Autohome Inc.

Ladies and gentlemen, thank you for standing by for Also Home's third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow management's prepared remarks. As a reminder, this conference call is being recorded. If you have any objections, you may disconnect at this time. A live and archived webcast of the earnings conference call will also be available on Auto Home's IR website. It is now my pleasure to introduce your host, Sterling Song, Auto Home's IR director. Mr. Song, please go ahead.

Thank you, Heidi. Thank you. Hello, everyone. Welcome to Auto Home's third quarter 2023 earnings conference call. Earlier today, Auto Home distributed its earnings press release, which can be found on the company's IR website at .com.com. Joining me today on the call are chairman and CEO, Mr. Quang Long, and chief financial officer, Mr. Craig Yen Tseung. Management will go through their prepared remarks, which will be followed by a Q&A session where they 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. Forward-looking 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 are not limited to those outlined in your public filings with the U.S. Securities and Exchange Commission and the HHC change. Auto Home doesn't undertake any obligation to update any forward-looking statements except as required under applicable law. Please also know that Auto Home's earnings press release and this conference call include discussions of certain audited non-GAP financial measures. The reconciliation of the non-GAP measures for the most directly comparable GAP measures can be found in our earnings release. I will now turn the call over to Auto Home's chairman and CEO, Mr. Long, for opening remarks. Please go ahead, Mr. Long.

Thank

you, Mr. Long. Hello, everyone. This is Mr. Long, chairman and CEO of Auto Home. Thank you for joining our earnings conference call today.

The GAP has increased by .2% and the revenue has increased by 31.4%. The data products continue to maintain a good rise. Last year, the revenue increased by more than 30%. At the same time, we are still working with the New Energy Company. The revenue from the New Energy Company in the third quarter has increased by nearly 70%. In addition, the -G-level of the GAP has increased by .3% and the GAP has increased by 31.7%.

In the third quarter, our new businesses continue to drive Auto Home's overall growth as we further optimize our revenue structure. This marks our fifth straight quarter of top line and bottom line growth on a -over-year basis, while consistently maintaining a high net profit margin. Net revenues for the third quarter were 1.91 billion RMB. Revenues from online marketplace and other businesses increased .2% -over-year, accounting for .4% of total revenue. Revenue from data products in particular generated strong growth momentum, increasing more than 30% compared to the same period last year. We also made substantial progress in deepening our collaborative efforts with NEB automakers. Revenues from NEB brands were up by nearly 70% -over-year as a result. Moreover, adjusted net income attributable to Auto Home for the quarter was up .3% -over-year, with our adjusted net margin hitting 31.7%.

We continued to work on our cooperation with NEB automakers to build a efficient collaborative business model. We recently invested in the Auto Home Energy Space Station, Chengdu Station and Chongqing Station, and worked with Tiantian Automotive. We fully explored the new retail and second-hand car sales business scene, and developed a dual-functional business. In addition, we also upgraded the infrastructure of the retail platform, and improved the value of multiple products. We also provided driving and security

for the retail and second-hand car sales business in order to improve the data and the smart technology of the business. We also developed a new business model that is more efficient and engaged with our community, and creates a virtuous cycle that drives growth across the platform. We also continue to explore new ways to develop, integrate, and create synergies between the diverse business models across our ecosystem. The Auto Home Energy Space franchise stores we recently launched in cooperation with TTP in Chengdu and Chongqing have given us the opportunity to further refine the new retail plus youth car business model and drive further business development. In addition, we also upgraded the foundational infrastructure and capabilities of our digital platform to enhance the value of our data products and seamlessly integrate big data and cutting-edge technologies to empower the digital transformation of dealers.

Currently, new energy vehicles are rapidly rising, accelerating the transformation and upgrade of the automotive industry, and bringing new technology and new models to the forefront of the industry development. In the new market environment, we focus on the major opportunities brought by new energy and digitalization, supporting the transformation of business partners, and expanding our service scope.

