Autohome Inc.

Ladies and gentlemen, thank you for standing by for Autohome's third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the former presentation. As a reminder, this conference call is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to introduce your host, Sterling Soong, Auto Homes IR Director. Mr. Soong, please go ahead.

Thank you, operator. Hello, everyone. I'm Sterling Soong, and welcome to Auto Homes Third Quarter 2022 Earnings Conference Call. Earlier today, Auto Homes distributed its earnings press release, and you may find a copy on the company's website at www.autohomes.com.cn. On today's call, we have Chairman and Chief Executive Officer, Mr. Xuan Long, and Chief Financial Officer, Mr. Craig Zeng with us. After the prepared remarks, our management team will be available to answer your questions. Before we continue, please know that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Provolution statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but not are limited to those outlined in our public filings with the U.S. Securities and Exchange Commission and the Stock Exchange of Hong Kong Limited. Auto Home doesn't undertake any obligation to update any forward-looking statements except as required and applicable to law. Please also note that Auto Home's earnings press release and this conference call include discussions of certain audited non-GAAP financial matters. Please refer to our press release, which contains a reconciliation of the non-GAAP matter to the most directly comparable GAAP matters. and is available on Autohome's IR website. Again, as a reminder, this conference is being recorded. In addition, a live and archived webcast of this earnings conference call will also be available on Autohome's IR website. Now, I will turn the call over to Autohome Chairman and CEO, Mr. Long, for opening remarks. Please go ahead, Mr. Long.

Thank you, Song Kang. Thank you everyone. Thank you for joining us today in our third quarter 2022 earnings conference call. continued to have a good recovery in the first half of the year, and continued to achieve excellent business performance. The total revenue reached the people's share of 18.43 billion yuan, which is 4.5% of the net growth.

Among them, the media business income increased by 28%, belonging to the family of cars, which adjusted the net profit rate to 5.9 billion yuan, which is 1% of the net growth, which adjusted the net profit rate to

32% Since 2022, the government has launched a series of economic stimulus policies that support the consumption of cars, pushing forward the potential for the release of consumption. At the same time, the limit of traffic in second-hand cars has also been completely eliminated. As for the development of second-hand cars, the policy bottlenecks are increasing. The pandemic has been effectively suppressed. In the third quarter, domestic cars are obviously coming back.

The total number of new cars in the country is 5.69 million. We are pleased to report a strong operational performance in the third quarter, building on our vigorous recovery momentum from the first half of 2022. Our total revenues for the third quarter were RMB $1.843 billion, up 4.5% year-over-year, and the media service revenue surged by 28% year-over-year. Adjusted net income attributable to auto home was RMB 590 million, returning to positive growth with a year-over-year increase of 1%. Adjusted net margin was 32%. Since the beginning of this year, China's central government has introduced a series of economic stimulus policies targeting the auto industry in an effort to unleash relevant consumption potential. Also, the abolishment of used car circulation restrictions has helped to relieve the bottleneck hindering growth in the used car industry. With these policy changes alongside effective measures to contain the spread of the COVID-19 pandemic, China's passenger vehicle sales recovered rapidly in the third quarter with a total of 5.69 million units sold or 23% year-over-year growth.

Due to the influence of the pandemic, the automotive industry has become an important part of the national economy and a cornerstone of the daily life of the people.

It is a typical long-term industry that has been supported by the government for a long time.

The future of automotive consumption has a huge room for improvement. Zhijia started on its own, actively changed and deepened the customer base to meet the customer's needs, and continued to actively adjust the business model.

