XPeng Inc.

Q4 2022 Earnings Conference Call

3/17/2023

spk23: Hello, ladies and gentlemen. Thank you for standing by for the fourth quarter and fiscal year 2022 earnings conference call for Xpong Inc. At this time, all participants are in a listen-only mode. After management's remarks, there will be a question and answer session. Today's conference call is being recorded. I will now turn the conference over to your host, Mr. Alex Shia, Head of Investor Relations of the company. Please go ahead, Alex.
spk13: Thank you. Hello, everyone, and welcome to XPeng's fourth quarter and fiscal year 2022 earnings conference call. Our financial and operating results were issued by our Newswire services earlier today and available online. You can also view the earnings press release by visiting the IR section of our website at ir.xiaopeng.com. Participants on today's call from our management will include co-founder, chairman, and CEO, Mr. He Xiaopeng, vice chairman and president, Dr. Brian Gu, Vice President of Finance, Mr. Dennis Liu, Vice President of Corporate Finance and Investment, Mr. Charles Zhang, and myself. Management will begin with the prepared remarks, and the call will conclude with a Q&A session. A webcast replay of this conference call will be available on the IR section of our website. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the relevant public filings of the company as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that EXPON's earnings press release and this conference call include the disclosure of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. EXPON's earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. I will now turn the call over to our co-founder, chairman, and CEO, Mr. He Xiaopeng. Please go ahead.
spk07: Hello, everyone. In 2022, Xiaopeng Motors' delivery volume has exceeded 120,000 units. It is ranked 10th in the list of new energy vehicles in China, with a growth of 23%. Looking back, the industry competition between the macroeconomic economy and new energy vehicles in 2022 has brought many challenges. Our performance has also been under pressure. But in another way, Fortunately, these pressures have also helped us to see the challenges of the industry earlier than most companies in our company. What I am very happy about is that we started to analyze, dig up and solve these problems earlier than most companies in our industry. Since the end of last year, we have decisively carried out strategic review and adjustment, and greatly expanded and promoted the overall organizational structure. and the core to strengthen the short-term of comprehensive capabilities. We choose to self-defeat to carry out a real 20-time startup on a higher dimension and platform. I think that Xiaopeng is about to take a turn. Because we see what our goal is, what our advantages and our disadvantages are. We not only have confidence in the growth of sales and market share, but we are now more focused on the basics, including organizational capabilities, conventional capabilities, marketing capabilities, and the comprehensive improvement of cost capabilities. Hello, everyone. In 2022, XPeng delivered more than 120,000 electric vehicles, a year-over-year increase of 23%, and ranking number 10 among emerging EV makers in China, as measured by vehicle insurance registration volume.
spk21: Throughout the year, a challenging macro environment and increasingly intense competition in the NEV market placed pressure on our performance. Amidst this pressure, we saw an opportunity to become a first mover in tackling the challenges faced by industry and examine inhibitors to our business growth at the same time. At the end of last year, I rapidly and decisively conducted a review of our strategies and implemented a series of significant adjustments to our organizational structure with a focus on improving areas of weakness. We have decided to start the change with ourselves and revamp XPeng's business with a startup mindset on an elevated platform with new angles. I believe XPeng is approaching an inflection point. as we have clearly identified what our goals are and what our strengths and weaknesses are. We're now building recovery momentum in ourselves and market share expansion. As we do this, we're placing a high premium on improving our organization and cost efficiency to fortify our strong foundation and better position our company for sustainable growth over the long term. Our overarching goal is to make XPeng a leader in the Chinese EV market and ultimately win the global EV race.
spk07: We have adjusted and upgraded the management team from the top. Wang Fengying, a new president with more than 30 years of experience in the automotive industry, has joined us. Fengying will be fully responsible for Xiaopeng's product planning, sales, brand market, and the entire large product system. Fengying has a deep background in industry experience and market dynamics. Special excellent and strong support This will help Xiaopeng's products more accurately grasp the customer demand And greatly improve our ability and efficiency in the brand market sales service At the same time, we also adjusted the management structure to make it more flat and huge From February of this year, Xiaopeng's all design teams, R&D teams, production teams, supply chain teams, and organization management teams, process management teams, all reported directly to me I believe that in the next few months, our overall planning ability, decision efficiency, and execution efficiency will be significantly improved. These adjustments have effectively activated our execution and operation power. I believe that in the long term, I will continue to pay attention to how to achieve several times the efficiency and customer value through the same number of people and through technology innovation and management innovation to greatly reduce the cost of the whole chain.
