NIO Inc.

Hello, ladies and gentlemen. Thank you for standing by for NIO Incorporated's third quarter 2025 earnings conference call. At this time, all participants are in the listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Ray Chen, Head of Investor Relations and Corporate Finance of the company. Please go ahead, Ray.

Good morning and good evening, everyone. Welcome to NIO's third quarter 2025 earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website. On today's call, we have Mr. William Lee, founder chairman of the board and chief executive officer, and Mr. Stanley Chu, chief financial officer. 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 Securities Mitigation 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 findings of the company with the U.S. Securities and Exchange Commission. the Stock Exchange of Hong Kong Limited, and the Singapore Exchange Securities Trading Limited. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that news, earnings, press release, and this conference call may conclude discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. please refer to Niel's press release, which contains a reconciliation of unaudited non-GAAP measures to comparable GAAP measures. With that, I will now turn the call over to our CEO, Mr. William Li.

William, please go ahead.

Hello, everyone, and thank you for joining Niel's 2025 Q3 earnings call. In Q3 2025, the company delivered 87,071 smart EVs, representing a year-over-year growth of 40.8%.

In Q3 2025, the company delivered 87,071 smart EVs, During the quarter, we launched two large three-row battery electric SUVs, the Elmo L90 and the new Elnio ES8.

Both models have received strong recognition from users from their comprehensive competitiveness and continue to see solid demand. In the meantime, Firefly continues to see steady market growth. By covering a broader range of price segments and meeting more diverse needs, the new Envo and Firefly brands are able to drive significant growth in deliveries.

In October 2025, In October, the company delivered 40,397 smart EVs.

up 92.6% year-over-year, marking three consecutive months of record high deliveries. For Q4, we expect total deliveries to be in the range of 120,000 to 125,000, a year-over-year increase of 60.1% to 72%, achieving a new quarterly high.

财务表现方面,通过成本结构的持续优化, On the financial front, thanks to the ongoing cost optimization, in Q3, the vehicle growth margin improved to 14.7%.

and the growth margin of other cells was 7.8%, resulting in an overall growth margin of 13.9%, the highest in nearly three years. This reflects the company's strengthened product and service profitability.

同时,我们研发销售与管理方面的运营效率持续提高, 公司第三季的non-GAAP运营亏损环比收载超30%, In the third quarter, the company also achieved positive cash flow and free cash flow.

Operational efficiency in R&D, sales, and general administration continued to improve. Non-gap operating loss was narrowed by 30% quarter over quarter. In Q3, the company's operating cash flow and free cash flow both turned positive.

In terms of products and technology, we will stick to the pure electric technology route that can be charged, replaced, and upgraded in the future. New remains committed to a battery electric vehicle roadmap featuring chargeable, swappable, and upgradable batteries.

Leveraging the company's full-stack R&D capabilities in 12 key tech areas, The three brands are able to precisely meet users' needs across multiple market segments, and the competitiveness of our new products under all three brands has been well received.

未来品牌方面, 近期我们推出了ET9低频线特别版的三款全新色彩主题。 低频线版本是未来品牌最高线产品的特别版本。 凭借独特设计品位,科技行政旗舰定位和尊享服务, Since its launch, the market has been outstanding. Our full-scale technology flagship SUV, the new ES8, officially launched and started delivery in September. With the space and price experience advantages brought by pure electric technology, the new ES8 continues to hot-sell in the high-end, large-scale SUV market. It has achieved more than 10,000 deliveries in just 41 days, creating the record of more than 400,000 yuan of pure electric car delivery. The future brand's other core product, The new brand recently introduced three color themes for the ET9 Horizon Edition.

The Horizon Edition is a special collection reserved for NIO's most prominent flagship models. The distinctive design, advanced technology, Executive excellence and exclusive services make the 189 Horizon Edition a standout in the market. The all-new ES8, an all-around tech flagship SUV, was launched and started delivery at New Day in September. Leveraging the unrivaled space and driving experiences made possible by its all-electric technology, the all-new ES8 has remained a top seller in the premium large zero SUV segment. surpassing 10,000 deliveries within just 41 days, the fastest for a BAV priced above 400,000 RMB. In November, the ES6, another all-around SUV in NIO's lineup, celebrated its 300,000 units delivery milestone, topping the sales chart of China's BAVs model, priced over 300,000 RMB.

乐道品牌方面, 2019年7月底上市以来, 三个月完成超过3.3万台交付, Within the Ongo brand, the L90 delivered over 33,000 units in three months since its launch in late July.

leading the large battery electric SUV segment for three consecutive months. The L60 also delivered strong performance, maintaining a top two position in the battery electric SUV segment, with MSRP above 200,000 RMB during the first three quarters. With exceptional products, experiences, and word of mouth, the Anvo brand increasingly becomes the preferred choice for families.

In terms of brand, Since the delivery, sales have maintained their leading position in the high-end smart electric car market, becoming the benchmark of the Western market. At the same time, Yonghu Chong has newly launched a special version of the model, further attracting users who pursue quality and individualization. This mobile car is gradually entering the overseas market. We will enter more countries and regions in Europe and Asia.

Since the delivery began, Firefly has led the high-end small EV market in sales volume, establishing itself as a benchmark in the market. With creative launches of special editions, it continues to strengthen its appeal among users for value quality and individuality. This dynamic small car is already making its way into global markets and will expand into more countries and regions across Europe and Asia.

In terms of autonomous driving, The future world model is the first world model to be trained on the basis of understanding the world and predicting the world. We also see that the trend of self-driving industry technology is gradually leaning towards the world model. Next, we will carry out the upgrade of the future world model in the future world model. In the city and high-speed lines, the smart bus, the smart safety assistance, the full range brings experience optimization, and the new experience of open-set open-set open-set open-set

In smart driving, the new world model, NWM, is the first world model that not only understands and predicts the real world, but also operates with a closed-loop training system. Actually, the industry trend is increasingly shifting toward a world model roadmap. Next, we will gradually roll out upgrades on NWM for vehicles equipped with NILS NX9031 and NVIDIA's AWING X smart driving chips, further enhancing urban and highway NOP plus parking and the smart safety performance. The upgrades will also enable execution of open set commands. For the ongoing smart driving, the Coconut 210 scheduled for release at year end will upgrade its model-based end-to-end solution for urban and highway NOA, as well as parking, delivering a more seamless driving experience.

In terms of sales network, we have opened 172 future centers and 395 future spaces. The number of open doors has reached 422. In terms of service network, we have opened 405 service centers and 70 care centers.

