Cango Inc.

Good morning and good evening, everyone. Welcome to the Cango Inc's third quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. This call is also being broadcast live on the company's IR website. Joining us today are Mr. Yaiyang Lin, Chief Executive Officer, and Mr. Yongyi Zhang, Chief Financial Officer of the company. Following management's prepared remarks, we will conduct a Q&A session. Before we begin, I refer to the safe harbor statement in the company's earnings release, which also applies to the conference call today as management will make forward-looking statements. With that said, I'm now turning the call over to Mr. Yai Yanglin, CEO of Cango. Please go ahead, sir.

Hello, everyone. Welcome to the third quarter of the Cango 2022 financial report call.

Hello, everyone, and welcome to CanGo Third Quarter 2022 Earnings Call.

In the third quarter, the impact of the COVID-19 pandemic and the complex external environment still exists. But we also see that the changes in consumer habits caused by the pandemic are affecting the change in the mode of car trading. In addition, the increase in the market policy of the new and second-hand cars in the last two quarters has not only improved the confidence of industry participants,

In the third quarter, market conditions in China's automotive industry remain challenging due to COVID-19 resurgences across the country and the complex external operating environment. However, the change in consumption behavior brought on by the pandemic, with consumers shifting to online shopping, is reshaping the transaction model of the whole automotive industry. Beyond that, favorable policies released in the last two quarters benefiting both new and used car sales have not only boosted confidence among industry participants, but also improved the order of the industry, laying a solid foundation for the sustainable development and prosperity of China's automotive industry.

and fully utilize the rich industry experience accumulated in the past 10 billion years and the deep understanding of the lower market and the advantage of matching supply chain service. Through service productization, we enhance the consistency of supply chain. At the same time, we pay attention to the output of small and medium-sized retailers and high-performance products, and continue to strengthen the training of the stock market platform as a broad-spectrum and delivery point. In the third quarter, the overall business performance of the company is more stable,

In the face of these evolving market trends and regulatory changes, we remain focused on our car trading transaction business during the third quarter and continue to implement our dual-platform strategy covering both the new and used car markets. We further improved our service capabilities and enhanced our supply chain stickiness Through service standardization, taking full advantage of our over 10 years of industry expertise, deep insights into the lower-tier markets and outstanding supply chain support. Meanwhile, we continue to empower downstream medium to small-size dealers with high-margin product offerings to further strengthen our platform's instrumental role as their customer acquisition and delivery channel. We delivered a solid operational performance in the third quarter with our total revenues re-changed 420 million RMB, of which revenues from car trading transactions was about 350 million, accounting for over 83% of total revenues. 下面我将与各位分享公司三季度主要的业务进展。 Next, I would like to share some highlights of our third quarter business performance. 首先是新车交易。

In the field of self-sufficiency, we actively expand the range of self-sufficiency members from the general category to the number of reserves. On the one hand, we are in steady progress with the street shopping malls such as Guangqi 30, 17 Dazhong, 17 Audi, and other large main airport. We are gradually recognizing and appreciating the depth, industry, energy consumption accumulated by the deep-rooted lower-level market for many years, as well as the advantage of targeted car transaction matching service capabilities. On the other hand, we are improving the judgment ability of the internal team on the price of the vehicle, Let's begin with the new car trading transactions business.

For our self-owned new cars, we expanded our vehicle inventory while also diversifying by brand and model. We have made good headway in our ongoing negotiations with large OEMs, including JAC Mitsubishi, FAW Volkswagen, and FAW Audi. More and more OEMs are recognizing the value of our deep industry know-how and full-service capabilities around auto transactions, especially in lower-tier markets. Furthermore, we have sharpened our team skills in evaluating car models and prices, empowering us to further increase vehicle diversity and stock and sell cars that better align with local demand, which in turn enhances our localized competitive advantages. With respect to transaction facilitation services, we continue to create and commercialize services to meet dealers' needs with a focus on standardization. We have launched a series of tailored functions and products to improve dealers' experience on our platform, reinforcing their stickiness.

Our can-go car platform progressed steadily during the third quarter with 9,350 dealers in 31 provinces and 305 cities on the platform as of September 30, 2022.

Our self-owned inventory on the platform currently includes 43 vehicle models across 23 auto brands and 30 model series. We sold a total of 12,639 cars during the first nine months of 2022, including 7,677 new energy vehicles, resulting in the penetration rate of NEVs exceeding 60%.

