Niu Technologies

Good day and thank you for standing by. Welcome to New Technologies' third quarter 2022 earnings release conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ms. Wendy Chow, Senior IR Manager. Thank you. Please go ahead.

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss new technologies results for the third quarter 2022. The earnings press release, corporate presentation, and financial spreadsheets have been posted on our investor relations website. This call is being webcast from company's IRF website as well, 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 U.S. Private Securities Dedication 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 findings with the Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required by law. Our earnings press release and this call include discussions of certain non-GAAP financial measures. The press release contains a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results. On the call with me today are our CEO, Dr. Yan Li, and CFO, Ms. Siang Zhou. Now let me turn the call over to Yan.

Thank you, Wendy, and thanks, everyone, for joining us on the call today. In Q3 2022, our business faced challenges from rising raw material prices, market demand fluctuations, and aftermath of the COVID resurgence in China. All those factors brought serious disruptions to our operations. During this quarter, we delivered a mixed result in China and international markets. Total sales volume was down by 19.2% year-over-year. Total sales volume in the international market reached nearly 58,000 units, attributed to the growth in the kick scooter category, bringing the biggest year-over-year leap in sales in the U.S. overseas market. In China market, we experienced a decrease in sales. Sales volume in China market was 263,000 units, down by 32.9% year-over-year. Now I will go over the challenges and opportunities in each market in detail. First, for the China market in Q3 2022, we continue to experience difficulties due to the impact of the high lithium battery cost, the sporadic COVID lockdowns, and the delay of new product rollout. The raw material price for the lithium-ion battery has a sharp increase since the beginning of the year. The increase has slowed down the penetration rate of lithium-ion battery electric scooters across the entire China market. We observed in money Tier 2 and Tier 3 cities that asset-based scooter percentage increased in the market as the price gap between the lithium and lead-acid batteries widened. This has impacted us significantly since the majority of our e-scooters are lithium-ion battery based, especially in our entry-level products, which accounted for over 90% of the volume lost year-over-year. We did also actively optimize the product portfolio to reduce the entry-level percentage, as under the new lithium-ion cost, those product lines produce subpar gross margins. The replacement hype of replacing old standard scooters with new national standard scooters has also declined in Q2 and Q3 for our target market of Tier 1 and top Tier 2 cities. For example, the overall market of Beijing declined by 60% of most of the replacements were completed last year. Given our sales are still more concentrated in the top tier cities, our sales volume was also impacted this year. Last but not least, our main product, Zero-Out, has been significantly delayed this year, partially due to the COVID resurgence lockdowns in Shanghai and the cities where our R&D center is based. Although the high-end product like SQI was released in August, it won't be able to ship until December. And our new U+, our high-end Gola series like G6T and V2 were shipped in late August or early September. Those core products this year we launched have missed the key sales seasons, hence provided not enough fuel for the 2022 sales. Now despite the sales volume drop and delay in the new product rollout, the newly rolled out product received overwhelming positive responses from the media and the consumers. This helped to restrain our brand as a high-end lifestyle brand in China, but also lay out a strong foundation for the 2023. First, we pre-released the revolutionary SQI eBicycle in August priced at RMB $8,999 to $9,599, which I had briefly talked about in my last quarter's earnings call. With its innovative look and a cutting-edge aerospace magnesium material, the evolutionary SQI was well-received by the market We received more than 15,000 pre-orders for the pre-release. Another high-end product we launched around the same time is our new U+. The new U has inherited a classic design for our all-time most popular U series, but designed with improved light design, smart controls, and writing ergonomics, and additional personalization functionality. The new U has nearly 50,000 shipments within the first 30 days of the throwout. During the W11 shopping festival, our new U Plus has ranked number one bestseller product in the electric scooter category by Taobao. Together with the SQI, those new products helped new to rank number one in the transportation category on Taobao. With the record-breaking sales of SQI and the new U Plus, we re-consolidate our position to lead in the premium electric two-wheeler market in China. Now, along with the launch of this new product, we initiated market events via PR, social media marketing, KOL collaborations, offline product launches, and user events. The marketing campaign around the new product launch has gained a total of 1.4 billion views across all platforms. 