NIO Inc.

Ladies and gentlemen, thank you for standing by for NEO Incorporated's first quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Rui Chen, Director of Investor Relations of the company. Please go ahead, Rui.

Thank you, Rachel. Good evening and good morning, everyone. Welcome to NIO's fourth quarter 2020 earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted at the company's IR website. On today's call, we have Mr. William Li, founder, chairman of the board, and CEO, Ms. Stephen Fong, chief financial officer, Ms. Danny Chu, VP of finance, Before we continue, please be kindly reminded that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain filings of the company with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statement except as required under applicable law. Please also note that new early press release and this conference call include discussions of unaudited gap financial measures. as well as unaudited non-GAAP financial measures. Please refer to news press release which contains a reconsultation of the unaudited non-GAAP measures to comparable GAAP measures. With that, I will now turn the call over to our CEO, Mr. William Li. William, go ahead, please.

Hello, everyone. Thank you very much for attending the first quarter of 2020.

Hello everyone, thank you for joining NEWS 2020 Q1 Earnings Call. In the first quarter of 2020, Niu delivered an aggregate of 3,838 ES8s and ES6s. Starting from April, our sales and deliveries have witnessed a solid recovery. We delivered a total of 3,155 ES8s and ES6s in April, representing a robust 105.8% month-over-month growth.

We are extremely proud that since October 2019, NIO ES6 has outperformed others and ranked as the top-selling electric SUV in China auto market for seven consecutive months.

It is the only electric vehicle among the top 10 best-selling luxury mid-size SUVs.

受疫情影响,第一季度中国乘用车市场销量同比下滑41% 而我们第一季度的交付量同比仅下降了3.8% 我们由于行业的表现得益于全程在线的业务流程和基于云连接的服务体系 我们的产品和服务体系在疫情期间

Due to the impact of COVID-19, the overall passenger vehicle sales in China has slumped by 41% year over year, yet over Q1 deliveries decreased only by 3.8% compared with the same period of 2019. Over bucking the trend, The performance is mainly attributable to the end-to-end direct sales business process and the cloud-based service system. Our products and service systems have withstood the arduous test during this unprecedented outbreak and won wide recognition from the market and users.

On April 19, the new ES8 was delivered to users. The new ES8 has been upgraded to more than 180 products. On April 19, the all-new ES8 commenced deliveries to users. It boasts over 180 improvements, with the NEDC range reaching up to 580 kilometers. With further enhancements on its comprehensive competitiveness,

The all-new ES8 has received rave reviews across the board from the users and media after the deliveries.

With the control of the Chinese epidemic, since April, our work in supply chain, manufacturing, sales, service, and research has gradually returned to normal. The epidemic has gradually eliminated the impact of supply chain and production manufacturing. Our research work has begun to speed up.

As the novel coronavirus outbreak has been brought under control in China, since April, our business operations have started to return to normalcy in every aspect, including supply chain, manufacturing, sales, services, and R&D. The supply chain and manufacturing have gradually recovered from the pandemic. In the meantime, Our R&D activities are picking up speed and the offline self-network is also bouncing back.

Starting from April, we have been continuously exploring innovative sales channels, leveraging the advantages of both online and offline platforms. In 2020, we have opened 44 new new spaces in 24 cities.

So far, we have opened 22 new houses and 92 new spaces in 76 cities around China. We will continue to open more efficient and flexible new spaces to increase our offline touchpoints and community presence.

从4月下旬开始,我们的新增订单已经恢复到疫情前的水平。 随着供应链与生产制造逐步恢复正常,我们有信心, Since late April, our daily new order rate has already returned to the level before the outbreak. In light of the normalization of supply chain and production, we are confident to deliver 9,500 to 10,000 ES8s and ES6s in total in the second quarter,

reaching an all-time high in over quarterly deliveries.

As for the gross margin,

Along with the strong recovery of quarterly deliveries, reduction of battery pack and other bomb costs, optimization of manufacturing expenses and efficiency, and the steady rise of the average selling price, we expect overall growth margin to substantially improve and the vehicle growth margin to reach over 5% in the second quarter this year.