The rapid adoption of NEDs is accelerating the transformation of the automotive industry, bringing new technologies and business models to the forefront. In the new market environment, we are focused on capitalizing on the major opportunities NEDs and digitalization present, supporting our partners in the transformation of their businesses, and broadening the services we have on offer. This will ultimately create a one-stop ecosystem that spans the entire consumer cycle from the research and the purchase phase through to the use and exchange of cars to drive long-term sustainable growth.

Next, I would like to ask Mr. Craig Zeng to explain the business and

financial situation of the three-season.

Thank you, Mr. Long. Hello, everyone. I am Craig Zeng,

the CFO of Auto Home.

In the third quarter, we continue to strengthen the construction of body-based tools and content, and enhance the platform's compatibility and expand the platform's influence. For example, we focus on the development of a new energy testing system to cover the vehicle model. In the third quarter, we will complete the test of nearly 100 new energy vehicles, providing users with more comprehensive, more professional tools, and improving the user choice and decision-making experience. So far, the number of users for the testing tools has exceeded 2.6 million. In addition, the super-savvy 818 car of Auto Home and the social media and social networks of CCTV and other video media have achieved a joint flow of multiple platforms, and the full exposure has broken 145 million, further increasing the impact of Auto Home on the industry.

In the third quarter, we set up our efforts to systematically develop tools and content, widen the platform mode, and broaden our profile across the industry. With interest in NEV's growing, for example, we tested nearly 100 popular models to provide users with comprehensive, -to-understand, and professional analysis and information. To date, more than 2.6 million users have used our testing tools to assist their car-buying decision-making. In addition, we promoted Auto Home's August 18 Super Auto Festival on multiple platforms in collaboration with CCTV's Finance Channel and other broadcast and social media platforms. Total exposure exceeded 14.5 billion impressions, which further strengthened our profile in the industry. At the same time, we launched the next development phase for our service system, which combines online content with offline experiences to further increase our mindshare among users. At the Chengdu Auto Show, we showcased our purchase assistance service for the first time, which offers consumers a hands-on purchasing experience, where they can view and evaluate various car models accompanied by our highly experienced editors. We also launched a shopping guide program to encourage content creators to produce and promote content that facilitates the decision-making process for consumers and boosts overall car consumption through our platform. According to Quest Mobile, mobile DAU in September increased .3% -over-year to .69.01 million, underscoring our ability to steadily strengthen our leadership position in the automotive media vertical.

We also introduced second-hand car business to the new retail category. In addition to providing multi-brand new energy vehicles, we also used second-hand car business to create a new scene and daily car handling capabilities, providing consumers with a hands-on experience.

Following the launch of our first -and-mortar NEV experience store last September, we further refined this business model by integrating our used car business. In addition to providing a one-stop service for NEVs from multiple brands that span from car selection to purchase services, these stores now offer consumers the option to trade in their cars and apply the proceeds towards the purchase of a new one. This will create additional opportunities for car sales and take advantage of TTP's vehicle disposal capacity.

In addition, we have also integrated the favorite car culture and art museum of young people, and we have also held a series of innovative marketing activities. The business is very representative. In addition, the Chongqing Station, which was officially launched two weeks ago, is the store of our first exclusive second-hand car operation area. The -in-one service model provides consumers with a one-stop experience, allowing them to purchase a new car or second-hand car while they are selling a second-hand car. This innovative service model fully utilizes the business connection between the new retail and second-hand car, providing consumers with vehicle inspection, purchase, and exchange services. It is another big innovation

in the new retail model. Auto Home Energy Space Chengdu Store, which opened this past August, has become particularly popular among young consumers with its innovative marketing activities and automotive culture offerings, including a car museum. In addition, the Chongqing Store, which officially opened two weeks ago, is our first location to feature a dedicated youth car selection within the store. This provides consumers with a one-stop experience, allowing them to sell their old cars and purchase an EV or a youth car at the same time. This innovative service model capitalizes on the synergies between our new and youth car businesses, and offers consumers a complete suite of additional services including vehicle inspection, purchase, and replacement. Our new retail business at the moment is developing rapidly, with the construction of new retail stores in certain cities having already begun. Over the next two years, we plan to increase the penetration of Auto Home Energy Space franchise stores across the country, allowing Auto Home to turn its online advantages into offline business across a broad range of markets. TTP will also leverage the Auto Home Energy Space Network to accelerate the expansion of its operations nationwide.