3x of the view had a similar campaign in 2021. Those marketing activities again strengthen our brand messages as a lifestyle brand in China, urban mobility industry. Now amid the leading price increase, we took a step to optimize our product portfolio towards the premium, the high-end product, to improve our gross margin, as well as to restrain our brand as a premium brand in China. For the first three quarters, our premium new series product percentage continued to increase from 31% to 39%, while our entry-level zero series product reduced from 28% to 15%. During the W11 shopping festival online, Eighty-three percent of our e-scooter orders came from products over 5,000 RMB. So despite the rise in raw material costs, we managed to improve our gross margin in China significantly by 300 base points. Now coming to the international market, we faced challenges in the electric two-wheeler market from the temporary shutdown of the sharing market demand as well as the macroeconomic high winds in the rising Euro and U.S. dollar exchange rate and the increased lithium prices. First, the market for the sharing electric motorcycles has temporarily shut down this year as the sharing operators has not raised additional capital for expansion, but merely focused on current CapEx deployment. The sharing sales accounted for one-third of our sales in the international market last year. So this year, we experienced a zero sales from that. Now the rise in the lithium prices coupled with the weak Euro forced us also to increase the prices in the European market, which impact our sales of electric motorcycles in the consumer segment. So at the end, the total sales of electric motorcycles in Q3 in the overseas market went down by 34% year-over-year. However, during this quarter, we had a significant 166.5% year-over-year growth in the sales of Southeast Asia markets. mainly from the growth of Indonesia and Thailand market. During the G20 summit in Bali, Niu proudly provided the electric scooter to be used by the Indonesian national police officials to support the local government's effort to green transportation. We have continued effort in expanding the Southeast Asia market as we hope to grow with the trend of transition from traditional gas fuel two-wheelers to electric two-wheelers as it happens. We have also started exploring battery swapping solutions to aid adoption of electric motorcycles with its first trial in Singapore. Contrary to the decline of the electric motorcycle market, we have experienced a tremendous growth in the micro mobility market. For the kick scooter category, we had a significant quarter in growth of sales from kick scooter category during the autumn-south season for the electric motorcycles. The sales of kick scooters rocketed to 55,000 units during Q3, a growth of 162% quarter over quarter. Since Q4 2021, we have strategically rolled out KickScooter products to cover a wide range of market needs. The first launched K3 and K2 are proven to be successful in the market. During the Amazon summer Prime Day sales in July, used two KickScooter models were ranked number one, number two on Amazon best sellers in the KickScooter category in French, Spanish, and Italian market. The KickScooter products gained not only popularity among customers, but also recognition from the industry. Our K3 Max received outstanding coverage from U.S. biggest tech media, including Tom's Guide and the TechGrader. It was ranked number one of the best oral electric scooter by Tom's Guide and awarded a perfect score by TechGrader. The K3 Pro model was also awarded a second place for the best sustainable mobility device by Exatica, a Spanish top medium in their annual awards. Now during Q3, we continue to expand our product offerings. We launched a K1 KickScooter and K-Use to add a KickScooter product portfolio. K1 is entry-level KickScooter product where K-Use is a KickScooter for six to 14 year old. With those two product added, we now have a complete product offerings with price range from $300 to $900, covering both children and adult KickScooter products. Also, along with the KickScooter product, we also pre-launched our first e-bike product, C3, recently. It's a dual-battery e-bike with two lightweight swappable batteries offering a long drive range of 62 miles. Now, besides the product launches, we have also built our sales channel for our new micro-mobility products. Through a focused effort, we have achieved a solid presence on online channels, building not only sales but also a brand image and brand awareness through our shops on arms on cross markets. Meanwhile, riding the momentum from the recognition we gained from our online shops, We started to expand our offline sales point by working with retail store like Best Buy and Media Mart. By the end of Q3, our Kickstarter was sold in more than 750 retail shops across Europe and North America. And we expect to grow this number to over 3,000 by next year. Along with expansion and growth of product portfolio and sales channel is our effort