Since 2019, In the first quarter of 2020, the company's sales and management costs decreased by 45.1% and operating losses decreased by 44.4%. In the second quarter, although sales costs and research and development expenses will increase, we are still confident in promoting operating losses and continuing to reduce them.

After a series of restructuring and operational optimization initiatives across the company since 2019, overall efficiency has been significantly improved. In the first quarter 2020, the company SG&A has dropped by 45.1% from Q4 2019, and the operating loss has decreased by 44.4%. In the second quarter, the SG&A and R&D expenses will increase to some extent, but considering our growth margin improvement, we are still confident to reduce operating loss.

Next, I would like to share with you the latest progress on two important tasks in the second quarter. First is the Battery-as-a-Service BAS First, the progress on the innovative business model of a battery as a service. It is widely acknowledged that we have always been working on the chargeable, swappable, and upgradable battery service model

Based on the separation of a vehicle and battery, that is BAS. BAS can lower the initial purchase price and enable users to continuously upgrade to the battery and enjoy better power replenishment experience. NIO owns more than 1,200 battery swap-related patents on the vehicle battery pack, battery swap stations, and the cloud services solutions. To date, In April of this year,

China's Ministry of Industry, Technology, Development and Finance jointly published the latest policy on new energy car subsidies. It clearly mentions the development of commercial models that encourage the exchange of electricity technology and the separation of electric vehicles. According to the new policy, the only luxury electric car brand that can enjoy national subsidies in the future will become more than 300,000 yuan. We will use national policies to accelerate the design of products and service solutions related to BAS. In April, the Ministry of Industry and Information Technology, the Ministry of Science and Technology, the National Development and Reform Commission and the Ministry of Finance

issued the latest new energy vehicle subsidy policy, which clearly stated to encourage the development of battery swap technology and innovative business models based on the separation of battery and vehicle. With the new policy, NIO is the only premium EV brand with products priced over 300,000 RMB yet still receiving the national EV subsidy. Based on the latest published policy, we will speed up the development of BATS products and service solutions, which are planned to release to users in the second half of this year. As the time goes on, we believe our competitive edge enhanced by BATS will become more self-evident.

Finally, I would like to update you on the progress of future Chinese projects. On April 29, the Future and Strategic Investors signed a final investment agreement. According to the agreement, the Future will invest in China in the future, including policy development, supply chain, sales and service, and the core business and related assets of Future Energy. The Strategic Investors will invest 70 billion RMB in the Future China. In addition, the Future will invest 42.6 billion RMB in the Future China. After the transaction is completed, the Future will hold 75.9% of the future China's control shares. Last but not least, I would like to share with you the progress of NIO China project.

On April 29, NIO entered into definitive agreement with a group of strategic investors. Under the agreement, NIO will inject its core businesses and assets in China into NIO China. including vehicle research and development, supply chain, sales and services, and new power. The strategic investors will invest an aggregate of 7 billion RMB into new China. In addition, NIO will invest 4.26 billion RMB into new China. Upon the completion of the investment, NIO will hold 75.9% of controlling China, while the strategic investors will collectively hold the remaining 24.1%, and New China will be a subsidiary of NIO.

此次未来中国的战略融资是未来发展的又一个重要里程碑,未来将有更充裕的资金支持业务发展,并进一步打通人民币融资的通道。 The strategic investment in NIO China is another important milestone of NIO for its long-term growth. With the investment,

NIO will have sufficient funds to support its business development and to open RMB financing channels in order to enhance its leadership in products and technologies of smart electric vehicles and offer services exceeding users' expectations. The launch of NIO China headquarters in Hefei will enable NIO to improve its operational efficiency and to sustain its growth and competitiveness in the long run.

The transactions are proceeding well according to plan. We are fully confident that it will be closed before the end of June 2020. Thank you for your support.

With that, I will now turn the call over to Stephen to provide the financial details for the quarter. Stephen, please go ahead.

