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 Autohome's IR website. It is now my pleasure to introduce your host, Sterling Song, Autohome's IR Director. Mr. Song, please go ahead.

Thank you, Heidi. Thank you. Hello, everyone. Welcome to Autohome'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 ir.autohome.com.cn. Joining me today on the call are Chairman and CEO, Mr. Quan Long, and Chief Financial Officer, Mr. Craig Yanzeng. 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 Dedication Reform Act of 1995. Forward-looking statements are subject to risks and certainties 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 Hong Kong Stock Exchange. Auto Home doesn't undertake any obligation to update any forward-looking statements except as required and applicable law. Please also know that Auto Home's earnings press release and this conference call include discussions of certain unaudited non-GAAP financial measures. A reconciliation of the non-GAAP measures for the most directly comparable GAAP measures can be found in our earnings release. I will now turn the call over to Autohome's Chairman and CEO, Mr. Long, for opening remarks. Please go ahead, Mr. Long.

Thank you, Song Kai. Hello, everyone. I am Long Quan, the Chairman and CEO of 70 Homes. Thank you for attending our phone call today.

Thank you, Sterling. Hello, everyone. This is Quan Long, Chairman and CEO of Autohome. Thank you for joining our earnings conference call today.

In the third quarter, our new business continues to lead the overall business development of car manufacturers. The pay-to-earnings structure is not only optimized, but the total revenue and net profit in five consecutive quarters have achieved the same growth. The net profit is also stable at a higher level. The total revenue of the third quarter is 19.1 billion yuan, online marketing and other business income increased by 25.2% compared to the increase of 31.4%. Data products continue to maintain a good uptrend, and revenue increased by more than 30% compared to the same period last year. At the same time, we have not only expanded the cooperation with new employees, but also increased the revenue of new employee brands by nearly 70% in three seasons. In addition, In the third quarter, our new businesses continue to drive auto homes' overall growth as we further optimize our revenue structure.

This marks our fifth straight quarter of top-line and bottom-line growth on a year-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 25.2% year-over-year, accounting for 31.4% 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 NEV automakers. Revenues from NEV brands were up by nearly 70% year-over-year as a result. Moreover, adjusted net income attributable to Autohome for the quarter was up 2.3% year-over-year, with our adjusted net margin hitting 31.7%.

On the business side, we speed up the internal ecosystem construction, to develop tools, content and services, to build efficient systems, to meet the needs of users, to encourage creators to produce and participate in interactions, and to promote a positive cycle of platforms. In the field of innovative business, we continue to strive to explore multi-level business cooperation, to build an efficient business model, and to cooperate with TianTianPaiChi in the recent investment and operation of Qisezijia Energy Space Station, Chengdu Station and Chongqing Station. During the quarter, we accelerated the build-out of our content ecosystem

which combines efficient tools, content, and services to offer users the information they are seeking, motivates creators to produce content and engage 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 used 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.

当前新能源汽车快速崛起, 加速了汽车行业的转型升级, 也将新技术、新模式带到了行业发展的最前沿。 在新的市场环境中, 我们专注于利用新能源和数字化带来的重大机遇, 支持合作伙伴的业务转型, The rapid adoption of NEVs is accelerating the transformation of the automotive industry, bringing new technologies and business models to the forefront.

In this new market environment, we are focused on capitalizing on the major opportunities NEVs 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. With that, I will now turn the call over to our Chief Financial Officer, Mr. Craig Zeng, for a close look at our third quarter operating and financial results.

Thank you, Mr. Long. Hello, everyone. I am the Chief Financial Officer, Mr. Craig Zeng.

Thank you, Mr. Long. Hello, everyone. I am Craig Zeng, the CFO of Auto Home.

In the third quarter, we will continue to strengthen the institutionalization of tools and content construction, enhance platform integration, and expand platform influence. For example, we focus on the coverage of the new energy measurement system for vehicles. In the third quarter, we will complete the test of nearly 100 popular new energy vehicles, provide more comprehensive and more professional tools to users, and enhance the user selection decision experience. So far, 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 NEVs growing, for example, we tested nearly 100 popular models to provide users with comprehensive, easy 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 Finance Channel and other broadcast and social media platforms. Total exposure exceeded 14.5 billion impressions, which further strengthened our profile in the industry.