After going through the changes in business in the previous few seasons, Despite the impact of the pandemic, the auto industry remains a key pillar of the national economy. Auto is a daily necessity in people's lives. and given automotive typically long life cycle as well as prolonged support from the government, the auto industry still possesses tremendous growth potential as China's auto consumption level and the demand for upgrades continue to increase. To address challenges head-on, auto home visited customers listened to their demands and actively adjusted our business models to provide effective solutions to address their pain points. After a brief business adjustment in the past few quarters, we bottomed out and achieved a V-shaped rebound in the third quarter. We have now returned to a thriving year-over-year growth trend and are maintaining good performance and we delivered solid results to the market. With that, I will now turn the call over to our Chief Financial Officer, Craig Sun, for a closer look at our third quarter operating and financial results. Thank you, Nick Long. Hello, everyone. I'm Craig Zun, the dev world auto home. First, I'd like to give you an overview of our traditional business. In the face of the media and radio business of the mobile phone industry, the three-digit income reached RMB 5.56 billion. After continuing to improve over the past year, the first recovery has been more serious. It has once again highlighted the leadership position and stable market position in the automotive industry. There are two reasons behind it. For the third quarter, our media service revenue reached RMB $556 million, returning to positive year-over-year growth for the first time after over a year's continuous adjustment. This accentuates Autohome's leading position and stable market share in the auto media vertical sector. Our excellent performance is mainly attributable to two factors. First, the car manufacturer actively embraced the change, actively pursued innovation, and upgraded and modified the traditional business version. Not only in the car-watching section, but also using VR and other advanced technology to overcome the impact of the epidemic, we held a smart online car show to help customers effectively discover. Our own platform has also gained more traffic. In the first nine months of this year, we held 305 online car shows in total, covering more than 500 million people. We provided a great advantage for users to watch cars and choose cars at any time. First, we embrace changes and proactively pursue innovation to upgrade our traditional business. For example, to overcome the pandemic impact, we applied VR and other advanced technology to our car-searching tools and held online auto shows for customers to reach potential buyers more effectively. It also generated additional traffic for Auto Home's platform. In the first nine months of this year, we have held 305 online auto shows covering over 500 million people nationwide and offering users a seamless experience of searching and choosing cars anytime and anywhere. Normalizing online auto shows has effectively altered users' perceptions, improved their experience, and helped customers to navigate the tough business environment. Our online auto shows have received high praise from both users and our OEM customers, resulting in great improvements in our media business. Second, focus on resources, strengthen competitive advantage, and enhance industry influence. For example, Zhijia first created the world's most famous automotive media IP, the 818 Super Car Festival, which has been held for four consecutive years. This year, Zhijia has invested more resources and concentrated its advantage by cooperating with the central and micro-media to increase the exposure of the stock market and help car brands to move upward. Accelerating the digital transformation of the automotive industry, the activity of full exposure or 164 million, full short video playback or 1 billion, has shown an important media influence. Second, we concentrated our sources on fortifying our competitive advantages and enhancing our industry presence. For example, Auto Home initiated the H1H Super Auto Show, the world's most popular IP in the auto media sector, and has helped the auto show annually for four consecutive years. This year, we not only devoted more resources to the show, but also collaborated with China Central Television CCTV media platform to more effectively promote OEM's brands and products, accelerating the pace of digital transformation across the auto industry. This year's H18 Super Auto Show generated over 16.4 billion exposure across the entire network and over 1 billion short video views, exemplifying the unprecedented level of auto home brand influence in the auto media vertical industry. Media ads, exposure, and effect enhancements are an integral part of Zhijia's long-term efforts to upgrade user content. Zhijia continues to build core IPs from point-to-point, from flat-to-material to three-dimensional. All aspects are built on useful and interesting video content. Zhijia continues to innovate and signed the first super-realistic virtual person in the industry, Gong Jiuyu. His series of videos have been broadcasted over 100 million times on the whole network, which has caused a strong impact on users. In addition, Zhijia's 40 major original paid IPs, such as long-term notes, reached 2.36 billion in the total number of plays in the first three seasons, and 3.72 billion in the total number of plays on the whole network, and the influence continued to expand. Increased media exposure goes hand-in-hand with our continued advancement in content creation as well as our ongoing efforts to build our core IT. through which we have constructed a useful and fun video-based content ecosystem. For instance, in our pursuit of content innovation, we signed a contract for the industry's first hyper-realistic mass human, Gongjiu Yu. Thus far, her videos have garnered over 100 million views across the entire network, and her views generated enthusiastic responses among our users. Additionally, in the first three quarters of 2022, our four original IP theories, including the Travel Journal, among others, have accumulated over 236 million views on AutoHome platform and over 372 million on the entire network, demonstrating our growing influence. So in the future, Autohome will introduce additional matchwork features, virtual assets, and other interesting elements to our portfolio to further upgrade the quality of our video-based content ecosystem, encouraging greater participation and deeper engagement, especially among young users. Based on the efforts of the previous series of users, Zhijia's platform traffic has maintained a long-term stable growth. QAM's full-scale eco-friendly daily user volume in September reached 4,956,000, which is 13.4% of the total growth, and achieved rapid growth for five consecutive months. Among them, the mobile APP's DAU is 12.83 million, which is far above the industry level, and continues to maintain the leading position in the automotive industry. This series of efforts to strengthen our user content bolstered our ability to deliver long-term, steady traffic growth. According to PressMobile, Autohome aggregated average steady active users achieved a six consecutive months of accelerating growth in September, soaring by 13.4% year-over-year to 49.56 million. Furthermore, our mobile ATP CLU was over $12.83 million, greatly exceeding the industry level and affirming our industry leading position. In the clue business, the revenue of the third quarter has increased rapidly, and the total increase is more than 5%, which is higher than that of the first two quarters of this year, and the total growth is more than 7%. From the three-season car dealership cooperation business, the bonus version has broken through 13,000, the technology version has exceeded 7,000, and the high-end version of the business has exceeded 20,000. The total increase is more than 1,200 customers, and