Thank you, William. I will now go over our key financial results for the first quarter of 2020. And to be mindful of the length of this call, I encourage listeners to refer to our earnings press release, which is posted online for additional details. Our total revenue in the first quarter was 1.37 billion RMB, or 193.8 million US dollars, representing a decrease of 51.8% quarter-over-quarter and a decrease of 15.9% year-over-year. The decrease in total revenues quarter-over-quarter was due to a decrease of vehicle deliveries during the COVID-19 outbreak in China. Our total revenues are made of two parts, vehicle sales and other sales. Vehicle sales in the first quarter were 1.26 billion RMB, or 177.3 million US dollars, representing a decrease of 53.2% quarter over quarter and a decrease of 18.2% year over year. Vehicle sales accounted for and Lihong Qin. Other sales in the first quarter were 116.4 million RMB or 16.4 million US dollars, representing a decrease of 29.2% per quarter and an increase of 21.2% year-over-year. The decrease in other sales over the last quarter was mean attributed to decreased revenues derived from the home chargers installed and accessories sold, which were in line with the decreased vehicle sales in the first quarter of 2020. Cost of sales in the first quarter was 1.54 billion RMB, or 200, 17.4 million US dollars. were presenting a decrease of 15.4% quarter-over-quarter and a decrease of 16.8% year-over-year. The decrease in cost of sales compared to the fourth quarter of 2019 was mainly driven by the decrease of delivered volume of ES6 and ES8 in the first quarter of 2020. Gross margin in the first quarter was negative 2% compared with negative 8.9% in the fourth quarter of 2019 and negative 13.4% in the same quarter of 2019. The decrease of gross margin compared to the fourth quarter of 2019 was mainly driven by the decrease of vehicle margin in the first quarter of 2020. More specifically, VCO margin in the first quarter was an active 7.4% compared with an active 6.0% in the fourth quarter of 2019 and an active 7.2% in the same quarter of 2019. The decrease of VCO margin compared to the fourth quarter of 2019 was mainly driven by the decrease of production and volume of ES6 and ES8 in the first quarter of 2020. The R&D expenses in the first quarter were 522.4 million R&D, representing a decrease of 49.1% quarter over quarter and a decrease of 51.6% year over year. The substantial decrease in research and development expenses was primarily attributed to the COVID-19 outbreak. that caused the significant reduction of design and development activities. SGMA expenses in the first quarter were 848.3 million RMB, representing a decrease of 45.1% quarter-over-quarter and a decrease of 35.7% year-over-year. The decrease over the fourth quarter of 2019 was primarily attributed to some one-off expenses incurred for the optimization of our sales network structure in late 2019 and the COVID-19 outbreak that caused the significant decrease of marketing and promotion activities, as well as the decrease of activities in business support functions in the first quarter of 2020. The decrease of R&D expenses and SG&A expenses were also attributed to the improvement of operating efficiency resulting from our operation optimization and cost control efforts. Last for operations in the first quarter was 1.57 billion RMB, representing a decrease of 44.4% quarter over quarter and a decrease of 40% year over year. Share-based compensation expenses in the first quarter were 32.4 million RMB, representing a decrease of 36.8% quarter over quarter and a decrease of 72.9% year over year. The decrease in share-based compensation expenses over the fourth quarter of 2019 was primarily attributed to the continuous decline in the number of employees and the impact of part of the share-based compensation expenses being recognized by using the accelerated method previously. Net loss was 1.69 billion RMB in the first quarter, representing a decrease of 49% quarter-over-quarter and a decrease of 35.5% year-over-year. Net loss, attributable to NIO's Ordinary shareholders in this quarter was 1.72 billion RMB, representing a decrease of 40.5% quarter-over-quarter, and a decrease of 35% year-over-year. Basic and diluted net loss per ADS in the first quarter were both 1.66 RMB, or including share-based compensation expenses and accretion of redeemable non-controlling interest to redemption value. Non-GAAP adjusted basic and dilute loss per ADS were both 1.60 RMB or 22 cents per ADS in the first quarter. Our balance of cash and cash equivalents restricted cash and short-term investment, what, 2.40 billion RMB as of March 31st, 2020. And now, for our business outlook. As William mentioned, for the second quarter of 2020, the company expects deliveries to be between 9,500 and 10,000 vehicles, representing an increase of approximately from the second quarter of 2020. The company also expects the total revenues of the second quarter of 2020 to be between 3.37 to 3.53 billion RMB, or between 475.7 to 499.1 million US dollars. This would represent an increase of approximately 145.5% to 157.6% from the first quarter of 2020, an increase of approximately 133.3% to 134.3% from the second quarter of 2019. This outlook reflects the company's current and preliminary review on the business situation and market condition, which is subject to change. Now, let's conclude our prepared remarks. I will now turn the call over to Operator O to facilitate our Q&A session.