On the other hand, the private service system has also entered a new stage. Through online content and online experience, In the Chengdu Motor Show, we first tried to help the buyers. Based on the image of the car type organization, see the car team, the editor of Zhijia, Da Ka, accompanied the consumers to see the car, choose the car, and bring them different shopping experiences. We also released the guide to reach people. From multiple dimensions, we encourage creators to produce and promote the content that helps consumers to buy the car. 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 boost overall car consumption through our platform. According to Quest Mobile, Mobile DAU in September increased 39.3% year-over-year to 63.69.01 million, underscoring our ability to steadily strengthen our leadership position in the automotive media vertical.

In the energy sector, the first company launched in September last year After the new energy offline experience line, we have upgraded this model and tried to integrate the second-hand car business into the new retail market. In addition to providing multi-brand new energy vehicles, we also use the second-hand car business to create an increase in the number of vehicles and the ability to measure the number of vehicles every day to provide consumers with an easy-to-buy change service.

Following the launch of our first brick-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.

今年8月開業的成都站更是集合了年輕人喜愛的汽車文化,藝術館等形式,並不定期舉辦一系列創新營銷活動,業態急劇代表性。 此外,兩週前正式投入運營的重慶站是我們第一家設有專屬二手車運營區域的店鋪。 with a three-in-one service model to provide consumers with a one-stop experience, allowing them to purchase a new car or a second-hand car while selling second-hand cars. This innovative service model fully utilizes the business relationship between new and second-hand cars, providing consumers with vehicle inspection, purchase, and replacement services. It is another great innovation in the new and second-hand car model.

Also from Agilis Space Chengdu Store, which opened this past August, has become particularly popular among youngest 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 used 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 used car at the same time. This innovative service model capitalizes on the synergies between our new and used car businesses and offers consumers a complete suite of additional services including vehicle inspection, purchase, and replacement.

日前我们的新零售业务发展迅速, 新零售门店已在全国13个城市落地, 未来两年, 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.

In terms of digitalization, We have done a technical and information channel upgrade in the communication class and the crowd drawing class to increase the efficiency of communication and the accuracy of the drawing. We have also deepened the application of AI in smart machine products to further save workers and strengthen content quality and provide higher value services to sales customers. In the previous nine months, we will continue to maintain a two-digit balance of the core indicators, including the number of electronic military cooperation products and the number of electronic military income,

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 the 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.

In addition to continuing to promote business links with new sales documents, we base our products on second-hand car auction and new car end-to-end trading data. Combined with large model computing capabilities, we launched a one-stop car price survey platform to provide second-hand car dealers with real car price and valuation tools. Car dealers can accurately survey different areas, different brands, and different models of new cars and second-hand cars for accurate valuation Turning to our used car business, in addition to our ongoing cooperation with new retail stores

We launched a one-stop vehicle price inquiry product during the quarter based on used car auction and new car transaction data. This platform provides used car dealers with the real vehicle transaction prices as well as valuation tools supported by large language model capabilities. Dealers can now accurately evaluate each vehicle by querying the transaction prices for new and used vehicles across different regions, brands, and models. In addition, we are also boosting the transaction conversion rate by increasing customer and user satisfaction rates. In the third quarter, Autohome's matching and auction services platform accounted for about 24.4% of all used car transactions in China, a year-over-year increase of approximately 3% plus.

The growth of car sales and profits in the last three seasons has been stable. The income structure continues to improve. The joint development of multi-purpose businesses has greatly improved the space for the overall business. And the new car sales business is also accelerating the development of the expressway. In summary, we delivered steady revenue and profit growth during the quarter while continuing to optimize our revenue structure.

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'll 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 NEV 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.

The total revenue of the third quarter is 19.1 billion yuan, which is a 3.4% increase in total. To be more specific, the revenue of media services is 4.77 billion yuan, the revenue of clue services is 8.30 billion yuan, and the revenue of online marketing and other services is 5.99 billion yuan, which is a 25.2% increase in total, mainly due to the increase in revenue of data products.