the increase is 6.5%. Now let's look at our new generation business, where revenue witnessed an accelerated growth trend in the third quarter, with year-over-year growth of over 5%. passing the growth rate for the first two quarters of 2022. Moreover, the quarter-over-quarter growth rate was over 7%. In terms of the number of our customers in the third quarter, over 13,000 dealers purchased our premium version and over 7,000 dealers purchased the tax version, for a combined total of over 20,000 dealers purchasing the high-end version of our yeast subscription packages. This represents an increase of over 1,200 dealer clients or 6.5% growth compared to the second quarter. The steady increases in both revenue and the number of customers once again illustrate our ability to keep empower our client's business. Moving forward, building on our excellent product capabilities, we'll continue to expand our product pipeline and increase R&D input as we endeavor to holistically fulfill our customers' needs with upgraded products and services. In addition, in the field of innovation, Shijia's rapid promotion of the second growth curve by progressive development plans, whether it represents the new energy source business in the original direction, the new energy source business in the future direction, or the second-hand car business with a wide space, or the digitalized product business with a negative customer, have all achieved long-term progress and made a significant breakthrough. Turning to our new initiative, we continue to execute our development plans and accelerate the realization of our second growth curve. Whether we look at our NED business representing the direction of the future, our used car business with the fast growth potential, or our digital product business empowering our customers, we have made significant progress and achieved substantial advancement. In the face of the constant improvement and structural changes in the absorption rate of new energy vehicles, Zhijia is actively leading the change of industry. Zhijia is one of the world's leading energy space stations with a new sales model that everyone has. Through multi-brand, one-stop, 3G all-in-one virtual driving, with wireless connection and test drive service, Helping users complete the inspection, selection, market price, and purchase of cars, it completely subverts the traditional purchase experience that takes up a lot of money, and solves a wide range of user purchase problems. This is not only reflected in the market, but also received widespread attention from various companies in the energy industry. In September, the first offline experience store in Shanghai was officially opened, which caused a huge rebound in the industry. First, let's look at NEV. Facing the continuous evolution of the NEV market structure and the increase in NEV penetration rate, AutoHome adapted proactively and elapsed the market's transformation by pioneering a unique, multi-brand retail model, EnergySpace. offering 3D holographic virtual car viewing, followed by test driving services across a broad board of China's new NEB brands, makers, and models. Energy Space provides a one-stop service for selecting, test driving, and purchasing cars, which completely subverts the traditional time-consuming car purchasing experience and soft users' pain points. And this space has not only helped us stay ahead of the market, also drew attention from other AUV automakers to look at Autohome in a whole new light. In September, we unveiled our first offline experience store in Shanghai, attracting great attention across the industry. In the future, Autohome's energy space will increase its presence in top-tier cities and steadily expand into lower-tier cities, covering more energy grants and models. By building ecosystems that benefit all parties, Autohome will continue to contribute to the fast-growing and prosperous Chinese energy industry. In addition, in this quarter, Zhijia and Beili New Energy has signed an exclusive strategic cooperation agreement. In the future, both parties will engage in in-depth cooperation in all kinds of new energy data applications. Zhijia will develop and build more new energy vehicle sales data products and services, more accurately improve the quality level of new energy second-hand vehicles, and expand more development space for the new energy industry. Notably, during the quarter, we signed an exclusive strategic partnership with the Beijing Institute of Technology Xinyuan Information Company. Going forward, the two parties will conduct in-depth cooperation in various areas such as NEV data applications. This cooperation will empower also home with valuable data sources to develop more digital products and services supporting NEV sales and marketing, improve valuation mechanisms for used NEV, and broaden our NEV business growth prospects. In Q3, revenue generated from NB Brands continued to grow vigorously and increased by 140.7% year-over-year, once again outperforming the industry's sales growth overall. This year, there have been a series of radical changes in domestic second-hand car policy. The industry is facing new development opportunities. By using the east wind of good policies, Zhijia continues to integrate the three-in-one advantage resources of Tianqian Driving and Ping'an Group to accelerate the construction of second-hand car integrated trading service platforms. In terms of customer sales, we are looking at the needs of new cars in the second-hand car manufacturing group, accurately match its new car image, and effectively connect the main factory and user needs. Through the production of manufacturing products and the operation of the main factory, we have reached cooperation with 22 brands. The results are very good. In terms of customer sales and purchase, we provide standardized service for both buyers and users. We have implemented the first-hand service for both buyers and users. Customer purchase experience is more convenient. At the same time, the number of certified drivers on the Zhijia Chengxin car platform is also rapidly increasing, which greatly enriches the number of second-hand car drivers. We provide more clues and trading opportunities for second-hand car buyers and car dealers, and expand the source of second-hand car income. Next, the youth car market. With this year's positive changes in government policies, China is undoubtedly the world's fastest growing and highest potential youth car market. To make the most of this opportunity, we continue to consolidate resources across TTP, Ping An Group, and Autohome to gain a competitive edge and propel development of our one-stop used car transaction platform. For used car sellers, our Trading Go product, which targets users looking to trade in their used cars and purchase new ones, has proven attractive for OEMs seeking ways to reach potential new car buyers. We have already established collaborations with 22 brands and received positive feedback. For used car buyers, we provide a standardized one-stop service for searching, buying, and using cars, realizing the industry's first exploration of one-stop car purchasing plus test driving services and delivering a smooth and convenient user experience. In addition, we continue to make progress with our certified use-car system and have rapidly increased the number of certified use-car sources on our platform, creating more needs and transaction opportunities for both use-car dealers and buyers. Going forward, AutoHome will accelerate implementation of business innovations to establish a full use-car ecosystem covering upstream, midstream, and downstream players. augmenting our competitive advantage while contributing to overall industry development. We continue to deepen business synergy with TPP in third quarter Through our matching and auction services, our platform accounted for around 21% of all used car transactions in China in the first quarter, with 3 percentage points year-over-year growth, and we expect its operating conditions will