We have also upgraded the technology and information channels in the Chongqing Store and the Renquan Painting Shop, to enhance the efficiency of painting and the accuracy of painting. We have also deepened the application of AI in smart products, to further reduce artificial intelligence, strengthen content quality, and provide more valuable services to our sales customers. In the first nine months, we will continue to maintain the same growth of two-digit numbers, including the core indicators of the electric and military cooperation product numbers and the electric and military income. We will continue to quickly cover the application scenarios of digitalized products, and turn the rich consumer and human-driven products into digitalized products, using high-efficiency to replace low-efficiency to help

customers reduce their costs. On the digitalization front, we upgraded our technology and information channels to improve communication and user profiling, and strengthen the efficiency and accuracy of customer outreach. We also broadened the application of AI into our smart products, to generate further labor savings, improve content quality, and provide more value to dealer customers. In the first nine months of the year, key metrics such as the average number of data products adopted by each dealer store and average revenue from data products per dealer store both increased by double digits when compared to the same period last year. We are rapidly expanding our digital product portfolio across a range of application scenarios in order to support dealers as they shift from human-driven to digital-driven operations to improve their operational efficiency, and ultimately lower the door prices for customers.

We base the data of the second-hand car auction and the middle-end of the new car as a combination of large-scale computing capabilities, and launched a one-stop car price inspection platform to provide second-hand car dealers with real car sales prices and valuation tools. The dealers can accurately check the different areas, different brands, and different models of new cars and second-hand car dealers, to provide the exact valuation of the second-hand car. In addition, we also improved the satisfaction of users and merchants respectively, and promoted the transaction conversion rate improvement. In the third quarter, the -to-data combination and auction service penetration rate of the three-part platform continued to increase, affecting the total number of second-hand car dealers in China by about 24%. The same increase of about 3%.

We also improved the transaction conversion rate of the third-hand car dealers, by increasing the transaction conversion rate of the third-hand car dealers, and increasing the transaction conversion rate of the third-hand car dealers. In the fourth quarter, the -to-data combination and auction service platform accounted for about .4% of all used car transactions in China, a -over-year increase of approximately 3%.

In summary,

we delivered steady revenue and profit growth during the quarter, while continuing to optimize our revenue structure. Our revenue structure is the same as the previous quarter, and we are working to improve the overall revenue structure of the third-hand car dealers. Our new retail business is gaining growth momentum as synergies among our diverse business lines begin to take hold, which will greatly strengthen overall growth prospects going forward. Looking ahead, we will continue to advance our ecosystem approach by creating new business models that connect the online and offline channels to help automakers transform and adapt to NEB trends. We are confident that our diversified business will drive auto home growth to the next level.

Next,

let me walk you through the key financials for the third quarter of 2023. Please note that, as with prior calls, I will reference RMB only in my discussion today unless otherwise stated.

Let me now talk about

the net revenue for the third quarter. The net revenue is given primarily by increasing revenue contribution from data products.

In terms of cost, the third quarter's revenue was RMB 3.74 billion, and the previous quarter's revenue was RMB 3.31 billion. The revenue growth is mainly due to the increase in content and application costs. The third quarter's profit was 80.4%, and the previous quarter's profit was 82.1%.

In terms of

business costs, the third quarter's sales and market costs were RMB 9.35 billion and the previous quarter's sales and market costs were RMB 8.63 billion. The combined growth is mainly due to the growth in the market, and the annual sales and market costs increases to 3.12 billion in the previous quarter's sales and market costs. 3.55 billion yuan, the same period as last year was 3.87 billion yuan. The same decline was mainly due to a reduction in personnel related costs. Finally, the general management costs were 1.41 billion yuan, the same period as last year was 1.36

billion yuan. Turning to operating expenses, sales and marketing expenses in the third quarter were 935 million, compared to 863 million in Q3 2022. The increase was primarily attributable to the increase in marketing and promotional spending. Product and development expenses were 355 million, compared to 387 million in Q3 2022. The decrease was primarily attributable to a decline in personnel related expenses. Finally, general and administrative expenses were 141 million, compared to 136 million in Q3 2022. Overall, we delivered operating profit of 166 million in the third quarter, compared to 192 million in the corresponding period of 2022. Adjusted net income attributable to Auto Home Inc was 604 million in the third quarter, compared to 590 million in the corresponding period of 2022, representing an increase of .3% year over year.