Net revenues for the third quarter were $1.91 billion, up 3.4% year-over-year. Breaking it down by segment, media services revenues were $477 million, leads generation services revenues were $830 million, and the online marketplace and other revenues were $599 million, up 25.2% year-over-year,

driven primarily by increasing revenue contribution from data products. Moving on to cost.

Cost of revenues in the third quarter was $374 million compared to $331 million in the third quarter 2022. The increase was primarily attributable to an increase in content and operational costs. Growth margin in the third quarter was 80.4% compared to 82.1% in Q3 2022. In terms of revenue,

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.

In general, the third quarter's annual revenue of the car company was $1.66 billion, and the same year's revenue was $1.92 billion.

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 2.3% year-over-year.

In the third quarter, the new adjustment of the basic and財務 revenue per share was 1.23 yuan, and in the same period last year, it was 1.18 yuan. In the third quarter, the new adjustment of the basic and財務 revenue per share

Nine GAAP basic undiluted 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.

截止2023年9月30日, 我们的资产负债表继续表现强劲, 现金等价物及短期投资合计为234.3亿元,

As of September 30, 2023, our balance sheet remained very strong with cash, cash equivalent and short-term investment of $23.43 billion. We generated net operating cash flow of $425 million in the third quarter of 2023.

In November 2021, On November 18, 2021,

our board of directors authorized a share repurchase program under which we were permitted to repurchase up to 200 million US dollars of auto home ADS for a period not exceed 12 months thereafter. On November 3rd, 2022, our board of directors authorized an extension of the share repurchase program for another 12 months, expiring on November 17th, 2023. As of October 27, 2023, we have repurchased approximately 6.25 million ADS for a total cost of approximately 187 million US dollars. 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 Kami Wang from CICC. Please go ahead, your line is open.

Good evening, Mr. Guan. Thank you for accepting my question. I would like to ask two questions. First, we can see that the three-season car market is showing a relatively mild warm-up. But at present, the overall stock market is still in a state of decline in this price strategy. I would like to ask Mr. Guan how you see the development trend of the next year's car market and the structural opportunities. Then the second question is about the new sales model of New Energy. We have seen that our experience store has been expanded from Shanghai to Chengdu and other areas. So far, we have seen how the core city's business target is and how the management plan for the new sales business next year and the goal of growth is to look forward to. Then I will quickly translate it myself. So thanks for management for taking my questions. And I got two questions here. So first of all, could you please share your youth market outlook for the upcoming quarters and do you expect continuous price competitions among OEMs? And secondly, could you update us on the progress of the new retail model for any youth? Especially, could you share with us the key operating metrics of higher near cities such as Shanghai or Chengdu? Thank you.

Okay, this is the first question about this test. This is my answer. So we also see that this third quarter of our country's economy is continuing to recover. So the National Bureau of Statistics also released relevant data. So the GDP of domestic production in the third quarter is the same as the growth of 4.9%, which is higher than expected in the market. But we also see that according to the data of the Chen Lianhui, The sales volume of used cars in the third quarter increased by 1.8%. This is compared to the second quarter, which is 21.4% higher than the previous one. In this regard, the number of sales has slowed down significantly. The main reason for this is because of the impact of this technology, which was relatively high in the same period last year. In addition, the consumer's consumption of general goods is still cautious. So the automotive industry is facing challenges.

Okay, I will take the first question. In Q3, does the economy continue to recover and rebound? According to the statistics released by National Bureau of Statistics, in Q3, our GDP grew by 4.9% year-on-year, higher than market expectations. However, 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. Well, at the same time, the consumers continue to be precautious about the commodities consumption. As a result, there is still challenges for the entire auto industry.

Based on the data from the Chen Lianhui, from this year to September, China's automotive industry is only 4.9%. So this is lower than the average level of the overall industrial enterprise profit rate of 5.7%. The main reason for this is because of the profit of the oil and gas industry. But the market ratio has dropped significantly. Although new energy vehicles are growing at high speed, most of them are losing money. So for the automotive industry, this kind of structural adjustment is still in progress.