continue to improve going forward. Finally, let's take a look at the data products. The third group of commercial data products continues to maintain a good development trend. The revenue has increased by 37%, and the number of customers has exceeded 19,800, which is 5% higher in the previous quarter and increased by 16% in the same year. In the first three quarters of 2022, the number of single-business buyers and the rate of e-sports revenue all showed a fast growth. with a 31% and 20% increase in the same period. In addition, in the face of the customer service of the main airport, by constantly upgrading products, using the technological transformation of the industry, we can greatly assist in the digital transformation of traditional vehicles. Currently, we have established 48 mainstream car brands in the rain market, and we are working in depth. In the future, we will continue to assist the rapid growth of the second wave of companies. Lastly, on the data product front, data data products continued their healthy growth trend in the third quarter with revenue surging by 37% year-over-year and the number of clients up by 5% quarter-over-quarter and 6% year-over-year to over 19,800. During the first nine months, of 2022, the average number of beta products adopted by each dealer store and the average revenue per dealer store increased vastly by 31% and 20% year over year with package. On top of that, which successfully capitalized on opportunities brought by the auto industry digital transformation as part of our continuous effort to upgrade our product. Presently, Auto Home has established in-depth collaboration with 48 mainstream automakers, which will continue to support and accelerate Auto Home's second growth curve. Even though we are facing a little complicated macro environment, in the third quarter, we have achieved bright results in all business stages, continuing the good system that has continued to improve in the first half of the year. As a leader in the Chinese automotive industry, over the past year, Automotive Home has focused on two major areas. On the one hand, we are building an eco-friendly strategy, uniting security resources, and building an all-terrain car eco-system to create a life-saving community for automotive users. On the other hand, Zhijia is focusing on the future of the industry, leading the industry to innovate and continue to upgrade all innovative business models. Zhijia will continue to use the stable operating industry to promote digital transformation of the entire industry, and continue to create more long-term value for users, customers and shareholders through the excellent performance of the period of development of the industry. To summarize, despite an uncertain microeconomic environment, we are pleased to have achieved extraordinary results in all three of our business segments, expanding our recovery momentum since the first half of 2022. As one of the leaders in China's auto industry, Auto Home has focused on two main strategies over the past year. First, we are actively advancing our ecosystem approach consolidating resources with Ping An Group to build a one-stop full-chain Autohome platform that provides comprehensive services for auto users. In the meantime, we are deeply invested in the industry's future and committed to leading industry-wide innovation by continuously cultivating our innovative business segment. Faced by a strong business foundation and brilliant financial performance, Autohome will foster digital transformation in the industry, creating lasting value for all our stakeholders with outstanding performance that navigates market cycles. Next, I will explain to you the main financial situation of the third quarter of 2022. Please note that I will only introduce RMB as a currency unit in today's discussion unless there is any explanation. Next, let me walk you through the key financials for the third quarter 2022. Please note that, as with prior reports, our references aren't the only in my discussion today unless otherwise stated Next, revenues for the third quarter were 1.84 billion, up 4.5% year-over-year. For a detailed breakdown, media services revenue came in at $556 million, an increase of 28% year-over-year. Least generation services revenue increased 5.3% year-over-year to $809 million, and online marketplace and others revenues were $478 million. Moving on to cost, cost of revenue in the third quarter was $331 million compared to $281 million in Q3 last year. The increase was primarily attributable to our continued investment in conscience. Growth margin in the third quarter was 82.1% compared to 84.1% in Q3 2021. The same period is 7.12 billion yuan, the same growth is mainly due to the increase in market promotion cost. The annual cost is 3.87 billion yuan, the same period is 3.64 billion yuan, the same growth is mainly due to the increase in the investment in digitalized product related research and development activities. Finally, the general management cost is 1.36 billion yuan, the same period is 1.11 billion yuan. Turning to operating expenses, sales and marketing expenses in the third quarter were $863 million compared to $712 million in Q3 2021. The increase was primarily attributable to the escalation of marketing and promotional spending. Product and development expenses were $387 million compared to $364 million in Q3 2021. The increase was primarily attributable to greater investment in research and development activities for digital products. Finally, general and administrative expenses were $136 million compared to $111 million in Q3 2021. Overall, we delivered operating profits of 192 million in the third quarter compared to 365 million in the corresponding period of 2021. Adjusted net income attributable to Auto Home Inc. was $590 million in the third quarter compared to $583 million in the corresponding period of 2021. In the third quarter, we'll go on the 1.18. compared to both RMB 1.16 in the corresponding period of 2021. Nungap's basic and diluted earnings per ADS in the third quarter were RMB 4.73 and 4.72 respectively, compared to RMB 4.61 for both in the corresponding period of 2021. As of September 30, 2022, our balance sheet remains very strong with cash, cash equivalents, and short-term investments of RMB 20.34 billion. which generated net operating cash flow of $541 million in the third quarter of 2022. On November 18, 2021, the Car-Owned Board of Directors authorized a $200 million stock return plan for 72 months. As of October 31, 2022, we have already returned about 3.51 million stocks, the total cost of which is about $1.06 billion. On November 3, 2022, the Board of Directors authorized the duration of this stock return plan to be extended for 12 months until November 17, 2023. The company's long-term maintenance of documents, cash reserve abundance, cash flow health, and continued active return on the public market showed the company's determination to improve its capital return efficiency. It also expressed to the market that the company has always valued the interests of large investors for a long time and continued to take the initiative to manage the market. On November 18, 2021, our Board of Directors authorized a share-reported program under which we may report up to $200 million of auto home ADRs for a period not to exceed 12 months thereafter. As of October 31, 2022, we have repurchased approximately 3.61 million ADS for a total cost of approximately 106 million USD. On November 3, 2022, our Board of Directors authorized an extension of the shared repurchase program for another 12 months, expiring on November 17, 2023. Auto Home's stable long-term operations, healthy cash flow, and ample cash reserves, as well as our active stock replenishment program, demonstrate our intention to improve the company's capital structure efficiency and reflect our long-standing dedication to our investors' interests. We will maintain our efforts to proactively manage market value. With that, we are ready to answer your questions, operator.

