million units to 2 million units a year in terms of motorcycles. Majority are petrol at this point. And then within the entire market, about 50% are 100cc below, and 50% are like 125cc above. Our product offering used to be 50cc below. By 50cc below, it means the drive speed is like 50 kilometer per hour. And we started to have like a 70, 80cc product, like a drive speed of 70, 80 kilometer per hour. So the MGT EVO and also the upgraded MGTS and also the R product, both are at 90 kilometer per hour, 100 kilometers, 120 kilometers. And those are actually really to attack the other 50% of the market, which is 100cc above. We never had product in that market. So it's a white space for us. And you can see those markets actually, I do think those products are also revenue generators.
spk07: Very clear. Very clear. Thank you.
spk05: As there are no questions, thank you. Seeing no more questions on the queue, let me turn the call back to Mr. Lee for closing remarks.
spk03: Well, thank you, operator, and thank you all for participating in today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Thank you.
spk05: Thank you all again. This concludes the call. You may now disconnect.
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