On the basis of ensuring the stability of high-quality car users, we are also continuing to improve online product certification. In October, key service products such as Dingjingbao, Car-free, and new Car-free will be launched one after another. With the abundance of online service products, the diversity of online activities has also been improved, promoting the development of online trading habits of car manufacturers, and thus improving user consistency. In the third quarter, the number of platform release car users and car patrols has doubled to nearly 10,000. In addition to a steady supply of high-quality new cars, we continue to refine our online product offerings for dealers. We unveiled several key standardized products in October.

including deposit guarantee, Chinese name is called Dingjingbao, and also hassle-free vehicle replacement and maintenance service called Che Wu You, as well as a customer leads generation service or Xing Che Qian Ke. These enriched services have encouraged an increase in the frequency and a variety of dealers' online activities, leading them to form new online transaction behavior and increasing their stickiness on our platform. In the third quarter, the cumulative number of car sources posted and car search entries on our platform more than quadrupled quarter over quarter to nearly 10,000. It is also worth mentioning that since the CanGo HowTo app was launched at the end of the second quarter of this year, it has attracted over 300,000 page views and more than 27,000 unique visitors in total by the end of September.

In addition, as a strategic partner, the car aftermarket and car financial services successfully completed the online chain service upgrade in three seasons. Users can easily access high-performance and high-quality car aftermarket and car financial services in the carbon car car app. In the aftermarket business field, we provide car insurance products as the core, and customize non-car insurance products as the main products to meet the insurance needs of multiple users.

We also integrated a one-click connection to our aftermarket and automotive financing facilitation services during the quarter. Dealers can easily access our efficient and high-quality aftermarket and financial services on the CanGo HowTo app. Speaking of aftermarket services, we met dealers' multifaceted insurance needs with a comprehensive insurance product metric centered on auto insurance alongside customized non-auto insurance products.

We are confident that the overall expected scale will be controlled in a relatively safe range.

Regarding automotive financing facilitation, the overdue ratios rose slightly quarter over quarter in the third quarter due to pandemic recurrences in various regions. As our outlook on our future credit data performance remains cautious, we plan to tighten risk controls and strengthen personal management. We are confident that by improving operational efficiency and asset quality in the business, we can keep our overall overdue ratio within the relatively safe range.

From the supply chain to the physical market, the Chinese car market, which is affected by the epidemic, is in a fluctuating and uncertain environment. Under such a background, Canggu Good Car Platform has built a new online digital supply chain, involving key parts such as drivers, logistics, and cars, to provide a diversified solution for car manufacturers. The technology-enhanced car trading platform ecosystem not only can change the way car manufacturers operate, From supply chain disruptions to dealer store closures, the pandemic has brought unprecedented volatility and uncertainty to China's auto market.

Against this backdrop, we are striving to build a new digital supply chain with the CanGo how-to platform, providing diverse solutions for auto dealers to address their needs across car sourcing, logistics, vehicle registration, and other car trading-related business. A technology-empowered car transaction platform ecosystem can not only improve dealers' operational models, but also significantly alleviate traditional dealers' capital logistics and inventory constraints. It can also accelerate the technological development and digitization of the circular automotive market while facilitating business transformation throughout the automotive industry.

Now moving on to our latest progress in used car transaction business.

Based on the operational experience of Kengo Hot Wheels platform, we officially launched our Kengo U-Car WeChat mini program to provide dealers with more convenient used car transaction services. As of the end of the third quarter, Kengo U-Car mini program has accumulated over 290,000 page views and 15,000 unique visitors with more than 3,000 registered dealers.

Zhiyin second-hand car is an advantageous service for stock and high-end cars. It is also the focus of our next exploration in the direction of second-hand car trading. Based on the vast network of lower-level retailers and the experience accumulated in the automotive industry for more than 10 years, we ourselves have a rich second-hand car quality staff, including self-adjusted second-hand cars for financial stock customers, second-hand cars for asset management departments, and second-hand cars for wholesale cooperation with the main airport, and so on. Zhiyin model risk is controllable,

Self-owned used car model is one of Kangaroo Car's primary advantages and also the focus of our ongoing exploration in the used car market. Thanks to our massive dealer network across newer tier cities as well as decade-long industry experience, We have abundant sources of high-quality used cars, such as vehicles replaced by our financing facilitation customers, repossessed cars from our asset management department, and wholesale used cars from our OEM partners. Furthermore, our self-owned car model exhibits strong user stickiness and manageable risks. Given these positives, we plan to prioritize and promote this model going forward.