in PR and marketing. In 2022, we published over 700 articles covering our product across all media platforms. The PR articles have gained more than 100 million views. On KOL marketing to support coming Black Friday sales, we collaborate with influencers with big fan bases to create content featuring our product. Those content generate a total over 2 million views on YouTube and TikTok. I believe the expansion of product portfolios, developing sales and channels, and exposures from PR marketing activities, our micro mobility category has a much larger potential in bringing exponential growth in 2023. Now for Q4, we remain a cautious outlook. In China market, the fourth quarter has always been a low quarter in terms of market demand. On top of low demand, the impact of the price increases will be continuous. In addition, the sporadic COVID resurgence also add additional uncertainty to our key markets. Now in the overseas market, we haven't seen a bounce back in the electric two-wheeler sales for the sharing business, and the increased price will continue to exist and have an impact on our sales on electric motorcycles. We saw a positive trend in the national kick school market, but since Q4 is traditionally a low quarter, we expected moderate growth from that category. So overall, 2022 has been a tough year for our business in operation, as we've faced headwinds from raw material price increase and the macroeconomic uncertainties bringing negative impact to our financials. In the face of mounting challenges, however, we made quite a few crucial operation adjustments and laid out a strong foundation for a promising 2023. Since the formation of the company, Niu has the ambition to become a global mobility solution provider and a well-recognized lifestyle brand in urban mobility. Leveraged our design strengths and technology innovation capability, we created a smart leading iron scooter category in China was able to quickly establish our brand name in the electric motorcycles globally. Now facing the recent market shift, we focused on increasing R&D effort on our premium new series and high-quality Goa series as opposed to low-end entry-level products this year. The two premium products, SQO and U+, have received overwhelming positive feedback and proven to lift our brand in just three months of debut. The SQI was recognized as a revolutionary first of its kind by the media with the innovation in material technology and design. The new U Plus has generated a widespread trend on social media. Also, the high quality Gola series like V2 and G6T are also well received in the market, accounting for nearly 80% of our mid-end products in the first 30 days of their debut. Those are the proven testimonials of our brand leadership, as well as our capability in product creation. Those new products, the first teasers of our new product series, and there are a series of premium new products and high-quality global products in R&D rolling out in time next year to regain the growth in the China market. Now, on the global mobility solution provider front, we have made significant progress in 2022 through expansion of product categories and different solutions according to the different regional needs. We observed that micro mobility market continued to rebound and show a great resilience since the pandemic. The urban transports like kick scooters and e-bikes gained popularity after COVID when people prefer to commute with personal transportation methods. We have established ourselves successfully as a recognized brand and player in the kick scooter market within just one year entry, joining our four products, always positive response from the market, gaining leadership in online channels first. Now, as 80% to 90% of sales in this market are from offline channels, we see a huge growth potential for our kick scooter market as our offline channels is still in its early stage. We plan to take a similar approach in the eBike categories to repeat the success of the kick scooters. As we plan to officially launch the first eBike product in Q1 next year, we are also actively marketing the eBike product, building online shops, attracting customers and also bring up the brand awareness. Meanwhile, after the online presence, we plan to expand into the specialized e-bike stores and other offline channels in order to bring a wider traction. Now for the electric motorcycle market, although it took a setback this year in the sharing market, I believe the replacement demand is still there as our nearly 30,000 sharing vehicles are still in operation. We expect some of them will be replaced in 2023 after four or five years in operation. In addition, in the Southeast Asia market, after several years of planting the seeds, we're able to achieve meaningful growth this year. We're also investing in R&D and have product ready for the battery swapping solutions to lower the upfront cost for consumers, which could be a game changer in the years to come. Now, with those focused strategy and our determined mindset in execution, we're very optimistic that we'll recover from the temporary downturn in 2022 and then re-strengthen our brand and regain growth and profitability in 2023. Now, I'll turn the call over to CFO Fionn to discuss our financial results.