Our self and service network currently includes 172 new houses, 395 new spaces, 422 online stores, as well as 405 service centers and 70 delivery centers.

In terms of the charging network, so far, we have a total of 3,641 charging stations in the world, and a total of more than 9,200,000 charging services per user.

Our global charging and swapping network now operates 3,641 power swap stations, providing users with more than 92 million swaps. Besides, NIO has built over 27,000 power chargers and destination chargers.

On September 17, NIO completed a total of $1.16 billion in equity financing on both the U.S.

and Hong Kong stock exchanges. further strengthening its balance sheet and providing ample resources for its long-term commitment to R&D and user services.

On November 23rd,

The 2025 NIO Formula Student Electric China successfully concluded in Hefei. NIO has been supporting this competition since 2018, helping cultivate tens of thousands of young professionals for the industry.

Today is the 11th anniversary of NIO Formula Student Electric China. We insist on normal development in the core technology field of smart electric vehicles, and continue to invest in the construction of charging power infrastructure. The day also marks the company's 11th anniversary.

Over the past 11 years, we have remained committed to in-house R&D in core smart EV technologies, continued investing in charging and swapping infrastructure, built a multi-brand sales and service system, and created a vibrant community for over 900,000 users to share joy and grow together.

这些优势已经获得越来越多用户的认可。 今年三个品牌的全新产品在不同细分市场表现突出, 公司进入新一轮快速增长阶段。 与此同时,我们基于CBO基本经营单元机制, 全面调整组织结构,提升运营效率, 经营结果得到了持续的改善。

These advantages have been increasingly recognized by our users. This year, our new products across their brands have performed strongly in their respective market segments, marking the beginning of a new phase of rapid growth. At the same time, through the self-business unit mechanism, we have comprehensively optimized our organization and enhanced operational efficiency, consistently improving our business results.

Looking ahead, we will continue to provide more competitive technology, products, and services to deliver better user experience and greater user value.

As the company evolves into a user enterprise leading in technology and experience, we aim to shape a sustainable and brighter future with more users.

感谢大家的支持,现在Stanley将为大家介绍2025年三季度的财务业绩,有请Stanley。 Thank you for your support.

With that, I will now turn the call over to Stanley for Q3's financial details. Over to you, Stanley.

Thank you, William. Let's now review our key financial results for the third quarter of 2025. Arbitrary revenues reached 21.8 billion RMB, increased 16.7% year-over-year and 14.7% quarter-over-quarter. Vehicle sales were 19.2 billion RMB, up 15% year-over-year and 19% quarter-over-quarter. Year-over-year growth was mainly due to higher deliveries, partially offset by a lower average selling price from product makes changes. The quarter over quarter increase was mainly from higher deliveries. Other sales were 2.6 billion RMB up 31.2% year over year and down 9.8% quarter over quarter. The year over year growth was driven by increased sales of used cars, technical R&D services and sales of cars accessories and after-sales vehicle services, while the quarter-over-quarter decrease was mainly due to the decrease in revenues from used cars, technical R&D services, partial offset by the increase in parts, accessories, and after-sales vehicle services, and provision of power solutions. Looking at margins, vehicle margin was 14.7% compared with 13.1% in the Q3 last year. and 10.3% last quarter. The year-over-year and quarter-over-quarter increase were mainly due to the decreased material costs per unit primarily driven by our comprehensive cost reduction efforts. Overall gross margin was 13.9% versus 10.7% in Q3 last year at 10% last quarter. The year-over-year increase mainly reflected higher vehicle margin and better profitability in sales of parts, accessories, and after-sales vehicle services, driven by cost reduction and efficiency improvements. The quarter-over-quarter increase was mainly attributable to higher vehicle margins. Turning to OPEX, R&D expenses were 2.4 billion RMB decreased 28% year-over-year and 20.5% quarter-over-quarter. The decreases year-over-year and quarter-over-quarter were mainly driven by lower personnel costs in R&D functions due to organizational optimization and the decreased design and development costs from different development stages. SGN expenses were 4.2 billion RMB. up 1.8% year-over-year and 5.5% quarter-over-quarter. The year-over-year SGA expenses stayed stable. The quarter-over-quarter increase was mainly driven by the increase in sales and marketing activities associated with new product launches. Loss from operations was 3.5 billion RMB, down 32.8% year-over-year and 28.3% quarter over quarter, excluding share-based compensation expenses and organizational optimization charges. Adjusted loss from operations was 2.8 billion RMB, representing a decrease of 39.5% year over year and 31.3% quarter over quarter. Net loss was 3.5 billion RMB, showing a decrease of 31.2% year-over-year and a decrease of 30.3% quarter-over-quarter. Excluding share-based compensation expenses and organizational optimization charges, adjusted net loss was 2.7 billion RMB, representing a decrease of 38% year-over-year and 33.7% quarter-over-quarter. Furthermore, We generated positive operating cash flow and positive free cash flow this quarter. Together with the $1.16 billion U.S. dollar equity offering in September, we ended the quarter with $36.7 billion RMB in total cash and cash equivalents, restricted cash, short-term investments, and long-term time deposits, laying a solid foundation for our future growth. That wraps up our prepared remarks. For more information and the details of our audited first quarter 2025 financial results, please refer to our earnings press release. Now I will turn the call over to the operator to start our Q&A session. Operator.

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask a question. For the benefit of all the participants on today's call, please limit yourself to two questions. And if you have additional questions, you can re-enter the queue. Our first question comes from the line of Tim Xiao from Morgan Stanley. Please go ahead.

Hi. Thanks for taking my question. This is Tim from Morgan Stanley. So I have two questions. So the first question is about a break-even target because we noticed that news update of fourth quarter delivery guidance of 120 to 125,000 came in like around 20% lower than our previous target of 150,000. So just wondering with the evolving shortfall, how does it affect the company's break-even target for fourth quarter? And considering the sub-seasonal demand and policy uncertainty, when could the company achieve previous monthly runway of 50,000? That's my first question.

Thank you, Tim. We are still confident that our goal is to achieve the profit of the fourth quarter. This is still the goal of our company. We actually saw that in mid-October, I believe everyone's recent data on market growth should also be able to see it. Because next year's tax return, There are a lot of cars that have orders, like this new car, like our new ES8. It is generally promised to the user to do this under the hood. But this self-adjusted subsidy is true. No one can give such a under the hood at this level. So this demand must be affected. The main impact is still on us. Like L90, like L60. . . . . . Thank you for the question.