Operator, let's start the Q&A session, please.

Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press found or hash key. For the benefit of all participants on today's call, please limit yourselves to two questions, and if you have additional questions, you can re-enter the queue. Your first question comes from the line of Tim Hsiao from Morgan Stanley. Please ask your question.

Hi, Lihong, Steven, Jade, and Tim. Congratulations on the solid progress, and thanks for taking my question. So just two quick questions. First is about Volkswagen's strategic move of purchasing a big stake in JEC. Although we know the deal might take place at the parent-co-level and shouldn't have any immediate impact to our current partnership with JEC. But would you be concerned about the long-term collaboration with JEC, or if that would urge NIO to reconsider the capacity expansion plan or alternative manufacturing partner? That's the first question. And my second question is about our agreement with the Hefei investors. According to the details shared, I think the new inquiry needs to apply for Thank you.

We recently saw some market rumors that Volkswagen and JEC will have some deeper cooperation. Of course, we don't know the details. I saw some comments from JEC. No matter what, we believe that in Anhui or Hefei, there are more car manufacturers in this market. Whether it is from the supply chain or from the efficiency of all aspects, it is definitely a very positive thing. Our collaboration with GAC is very deep. We don't think that such a collaboration will have any impact on our manufacturing. In general, if there is such a collaboration, of course I can't comment on the authenticity, I just say that if there is such a collaboration, I believe that the business layout in Hefei is positive.

Thank you for your question. Recently, we do hear a lot of market speculations about the in-depth cooperation between Volkswagen and JEC. To be honest, we don't really know much about the details. Although JEC has also issued some comments about the speculation, but if we are going to have more automakers located in Hefei, I think this is good news for us. because this is going to be beneficial for the development of the supply chain and the production capacity in Hefei. Other cooperation with JEC is Wing Wing Corporation. So if JEC is going to work very closely with Volkswagen, which we're not really sure, but if this is the case, we think this is not going to affect other manufacturing If they are going to work very closely together, we think this is very beneficial for our cooperation with JEC.

The second question is, for us and Near China, for us as a whole, as a whole strategy, you have helped us to open the channel of RMB. We are also very happy to have a few strategic investors this time. Of course, from the perspective of Near China, In terms of the question on the new China from the strategic perspective

But in general, our long-term strategy is...

NEO Inc. will maintain a significant control over NEO China. This is what we have been praising.

Our strategy is NEO Inc. is going to hold the controlling stake in NEO China for the long term.

If you see the information we have shared with you, NEO Inc. and NEO China According to our previous press release, New Inc. has the redemption rights and the warrants on the New China Project. So of all speaking

New Inc. can have the long-term controlling stake in New China. According to our previous annual report, we have the right for the redemption and the warrants on the New China.

Actually, if you refer to the annual report that the company filed in early May, they have filed the investment agreement for the strategic investment in New China. According to that, New Inc. has the warrant to purchase more shares for New China, and also we have the Thank you. Thank you. Your next question comes from the line of Bin Wang of Credit Suisse. Please ask your question.

Thank you, everyone. I actually got three questions. Number one, about the order. If you recall, in last call, you already provided an order in the past 30 days. So right now, can you provide, from now, in the past 30 days, how much order you received? And what's the order flow? Because there was a local news flow search in the end of April. Just last week, you got 2,000 orders. That's why I want to get a number, what's the order in the past 30 days, as number one. Number two, actually, it's about the growth margin in the second quarter. You mentioned the vehicle growth margin would go to about 5%.

Can you provide a guidance for overall growth margin, not just the vehicle, but also including everything? That growth margin overall will be 10% positive in the second quarter. That's my second question. And my last question is about the potential risk came from the U.S. industry. Think about recent China-U.S. relations. Thank you, Wang Bin.

Our first question is about orders. Since the end of April, our orders have returned to the level before the epidemic. Currently, the amount of orders is still increasing. In the past 30 days, we have some live broadcasts, Thank you for your question. Actually, since the late April, our order growth rate has returned to the level before the outbreak. Our current order growth momentum is actually quite strong,

For the last 30 days, because we had the live streaming event and other activities. So at this moment, I cannot disclose the specific number of the orders we received in the last 30 days. But what I can say now is that the order growth momentum is very positive.