Thank you, Yan. And hello, everyone. Please note that our press release contains all the figures and comparisons you need. 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 that all mandatory figures are in RMB if not specified. Total sales volume including China and overseas markets for the third quarter was 321,000 units decreased by 19% compared to the same period of last year. As our overseas business continues to gain traction, sales volume from the international market has been growing fast, and this quarter contributing 18% of our total sales volume. And if looking at the nine months, they contributed 15% of the total volume. China market sales volume was 263,000 units representing a 33% year-over-year decrease, while most of the sales volume decrease was contributing to the decline of our lower-end SCOVA entry-level series. Total sales volume of our premium series remained at the same level, 224,000 units in the third quarter versus 230,000 of the last year. and those premium models together accounted for 85% of the total sales volume in China market compared to 59% in the same period of 2021. International market continued to see high speed growth thanks to kick scooter sales ramped up. The total sales volume reached 58,000 units among which the kick scooter sales volume was 55,000 units more than doubled compared to last quarter, and e-motorcycle sales volume decreased by one-third to 3,000 units, mainly due to the temporary headwinds from declining to be sharing orders. This year, the sharing business companies in Europe are facing challenges raising new capital, which in turn impacts their budget for expansion. The third quarter, our total revenue was RMB 1.15 billion, decreased by 6% compared to the same period of last year, and blended scooter ESP was 3287, increased by nearly 17%. To break down the revenue by ranging, the e-scooter revenue from China market was RMB 859 million, decreased by 20%, And the ASP in China market reached RMB 3265, 19% higher on a year-over-year basis, as product mix was more concentrated on premium models, as mentioned ahead. Overseas scooter revenue, including kick scooters, e-motorcycles, were RMB 195 million in the third quarter, increased by more than threefold year-over-year. In the third quarter, overseas scooter revenue accounted for 19% of our total scooter revenue. Blended scooter ASP of the overseas market decreased by 61% since lower priced kick scooter, which ASP is only 25% to 30% of the e-scooters, are now taking greater share of the total scooter revenues. But looking at each category separately, Both e-mopeds and kick scooters saw a year-over-year ASP improvement of 30% to 35%. In addition, accessories, spare parts, and services revenue were in the 99 million, decreased by 7% due to the less overseas demand for extra battery packs. World's margin of this quarter was 22.1%. 2.1 PPP higher compared to the third quarter of 2021 and 1.2 PPP higher than the previous quarters. Out of the year-over-year 2.1 PPP increase, 2.5 PPP was due to better product mix in the China market, 1 PPP due to the increase in US dollar exchange rate, and minus 1.4 PPP due to the higher proportion of kick scooter sales with lower gross margin. Our total operating expenses for the third quarter was $263 million, 72% higher than the same period of last year. The operating expenses as the percentage of revenue was 23% compared to 13% year over year. Going into details about expenses, total selling and marketing expenses were RMB $170 million, $81 million higher year-over-year, including around $54 million in marketing and promotions for kick scooters and domestic new products, and the rest of $27 million in depreciation and amortization expenses of the new stores and stock related costs. Despite being a global leader in e-motorcycles, we are still new to the Kickstarter market. To quickly gain product popularity, we put lots of resources and efforts into the online e-commerce platforms like Amazon, Shopify, and etc. We are glad to see those inputs have already paid off. Excellent online customer feedback helps us enter into more offline channels. which we believe is crucial for us to further expand our Kickstarter market share and bring us to the next level as the global leader in micromobility. And we believe those online promotion expenses as a percentage of revenue will become lower going forward with our market share increasing. Starting from August and lasting to the end of October, we held a series of events in downtown areas in more than 20 cities in China, showing the new products, setting up pop-up stores, offering test drives, and providing a platform for new fans to share their riding experiences and celebrate with each other. More importantly, we keep being committed to the user and co-fans community. To summarize, we invested RMB 54 million more in marketing expenses to those overseas and domestic marketing promotions altogether in this quarter. In addition, last year we expanded our retail channels by adding nearly 15,000 new franchise stores. Those new stores' depreciation and amortization expenses will have a continuous three-year financial impact on selling and marketing expenses. R&D and G&A expenses together are R&D 94 million in the third quarter, an increase of 30 million compared to the same period of last year, among which staff-related expenses were 17 million higher. Design and testing expenses were 7 million higher. As we expand our product portfolio and global footprint, we will continue to invest in talent, professionals, and other resources to support our technology development and organizational upgrades for global pioneers. The total operating expenses include share-based compensation for RMB 247 million, increased by 73% year-over-year, representing a 21% of revenue. This quarter, we had an income tax benefit of RMB 6.6 million, compared to 17 million income tax expenses last year. Since we were identified as a Jiangsu provincial high-tech enterprise, we were qualified for a lower corporate income tax. And our tax refund was booked in this quarter, same as in last quarter. The third quarter net income was 2.9 million compared with RMB 92 million in the third quarter of 2021. And the net income margin was 0.3% compared with 7.5% in the same period of 2021. Adjusted or non-GAAP income was RMB 20 million, net margin of 1.7%. Turning to our balance sheet and cash flow, we ended the quarter with RMB 1.48 billion in cash, restricted cash, term deposits, and short-term investments. Our operating cash flow was positive 73 million, mainly due to the payment term benefits from the suppliers. Inventory slightly decreased on a sequential basis and increased by RMB 1.48 billion. $70 million on a year-over-year basis, mainly because of the international kick scooter sales ramp up, since we need to stock up locally to ensure a fast turnover when orders came in, as mentioned in our previous call. The capex for the third quarter was RMB $18 million, compared to $76 million in the same period last year. The decrease was mainly due to the new store opening slowdown. Now we're turning to the guidance. In light of the volatile domestic market and our strategy focused on the premium market, we expect the fourth quarter revenue to be in the range of RMB 789 million to 986 million, no change to a decrease of 20% year over year. Please be aware that this outlook is based on information available as of the date and reflects the company's current and preliminary expectations, which is subject to change due to the uncertainties related to various factors, such as the pace of the COVID-19 pandemic recovery, among others. With that, let's now open the call for any questions that you may have for us. Operator, please go ahead.