Actually, for the company, we still have the confidence in achieving quarterly breaking even in Q4, and this is still our financial target towards the end of the year. But in the meantime, we did see the impact coming from the phase-out and the determination of the trade-in and replacement subsidies since the middle of October. But this is actually the challenge faced by the entire industry. In that case, in Q4 for the entire industry, we may not see the year-end sales spike that we normally expect towards the end of the year. As you are closely tracking the market and all the numbers, probably you have also foreseen that potential change towards the end of the year. And in the meantime, as next year, the purchase tax exemptions on the new energy vehicles will be further reduced. For the new products like the ES8, with other backlogs that will continue towards the next year, car companies, including NIO, provide the guarantee for the purchasing tax exemptions to users waiting up for their cars next year, yet no car company is going to provide the guarantee for the trade-in and replacement subsidy. In that case, the overall market demand has been affected because of the cancellation of the trade-in subsidy. Especially for our company, our Envoy L60 and L90 are majorly affected by this cancellation as they are also a relatively low price segment and are more sensitive to such changes. Yet we still have confidence in achieving Q4 break-even target. This is mainly because we do see a strong demand for our high-margin products, like the Onyo ES8. We still have an ample order backlog and also new order intake for that product. So overall speaking, the order intake on the envelope has been affected because of the cancellation of the trade-in subsidy, yet the overall impact on the gross profit is limited. In that case, we do have the confidence for the financial target.

In terms of the net profit, we have seen that in the third quarter, we have achieved a net profit of 44.7%. This is higher than what we expected. From my current and the cost discussed by the partners, including the price drop of the fourth quarter at the end of this year, our fourth quarter should be able to achieve a net net profit of about 18. So considering that in the middle of this, the sales of our ES8, the delivery amount, will have a very large rise in the fourth quarter, so the net profit of ES8 itself will also exceed 20%.

In the meantime, in terms of the vehicle growth margin, in Q3, we have achieved a vehicle growth margin of 14.7%, better than we expected. In the meantime, we are also working with our supply chain partners on the continuous cost reduction and also commercial negotiation efforts towards Q4 With that, we foresee the vehicle growth margin in Q4 to be around 18%. And for the ES8 in Q4, we also expect significant growth in sales and delivery volume with a very lucrative margin of over 20%. Then the overall growth process for the entire company will be significantly improved from Q3.

在这个飞车业务方面,大家可以看到我们Q3的这个数字也比我们预期的要好一些。 In the meantime, we also see

good financial performance of our non-car sales business, and we also expect such momentum to continue into Q4. So we see improvement both in the sales revenue contributed by the non-vehicle business as well as the gross margin improvement of that part. With that, the gross profit, the vehicle gross profit or the non-vehicle gross profit, we'll also see improvement from Q3 to Q4.

In terms of the control, We can see that in Q3, we have seen that in the past, since this year, we have continued to improve our operating efficiency and achieved some results. In Q4, our operating efficiency will continue to improve, whether it is sales, management or development costs. We actually saw that in Q4, we did not have such a big market activity. So in general, our control of these three costs is still according to our plan.

And in terms of the expense and also cost control, since this year, we've been taking a series of actions in improving our operational efficiency and also our expenses utilization. And we already see some good results from the Q3 financials. And we will also continue such effort in Q4 in improving the sales SG&A expenses as well as the R&D expenses and their efficiency. Especially in Q4, we don't expect any major or high-profile marketing or campaigns.

In that case, we will be controlling our expenses in Q4 with our SG&A as well as the R&D. So all sum up, our sales volume was affected by the phase out of the trading and replacement subsidy.

yet the gross profit is not majorly affected. In the meantime, we will continue our efforts in improving the efficiency and utilization of our investment and expenses. In that case, we expect also improved business results from Q4 and also have the confidence in achieving the quarterly break-even target. Thank you, Tim.

Thank you so much, Ruilin, for all the details. My second question is about our voluntary gifts together with the new model schedule. Because I think back to previous quarters, the management mentioned that we target like 50,000 monthly run rate in both quarters. So if we are not going to achieve that, when can we achieve 50,000 monthly sales? And considering all the macro uncertainties, would NIO need to consider moving up the launch schedule of the new models to first quarter or earlier to bolster the sales momentum into next year? That's my second question. Thank you.

谢谢。 我们今天给的这个指引的话是四季度12万辆到12.5万辆。 . . . . . . . . So recently, the volatility of the entire industry is indeed greater. Based on the layout of our current product, we still believe that next year, at some point, we will be able to achieve a sales of 50,000 a month. Because next year, we still have three large vehicles to launch. Next year, we believe that with the improvement of our performance, with the improvement of the efficiency of our entire marketing, we believe that next year, We are still following our original plan. In Q2 of next year, we will have two new cars on the market. In Q3 of next year, we will have one new car on the market. We will still maintain this rhythm.

Thank you for the question. As also previously mentioned in my remark, the guidance we provide for Q4 is 120,000 to 125,000 units. In terms of the adjustment on the guidance, as also explained, it's mainly because of the impact on the phase-out of the trading and the replacement subsidy. With that, we will not be able to see the year-end sales spike driven by the seasonality towards the end of the year. Especially this will affect the sales of our cars that have already experienced their new car hype stage. But this is also the challenge faced by the entire industry. Based on our current product lineup and also launch cadence, we do expect that sometimes next year, in the first half of next year, we will achieve 50,000 monthly delivery. This is based on the consideration that we will be launching three large models next year, and also based on the continuous improvement in our sales capacity and also our sales and marketing efficiency. So we do see opportunity of achieving more than 50,000 units per month somewhere first half of next year. And in the meantime, we will also not just randomly change our new car launch cadence or plan simply because of a short-term or temporary policy changes or impact. We will still keep our original launch cadence. That is to launch two new models in Q2 next year and one new model Q3 next year.

Thanks. Thank you. Really understand. Looking forward to the first break-even quarter and more to come. Thank you.

Thank you, Tim.

Thank you. The next question comes from Paul Gong with UBS. Please go ahead.

Hi, William. Thanks for taking my question. My first question is regarding the 2026 outlook. Given there would be 5% of the purchase tax being levied on the EVs, how shall we think about the company's preparation for such a policy change? Shall we compensate for the customers for this amount and adjust it along the supply chain and internal cost control, or do we expect to let the consumers take majority of it? This is my first question.