The third quarter, the new adjustment of basic and insurance net profit was 1.23 billion yuan, compared to last year, was 1.18 billion yuan. The third quarter, the new adjustment of basic and insurance net profit for the US stock exchange was 4.93 billion yuan and 4.92 billion yuan, compared to last year, was 4.73 billion yuan and 4

.72 billion yuan. Non-GAAP basic and diluted earnings per share in the third quarter were 1.23 respectively, compared to 1.18 respectively, in the corresponding period of 2022. Non-GAAP basic and diluted earnings per ABS in the third quarter were 4.93 and 4.92 respectively, compared to 4.73 and 4.72 respectively, in the corresponding period of 2022.

As

of September 30, 2023, our balance sheet remained very strong with cash, cash equivalents and short-term investment of 23.47 billion yuan.

In November 2021, the board approved a plan to return stock in less than $200 million within 12 months. In November 2022, the board extended the plan to 12 months. The plan will be in effect from November 17, 2023. By the end of October 27, 2023, we have bought back about 6.25 million shares of the US stock exchange. The total amount is about $1.87 billion. On

November 18, 2021, our board of directors authorized a share repurchase program under which we were permitted to repurchase up to $200 million of auto home ABS for a period not exceed 12 months thereafter. On November 3, 2022, our board of directors authorized an extension of the share repurchase program for another 12 months, expiring on November 17, 2023. As of October 27, 2023, we have repurchased approximately 6.25 million ABS for a total cost of approximately $187 million.

With that,

we are ready to take your questions. Operator, please.

Thank you. If you wish to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will take our first question. Your first question comes from the line of Kayme Wang from CICC. Please go ahead. Your line is open.

Hello, Kayme Wang. Thank you for accepting my question. I would like to ask two questions. First, we have seen that the 3G test has been a mildly warm-up. At present, the entire main factory is still in a state of emergency in terms of price strategy. I would like to ask Kayme Wang how to view the development trend of the next year's test and the structural opportunities. The second question is about the new sales model for the new year. We have seen that the new sales experience has been expanding from Shanghai to Chengdu. At present, we have seen how the core city's operating index is, and how the management has been looking at the new sales business's investment plan and growth goals for the new year. I will quickly translate this. Thanks for taking my questions. I have two questions here. First of all, could you please share your market outlook for the upcoming quarters? Do you expect continuous price competition among all yens? Secondly, could you update us on the progress of the new retail model for any news? Especially, could you share with us the key operating metrics of higher-near cities such as Shanghai or Chengdu?

I will answer the first question about the test. We have seen that the economy of our country has been recovering well in the third quarter. The National Bureau of Statistics has also released relevant data. The GDP of domestic production in the third quarter is .9% higher than expected by the market. But we also saw that according to the data of the Youth Council, the retail sales of the third quarter's car has increased by 1.8%. Compared to the second quarter, the number of cars has increased by 21.4%. The main reason is that the technical impact of the same period last year has been higher. In addition, consumers are still cautious about the consumption of mass products. So the automotive industry is still facing challenges.

According to the data from CPCA, in Q3 passenger vehicle retail sales grew by 1.8%. In Q2, this number was 21.4%. You can notice there's a big slowdown of the growth speed. This is because of the high base number of the same period last year. At the same time, the consumers continue to be precautious about the commodities consumption.

According to the data of the Youth Council, the car industry has a profit of only .9% since September this year. This is due to the average profit of .7% of the entire industrial enterprise. The main reason is that the oil and gas cars are winning, but the market is falling. The new energy cars, although they are fast, are still growing, but most of them are losing. So for the automotive industry, this structural adjustment is still in progress.