The second question is that we think the net profit rate can exceed 5%. In terms of the growth margin, we believe that the vehicle growth margin can be over 5%. But for the overall growth margin, because we have implemented

a series of efficiency improvement and cost control measures. So our estimation is it should be over 3%.

Thank you for your question. I would like to answer your question about the impact of the new CELA deal on Mio Inc. We have noticed that a few Chinese companies have achieved the duality in exchanges of the U.S. and the U.K., such as Alibaba. Looking forward, we will actively and closely monitor the changes and trends of the markets and adopt plans that best serve the interests of new Inc. investors and shareholders. I think that's our comments to your question.

Thank you, Wang Bin.

Okay, I have a very quick first one. Okay, now, right now, you're actually under the supply or actually over capacity, which means if too much demand, what's the maximum monthly supply volume?

What's the number? Maximum capacity right now, monthly. Thank you, Wang Bin.

In fact, many of our users are waiting for us to produce our orders. We have been waiting for a while. including ES6 users and ES8 users. Of course, we also have EC6, which will be a little further away. Currently, the production capacity of Hefei's factories is able to produce 4,000 units per unit, which is 15 JPH plus some overtime, working 10 hours a day, which can reach 4,000 units per month. However, some of our supply chain partners have some bottlenecks in their production. In fact, a lot of users or actually many users have been waiting for the deliveries.

For example, users of the ES8 and ES6, it will be even longer for the users of the EC6. In the Hefei plant, under one shift, the monthly production capacity should be around 4,000 units with 15 GPH. And this means that the workers will need to work around 10 hours every day. But because some supply chain partners in our supply chain, they have some constraints on the production capacity, which means the production capacity for those supply chain partners is around 3,400 to 3,500. So although we do have some capacity in our own coffee plant, but the overall capacity in the supply chain is limited.

Many users are waiting for delivery, so we have decided to increase the capacity of the entire industry chain. We have asked our supply chain partners to increase their capacity, but you also know that this is a system project. At present, We understand many users have been waiting for the vehicle deliveries.

That is why we would like to boost the capacity in the overall supply chain system, which means our partners will also need to increase their production capacity. This requires a systematic effort across the supply chain. According to our plan, around August and September, we should be able to increase the monthly production capacity to around 4,500 to 5,000.

We are quite conservative in terms of the production capacity increase, but we would like to strike a balance

between the order growth and over production capacity increase considering the strong momentum on the demand side.

Thank you, Andy. Thank you.

Your next question comes from the line of Lei Wang of CICC. Please ask your question.

Thanks, William. Thanks, Steven. This is Wang Lei speaking from CICC. Congratulations on business drone deliveries. I have two questions, if you don't mind. So we have achieved a historical low SG&A and R&D expenses in the first quarter. That's mainly attributed to the virus outbreaks, I believe. Can we have your guidance on the operating expense for the next few quarters? That was the first question. And the second question is about the The deal again because as the last day of the first quarter we have cash and equivalents around like 2.4 billion RMB while we should ingest about like total 2.5 billion cash before June 2020. So do we need to issue new comparable bonds or issue the new private placement?

This is Danny.

Regarding the first question, in Q1 2020 we have seen expected results from the cost control efforts including the organization optimization and some restructuring initiatives. Expenses in Q2 and going forward I think will increase quarter over quarter compared with Q1 due to more R&D and marketing activities being performed in Q2. But considering our gross margin improvements, we are still confident to reduce the operating loss. And we expect the trend to continue in 2020. Yeah, that's all for question one.

Okay, so for your second question, yes, you're right. We have 2.4 billion RMB on our band sheet, and we will inject 2.4 billion RMB into New China. So first of all, we still have some cash, as you see in our band sheet, unused from the previous CDs, which can be injected to NEO China as part of the investment from NEO Inc. And then we will closely monitor the market and determine future financing plans to support our further cash rejections. And yeah, that's all.