Thank you, Pao. Next year's purchase tax will be reduced. This will be better for us than for others. Because 80-90% of our users rent batteries. So the price of batteries will not be included in the tax. So for us, there will be some advantages. So we have been waiting for ES8 for a long time. We are also the first in the industry to say that we will go to the end of this purchase tax break. This is what we actually announced when ES8 was listed. Other models do not involve us waiting for so long. So other models do not have such a strategy so far. But in terms of the specific purchase tax next year, Thank you for the question.

As next year, the purchasing tax on the new energy vehicles will be halved. Actually, the impact on us is less major in comparison to other new energy vehicle models and also companies. As 80, 90% of our users choose to buy the car while subscribing to the battery. In that case, the price of the battery is excluded from the tax base. In that case, our tax exemption is still more advantageous. than other companies and also non-swappable models. And in the meantime, for the popular products like the O'Neill ES8 with a very long waiting time for the deliveries and pickup, we are also the first car company to announce the purchasing tax guarantee for our users who have to pick up their cars next year. We have made this purchasing tax guarantee already at the launch of the ES8. For other products and the models, as their waiting time is not as long as all new ES8, so far we don't have the guarantee policy for other models. As for the specific measures that we are going to take in the face of the purchasing tax changes next year, well, it highly depends on the dynamics of the market, the landscape of the competition, and also the practices of other peers. So we will keep flexibility in our measures and also policies. But currently, we don't have a very specific plan.

For the entire industry, I think it should be from the perspective of the market and users, it should have already digested the impact of the policy of purchasing tax. So, if we look at it, the Chinese real estate industry is now dependent on this policy. In fact, it has become a It's a lot smaller than it used to be. Because now, from the user experience, from the cost, from all aspects, the route of pure electricity, its advantage is still very obvious. This is why we see this year, from January 1 to October, the growth of pure electricity is far more than that of other energy forms. So from the perspective of the future, in general, I am still full of confidence in the market. I think Google Shreds' withdrawal from this matter, its impact, its...

And in the meantime, we also see that the entire industry, including the public and users, are gradually digesting the face out of the purchasing tax policies on the new energy vehicles. Especially right now, if you look at the smart EV industry in China, it is now less policy driven as the actual user experience and also the cost advantage of battery electric vehicles are more evident and also becoming more attractive to the users. In the first 10 months of this year, the self-volume growth of the BAP actually increased significantly. This also gave us the confidence in continuing such momentum. So there will be impact from the purchasing tax based out, but it will be very limited.

Thanks. My second question is regarding the expense control. And we have already seen quite some cost reduction, especially from the R&D in Q3. And prior guidance, Q4 should see further efficiency improvement there. Heading into 2026, shall we expect the lower cost structure on the expense side to stay as a constant and new normal, i.e., shall we expect like low $2 billion something for the R&D per quarter and around $4 billion or even lower than $4 billion on the SGMA per quarter?

Okay. Yes, Paul. The cost of development in the third quarter is about 2 billion yuan. According to what we talked about before, the cost of development in the fourth quarter and next year's quarter is still around 2 billion yuan per quarter. We don't have a plan to further to reduce such a development cost. In fact, our main job is still to see how to continue to improve our research efficiency. That is to say, based on our CPU mechanism, we will have a greater output of about 2 billion in development cost per quarter. Now we are doing, for example, each project has to be idealized, and then based on the input and output to evaluate and decide each project and continue to review and improve. And we believe that such a strength Thank you for the question.

As mentioned in Q3, our R&D expenses is around 2 billion RMB in the non-GAAP basis. And also for Q4 and the next year, we expect our quarterly R&D expenses to be flat, also around 2 billion RMB. per quarter. And so far, we don't have any plan to dial back on the R&D expenses. But in the meantime, we will focus more on improving the efficiency of our R&D activities, especially leveraging our cell business unit mechanism. We will make full use of the output of this $2 billion R&D investment every quarter. Inside the company, for the project initiation and approval, we have established the ROI evaluation mechanism. We also have the closed-loop with the project review and also improvement. By continuing such efforts, we believe that at 2 billion RMB per quarter in R&D, we will be maintaining our existing product development as well as the key technology development without compromising on the competitiveness of the entire company.

Regarding SGA, due to our sales and our previous goals, Compared to the previous 50,000 units, there are some downturns. Therefore, the overall profit-benefit ratio of SG&A to sales income may be slightly lower than our original goal. We originally hoped to achieve 10%. Now it looks like it's about 12%. Of course, this is under the situation of the big goal of our 4G group profit that William just talked about. We achieved such a goal. Of course, in terms of your absolute number, 14 billion is basically the same in four seasons. From the perspective of next year, of course, we will continue to increase the efficiency of this sales. In general, a percentage of about 10% of the sales cost is still one of our goals in these few seasons.

And in terms of the SG&A expenses and its percentage to the sales revenue, as in Q4, based on the sales volume guidance, we have lowered our volume from 50,000 units per month to we have lowered from that base. In that case, originally our target is to achieve 10% ratio between SG&A and the sales revenue, and now it's around the 12%. And in Q4, we will also be keeping that level. But this is against the overall background of achieving the quarterly breaking even in Q4. And in terms of the absolute amount, that's around $4 billion per quarter, as you mentioned. And the next year, we will focus on improving our efficiency in sales and also overall activities. Overall, we believe that 10% between SG&A to the total sales revenue should be a reasonable target for us to achieve.

Thank you, Paul.

Thank you, William and Stanley. I'm looking forward for more efficient operation going forward.

Thank you. Your next question comes from Nick Lai with J.P. Morgan. Please go ahead.

Yes, this is Nick. I'm from J.P. Morgan. Thank you for listening to my question. The first question is actually a question. Sorry to interrupt, Nick.

I'm really sorry to interrupt, Nick. Your line is not that clear.

Okay. Is it better right now?

Hello? Yeah, Nick, go ahead, please.

Okay. Can you hear me right now? Yeah, thank you. My first question is really about the possibility into 2020. Based on William's comment earlier, in our second quarter, next year, we have a three-year model. And monthly, it's going to be 15,000 units. And we also mentioned that expense ratio of essentially content. So, with all this common, it's fair to say that a fair downfall to 25% even, then next year, for the full year, or at least in second half next year, likely, you know, profitability should also be very strong. That's my first question. How should we think about profitability in 2026?