The new cars are still making profit, but their market share is declining. While NEVs experience a high speed growth, but most of them are still suffering from losses. As a result, the entire auto sector is still going on the restructuring.

If we support the old car's new consumption, and speed up the cultivation of the second-hand market, and strengthen the construction of new energy car supply measures, we believe that this series of good policies will promote the speedy recovery of car industry consumption.

We believe that the new technology will be more effective to promote auto consumption. For example, there is a policy about optimizing the car purchase restriction management to support the trading of the old cars for the new ones, and accelerate the development of the used car market, and strengthen the development of NEV-supported facilities. We believe that with the above-mentioned free-rope policies, the auto sector consumption will continue to recover in a very speedy way.

We believe that the new energy car market will continue to grow. This is one aspect. The second aspect is that the potential of the second-hand market will continue to expand. We can see that the consumption of China's second-hand cars is rapidly rising. The transaction volume of the second-hand cars has reached 13.49 million units by September this year. The transaction volume is increasing. The second-hand car market has reached 85.98 billion yuan. The second-hand car market in China is a market worth 10 billion yuan. As the new energy car market develops, more consumers will have the low-cost advantages of buying and using cars. At the same time, the implementation of the second-hand car single-seater policy will also give the second-hand car business a more robust space to develop. So the potential of the second-hand car market in China is huge.

The current trend for the auto market of next year, we think that there are mainly the following two aspects. First of all, NEV will continue to be the priority of the development. According to the data of the CPCA, by the end of September, NEV passenger vehicle market penetration hit 36.9 percent. And Central, as well as the local government, continue to launch more targeted and effective measures to promote the consumption of the NEV. We estimate that next year, NEV penetration will continue to go higher. And the second trend is that the youth car market will continue to expand its market potential. We've noted that the youth car consumption quickly and rapidly emerged in China. In the first nine months of 2023, the youth car trading volume was 13.49 million units, and the trading value was 859.8 billion RMB. The youth car market in China is indeed a trillion-level market. And with the development of NEV, more and more consumers got the advantage of purchase and youth car in low cost. At the same time, the separate endorsement policy and its implementation for the youth car also deliver more development potential and space for the car dealership industry. So I believe that there's a huge potential for the youth car development in China. In a word, the Chinese auto sector in the medium and long term will enjoy a stable and upward trend. And we are very confident about the long-term development trend and its potential of the Chinese auto market. Auto Home will continue to grow our NEV and youth car business to grasp the new market opportunities and use diversified ecosystems to empower our long-term development growth.

This is a very important indicator. We haven't made a formal disclosure of these indicators in the core city. But from the perspective of the current owner, we are still satisfied with the feedback from the customers. So the acceptance of this new model is also very good. We also welcome you to our business. We will be able to visit the city and understand the first-hand situation. In the next one or two years, we will promote our model in different cities and cities based on the situation of different cities and partners. Because our model has a great advantage. We have a strong productivity in the first, second, third, and even fourth and fifth lines. So our goal for next year is to promote it to 50 cities and to 100 cities in the next 25 years. We are also looking forward to the new model, which will continue to increase its penetration rate. In the future, we will contribute more financial data

to the home. Mr. Sun will take the second question. The first thing we should look at is the number of the stores we build. Now, in Shanghai, Haikou, Chengdu, and Chongqing, we already officially put our stores into operation. And besides, by the end of the year, we're going to build another 20 new shops. So this is a very important indicator for us, the number of the stores. Well, at the same time, you can see that now for the numbers and indicators, we haven't disclosed these numbers in the essential cities. However, the speed of building our stores, as well as the feedback we get from the consumers, are pretty positive. And I think that this is a very popular trend in the future. And if you get a chance, we welcome all of you to visit our stores in different cities. And in the next one or two years, according to our development in different cities, as well as our cooperation with different partners, we will continue to promote the number of our stores. We have not only built stores in tier one, tier two, and tier three cities, but also tier four and tier five. We see very strong vigor and vitality in different tiers of the cities. We plan that next year we're going to cover another 50 cities. And by the end of 2025, we're going to cover a total of 100 cities in China. We expect that with the final penetration of the NEV, in the future, new retail business will continue to contribute more in our financial contribution.