Thank you. As a reminder, to ask a question, you need to press star 11 on your telephone. Please stand by while we compile the Q&A roster. The first question comes from the line of Jing Chang from CICC. Please go ahead.

Hi. This is Jing Chang from CICC. Thank you, Ian, and thank you, Fionn, for your detailed explanation. I have two follow-on questions. is about our selling and marketing expense. We see that our selling and marketing expense in the third quarter reached a historic high. And Fei-Yuan just mentioned some breakdowns. What about looking ahead? So which part is expected to be sustained and which part is expected to decline soon? And what is the expected steady state level of our selling and marketing expense? And do we have some methods to promote, to reduce the expenses? And my second question is about our product pipeline. At present, we can see the cost of this industry is still very high. So as for the product strategy for next year, especially in Chinese domestic market, so what market segments should we focus more on for our new product? Is the premium market or some lower tier city market as we want to achieve positive sales growth? This is my two questions. Thank you.

Thank you, Changjin. This is Fionn. I'll answer the first question. regarding to your questions about the selling and marketing for sure as you said that I already give the breakdown and I think the depreciation and amortization expenses related to the new stores will continue at the same level for the next two years Since we opened more than 14,000 new stores starting from 2021, and those depreciation and amortization expenses will last for at least 36 months. So that means for the next two years, we still have those kinds of expenses in the selling and marketing expenses. And in addition, for the new stores we open this year and for the following years, we will amortize those expenses in the same way. So this is a major part of the expenses will still remain the selling expenses. The other part is our marketing expenses for the daily operation, which we will reduce at the lowest level. But for the kick scooters, as I mentioned, since we are still using the expansion strategy for the next two years, Unless our market share increase at a very significant level, which I mean it should be around 1 million or around 800,000 units globally. Otherwise, those promotion expenses, especially the online traffic expenses, which are huge by the efficiency. those online promotion expenses were still at a significant level, along with our market share increasing in the kick scooters. For the reduction of the selling expense, since we already made the cut of the of the staff cost, which means we merge several teams and we increase the staff efficiency to increase the whole company's staff cost. Those will make the benefits beginning from next year, I think. Since those staff costs will only reflect on the financial statements later for at least one or two quarters, then we will see the obvious impact on the financial statements. But for sure, we already did several execution improvements to maintain the lowest level of the expenses and to improve the whole company's efficiency. And to summarize, I think for the next two to three quarters, the selling and marketing expenses altogether will remain at the quarterly level. will remain around RMB 100 million to 130 million for the next two to three quarters. And after that, you will see at least a 20% decrease on a quarterly basis. This is the answer for your first question. I'll pass the second question for Yan.