Thank you. I have a follow-up question on the OPEX because we have roughly $500 million amongst the OPEX in the first quarter. And what's the estimation on the absolute dollar amount for the next few quarters, like $700 million sounds like a reasonable one or even lower?

Operating expense-wise, as I mentioned, I think there will be An increase in Q2 since the more R&D and marketing activities. But generally, the operating loss, I think, will continue to be reduced. So the exact number...

I don't think that we are supposed to give the guidance on the absolute dollar amount of the expenses for the current quarter, but our goal is to reduce the operating loss through the loss margin gain as well as the efficiencies through controlling the operating expenses.

Okay. Thanks. Thanks all.

Your next question comes from the line of Fei Feng of Goldman Sachs. Please ask your question.

Hi. Congratulations on the strong results. My first question is about vehicle margin.

How would you guide vehicle margin to progress beyond second quarter's 5%? Are we still tracking towards double-digit vehicle margin by the fourth quarter? That's the first question for me. Second question is, how many of your cars were sold in new house versus new space in the first quarter and also in April? Thank you.

Okay, the first question about the vehicle margin. We still expect the gross margin to expect double digits by the end of 2020 with further decrease in bomb cost including the battery package and also sales of more product with higher gross margin and continued optimization of our manufacturing cost, yeah.

Yes, we will continue to maintain the two-digit price prediction before the end of this year. We are now very confident in completing this. Of course, the second question you asked just now, how many cars are in NIO House and how many are in NIO Space? At present, most cars are still sold through NIO House and online combinations. Because our NIO House is mainly in our big city. So this is mainly related to the sales area. But Nearspace is very meaningful for us to expand our customers in some two-tier cities or three-tier cities. We expect that in the third quarter, we will be able to see some of the functions of Nearspace in the expansion of channels. In terms of the first question for the growth margin, we still would like to keep our guidance regarding the double-digit growth margin by the end of this year.

At this moment, we are still quite confident to achieve this objective. With respect to your second question, I would like to say that at this moment, most of the vehicle sales happens in the new houses and the online channels. This is mainly because the new houses are located in those big cities, but we believe new spaces are going to play a very important role In the future, especially in terms of the channel expansions in the Tier 2 and Tier 3 cities, and it's going to play a very bigger role in the third quarter for the channel expansion in those lower-tiered cities. Of all speaking, currently 70% of the vehicle sales are through the new houses and the online touchpoints.

Thank you. Your next question comes from the line of Lee Meng Shen of Bank of America. Lee, you can ask your question. Your line of Lee Meng Shen of Bank of America, your line is now open.

Oh, thank you. Hi, William, the management team. Thank you for your time. and congrats for the good results. So I have a few questions. My first question is that when will you start to deliver EC6 and also decide the price? And also, when will you start to ship the 100kW battery with your cars? And will there be any meaningful spec change? For example, like a driving range and also increase your weight or overall the weight will be maintained at a similar level compared to your current 84 kW models. The reason I'm asking is because I also want to know that when you start to use some more advanced cell to pack a battery to improve the battery density so that the horsepower can be maintained or even improved, even you use a bigger size battery. My third question is regarding your cooperation with He Fei government. So besides the investment from He Fei, I believe He Fei will also give you more support from other, I think, financial aspects. So could you elaborate more and more support and cooperation from He Fei government. Thank you.

Our plan is to start the deliveries of the EC6

In September and the delivery of the 100 kilowatt hour battery pack in the fourth quarter.

那我们的这个电池包虽然是这个我们现在的这个都是在一种尺寸下边去迭代的,但是重量不会有什么特别大的差别,就是里边的这个能量密度肯定是整包的能量密度肯定是变高了的。 For the battery pack, the current battery pack will upgrade within the same size. The weight will not change but the power density will improve. In this case, it's not going to

This is an impact on the performance of the vehicle, and this is one of the parameters and the criteria in our technology development. This is a very important endorsement to our technical competence, because within the same battery pack size, we can upgrade the battery from the 70 kWh to 84, and this year we're going to ship the 100 kWh battery pack.

第二个问题就是对于未来中国在合肥当地的运营和发展, In terms of cooperation and development in Hefei regarding Neo-China,

We will work together with Hefei government and other related departments to work out the specific policies. We believe we should be able to get some preferential and supportive policies.