Thank you. Ladies and gentlemen, to ask a question, you will need to press star 11 on your telephone. Please stand by while we compile the question and answer roster. Our first question comes from the line of Thomas Chong from Jefferies. Please ask your question, Thomas.

晚上好,谢谢管理层介绍我的提问。 我有两个问题,第一个问题是关于汽车行业三季度发展的情况, 还有我们应该怎么看四季度还有明年的一个展望。 第二个问题是关于当前二手车发展还有市场的情况, 都是包括TentenPipe。 How should we look at the strategy for next year? Thanks, management, for taking my questions. My first question is about the auto industry, Q3 development, as well as how we should think about Q4 and 2023 outlook. And my second question is about the used car market, how the sector is developing so far, as well as the market landscape, including TTIP, as well as how we should think about next year's strategies. Thank you.

Thank you for your question. You asked two questions. The first one is about the development of the industry. I will answer this question. The second one is about the second-hand car.

Wait a minute.

China's policy and development has always been watched by all parties.

Thank you for your questions. The first question is related to the industry and I will answer that. The second question is related to the youth car business. Our CFO will answer you. So first of all, the auto industry is the pivot industry for our national economy and it has been receiving attention from all parties concerning its policies and development.

First of all, I think that the car industry's natural moment this year has passed. Because we have seen that the car industry's profit and loss is very significant in the third quarter. Then I will share two sets of data with you. According to the statistics of the Chen Lianhui, the sales of used cars in China this year fell by 4.5% in the first quarter. The second quarter fell by 9.8%. But now we can see that the third quarter has increased by 23%. The relevant data of the National Statistics Bureau also shows that in September this year, the revenue of our country's automotive manufacturing industry has increased by 6.7%.

The profit is more than 37 billion yuan.