Sure, I think just to a little bit add on the first question, right, so I think in terms of absolute value, so you look at that number, but if you look at the percentage of sales, it will definitely go down. If you look at Q3 this year, we're looking at the sales and marketing, it's almost like 14 or 15% of the revenue. I think, you know, partially as what Sian just mentioned in terms of absolute number, that's what you see on the numerators, right, on the denominators. You know, the revenue growth is obviously not as, you know, it's below our expectations. So, you know, a lot of fixed overhead, for example, when you have a, you know, like a, like a, you know, marketing activities or product rollout, right? It's a fixed cost divided by a revenue amount. That's why you guys see a high percentage. But if you look at, you know, in our, not saying 2022, but if you look at 2021 or 2020, you look at our sales marketing roughly as a percentage revenue, we keep it basically somewhere between 7% to 9% fluctuate. I think that's what we're trying to target to get in 2023. But obviously, the absolute dollar amount is probably similar. But I think that's just on that note. I think the second part you asked about the product development, I think the issue is actually we're We focus on premium and also what we call the mass premium product. Basically, the premium product will be our new series, anything above 5,000 RMB for China market. The mass premium product will be something basically anything about 3,500 RMB to 5,000 RMB, which we call the high-quality global product. I think those will be sort of the focus. at least that will be focused for 2023, partially because when we actually did a deep diagnostics on our entry-level product, the zero series, after the lithium price increases, it's basically its gross margin contributions almost become insignificant. Not saying it's almost zero, but if you actually take into consideration cost over the stuff. those products are not making value for the company at this point. So that's the reason that we're focusing on what we call the premium and our mid-end. Having said that, I think if you look at the entire market, the entire market for that product is still high. Given our sales volume at this point is below 1 million units, if you look at the entire market for the product above 3,500 RMB, We're still looking at that market's probably at least about 10 million units, if not more. So I think the total addressable market is still so large for us to attack. So to this point, we feel like there is no point to spend additional R&D dollars on product that actually makes zero very small attribute gross profit contributions.

Okay. Okay. Thank you.

So hopefully that addresses the question.

Okay. Sure. Thank you for your answer.

For the questions. Next question comes from the Liao Yat-Ting Chen of CICC. Please proceed.

Hello, I'm Chen Yating from CICC, and there are three questions. The first question is, I'd like to know what's your product strategy for overseas market in 2023, and do you have sales volume goals in Malaysia? And the second question is, what's your channel strategy next year domestically? Will you reduce the channel storage, or what will you focus more on? And the third question is, I'd like to know the gross margin of e-scooters in the Gova series, if you can share with us. Thank you.