Thank you, Nick. Our goal for next year's business is to achieve this year's profit. This is our first goal and our plan. From the current direction, we are still confident. The main thing is our non-GAAP. Let's emphasize the non-GAAP. The non-GAAP... . . The growth of BEV, the growth of BEV sales, has increased by 26%. Of course, the growth of REIF and PHEV has actually decreased. The growth of REIF and PHEV has decreased by 12% and 7%. That is also because of BEV's promotion. The growth rate of NEV used this year is 55% in three seasons. If we look at the first three seasons, This B1V's sales increased by 33%, while Zengcheng's sales increased by only about 3%. If we look at October, the B1V's sales increased by 13%, while Zengcheng's sales actually decreased by 13%. So we can see that the entire market is accelerating to the power market to convert. If we look at the market of more than 300,000, which is the market of high-end used cars, in the past, the penetration rate of this B1V was actually relatively low. If we look at some of the recent trends, we can see very clearly that in the high-end market of more than 300,000, which is the market of our future brand, our growth space is very large. Since this year, the core of the high-end market should have gradually begun to form. 那么BEV的渗透率是快速的上升。 那么去年,全年的BEV的渗透率在30万以上的市场,只有12%。 今年三季度是达到了18%。 那么今年的前三个季度的话,30万以上的市场的BEV的腾底是增长了33%。 那么增程的话,其实腾底是下滑了10%。 那我们再看到蔚来和乐道都所在的大三排的SUV的市场。 Thank you for the question.

Actually, for the full year, our business target is to achieve profit for the full year of 2026 on the non-GAAP basis. And we do see confidence in achieving this profitability target for next year long gap as we basically look at this from both market trend perspective as well as the relative competitiveness of our products and services. Here are some insights into the market and the trends over the past one year or so. we will be really looking at the penetration rate of the battery electric vehicle in the premium segment and also more specifically in the large railroad SUV market. In Q3, the sales volume of the fab increased by 26% quarter over quarter. Well, for RIV and P-Hive, the sales volume only increased by 12% and 7%. Well, actually decreased by 12% and 7% quarter over quarter. And if we look at the entire new energy vehicle market, the penetration rate has reached 55% in Q3. And this is majorly powered by the growth in the battery electric vehicle. And in the first three quarters, the south volume of the BAF has increased by 33%. Well, for RIV, it's only 3%. And more specifically, in October, the BAF south volume increased by 13%. Well, for the RIV, it decreased by 13%. So this is also showing how well received and how well received and adopted the BAF model is. And more specifically, on the premium segment, price above 300,000 RMB, this is where our new brand and our products are in. For the BAF, it used to be at a relatively low penetration rate, but we do see a trend of improving that penetration. This also gives us huge opportunity for enlarging our penetration and market share in that segment. For this year especially, we see the trend where the premium battery electric vehicle products are more and more received by the users. We have already seen the awareness and also the upside for such products. And also this has powered the increase in the penetration rate of this product. For a full year last year, the penetration rate of the battery electric vehicle in the premium segment was only 12%, but in Q3 this year, it's already 18%. And in the first three quarters, the penetration rate of the BAV has increased by 33%, yet for the range-extended vehicles, it actually decreased by 10%. And more specifically, for the large barrel SUV segment, the south volume of the BAV took the first place for the first time in September, and it continued such momentum in October. In October, we see the total volume of the BAV registration was around 39,000 units. Well, for RIV, that was only 24,000 units.

From the perspective of next year's sales growth, we talked about next year. Next year, our L90 and the new ES8 are still in a new car cycle. Next year, we still have three big cars. That is to say, we have a total of five big cars next year. So our five big cars are in this medium-sized and large-sized surrounding market. If we look at the trend, this year's third quarter, the growth of B1V is 146%. Then RAV4, So, penetration, we still have a big chance of rising. So, in general, our current product and the current market trend are more compatible. So, our overall sales growth for the next year, especially our large-scale sales growth, as a result, our product advantages, our charging power facilities, charging power network advantages, we are still very confident.

Regarding the sales volume and also for next year, as for the Envoy L90 and also the new Envoy ESH next year, we will still continue the bus around these two products relatively new to the market. Plus, we are going to introduce another three new large models. So we will be having five new large models available to the market next year from the new and Envoy brand. And if we look at the mid to large and also the large SUV segments where our new models will be targeting, in Q3, the south volume of the BAV models increased by 146%. Well, for RIV, it's only 19%. But as I've mentioned, the overall penetration rate of the BAV among the premium large vehicle models is still relatively low, which means that we do have huge opportunities and potential. In this segment, overall speaking, our product launch cadence is in line with the market shift and also the trend, especially considering our large models are also competitive in both products as well as the charging and swapping experience.

这些大车在我们的销量的比例肯定是会在明年的话它的销量应该在我们的比例是比较高的 那也会带来毛利率的增长 那我们预期明年我们的目标还是实现 about 20% of the net profit. This is our net profit base this year. We hope to increase it further. Of course, this is also combined with the cost of our supply chain. The cost of the supply chain has dropped. Then in terms of fees, you can see that since this year's CBO system was implemented, we have achieved a very good result in terms of fee control. We will continue to optimize and improve the efficiency in the development cost, sales cost, management cost. So in terms of cost control, we are still very confident. So in general, the sales of this big car, our product has proven that our product positioning, combined with our advantage in charging, is able to get a significant share. Then the BV in this big car and the penetration rate in the market of more than 300,000, We have seen this trend. In terms of profit, our goal is to achieve a target of about 20. Considering the increase in the mix of big cars, we think we are confident. In terms of cost, we have seen the results today. So from this perspective, we think we will achieve a year-round profit next year. This is a target. Compared to our entire team, it is still

And also for this five large models, they will also contribute the major sales volume among all of our products. As they're a high-margin product, they will also contribute more significantly to the vehicle gross margin. With that, next year, we expect the vehicle gross margin to be around 20%. That is the further improvement on top of our existing gross margin for Q3 and also out to the for Q4, but also this result will be dependent also on the continuous cost optimization efforts together with our supply chain partners. And in terms of expenses, as we have rolled out this cell business unit mechanism, we have tightened our control over expenses. We already see some good results, and we will continue such efforts next year in controlling the R&D and also SG&A expenses. And also, for our large vehicle models, based on its strong market performance and demand, it already proves that with the right product definition and also with our unique advantages in battery swap, we do can capture a decent market share in that segment. And in the meantime, we also see a positive trend and also huge potential. for the battery electric vehicles to take up a higher market share and also penetration among large models and also premium models. And also, thirdly, we have confidence in achieving the product growth margin of 20% plus our continuous efforts on the cost and expenses control. With all that combined, we think that achieving a full-year profitable achieving a full-year profitability on the long-term basis where the year of 2026 is a reasonable target for the team.