The same ratio dropped by 1.9%. The same ratio dropped by 1.9%. The same ratio dropped by 1.9%. So we can see that the sales of used cars has gone to the bottom, and the turning point has arrived. In the third quarter, the car is more likely to show the attitude of two-way production and sales, so the phenomenon of this rise and fall of the entire industry is relatively obvious. As the policy of the country is refined and actualized, in September, the implementation details are also printed and printed, and the demand for effective expansion has been further expanded.

first of all i believe that the darkest moment of this year for our industry has already passed q3 sees a significant recovery of the profitability of car manufacturers two sets of data for all of you according to the ctca This year, China's passenger vehicle sales Q1 year-on-year decreased of 4.5%, and Q2 year-on-year decreased of 9.8%, and Q3 year-on-year growth of 23.7%. According to National Statistics Bureau, in the first nine months this year, China's automobile manufacturing revenues has a synchronized growth of 6.7% and the profit over 370 billion yuan year-on-year decrease of 1.9% and the decrease margin compared to January to August has narrowed by 5.4 percentage points. We could see that the passenger vehicle sales is out of the bottom period and the running point might have already might have been arrived might have arrived in Q3 the monthly sales and the production are both very optimistic leading the industry for a stabilization and recovery and we see the follow-up policies getting more and more specific and consolidated and since September we see implementation of a series of necessary details. So that effectively boosted the effective demand and consolidated the foundation for economic recovery. So we believe that the also mobile industry is having a more and more positive environment for our development.

In addition, we have seen the policy of promoting the consumption of cars. The problem of supply chain and chip failure has also been resolved. Therefore, we are very optimistic about the expectations of the four-level car industry. The car industry has received long-term attention from the country and the government. Since this year, various governments have continuously launched encouraging policies to clearly and steadily increase the consumption of cars and others. In May, we can see that the State Council has announced a comprehensive cancellation of the 20-car limit. In September, the Ministry of Finance, the Tax Administration, and the Ministry of Industry and Industry have jointly issued a policy to continue the policy of new energy vehicles to be tax-free. This is to encourage the development of the new energy vehicle industry. There is a huge room for growth in the future. Although the outbreak of the outbreak of the epidemic since the beginning of the year has brought certain challenges and uncertainties to the Hongguan economic movement, it has affected domestic testing to a certain extent. In terms of timeliness, the test may contain some uncertainties, but with the arrival of the end of the year sales wave, the start of the car impact sales, the increase in the discount rate, and the movement, these are all expected to push the demand for mid-range sales to open up and open up the industry to the top.

Secondly, we benefit from the policies that encourage automobile consumption and we also see an alleviation regarding the problem of the supply chain as well as the shortage. Therefore, we are cautiously optimistic about the expectations for Q4 automobile industry development. Automobile industry is highly valued by the of country and the government, and this year has witnessed a series of favorable policies from all levels of government to specifically stabilize and boost the major consumptions like automobiles. In May this year, the State Council implemented, the State Council removed comprehensively the circulation restriction for youth cars, and in this September, Ministry of Finance, the Taxation Administration, and MIIT jointly launched the policy to exempt NEVs from auto purchase tax to encourage the NEV industry growth. So we see a huge potential for the upgrading in auto consumption in future. Since the beginning of this year, we have seen a recurrence of the COVID-19 pandemic in multiple locations in China, which brought certain challenges and uncertainties, including macroeconomic growth and to some extent brought negative impact for our automobile market in China and the consumer the consumers' confidence as well as their actions of hard-seeing has been impacted by the periodical pandemic control measures. So in a short-term perspective, there is to some extent uncertainty in the market, but we are embracing the busy season in sales. at the end of this year and the OEMs and the car enterprises, they try to give greater discounts to boost the sales. So I think that it is likely to boost the end consumption need and to initiate an upward cycle of our industry.

In addition, from the point of view of the car market sales structure, new energy vehicles have been continuing to grow rapidly. The policy of promotion and the improvement of supply and demand, coupled with the increase in oil price and the purchase of new energy vehicles, the market is active. In September, the domestic sales profitability of new energy vehicles reached 31.8%.

In September 2021, the profitability of 21.1% increased by 11%.

On the other hand, from the perspective of the sales structure of the auto market,

has been growing rapidly because of a very upward market due to the favorable policy, due to the improvement of the supply side, as well as the higher gas prices. In September, the NEV domestic retail penetration rate reached 31.8% in year-on-year growth compared to Last September, the penetration rate was 21.1%, and you can see there is an increase of 11 percentage points. In the first nine months this year, the NEV domestic retail penetration rate is 26%, and in the 2021 to 2035 NEV industry development plan, It mentioned that the goal of 2025 and EV penetration rate is 20%. Now we can see that the goal could be achieved three years in advance.