Thank you. We will take our next question. Please stand by. Your next question comes from the line of Richie Sun from HSBC. Please go ahead. Your line is open.

Thank you for giving me the opportunity to ask questions. I have two questions. First, can you tell us what expectations you have for the second-hand car market next year? I just briefly talked about it. And what are your expectations for the revenue and profit of the company's second-hand car industry? The second question is about the different Internet platforms that have now been using AI and large models to improve advertising, content production, and the efficiency of the network. What are the plans for our company in this respect? In the media, in the network of data, in the network of data and data products, do we see a space for improvement and efficiency? I will translate these questions myself. Good evening, management. Thank you for the opportunity to ask questions. I have two. Firstly, after the previous question that talked about use car, can management further quantify the expectation towards the use car market growth outlook in the next year? And what is your expectation towards the revenue and margin for this business? Second of all, various Internet platforms are using AI and large language models to improve ad monetization, content production, and least filtering efficiency. So what is the auto home strategy in this respect? And in media services, least generation data products, and among other business lines, do we see any room to improve the efficiency further? Thank you.

Thank you, Renxi. I think the first question is about second-hand cars. Second-hand cars are a very important part of car consumption. The second-hand car market has also been valued by the government. Recently, the government has also issued many policies to promote the second-hand car market. According to the data from the China Car Flow Association, the scale of domestic second-hand car trade in the first three seasons of this year has reached nearly 13.5 million taels, which is .6% in total. The Car Flow Association predicts that the number of second-hand cars in the country this year is expected to rise in the upper and lower history. We predict that the second-hand car market will continue to be a good market this year, and will continue to be active and bring a new stage of high-efficiency development.

We expect that the second-hand car market will continue to be a good market this year, and will continue to be active and bring a new stage of high-efficiency development. We expect that the second-hand car market will continue to be a good market this year, and will continue to be active and bring a new stage of high-efficiency development.

We expect that the second-hand car market will continue to be a good market this year, and will continue to be active and bring a new stage of high-efficiency development. We expect that the second-hand car market will continue to be a good

market this year, and will continue to be active and bring a new stage of high-efficiency development. We can see that this year, the new car price cuts and promotion campaigns do generate some challenges for the used car market. For Auto Home, our used car business shows a very strong resilience. In the first three quarters, the overall used car business, including TTP, maintained a very good growth momentum, and TTP still makes profit so far, and next year with more and more new retail shops and stores operating in different cities. I believe that TTP will also leverage the space stations to have their businesses all over China, and we are very confident that next year, the overall used car business revenue will continue to expand.

For AI, we continue to use and apply technology related to AI models to seek more opportunities for business cooperation to improve product competitiveness and customer satisfaction. At the beginning of the year, we reached a strategic cooperation with Baidu's Wuxin One Language Ecology. We will use Baidu's smart cloud to connect with Wuxin One Language's capabilities, combine our own data and technical advantages, and implement a comprehensive integration of intelligent dialogue technology and car digitalization. This is also the first time AI model technology has landed in the domestic car digitalization service scene.

We will leverage their capability of Baidu's smart cloud connecting with ErnieBot, and based on our own data and technology strengths, we are going to have a comprehensive convergence of intelligent dialogue technology with the auto digital services. This is also the first application scenario of the AI large language model technology on the auto sector in China.

I can give you some examples of the products. In the first half of the year, we launched a solution tool based on AI technology called Cloud Solution. It helps consumers quickly divide into different layers, and it allows users to reach high-quality users, releasing their production capacity, and improving service quality. Based on the GPP model, we are helping users to do car comparison and help consumers to analyze documents. We also have products to promote on the market. For example, AI smart writing is one of the functions of our smart assistant. It can help consumers complete the content and release and development of high-quality content. We hope to develop a large model product that can help consumers to increase their efficiency and improve their performance.