Yes, very clear, and certainly an exciting outcome for next year. My second question is more about the choice between in-house chip against media. Can you remind us what is our long-term strategy between insourcing and outsourcing, and what is the pros and cons between these two strategies?

Our Chenji9031 is the world's first 5nm chip. Compared to the flagship chip of the same industry, the flagship chip of the same industry in the world, we need to find the chips, find the mass production, find the car, find the full station, and run it through. So, of course, our chip team has already proven our ability. This is for our performance improvement. The improvement of the performance of the price, the competitiveness of our performance, and our cost are all very, very beneficial. Of course, we will insist on continuing to invest in this field for a long time. Of course, we have seen this chip. In fact, we have also seen some news recently. We are also working with our partners. We hope to be able to open our price chips to the entire industry. Thank you for the question.

Our NX1931 is the first smart driving chip made of a 5-nm process, and its takeout, mass production, application on the car, and also full-stack operations were all earlier than the competitors of the similar performance in the industry. And we also see how this in-house development chip is contributing to both performance improvement as well as the cost structure optimization. So for the long term, we will continue our investments and also efforts in the chip-related technologies. And in the meantime, maybe you have also noticed that recently we have announced a partnership where we are going to share our chip solution and the technologies to more industry players, both from the automotive industry as well as from the non-automotive industry, as we do see a good potential of applying this high computing power resonant chips on different types of devices, for example, robots. So we will work with our tech partners together to explore more use cases and also application scenarios of our chips.

Thank you. Thank you, Nick.

Thank you. Your next question comes from Ben Wong from Deutsche Bank. Please go ahead.

Thank you. The first question is about the margin in the third quarter. It clearly has a big margin drop by 4.4%, but it's just explained because of the construction. It seems not just enough. It seems because of the mix, because LRIT has been volume contribution more than 20,000 units. Can you break down about the margin driver? How much came from the margin from the onboard LID? How much from the cost reduction? Really, cost reduction was the key item. You actually got the cost of the job in the number three quarter. Thank you.

Hi, Oli. Regarding the increase in profit in the third quarter, as you said, we divided it into two parts. The main driver is the increase in sales. uh, uh, Thank you for the question.

As you've mentioned, our vehicle growth margin without in Q3 and the improvement from the previous quarter is majorly driven by two factors. The first is the cost reduction contributed by the supply chain. driven by the increase in our sales volume. And the second factor is the sales and the delivery of the L90, which is a high margin product that we have started to deliver from Q3. In comparison to Q2, we have delivered more than 20,000 L90, contributing better margin performance than the L60 in the previous quarters. These are two major drivers of the gross margin improvement in Q3. As for the specific breakdowns, I will also share more information offline with you.

具体的这个车型,我可以给你一些例子。 一个是刚刚William分享的,就像这个蔚来的这个全新ES8R, 在三季度我们就比较少了, 但是它的毛利也达到了20%。 像这个5566这样的顺销车型呢, We actually made a better balance between sales and horsepower. Basically, their horsepower reached and exceeded 25% in three seasons. In addition, we are like 66, 65, 55, which is basically between 15% and 20%. Then the L90 is also basically between 15% and 20%. So we actually have a single car model in the future brand and the new L90 that Le Dao has launched. In fact, the relative horsepower is still good.

But here I can share with you some of the vehicle margin performance model by model. For the new ES8, as mentioned by William, the vehicle margin is 20%. Of course, we didn't start the delivery of the ES8 until late Q3, so its actual contribution in the volume side is relatively small. And for the ET5, ET5T, their vehicle gross margin is between 15 to 20%, and for ES6 and ET6, their vehicle gross margin both margin is over 20% and even reaching 25%. As these are already products being in the market for a while, we have already wear off the new car bus on this model. And for the L90, its vehicle margin is around 15% to 20%. So overall speaking, for the new models plus the onboard L90, they do have a pretty good vehicle margin performance.

Thank you. My second question is about your latest joint venture with Acceleron. This is maybe a larger shareholder with 36.4% stake in the company. So my question is, number one, why are you choosing this partner, Acceleron, from Chongqing? Why is it not somebody else? Secondly, what's the business model about this joint venture? Is it just a sales company? Or is it actually you really made this joint venture to make a chip by themselves? Meanwhile, do you actually get any license fee already from Stone Venture? Because this is to be, we'll say, your choice. Thank you.

Thank you. I see some media reported some information about our chip, JV. We hope that through these methods, we can find cooperation partners to sell our chip to the outside world. . . . . . . They have their own resources. They also have their own Well, thank you for the question.

Yes, some media has covered the establishment of this chip joint venture. And also, we are leveraging our partners of this joint venture to sell our chip and also our IC design capabilities to other clients and also potential users. But this is not an exclusive partnership. We still have the possibility and also the opportunities to sell our chip solution and product to other partners and companies from our site. So that's one part of the way to sell that. We can also leverage our performance resources to provide our chip solution to other car companies or other clients, and they will be acting as a tier one providing such solution. In the meantime, as mentioned, we also see opportunities of applying such chip in the non-car market. or the non-automotive industry. So that is also a pretty common practice for the car companies to share their technologies across different industries. And for our partners, they do have mature experience and also skills in the industry, in the chip design industry. They also have their own client and also network connections. And also they have some chip products that can be complemented to our chip across different scenarios. Global speaking, we believe that this is a win-win partnership.

Thank you.

Thank you. Your next question comes from Jeff with Citi. Please go ahead.

Hi, this is Jeff from Citi. My first question is on the 4Q ASP. So it looked like the $34 billion revenue guidance should match with vehicle ASP up 12% Q on Q at 246,000 RMB. So, if the GDP margin reaches 18%, that's around 6 billion gross profit, right? So, this is my first question. And my second question is the first quarter. we recognize the 4Q guidance such as the revenue up 56% Q1Q, right, and the GDP margin reached 18%. But having said that, entering the first quarter next year, our volume is not going to drop back to the third-quarter level, right? And secondly, it looks like our high-margin products at Q1Q volume in the first quarter is going to be stable. So, therefore, the product mix should further improve into 1Q on the Q1Q base. So, my second question is, would the first quarter vehicle margin also stay closer to the 18% level because the higher margin products contribute more to the mix? Thank you.