According to the forecast of the Mid-Autumn Festival, under the continuous operation of a stable economic and consumer policy, the production and sale of cars in the fourth quarter will continue to maintain a stable attitude. The forecast of the whole-year car market will achieve the goal of steady growth. Of course, the growth of cars also needs to be continuously improved by policy. I hope that the consumption and consumption of the central and local areas such as construction tax reduction will be continued by the policy next year to help the stable development of the car industry.

According to the estimation by CAAM, or China Association of Automobile Manufacturers, the Q4 manufacturing and sales of automobile will continue to be stabilized under the positive influence of policies that aim to stabilize economy and boost consumption. And it also estimates that the overall auto market this year could achieve the stable growth targets. And of course, the auto market still needs favorable policies and we hope that the related policies could continue next year so as to contribute to a stable growth of auto sector.

The second question is about data products and vehicles. Since the beginning of the year, data products have been a part of our digital sales business. So the second question, I see that you are quite interested in our data products as well as the second cost business.

Well, about our digital products, since the beginning of this year, we see a constant positive trend in our digital dealer business. So we have a double-digit growth in terms of revenue, quantity, the per-store revenue, as well as the In terms of digital products, we continue to develop new products. We have established cooperation with more than half of the mainstream automotive brands in the Chinese market.

I just mentioned 48 companies. Speaking about the digital product for OEM, we have already established a collaboration partnership with over 50% of the mainstream auto brands in the Chinese market, specifically 48 brands.

However, there is a very slight contraction because of the decrease of the client appointment that we see an increasing depth of our collaboration.

And talking about our digital products,

in terms of new energy. Recently, we signed an exclusive strategic cooperation agreement with the Beijing Institute of Technology, Xinyuan Information Technology Company Limited, which further diversed our dimension of the data product. And in future, there will be in-depth cooperation between the two parties. We believe there is huge potential in terms of digital products for NEV new cars as well as used cars, which is an area that we are advantageous and good at.

In terms of the second-hand car market, we have just talked about policy support. In terms of potential, the second-hand car market is the fastest growing market in the world.

And talking about used cars, the first perspective is the policy perspective. The used cars in China is the fastest growing used car market.

And talking about the business landscape,

Auto Home, TTP, as well as Ping An cover the upstream and middle stream and downstream of the youth cost development, which is our unique advantage in competition and which is lacking by other counterparts in the sector.

In terms of business pattern, our certified e-car platform is committed to solve the pain points in the sector. And we are upgrading from a lead generation service

value-added and digital-like service and is growing beyond our solo monetization patterns. Overall, we look forward to the development of the second-hand car industry.

In the future, we will continue to promote customer service, maintain the business model of new assets, and build a second-hand car integrated trading service platform.

Generally speaking, we are very confident in the used car sector and we will maintain our light asset service model and to build a platform of integrated trading service for used cars. So above all, our answers to your two questions, Thomas. Right, thank you. Our next question comes from Brian Gong from Citi. Please ask your question, Brian.

Yeah, Long Zong, Zong Zong, Sterling, good evening. Thank you for accepting my question. My first question is, following up with Thomas' question, what is the budget and advertising market management of the automotive industry for the fourth quarter and next year? And the second question is, what is the current situation of our car dealership? I will translate myself. Thanks, management, for taking my question. Can management share your view on auto as budget and as market ahead in the first quarter this year and next year? And also for our lease product, will we continue to roll out more premium version ahead? Thank you.

Thank you. Overall, we are optimistic and optimistic about the excitement and the overall advertising market for next year. This is also based on our overall development of the new car market. Of course, in this year, we may be more concerned about the wide range of new car types. Several car exhibitions have been affected by the epidemic to a different extent, so this year's car exhibitions are basically not able to be held at a certain scale. Now that you're speaking,

still hold a favorable attitude and we are cautiously optimistic. Our estimation is based on the new car market. However, talking about the advertisement budget for new models of cars, this year the auto shows or auto exhibitions all suffered from the impact of the COVID-19 pandemic. and almost all of them, almost none of them were held according to the schedule or according to the scheduled time or scale. However, that has led to new forms of auto-shows, for example, virtually, and for example, integrating with Metaverse. So generally speaking, the advertisement budget of OEMs is still linked to the sales. That is why our attitudes for Q4 as well as for next year is cautiously optimistic.

We will continue to provide more services to retailers. In the past year, we have provided higher-end services to retailers. In the future, we will continue to provide new functions that help retailers to increase their price and efficiency, and provide better services to our customers.

Talking about 车商会, we have been providing a more diverse service to our dealers. For example, our prior version, the premium version, is very popular among our dealers. So we will continue to provide new features to help our dealers to cut costs and boost efficiency. 好,这是关于您这两个问题的回答。 So, that is the answer for your question, Brian. Thank you. Our next question comes from Richie Sun from HSBC. Please ask your question, Richie.