Sure. So I'll answer the first two, and then I'll let Fionn address the gross margin question. So first, on the overseas strategy, we're looking at a – well, again, we developed the market into sort of what we call a motorcycle market and a micro-mobility market. Within the motorcycle market, I think our bread-and-butter market at this point is Europe and the North America market, which, you know, Annually, we do about anywhere between 20,000 units to 30,000 units electric motorcycles. As I mentioned in the earning call, this year we took a step back because the sharing operator orders become zero. Last year, it was 10,000 units. But they will come back. It's just, you know, it kind of sort of fluctuates. It depends on, you know, they have raised the capital this year. They focused on internal operation and all that stuff. Now, then I think this market will grow with the market continuously. The overall market for the electric motorcycle market for the Europe and United States market is small. At this point, it's probably like 100,000 units a year. So overall, I think it's a small market, but we own like 20-something percent. So we'll actually continue to grow with the market. Now, the second electric motorcycle market, which really is still in its very early stage, is the Southeast Asian market. So we do see that we grow in Southeast Asia market. We probably double our sales in Southeast Asia market. Even by doubling, we're still looking at just 6,000 to 7,000 units. It's still a small market. I think we're trying to explore different models, like the battery swapping solutions in that market. The issue with that market is actually the electric motorcycle economics of electric motorcycle is still the price is still too expensive compared with petrol. So the upfront cost for the users is actually difficult. So we're working with partners there to see, you know, on the sort of battery swapping solutions that might actually sort of lower the upfront cost for the consumers. So some of the early trials already done in Singapore, but also early trials in Thailand. So I think those are something we're exploring. Then the next is sort of the micro-multi-ability market, which this year we see a huge volume growth, first being the kick scooter market, which the entire market on an annual basis is probably like 4 million units. We're still very, I think we have a strong, this year, you know, we have been able to achieve a name. Basically, people recognize us on Amazon, on the online website, saying, hey, this is a brand that can produce high-quality product in kick scooters. But even with this year's volume, like the first three quarters you added together, we just did about 80,000 units. All of that 4 million units market, we're very, very small. The reason being that we haven't really sort of entered a bunch of the offline stores yet. And historically, 90% of the sales are actually conducted offline. So those are something where we're working on which we actually have made a significant progress, but I just take time I think usually you know for any of those offline You know offline change it actually takes six to nine months to enter the store and actually be able to start to make sales So I think that's on the on the kick scooter market and the last one the e-bicycle market Which is actually it's getting attractions beginning attraction in the last few years and So, we have a product out next year, which actually will help us to make a name in that market. I think we're going to follow a similar strategy that we took on the Kickstarter market, basically make a name online, gather enough interest online, gather enough early user adaptions, and then start going offline. On top of that, I think even with the previous questions on the sales expense, right now the micro mobility business unit has a high sales expense. That's because a lot of stuff is done online where you see a high sales expense in terms of purchasing the traffic or that stuff. When actually 90% of the sales become offline, you're going to see a significant decline in terms of sales expense. So I think that sort of... the strategy for overseas market. We don't have the volume target yet. I think it's too early for this call to us to give a volume target. I think on the domestic channels in China, we have about 3,300 stores right now so far in domestic channels. I think we're taking a very slow stage this year to expand the stores because I think with the current market shift, especially with the lithium battery price went up, I think right now the number of stores is is enough for us to sustain our growth. I think the focus is merely to improve the per store sales, so same store sales in 2023. So we're not looking at expanding more stores, but really focus on improve the per store sales by 10% to 15% next year. And I'll let you on the gross margin part. Sorry.

Yeah, I'll take the third question. Regarding to the gross margin of over series, let me rephrase the definition of our accounting rule. Since the gross margin, when we account for our financial statements, it not only contains the bond cost, but also it contains all the discounts, the rebates of the sales. and also the logistic expenses and all the selling expenses related to the sales volume. So that means all the direct expenses and costs related to the sales unit will all accounted as the cost of the goods sold. So this is above our gross margin. And when we counted all the costs and expenses altogether, our gross margin of the GOBA series, including the entry to the premium models, the gross margin range is around 15% to 22%. So that means the cheapest or the lowest level of our GOBA series. the gross margin will still about 15%, which is the average level of our competitors. And this quarter, when you see the gross margin improved, since our product mix improved, the entry level only contains of the 10% of our sales volume. For sure, we did average gross margin of the global series will improve to around 20%. So this is everything about the GOLVA series gross margin. Hope this will address your questions.

Thanks a lot.

Thank you for the questions. Once again, to ask questions, you can press star 11 on your telephone. At this time, there are no further questions from the line. May I have a call back to the management for closing?

All right. Thank you, operator, and thank you all for participating on 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, management. Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.