With the help of high-quality second-hand car drivers and professional 1-to-1 service, Tango U-Car has greatly improved the second-hand car trading efficiency and trading experience. Since the introduction of small programs, Tango U-Car's online behavior mode has gradually become more active on the platform, as well as Tango U-Car's small programs are successfully promoted in the car industry.

Our high-quality used car sources are also Kengo Yoka's foot in the door with dealers. Combined with our professional one-on-one matching services, Kengo Yoka has highly improved dealers' trading experience and used car transaction efficiency. Since the launch of Cango UCAR mini program, dealers have gradually developed online transaction behavior and their engagement on the platform is increasing daily. Given the growing popularity of the WeChat mini program among dealers, we are developing an app version of Cango UCAR and expect to launch it within a year with the goal of delivering more comprehensive and convenient services.

Looking at the second-hand car market, the country's policy on promoting the development of second-hand cars is in full swing this year. At the beginning of July, 17 ministries jointly issued a document. On August 1, it canceled the state-owned second-hand car limit. On October 1, it resolved the product attribute of second-hand cars. In 2023, it restricted the number of personal transactions, etc. This has removed barriers that have been restricted for many years. This also means that second-hand car transactions will compete from a single price In addition, the second-hand car plays a key role in the circulation of the entire car, and if the second-hand car does not run smoothly, it will not be able to buy a new car for potential self-sufficient users. Therefore, it is important to vigorously promote the health development of the second-hand car industry and to drive the overall sales of new cars.

Looking at the future of the used car market, favorable policies released in quick succession earlier this year energized the used car sales. In early July, 17 government departments jointly unveiled measures to facilitate the trading and circulation of used cars. For example, restrictions on the cross-regional transfer of used vehicles that meet National 5 emission standards were lifted nationwide beginning August 1st. Temporary ownership registration by dealers will be allowed as of October 1st, while the number of used car transactions by individuals will be limited starting in 2023. These measures will be game changers in used car transactions, shifting competitive fields from price to quality, service, and user interest protection. Furthermore, used cars play a critical role in the circulation of the car market. Restrictions on used car sales deter car owners from replacing or upgrading their cars, weighing on new car sales. Therefore, the efforts to promote the orderly and healthy development of the used car industry will also be significant in boosting new car sales. In short, Kenco U-Car represents an important strategic component of future development plans. We are confident that by harnessing the power of our rich industry expertise and well-established lower-tier market network, we can leverage Kenco Houchi to capture policy-driven opportunities in the U.S. car market while providing dealers with better products and services. Meanwhile, with our dealers as the touchpoint, Kingo Hot Wheels can bring more high-quality cars and standardized services to our broad user base in lower-tier markets.

For the foreseeable future, we expect sporadic...

COVID-19 resurgences and a complex global macroeconomic environment continue to create many uncertainties in China's automotive industry. In the face of such uncertainty, we will remain prudent with our vision always in mind. Meanwhile, we will leverage our long-time strength to develop our new and used car businesses in parallel and elevate our one-stop platform service capabilities creating value for OEMs and dealers alike, and making car purchases simple and enjoyable. Next, I will turn the call over to our Chief Financial Officer, Michael Zhang, for a review of the company's financial performance.