Hi, good. Thank you management for taking my questions up to you. First of all, we've noticed that you have signed some collaboration with NetEase Music as well as Huawei. Can you elaborate on the rationale and also opportunities behind this? And what are the other collaboration opportunities that we've seen with other Internet companies? Secondly, in terms of cost savings, cost cost efficiency initiatives what are the other rooms for us to do more different the top macro environment thank you

Thank you for your question, Ritchie. The first question is about our collaboration with NetEase Music. This is a new initiative that we make in the scenario of driving

a car user scenario. We try to attract active users and to acquire new users. And we collaborate with Netflix Music to launch a campaign called Car Owners Music Season. And we launched some interactive activities to provide better experiences of driving and music. And I think it gave us more room for imagination of how this content consumption could be integrated with the driving scenarios.

We also collaborate with MaFengWo and we use this diverse format to

bring diversity to our content products, and we also try to boost user adhesiveness and bring traffic by fetch online and offline, which is a virtual and in-person interaction activity.

In addition, the collaboration with Google Maps and Huawei also allows us to explore business development and create a new traffic alliance system around different scenarios.

And besides, we also collaborate with AMAP and Huawei, and we try to explore business development based on different scenarios and try to build an alliance and a new system for traffic.

In addition, we will have some other collaborations, such as the one we just mentioned, Besides that, we also have some other collaborations, for example, the Beijing Institute of Technology, Xinyuan Information Technology Company Limited, which was mentioned.

the moment earlier. So also home in the future will have more collaboration with not only internet enterprises, but also traditional enterprises to build an ecosystem of, for example, of auto shopping, auto purchase, as well as auto application.

The second question is, what space do we have to increase the efficiency of the software? Here, I want to divide it into two directions, internal and external. Of course, there are many traditional ways to do it internally. We are continuing to adjust the personnel, improve the personnel skills, and so on. On the other hand, we are creating higher efficiency through technology.

And your second question is about our cost efficiency initiative. It consists of internal and external initiatives. Internally speaking, there are some quite traditional measures. For example, in terms of human resource, we have been doing and we will continue to take measures such as the performance evaluation. And another measure is technical measures.

I'll give you an example of how we

boost our cost efficiency via technical measures. For example, in our content generation, we use technological measures to boost the efficiency of content generation in terms of our inventory of core models, and we could even automatically generate explanations in video format.

There are more cases like this. If you are interested, you can feel free to reach out to me for more.

Talking about the external measures of cost-efficiency initiative, try to facilitate the building of our ecological system.

For example, currently our customer acquisition stage focuses on car

shopping and car purchase. And in the future, we will extend this change to car driving. So in this way, we could further improve our ecosystem and we could deeper our cost efficiency initiative. And so, are there any further questions? Thank you. Our next question comes from Xiaodan Zhang from CICC. Please ask your question.

Thank you for accepting my question. Congratulations to the company for achieving good results. I have two questions here. The first question is about our data products. We can see that the growth of the data products of three-year-old retailers is still very bright. However, due to the limited budget of the main machine factory, the growth of consumer products has brought some pressure. I would like to ask the management to share how to look at the demand of the main machine factory and the commercial business in the future, and whether there is a plan to launch new products in the near future. The second question is about the use of cash. The cash flow of the company has always been very abundant. Do we have a plan to further increase the ratio or increase the return on investment? So my first question is regarding the data products. As we could expect, the COVID resurgence may continue to weigh on our OEM's budget. How should we think of the OEM and dealer's demand entering into Q4 and 2023? Also, are there any recent plans for new product launch? And my second question is about our cash usage. Since we have sufficient cash balance, Do we have any plans to raise our dividend payout ratio or step up our share buybacks? Thank you.

Okay, thank you. Regarding the issue of data products, we have already touched on it. We will continue to launch new data products according to the needs of our customers. For the stock market, it is more in the field of their sales and release. Thank you for your question. The first question regarding the data product, actually I have already talked about it earlier, and I will just recap it briefly.

So we will continue to launch new data products for our customers. For OEMs, we will help them mainly with their marketing and launching of cost. And for dealers, we will help them mainly with cost efficiency initiatives as well as market analysis.

Talking about our cash flow, we will continue our buyback plan.

We have been paying dividends in a stable manner, and we will, of course, pay returns to our shareholders in a manner that is best compatible with their best interests.

Okay, that's the end of the Q&A session. Thank you, everyone. Thank you for joining us today in the early conference call. Appreciate your support, and we look forward to updating you on next quarter's conference call in a few months.

So in the meantime, please feel free to contact us. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.