We are also helping consumers to reach high-quality content, and we are also helping consumers to increase their performance. We are also helping consumers to reach high-quality content, and we are also helping consumers to increase their performance. We are also helping consumers to reach high-quality content, and we are also helping consumers to increase their performance. We are also helping consumers to reach high-quality content, and we are also helping consumers to increase their performance. We are also helping consumers to reach high-quality content, and we are also helping consumers to increase their performance. We are also helping consumers to reach high-quality content, and we are also helping consumers to increase their performance. We have encouraged the user to evaluate products, choose the highest quality product, and such as mobile or Amazon. We have encouraged the user to evaluate products, choose the highest quality product, and such as mobile or Amazon.

This completes anweit of the task.

We will take our next question to six people who have opened an account private internet business for ulras. Next question. Your next question comes from the line of Thomas Chung from Jeffreys. Please go ahead. Your line is open.

Good evening. Thank you, Mr. Kuan, for answering my question. I have two questions. The first is about the market in the second half of the year and the situation in the first half of the year in 2021. The second is, can you update the market for the first half of the year? Thanks, management, for taking my questions. My first question is about the budget spent by OEM in the second half of this year as well as 2024. My second question is related to the overall used car market as well as the strategies for TenTenPi. Thank you.

Thank you, Thomas. I will answer the situation of the market budget for the main factory and the market budget for the next year. The competition for the entire market is still very intense in the second half of the year. The main factory is more willing to invest the budget into the middle-end of the market, such as the leads, the advertising with the effect, or the direct investment.

Okay, I will first take the question about the budget plan for the OEM in the second half as well as next year. In the second half of this year, and in particular since Q4, we see that actually the OEMs, they would like to invest more of their budget in promoting the transaction from the user side, for example, to support the lead generation as well as to invest on advertisement or directly subsidize the consumers.

In the second half of this year, and in particular since Q4, we see that actually the OEMs, they would like to invest more of their budget into the market, for example, to support the lead generation as well as to invest on advertisement or directly subsidize the consumers. In the second half of this year, and in particular since Q4, we see that actually the OEMs, they would like to invest more of their budget into the market, for example, to support the lead generation as well as to invest on advertisement or directly subsidize the consumers. In the second half of this year, and in particular since Q4, we see that actually the OEMs, they And in particular since Q4, we see that actually the OEMs,

they would like to invest more of their budget into the market, for example, to support the lead generation as well as to invest on advertisement or directly subsidize the consumers. And in particular since Q4, we see that actually the OEMs, they would like to invest more of their budget into the market, for example, to support the lead generation as well as to pay more attention to the effectiveness of the budget investment. For example, they would prioritize the support to the dealers or directly subsidize the consumers. As a result, in terms of the ad investment, they would be more precautious and they tend to further diversify their investment. So they would also pay more and higher attention to the effectiveness of the ad. And looking into the future, I think that we will continue to grab the opportunities, in particular in two areas. First of all, accelerate the digital application of AI, and secondly, still prioritize and focusing on NEV. And by leveraging our strengths, we can also further develop the technology and the technology. We will also try to win more customers and try to get their budget and investment.

In terms of the market, I have just mentioned that in general, due to the pressure and impact of the pandemic, the growth of the second-hand car has been restricted. But in the next few years, we think that the price of the new car has basically reached a stage. So in the next few years, we think that the second-hand car will be a double-sided growth and a whole market.

And for the used car market, I already mentioned that due to the price cut of the new vehicles and because of COVID-19, we do see that the used car market has been under some pressure as well as some restrictions. But I believe that in the future years, the price cuts for the new cars already come to a specific limit. And we believe that the used car market can expect a double-digit growth. And for TTP, you know, TTP is already generating profit. It means that it's already gone through the stage of survival. It's already entered into the stage of expansion and future development. In the future, we will continue to leverage the resources from the group as well as the other partners to facilitate the development of TTP. And in the previous answer to the questions, we also mentioned the -in-one service format. So we think that it will greatly help TTP to develop and will continue to facilitate its high-speed growth. Okay, next question,

please. Thank you. We will take our final question. Your final question comes from the line of Brian Gong from Citi. Please go ahead. Your line is open.