And according to the data from CPCA, in the first nine months of 2023, the overall profit margin for the Chinese auto industry is 4.9%, much lower than 5.7%, which is the overall industrial company's profit margin. However, I think that this is because even though ICE cars are still making profit, but their market share is declining, while NEVs experienced a high speed growth, but most of them are still suffering from losses. As a result, entire auto sector are still going on the restructuring.

目前的中央和各级政府为了稳定汽车生产, 扩大市场消费的应该来说是出台了 一系列的促进汽车消费的相关政策。 你比如说优化汽车先购管理的政策, 还支持老旧汽车的更新消费, 还有加快培育二手车市场, So far, central and different levels of the local government

They have been paying great effort to uplifting and stabilizing the auto production and also released a series of policies and incentives to promote auto consumption. For example, there is 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 accelerate and strengthen the development of the supportive facilities. We believe that with the above-mentioned favorable policies, the auto sector consumption will continue to recover in a very speedy way.

For the development trend for next year's test, we think there are mainly two aspects. The first is that the new energy sector is still the focus of the industry development. Then according to the relevant data released by Chen Lianhui, it is until September of this year. Then the market penetration rate of new people using cars has reached 36.9%. Then the central and local governments continue to promote more of some targeted and effective measures to promote the consumption of new people's cars. So we expect that the market penetration rate of new people next year will continue to rise. This is one aspect. Then the second aspect is about the potential of this second-hand car market. It will also continue to expand. So we can see that China's second-hand car consumption is rising rapidly. So this year until September, the amount of second-hand cars has reached 13,490,000 units. So the transaction amount has reached 85.98 billion yuan. The second-hand car market in China is a ten-million-dollar market. So with the development of new cars, more consumers have the low cost advantage of buying and using cars. In terms of the outlook and the 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 CPCA, by the end of September, NEV passenger vehicle market penetration hit 36.9%. 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 used car market will continue to expand its market potential. We've noticed that the used car consumption quickly and rapidly emerged in China. In the first nine months of 2023, the used car trading volume was 13.49 million units, and the trading value was 859.8 billion RMB yuan. The used car market in China is indeed a trillion-level market. And with the development of AEV, more and more consumers, they got the advantage of purchase and used car in a low cost. Well, in the same time, the separate endorsement policy and its implementation for the used car also deliver more development potential and space for the car dealership industry. So I believe that there's a huge potential for the used car development in China.

So let's sum it up. In general, the long-term situation of the Chinese automotive industry is stable and good. We are also full of confidence in the long-term development of Chinese cars. As a home of cars, we will continue to develop the business of new energy cars and second-hand cars. Then grasp the opportunity of the new market with the long-term health growth of multi-purpose production and ecological energy companies.

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 EV and used car business to grasp the new market opportunities and use a diversified ecosystem to empower our long-term sales development and growth.

Hello, I'm Zheng Yan. Let me answer your second question, which is about our offline experience stores. In terms of quantity, this is also a very important indicator for us. This year, in addition to Shanghai, Haikou, Chongqing, and Chengdu, we have been officially operating. Before the end of this year, we may have nearly 20 new retail stores that will gradually start operating. This is a very important indicator for us. In terms of core cities, We haven't made a formal disclosure of these indicators yet. But from the speed of the industry, we can see that our satisfied customers have given very positive feedback. So the acceptance of this new model is also very good. We also welcome everyone to visit our industry, to understand the first-hand situation. In the next one to two years, we will use different cities and our partners to promote our model in cities with different trends. Because our model has a big advantage. In addition to the first, second, and third lines, even the fourth and fifth lines, we will have a lot of visibility. So next year, our goal may be 50 cities. In 2025, we will have more than 100 cities. So we are also looking forward to this model of new energy. As its penetration rate keeps increasing, Mr. Dunn will take the second question.

So for the second question, the first thing we should look at is the number of the stores we build. Now, actually, in Shanghai, Haikou, and 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 stores in Tier 1, Tier 2, and Tier 3 cities, but also Tier 4 and Tier 5. We see very strong vehicle 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 further penetration of the AEV, 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.