Thanks, Jiayuan. Hello, everyone, and welcome to our third quarter 2022 earnings call. Before I started to review our financials, please note that unless otherwise stated, all numbers are in RMB terms and all percentage comparisons are on a year-over-year basis. Our third quarter performance showcased the resilience and the strength of our car trading transaction business, even in a challenging environment. We recorded total revenue of $416.4 million, outperformed our previous guidance. Card trading transaction business delivered revenues of $347.2 million, continue to play an essential role in our platform. Now let's move on to our cost and expenses during the quarter. Total operating cost and expenses in the third quarter of 2022 were $608.8 million, compared with $839.6 million in the same period, 2021. Cost of revenue in the third quarter of 2022 decreased to $308.6 88.7 million from 610.5 million in the same period 2021 as a percentage of total cost of revenue in the third quarter 2022 was 93.3 percent compared with 76.3 percent in the same period 2021 the change was primarily due to an increase in card trading transaction share of total revenues card trading transaction normally present a high cost revenue ratio thus pushing up the overall ratio. Sales and marketing expenses in the third quarter of 2022 decreased to $17.9 million from $46.8 million in the same period, 2021. As a percentage of total revenue, sales and marketing expenses in the third quarter of 2022 was 4.3% compared with 5.8% in the same period, 2021. General and administrative expenses in the third quarter of 2022 decreased to $57.8 million from $64 million in the same period, 2021. As a percentage of total revenue, general and administrative expenses in the third quarter of 2022 was 13.9% compared with 8% in the same period, 2021. Research and development expenses in the third quarter of 2022 decreased to $10.2 million from $17.4 million in the same period 2021. As a percentage of total revenue, research and development expenses in third quarter 2022 was 2.4% compared with 2.2% in the same period 2021. Net loss on risk assurance liability in the third quarter 2022 was $85 million compared with $55.5 million in the same period 2021. Net loss on risk assurance liability was mainly due to a sequential increase in the default rate since 2021. We recorded loss from operations of 192.3 million in the third quarter of 2022, compared with 39 million in the same period, 2021. Net loss in the third quarter of 2022 was 130.3 million. Non-GAAP adjusted net loss in the third quarter of 2022 was 110 million. On a per share basis, diluted net loss per ADS in the third quarter of 2022 was 0.96, and diluted non-GAAP adjusted net loss per ADS in the same period was 0.81. Moving on to our balance sheet, as of September 30, 2022, we had cash and cash equivalent of $745 million. compared with $1,250.7 million as of June 30, 2022. As of September 30, 2022, the company had a short-term investment of $2.7 billion, compared with $2.1 billion as of June 30, 2022. Looking ahead to the fourth quarter of 2022, we are now predicting our total revenue to be between $450 million and $500 million. Please note that this forecast reflects our current preliminary view on the market and operational conditions, which are subject to change. This concludes our prepared remarks. Operator, we are now ready to take questions.

Thank you. If you wish to ask a question, please press star 1 on your telephone keypad. If you wish to cancel your question, please press star 2. We have a first question from Shelly Wong with Morgan Stanley. Please go ahead.

各位管理層好,我是Morgan Stanley的Shirley. Then the second question is, because we have been looking at the transformation of the carbon footprint for a while. I would like to ask, what is the progress so far? And when do we expect this transformation to be almost complete? Then we can do the profit and loss balance. The third question I would like to ask is the second-hand car. Because of the second-hand car, we also see some good policies coming out. Hi, I'm Shelley. I'm from Morgan Stanley. I have three questions. The first question is about your outlook for 2023 car market because we are expecting some reopening policies

for China in the following months because we are seeing some restrictions are being gradually released. So what is your outlook for 2023 China auto market? And the second question is, could you elaborate on the progress of your transformation? When do you expect to complete the transmission process and when do you expect to break even? And the third question is about the used car market. we are seeing the issuance of many favorable policies from the government on used cars. So what is your expectation of the used car business? What are your plans for used car market? And could you elaborate on some specific initiatives that you are going to take to drive the used car business?

Thank you, Sherry. I will try to answer your three questions. The first question is about the market forecast for next year. From the supply side, the new type of cars that are currently produced in the main airport are getting richer and richer, expanding the range of customers' choices, and stimulating the consumption concept of different segment markets and people. Thank you, Shirley. I will take your three questions. So about your first question, our outlook for 2023 car market. From the supply side, OEMs are proposing a growing variety of new car models,

which has given the consumers more choices and has also stimulated car consumption of different demographics in various market segments. However, due to chip constraints and also semiconductors, non-production cycles and the continual production reduction, the production capacity in the overall automotive market will remain under pressure.

And on the demand side, consumption will likely remain weak with the pandemic's continued impact. Consumers purchasing behavior next year will largely depend on pandemic controls and also their perception of the pandemic development. The second question is about the company's transformation. Currently, our service-based products such as reliable patrol cars, logistics, deposit insurance, insurance services, new car guests, etc. have been continuously on the line on the Tango Good Car App. These products will continue to polish and improve the user experience in the process of trial use by retailers. In addition, based on the new car transaction business model, our second-hand car business is also basically running.

所以也已经投入资源进行二手车交易平台的开发,预计在年底前上线展演。 About your second question, the development of our transformation program. Well, we have gradually launched our standardized products on the CanGoHowTo app, including reliable car search, what we call 靠谱行车, and also logistic services and deposit guarantee, what we call 定金宝。 as well as insurance and also customer leads generation service, which we call Xin Che Qian Ke. As dealers use these products on a trial basis, we have been refining these services to enhance the user experience. In addition, based on our new car transaction business model, we have validated the viability of our used car business. So we have also been investing resources to develop a transaction platform for used cars. which we expect to launch by the end of the year.