Thank you. Thank you, William. Sorry, I got one more quick question. So maybe it's still early, but for the year-end Neo Day, will you consider to launch another new product or as your previous guidance that the sedan launch probably will be postponed to 2021 or 2022. So in this year end, there is no possibility to launch a sedan or other new model. Thank you.

Thanks for your question. I understand

Everyone is looking forward to the new day and of a new product launch. This actually proves that we have a very high product development and R&D efficiency because starting from the new day in 2017, we launch our new product every year on the new day. Of course, we don't want to break this tradition, but at this moment, we cannot disclose the specific details.

Got it. Thank you, William. Thank you.

Your next question comes from the line of Jiajie Shen of JPMorgan. Please ask your question.

Hi, William and Stephen. Hi, it's Nik Lai from JPMorgan. Thank you for taking my question. I know we have a few minutes only left, so two very simple high-level questions. The first one on the cash flow question, Can you walk us through on the cash flow in terms of inflow and outflow? You mentioned earlier in the first quarter we issued roughly about $435 million CB. That's roughly about $3 billion RMB. But at the same time, for the investment in Neo Inc., the first two installments due in June, we need to invest altogether $2.5 billion RMB. And on top of that, presumably at each quarter, the cash burn is somewhere about 1.5 to 2 billion RMB. So if you can provide some number or guidance on the quarterly cash inflow and outflow, that would be appreciated. And should we assume with all the investment, maybe in the next one year, we probably don't need to go to capital market and raise funds again. So that's a cash flow related question. And the second simple question is really on volume. I remember in the 2019 result call, we had about 5,000 units of backlog order. Can you give us an update of that number by first quarter? and also 2Q, the guidance of 9,500 to 10,000 units of delivery. It's a split between ES8 and ES6, similar to first quarter. Then lastly, EC6, a new model. How should we think about the volume? Would it be similar or close to ES6? Thank you.

Okay, so thank you for the question. This is Jade. I'm going to answer the first question that you have. Yes, as of the end of the first quarter, we did have about 2.4 billion RMB as cash on our balance sheet. Thanks to the CDs that we have raised in the first quarter, which has supported our operating and cash lease, and also that the rest of the money that we have right now definitely can be injected from New Inc. to New China for the installment as the investment we need to make in New China. So as for the future plans of the cash injection, we are going to monitor the market very carefully and see what's the best time and appropriate method to raise the capital in the future. And we definitely will get sufficient cash to support our future base development and expansion. So that is on the cash side. And on your second question regarding the orders, I think William can answer some on that.

Yeah.

At this moment, we cannot disclose the specific number of the order backlog, but according to our data, on the current backlog, it should be over 5,000, just like you mentioned.

Yes. Of course, its quantity is definitely smaller than that of ES6. From the perspective of delivery, because ES8 starts to deliver new ES8 from April 19, its climb also needs a process. The delivery volume will gradually increase. In general, if we look at it from the perspective of proportion, we think the long-term proportion should be around 1 to 3. If we look at it from their In terms of the product mix of the ES8 and ES6, as you know, the starting price of the ES8 is $110,000 more than that of the ES6.

So, It's quite natural that ES6 has a higher volume compared with the ES8. But after we start the delivery of the ES8, we also need some time to ramp up the production, the sales, and the delivery to the users. According to our current data, the percentage of the ES8 and ES6 should be 1 to 3, and this is because of the specific market segment.

For EC6, because we haven't announced the pricing yet, we are still thinking about some of the most suitable pricing strategies for the EC6 user group. The EC6 demand, we will have to see the final pricing after it comes out, we will be more clear. This is still directly related to the price. We also have to rely on productivity, For the sixth, because we haven't released the specific pricing yet,

We still need some time to understand what should be the pricing strategy for the EC6 and what is our target user group for the EC6. So we will need to understand those specific information to have a clear picture for the market amount. At that time, we also need to make a dynamic decision based on the production capacity, competition landscape, and offer Thank you. Thank you.

As there are no further questions now, I'd like to turn the call back over to the company for closing remarks.

Thank you again for joining us today. If you have any questions, just feel free to contact us through the contact information provided on our website. This concludes the conference call. You may now disconnect the line. Thank you. Stay safe. Thank you, everyone. Thank you, everyone.