Long Zong, Zong Zong, Sterling. 晚上好,感谢你们给我提问机会。 我有两个问题。 首先,管理层请问可以量化一下 对明年二手车市场的增速。 有什么预期 刚才也可能简单讲了一下 然后对公司的二手车业务的收入和利润有什么预期 第二个问题就是关于不同互联网平台 现在已经使用到AI和大模型 提升了广告变现 内容生产和线索清理等的效率 I will translate these questions myself. Good evening, management. Thank you for the opportunity to ask questions. I have two. So firstly, after the previous question that talked about used car, can management further quantify the expectation towards the used 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 lease filtering efficiency. So what is Auto Home's strategy in this front? Any media services, lease generation, data products, and other business lines? Do we see any room to improve efficiency further? Thank you.

Thank you. 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 a lot of policies to promote the second-hand car market. According to the data of the Chinese Car Transport Association, the size of domestic second-hand car transactions in the first three seasons of this year reached nearly 13.5 million taels, which increased by 12.6%. First, I will address the question about the used car market.

You know, used car market is a very important segment in the entire auto sector, and used car market always got high attention from the government. Recently, you know, the government continuously released a series of incentives to promote the consumption on the used car market. According to the data of Auto Dealers Association, in the first three quarters of this year, our used car market trading volume hit almost 13.5 million by 12.6% year-on-year. And also, according to the forecast of Auto Dealers Association, this year, our national used car trading volume is expected to hit a historical high. We expect that next year, the used car market will continue to keep today's and this year's good trend and continue to be very active and embrace the new stage of high-quality development.

From our income point of view, this year's second-hand car price drop and sale brought some challenges to the second-hand car industry. The second-hand car industry of the car industry has shown a relatively good performance. In the first three seasons, the car industry, including the day-to-day car industry, The overall business of second-hand vehicles has maintained a steady growth. The daily delivery of vehicles has also maintained the accumulated profit. With the addition of new retail stores in more cities next year, the daily delivery of vehicles can also establish a space station to achieve the expansion of more cities. We are also confident that the revenue of our overall second-hand vehicle business will continue to expand next year. We can also take a look at the growth of the entire second-hand vehicle market.

In terms of the revenue, you can see that this year, the new car price cuts and promotion campaigns do generate some challenges for the used car market. So for Auto Home, our used car business shows a very strong resilience. In the first three quarters, You know, the overall used account 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 growth. space stations and 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.

Regarding AI, in terms of applications, we continue to use technology related to AI large models to seek more business cooperation opportunities to increase product competitiveness and customer satisfaction. In the beginning of the year, we achieved strategic cooperation with Baidu's Wenxin Yiyan Ecology. And the second question, from the application side,

We continue to apply AI and large language model related technologies and to seek more business cooperation opportunities so as to improve our product competitiveness as well as customer satisfaction. At the beginning of the year, we enter into strategic partnership with Baidu ErnieBot and we will leverage their capability of Baidu 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 on the product. In the first half of the year, we launched a choice tool based on AI technology called YunChoose, which helps retailers quickly distribute users. to distribute and reach high-quality users, release production capacity, and improve service quality. Based on the GPT model, we are helping users to make car choices and comparisons, and helping retailers to analyze their products. For example, our AI intelligent writing is one of the functions of our smart assistant, which can help retailers to publish and write high-quality content. We hope that with this large model product, we can continue to help retailers to increase efficiency and improve operations.

Product-wise, in the first half of this year, we have launched an AI-based intelligent tool, which is called Smart Selection, to facilitate and empower the dealers to quickly segment their clients. and to reach out to the high network individuals as soon as possible, release their capacity and improve service quality. And based on GPT model, we are also helping the users and the clients to select the cars and also help the dealers to do the operation analysis. And for another example, our AI smart writing instrument is also one of the functions in our intelligent assistant. It can actually facilitate and empower the dealers to complete high quality and very good writing as well as the content release. We hope that by relying on this kind of large language model products, we can continue to help the dealers to cut costs and improve efficiency as well as to enhance their overall operation efficiency.