Thank you, Mr. Kuan. Good evening. The English language is coming to an end of the year. So I would like to ask when we will start the contract with the new car manufacturer Li Zhen. So what are our expectations for this contract? Do we still have space to raise the price? Now, as the sales of new cars are getting higher and higher, I don't know how Mr. Kuan sees the number of traditional car manufacturers, that is, the number of CES stores, will it be getting less and less? Thank you. I will translate it for myself. Can management share when we will start the contract renewal with dealers for this generation? And what's our expectation for the contract renewal this time? Do we still have room to raise our price? And along with the rising proportion of new auto sales from new SUVs, how does management think about the numbers of dealers from traditional OEMs? Will the number gradually decline in the future? Thank you.

Thank you, Brian. The contract renewal with the new car manufacturer is the same as usual. We have basically started now. It will end at the end of next year. This is the same as last year. You mentioned the rising price. In fact, the rising price has never been our target. In the past, some people in the market thought that the number of money we received from the car manufacturer was increasing. But in reality, we actually provided more services and digital products. In fact, it is not a result of a rising price. We have never pursued a rising price in the line to increase our business. This year, we also see that the profit of our car manufacturer is indeed more difficult. So this year, we will not renew the contract in the way of rising prices. We will talk about how to help them. Our digital products are more likely to help them to reduce the cost and increase the effect. So in general, we don't think that the rising price is our target this year. It's the same in the past. We don't want to increase the

price in the line. Thank you, Brian, for reading this question. Yes, we already initiated a contract renewal with our dealers. However, we will not use price increase as a strategy for us to gain more profit. It has never been our strategy. Of course, sometimes you think that we charge more from the dealers. That is because we have been providing more services to our dealers, including offering more digital products to them. And I think that we never take a price increase as a strategy for us to gain more and higher performance. And this year, as we know, the dealers generally encounter some difficulties. So we will, of course, never raise the price. So from our side, we would like to empower and enable the dealers by offering more digital products and helping them to cut costs and improve efficiency. So in the world, in the past and in the present, we have never been using the price increase as a strategy for us to gain more profit.

In terms of oil and gas, the sales of oil and gas in the first three seasons of this year has dropped by about 98% or so. The sales of oil and gas will definitely be affected. So if you simply look at the traditional oil and gas, the sales of oil and gas will definitely decrease from a large point of view. But at the same time, you can see that our new energy penetration rate is already very high. The new energy brand's store is also developing rapidly. Many new manufacturers are also starting to turn to new energy. Our new animals are also helping new energy sales. So in general, this is still a very active market. Because the overall sales of cars are expected to increase by 2% to 3% this year. It will be a stable and good situation next year. So in general, we think that the number of retailers is not a core problem. The core problem is how we adapt to new energy and this kind of change, how to help retailers get a new position. So in this respect, we are working hard in all aspects, whether it is digital products or the modernization model.

However, at the same time, the energy penetration has been on the rise. And you can see that in Q3, the penetration already hit 37%. So there are some rapid development trends for the energy brands. While at the same time, some traditional dealers are also transforming themselves into the energy dealers. So for our new retail business model, we are also trying to help those energy dealers to further expand and to tap deeper into this market. Because the market in a whole is very vigorous. And I believe that the number of dealers itself is not an issue at all. The thing is that how we can better adapt to all kinds of changes and dynamics to reposition those dealers so as to be more adaptable. So by offering those digital products and by facilitating them with our new retail model, I believe that we can do a better job in the future.

Operator.

Thank you. There are no further questions at this time. I will turn the conference back to management for closing comments.

Thank you for attending today's meeting. We look forward to the next performance call to discuss the latest developments in the company. If you have any questions or suggestions, please feel free to contact us anytime. Thank you.

Thank you, everyone. Thank you for joining us today. Appreciate your support. And we look forward to updating you on our next quarter conference call in a few months time. And in the meantime, please feel free to contact us if you have any further questions. Thank you. Thank you. Bye bye.

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