Hi, Jeff. Yes, regarding the average selling price for the entire company in the fourth quarter, there will indeed be an improvement because our entire high-priced model, ES8, will be increased. Our entire fourth quarter, this year, the new ES8's trading target is 40,000 units. Most of them are placed in the fourth quarter. So you can see here that the average selling price of the 4th quarter is still increasing compared to the 3rd quarter. The second question is about the net profit of the 1st quarter of next year. Generally speaking, the 1st quarter is a half quarter. So the whole sales compared to the 4th quarter will definitely be adjusted.

Thank you for the question. Regarding the average selling price, it will increase in Q4. This is mainly driven by the sales of the high-margin products, the ES8. As for the full year, our volume guidance for the ES8 is around 40,000 units, and most of this sales will be happening in Q4. So it is also contributing to the improvement of the average selling price from Q3 to Q4. And regarding your second question on the growth margin outlook for Q1 next year, well, normally Q1 is the low season of the automotive industry. So overall speaking, the sales volume in Q1 won't be as good or as high as we normally expect for Q3 and Q4 in the previous years.

Of course, as William just said, because this year's fourth quarter, the whole car market's tail effect, that is, the seasonality, is not as strong as the previous year. So, the reduction of the first quarter of next year will be weaker than the previous year. In addition, in the future, especially the new ES8 storage order, it will also so that we can reduce the seasonal impact. So overall, compared to the fourth quarter of the first quarter, especially compared to the first quarter and the fourth quarter of this year, there will be a reduction. The interest rate will definitely drop compared to the fourth quarter, but the success of such a gap will definitely be much better than the fourth quarter of this year and last year.

But as also mentioned, in Q4 this year, we may not see the common south spikes fueled by the seasonality. In that case, even if we are going to encounter the low season Q1 next year, the actual impact or the decrease from Q4 this year to Q1 next year won't be that significant in comparison to the previous years. Not to mention that we also have the ES8 order backlog that will last until the next year. This will also help to offset the seasonality impact in Q1 next year. So overall speaking, our operations and also volume forecast for Q1 next year will not be as good as in Q4 this year, but will also not be as low as in Q1 this year. So overall speaking, the vehicle cost margin falls into the same trend. It will be lower than the margin outlook we have for Q4 this year, but will be better than Q1 last year.

Thank you, Jeff. Thank you.

Thank you. Your next question comes from Ming Sun Li with Bank of America. Please go ahead.

Hello, William. This is Ming. So my first question is regarding your overseas plan because I think in the past few years, you have built several sales channel in Europe, and could you give us more of your strategy for overseas expansion for next few years? Thank you. That's my first question.

Thank you. Yes, in the past few years, from 2021 to last year, we mainly adopted a way of operating in Europe. So from the perspective of the actual results, because there are many special effects of tariffs, we still know that we still have to rely on local cooperative partners to start business. So from this year on, we are actually starting to expand the local . . . . . . . . . . In general, we are changing the way we expand our business, relying more on local partners to sell cars. The key point of this period is Yongwu Chong. Yongwu Chong, our European version, and our right-hand man, this product is developed and is already developed. So this will also, and the range of adaptation of this small car is relatively wide. So we are confident in Yongwu Chong's future global market. So in the future, some of our LeDoux models will also enter the global market. So of course, in LeDoux, its product is also relatively good for the global market. In NIO, because this price is relatively high, so we will be more patient. Because it is in the premium market, it needs to be more patient to build this high-end brand. So in China, we first have NIO, then there is Angle, and then there is Five Flags. Thank you for the question.

We entered into Europe in 2021, and from 21 to 24 in the past several years, we've been doing direct to customers or direct to users, the direct selling model for the European market. Yet in the meantime, with all the external factors, such as the tariffs in EU, we also started to realize that for a broader market entrance, we do need to rely on and leverage more on the partners' support and resources. That's why starting this year, we have started to look for local partners for our market entry. Right now, we already have identified high-quality partners in more than 10 countries and regions. And the Firefly will be the first brand where we introduce to the overseas markets leveraging our partners' resources and the network. The product will become available not only in Europe, Asia, but also in Middle East and also South America. So overall speaking, for the global markets, we are switching our business model from the direct-to-solving business model to a more partnership-based and also local partner-supported business model. And also for the Firefly and its product, it's actually a very good product, suitable for broader markets, and also its European version and right-hand drive version already developed, ready for the global market entry. So we do have confidence in the global expansion of the Firefly product. And in the meantime, we are also developing the Envo product for the global market. It is also a brand with a reasonable price range and product lineup for the global market expansion. As for the new brand, it targets the premium segment. It does take patience and time to establish brand awareness on the new product. In that case, we are also more patient and also more long-term for the global market expansion of the new brand. So overall speaking, in China, we started with the new brand, the premium one, and then we have the Anvo brand and the Firefly. But for the global market expansion, we will take the opposite way, where we will start with Firefly, and then when Anvo has the product ready for the global market, we will then push out Anvo and then Neos.

Thank you, William. My second question is regarding the expansion of more mass market opportunity. So since is very successful in L90 and also recently your L60, volume sales also continue to grow. So in the future, do you expect to launch more product under the Anvo brand and to, have more business opportunity for a segment at 2,000, 200,000 RMB or even below. Thank you.

Thank you. From Lebao's brand positioning, it is serving the family market, the mainstream family market. So from the perspective of the mainstream family market, when we look at Toyota, like Volkswagen, we will gradually expand our product line. In the long term, we think it should be from 100,000 to 300,000 to provide rich products to serve more users. Of course, we started from 200,000. The R60 started from 200,000. Now, the R90 is close to 300,000. So, between 200,000 and 300,000, Next year, L80 will be added to the product. We are developing a platform that costs less than 200,000 yuan. It will be launched when it is suitable. Thanks to our more and more mature charging network, we believe that we can achieve a better performance in the 10 to 300,000 yuan range. Thank you for the question.

For the Envo brand, it is defined as a family-oriented brand for the mass market. So just like Toyota and Volkswagen, for the long term, we do need to create a wide and broad product bandwidth to cater to more needs and also to cover more press and the market segments. So for the long term, for the Envo brand, our price bandwidth will be ranging from 100,000 to 300,000 RMB. Within that range, we are going to offer more diverse products and also options for our users to choose from. We started with L60 priced around 200,000 RMB. And for the L90, the fully loaded one has a price point of around or close to 300,000 RMB. And the next year for the L80, it will also be between 200 to 300,000 RMB. So that is already a segment captured by the existing three projects. And in the meantime, we are also developing a new product platform where we are targeting the price range below 200,000 RMB. We believe that with this diversified product and price lineup plus more mature power swap network, we are able to achieve a reasonable market share in the price range from 100,000 to 300,000 RMB. This is also the single largest price segment and the market in China's passenger vehicle market. market with a total volume of 15 million. In such a large market, there's no reason for us to not launch enough products to capture a sufficient market share.