在过去的一段时间,我们整个交易平台的业务逻辑则得到了验证, 既证明了业务上我们能做,而且有流盆可以支撑。 我们的基础设施建设以及IT后台运营支持都已经搭建完成, 跟各大主机厂的深度合作也在陆续开展。 Over time, the business logic validation of our entire transaction platform proves the viability of the business supported by our processes.

We have completed our infrastructure and back-end IT operation support, and we are also beginning our in-depth cooperation with the major OEMs. According to our data, revenues from car trading transactions now account for about 80%, actually over 80% of our total revenues. This means that our transformation to a car transaction platform is effectively complete. The next milestone will be the scale-up of our business model, which we will endeavor to complete next year, while consistently improving its replicability, sustainability, and profitability.

About your third question on the used car market, well, the used car market is quickly expanding. First, the government is paying more attention to this market as demonstrated by a series of

Thank you, Shirley. Thank you. That's all from me.

The next question comes from Sophia Zhu with Goldman Sachs. Please go ahead.

Thank you, Ms. Wang. I have two questions for you. The first question is about car finance. We can see in the new data that car loan income is relatively low. So I would like to ask, is the car finance part not done yet? And why is it not done yet? In addition, we see that the interest rate is still rising. So I would like to ask, when do you expect the interest rate to drop? The second question is about the financial network. Previously, the company should have mentioned that there are nearly 50,000 car dealers in the summer market. I would like to know about the future.

Thank you. Thank you. I have two questions. The first question is related to the automotive financing facilitation. Well, based on the data, we can see that the company's incremental revenue from car loans is already very small. So does that mean that you are going to stop this business and why do you decide to do so? And another related question is about the overdue ratio. We are seeing that the overdue ratio continues to grow. So when do you expect that inflection point to appear? That is, when do you expect the overdue ratio to start to go down? And my second question is relating to the dealership network. And as you mentioned before, the company now serves nearly 50,000 dealers in the lower tier markets. So what is the size of the dealer network that a company expects to reach and what will be the market share? Thank you. I will try to take your two questions. The first question about the car, I mean automotive financing facilitation business.

Due to the influence of the macroeconomic economy, continuing to expand the scale of financial business, the fluctuation of bad debt rate may bring huge cash flow pressure to the company, and even directly affect the company's operating order. Such a heavy asset business will be a huge challenge for our second entrepreneurial transformation. So for Canggu, our car financial business is not not doing, but the initiative to shrink the scale.

Okay, so given the current macroeconomic conditions, expanding this business actually may cause fluctuations in our back-down rate, leading to significant cash flow pressure and even threatening the company's survival. So such a heavy business would be a huge challenge to our transformation. So we are not really giving up the automotive financing facilitation business, but have proactively been reducing its size. Actually, we have incorporated this auto financing facilitation service into our how-to app. In the third quarter, our overdue ratios rose slightly due to the pandemic's impact. Based on our current business development strategy, the overdue ratios will remain at the present level for some time to come. As the existing lows are settled, however, the overdue ratios will drop to zero. There's not going to be an inflection point. About your second question, that is our dealership network in the lower tier markets.

目前平台内入住车商的总数大概在一万两千多家, 包含新车和二手车,主要以拉新和触火为主。 我们希望培养车商使用APP的习惯, 然后促进我们改善和提升APP的功能和体验,

So far, our platform has a total of about 12,000 dealers, including both new car dealers and used car dealers. So at this stage, we are focusing on migrating dealers to our platform through promotions and developing the dealer's habit of using our app. which will, in turn, we believe, drive improvements to our app functions and user experience so that we can provide better services to our dealers. Thank you.

Once again, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. Your next question comes from Brian Lantier with ZEX. Please go ahead.

Good evening, gentlemen. Thank you so much for holding this call. It's nice to see a little bit of stabilization in the business. I think that's good news. The first question, I guess, is sort of big picture on ways to increase shareholder value for the company. You've obviously had the two special dividends this year, and you still have an incredibly strong balance sheet. Looking out, how does the company prioritize that at the management and board level? Where are your preferences to try and drive shareholder value? Investments in R&D, share buybacks, additional dividends, or perhaps even acquisitions in the future. Do you have an internal preference among those? And then secondly, we're hearing after the third quarter from a lot of the Chinese auto manufacturers, They're ramping up production, but we're hearing that dealer sell-through has been a little bit lower. So we're hearing about some inventory build at the dealer level. Wondering how you think that could impact 2023 if there is excess inventory on dealer lots. Thank you.