Okay, next question. Thank you. We will take our next question. Your next question comes from the line of Thomas Chong from Jefferies. Please go ahead. Your line is open.

晚上好,谢谢管理层介绍我的提问。 我有两个问题。 第一个是关于主机厂在下半年还有2027年他们的市场的预算的投放的情况。 第二个的话是管理层可不可以更新一下二手车的市场还有天天派的战略。 Thanks, management, for taking my questions. My first question is about the budget spent by ODM in the second half this year, as well as 2024. My second question is related to the overall used car market, as well as the strategies for 1010Pi. Thank you.

Thank you, Thomas. Let me answer the question about the stock market and next year's market budget. In the second half of the year, especially in the fourth quarter, we can see that the competition in the entire market is still very intense. The gas stations will indeed have more intentions, especially the gas stations for fuel cars, will put this budget into the middle of the market, such as clues, commercial ads, or direct subsidies. At the same time, it will also put more resources to support the suppliers,

Okay, I will firstly take a 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 leads generation as well as to invest on advertisement or directly subsidize the consumers.

For next year, as Mr. Long mentioned, overall, the market is optimistic. But due to the profits of the main market and the pressure of the merchants' own profits, the main market may continue this year's trend. It will still consider the support of the merchants and some mid-term subsidies first. And for next year, just like Mr. Long mentioned, we think that actually for the market investment, we will continue to be cautiously optimistic because for the OEMs,

Since their profit margin are under some pressure, they will pay more attention to the effectiveness of their budget investment. For example, they will prioritize the support to the dealers or directly subsidize the consumers. As a result, in terms of the ad investment, they will be more precautious and they tend to further diversify their investment. So they will also pay more and higher attention to the effectiveness of the ad.

From the future, we will still grasp the trend of this industry. One is to accelerate AI digitalization, which is the most efficient improvement in the entire field. And the other is the rapid development of new energy. So it's still around these two points that we will improve our own capabilities and to grab the budget of more customers.

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 EV. And by leveraging our strength, we will also try to win more customers and try to get their budget and investment.

As for the second-hand car market, I just talked about it. In general, due to the pressure of new cars in recent years and the impact of the past epidemic, the growth of second-hand cars in the past has been restricted. 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 used car market has been under some pressure as well as some restrictions. But I believe that in the future years, you know, 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.

As for Shenzhen, they have maintained a profit in the past year. uh, uh, uh, uh, uh, uh, uh, uh, uh, And for TTP, TTP is already generating profits.

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 three-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.

谢谢管理层,晚上好。 因为也不到年底了,所以想问一下我们跟新销商这边, 力振这边,许约什么时候起动? 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 ways, 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. . . . . . . . . . . Ah.

Thank you, Brian, for raising this question. Yes, we already initiated a contract renew 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, they 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.

You mentioned the problem of the number of dealers. In terms of cars, the sales of two-wheeled cars in the previous three seasons dropped by about 9%, less than 8%. The number of dealers will definitely be affected. If you simply look at traditional cars, the number of dealers from a large point of view, it will definitely decrease. But at the same time, you also see that the penetration of our new energy today is already very high. Today, the 3G degree may have reached 37% of this amount. So the electricity of the new energy brand also has a rapid development. Many new manufacturers are also starting to transfer to new energy. Our new retail is also helping new energy to do this sales. So in general, this is still a Very active market because the overall car sales are expected to grow by 2-3% this year. It will be a stable trend next year. So in general, we think that the number of salespeople is not the core problem. The core problem is how to adapt to new energy and this kind of change. How to help salespeople to get a new position. So at this point, whether we are from digitalized products,

And the second question is about the number of the dealers in your question. In Q3, we see that the sales from the ICE car dealers dropped by a little bit less than 9%. Of course, the dealers are under some impact. and see that the sales of the ICE vehicles have been declining. However, at the same time, the NEV 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 NEV brands. Well, at the same time, some traditional dealers are also transforming themselves into the NEV dealers. So for our new retail business model, we are also trying to help those EV 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.

No, I don't. Operator?

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

Thank you everyone.

Thank you for joining us today. Appreciate your support. and we look forward to updating you on our next quarter's 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.