Thank you.

Thank you. Your next question comes from Jim Chang with CICC. Please go ahead.

Thank you for taking my question. I have only one question, a follow-up question in regards to the R&D expense. We have already seen our R&D expense in third quarter further decreased a lot to our previously guided level. But the industry has increased investment in intelligence and also AI-related other areas. How do we allocate resources allocate our limited R&D expense and how we balance the short-term R&D efficiency and also long-term R&D cost.

Thank you, Tang Jing. This year, in terms of R&D, we mainly used to increase efficiency and to identify the priority levels of different R&D projects. In terms of R&D, we use CDO's machine very well. We will not lose our long-term competitiveness. This is our bottom line. So one good thing we see is that the cost of R&D has dropped so much. We are very confident that we can guarantee the competitiveness of our core 12 power stations. Of course, if we look at the past few years, we actually have a lot of basic research and investment. For example, our chip operating system, and our smart base, our 900-foot high-end platform, and so on. There are some basic research Thank you for the question.

Actually, this year, our major focus in the R&D activities is to improve the efficiency and also to identify the priority of different R&D activities and the projects. In that regard, the CBU mechanism has played a very important role in helping to making full use of the R&D investment and expenses. And in the meantime, we will also make sure that we will not lose our long-term competitiveness as that is a baseline that they will not cross. So with the CBU, we actually are pleased to see that even if we're dialing back on the R&D expenses in the recent quarters, yet we still maintain the R&D capabilities and competitiveness in the 12 full stack capabilities for the Smart EV. So we're also confident to continue that competitiveness. And also in the past several years, we've made major investments in developing the fundamental technologies for the core EV products, including our chips, operating systems, intelligent chassis, and also 900-volt high-voltage architecture. As the foundation is already laid for the future products and the technology platform, the follow-up iterations won't be as costly as developing the foundation and also the fundamental technologies as the future iterations will also get more efficient in utilizing limited R&D resources.

In the field of AI, whether it is AD or NOMI, and other AI fields in the field of internal management and promotion, we will still ensure the strength of the research and development. Of course, we will also pay attention to the efficiency of the research and development. In fact, in the field of AI, if your algorithm and your data are efficient enough, We can see that we can achieve the same effect as our peers. We actually need to And also regarding the AI technology and its applications, like the smart driving and also our AI companion, Nomi,

as well as the internal management and efficiency tools, we will continue our R&D intensity and also efforts, but we'll achieve that in a more efficient way. And in terms of using algorithms and the data, we actually have identified some good practices and approaches that can be more efficient than simply putting up investments or resources for the sake of achieving a high computing power or data performance. So we have identified some approaches with higher return on the investment. And actually, in the AI industry, the success of the deep-seq has also proven that you don't need to make costly investments into developing a good large-language model performance. So it's the same practice for us. Not to mention that we can also leverage our collective artificial intelligence equipped on all the vehicles and also our data closed-loop With that, to achieve the same level of computing performance, we actually don't need to use that much computing power as our competitors or other peers are doing. So overall speaking, in terms of the R&D, we have been putting more focus on the return on investment evaluation as well as doing a better priority for our R&D activities.

Yes, thank you. I get it.

Thank you. Thanks. Thank you. The next question comes from the line of with HSBC. Please go ahead.

Thanks, Tim. I got two questions. First one is, could you share the cost benefit when we hit the volume threshold? The current run rate is half a million now, and it's only going to get higher next year. What benefit can we get, let's say, battery and other critical components that have high weight in the bomb structure?

Uh, yeah, uh, uh, . . . . . . . . . . Thank you for the question.

As mentioned, when the source volume reaches a certain level of scale, we will actually see how the economy of scale is contributing. to the improvement in the financial performance. And it's mainly contributed where it's mainly from two perspectives. The first is regarding stronger bargaining power along the supply chain. This can also help improve the vehicle cost structure as you already see in our Q3 and Q4 vehicle margin guidance. And for the next year, we don't have a clear picture regarding how much it will be contributed by the economy of scale from the supply side. Yet, as mentioned by William, our gross margin target for next year is 20%. That will actually partially be driven by the economy of scale on the supply side. And the second is regarding the improvement in the manufacturing efficiency and also cost optimization driven by the manufacturing. As we improve our sales volume, the overall amortization manufacturing cost per unit will be gradually optimized. That will also contribute to the improvement in the cost structure of our products.

Thank you, Stanley. The second question is regarding next year's new model. Could you help us to put in context the potential higher scale and also the mixed impact? We talked about the bigger vehicle has better margins. But we also talked about the envelope 90 is still 15% to 20%. So L80 will be below 90 in terms of the pricing, presumably. Will there be dilution or joint envelope scale outweighs that?

Yes. In the same way, we believe that it will be... Of course, because the pricing has not been fully finalized yet. But I believe that based on the positioning of these big cars, it will also bring us relatively good horsepower. Because these three big cars actually have a lot of synergy with the existing ES8 and L90. So from this year to next year, combined with the launch of ES8 and L90, we will also have more of such a steady movement. These will benefit the next three big cars. So in general, next year, plus the ES8 and L9, these five big cars, their sales proportion will reach a very high percentage of our total sales. In addition, its horsepower level is also compared to the low-priced models. It should still have a good horsepower level. Then to help us achieve a total overall 20% horsepower next year.

Thank you for the question. As mentioned, the three new large SUV models that we're going to introduce next year, they are all positioned at the higher end of the price spectrum of their respective segment. We haven't finalized the prices for these new models yet, yet we already expect more significant margin contribution by these three models. Not to mention that these three large models, they are fully synergized with the current all new ES8 and L90 from the cost structure. So this year and the next year for the cost optimization and the cost saving opportunities that we've identified on the ES8 and L90 can also be carried over to this three new models. So with five large models combined, we expect them to contribute to good product performance as well as on the margin levels, overall speaking, achieving 20% of equal margin.

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 further questions, please feel free to contact our investor relations team through the contact information on the website. This concludes the conference call. You may now disconnect your line. Thank you.