Thank you very much. I have two questions. The first question is from the perspective of Red Cross. Before that, I would like to thank the management for arranging such a telephone meeting in order to help us better understand the development of the company's business. We see that the company's business development is still relatively stable. This is a good news. My first question is from the perspective of Hongkuan. We see that the management level of the company is constantly trying to improve the shareholder value of the company. For example, in 2022, we saw that the company carried out two special branches. In addition, the balance sheet of the company's assets is also quite stable. What we want to understand is how the management level of the company will move forward in the future. The growth of shareholder wealth and the improvement of shareholder value. So which aspects will you focus on? And what is your focus or focus on? For example, will you continue to share? Or will you buy back? Or will you buy back? Or will you further expand the investment in the field of research and development? In other words, in these areas, which aspects will you focus on? Or which aspects will you focus on to improve shareholder value? And the second question is, we see that in the third quarter,

我来尝试回答这两个问题 一个是关于公司的资金储备 Thank you, Brian I will try to take your two questions The first question actually is about the use of our capital 一直以来我们致力于为股东创造最大的长期价值 秉承这一承诺 我们所有与资本市场相关的决策 都经过深思熟虑和谨慎考量

Well, actually we have always been committed to maximizing shareholders' value. With this commitment in mind, all our decisions related to the allocation of our capital are made following careful considerations.

In fact, we don't have any particular preferences. We distributed dividends twice this year along with our ongoing share buyback program. And as for MMA and R&D investments,

These decisions really depend on their compatibility with our business development plans. If the right opportunities come along, we definitely will consider them. That is to say, we will plan our cash deployments from a holistic strategic perspective based on the company's business position, business model development, and our expenditure programs, as well as, of course, external opportunities.

Your second question is about the inventory build-up and the market demand. We need to wait for the time to verify. We are also continuing to look at it.

Well, due to the pandemic, consumers are uncertain about our future income, which has resulted in a decline in demand for cars, with actual demand suppressed by the uncertainties. So we will have to wait and see if these pent-up demands will be unleashed in the future, and we are monitoring the situation very closely.

It's worth mentioning that the consumer demand for NEV is clearly on the rise. Although the IC engine cars, internal combustion engine cars, are becoming cheaper, consumers are still demanding more.

more for NEB rather than for the ICE cars. So the consumer demand for the traditional ICE cars are declining.

Okay, thank you.

Thank you.

The next question comes from Lorinda Goh with Citi. Please go ahead.

Good morning, everyone. I'm Lorinda Goh with Citi. Thank you. Lorinda from Citi, I have two questions. The first question is that earlier Mr. Lin mentioned the new partnerships with several traditional OEMs.

So why do these OEMs choose to work with Kengo? And what are the company's competitive advantages? And my second question is about the Kengo Yoka. You also mentioned that the self-owned used cars are an advantage of Kengo Yoka. So does the company plan to build Kengo Yoka into a purely self-owned car platform? 好,谢谢。这两个问题是我非常愿意回答的问题。 Thank you very much. I like your two questions.

Earlier, I met with several OEMs and all of them confirmed their recognition of our competitive advantages. Because over the decades, we have been serving small and medium-sized dealers in lower-tier markets.

And thanks to our hard work, we have built up strong and rich auto sales expertise in these markets. And the major OEMs, they have recognized our capabilities and also our deep penetration into the lower tier markets. And they do hope to leverage our network in these markets to sell their vehicles. 另外,因为我们可以提供除了车辆以外的

In addition to selling vehicles, we also provide a wide range of services, including warehousing, logistics, delivery, financing, facilitation, insurance.

We can also customize our services to dealers based only on specific needs and geographical locations. So such service capabilities are unique in the lower tier markets and making us very different from our competitors. And such capabilities have been widely recognized by both OEMs and dealers.

So about your second question, a purely self-owned model would be asset-heavy and requires

large amount of cash flow and also investment. This is definitely not what we want. Right now, we want to validate our business logic through the self-owned vehicle, I mean, the self-owned model to attract more dealers so that we can build a used car transaction platform, what we call Kangaroo Car. And then we will address dealers' challenges and enhance used car circulation efficiency with our platform. So the self-earned model will be one of our models rather than the only one. Thank you.

We have no further questions at this time.

I'll now hand it back to management for closing remarks.

Thank you very much. That closes today's earnings call.