spk21: What excites me is that our strategic adjustment has induced meaningful results in the first quarter of this year, which gives me confidence that we will achieve sustainable and greater breakthroughs in the next few quarters. My first step to the organizational restructure started with changes and upgrades in our top leadership. Ms. Feng Ying Wang has joined our team as president of the company, bringing us more than 30 years of experience in the automotive industry. Feng Ying is taking full responsibility for our product planning and sales operations, and is also in charge of our product platform management scheme. Her extensive industry experience, in-depth market insight, and strong execution capabilities will help our product capture customer demand more accurately, while greatly improving efficiency in our sales and services divisions. At the same time, the adaptations to our management organization are geared toward a flatter and more concentrated structure. Since February, all design, R&D, production, supply chain, and organizational management functions directly report to me. I believe that these shifts will significantly improve our planning capabilities and lift the efficiency of our decision-making and execution in the coming months. More importantly, these adjustments have effectively refreshed our execution and competitiveness. For the foreseeable future, I will remain focused on lifting the labor efficiency across our organization by multiple times so as to generate increased customer value with the same headcount and greatly reduce costs across a full range of processes through technology and management innovation.
spk07: and product design, we will start to rely more on the value of the customer and the realization of the value and the differentiation to innovate. We will adjust our configuration combination in the subsequent models, including new models and modified models, to integrate the modular design of the whole car with the consistent design of the car. In the design of the interior and exterior, because Xiaopeng's users all have a high pursuit of the United States, At the moment, I have directly managed the styling team and started to build three styling front-end teams at the same time for creative competition. I believe we will continue to significantly improve our interior and exterior design space. At the same time, when we promote NPS users, it is one of the core goals of the assessment of multiple business departments in the company, and we collect and reply every month. NPS assessment will drive us in product planning, With regard to our product planning and design, we concentrate on customer perceived value and product differentiation in our innovation. We'll make substantial changes to future product model configuration mix
spk21: whole vehicle modularized design, and consistency in smart features. In terms of interior and exterior styling and design, to meet XPeng customers' high standards for aesthetics, I am directly running the styling design division and building three teams that compete with each other to generate creative ideas. These initiatives will continuously improve our interior and exterior styling and space design capabilities. At the same time, I incorporated the Net Remoter Score, or NPS, into the core performance indicators for a variety of business functions and required feedback collection on a monthly basis. The NPS performance evaluation will anchor the transformation of our product planning, design, and development toward a customer-centric pathway. I believe our new products, our OTAs, and new services to come will demonstrate substantial progress. 在品牌营销方面,我们将围绕全自动驾驶这个核心差异点打透。
spk07: to improve users' awareness, expand our market, and start our current focus from the 1st and 2nd line market to the 3rd and 4th line market. We have completed the initial integration of brands and market teams and reaffirmed the overall strategy. This will help us to effectively improve the quality, effect, and flexibility of sales in the coming months, and greatly reduce sales costs.
spk21: In terms of branding and marketing, we'll harness our core differentiation in autonomous driving to the full extent and enhance customer perception. We are broadening our addressable market, expanding our penetration from Tier 1 and Tier 2 cities to Tier 3, Tier 4 cities. So far, we have completed a preliminary merge between our branding and marketing teams and refreshed our overall strategy. This will help us improve the quality, effectiveness, and flexibility of marketing activities in an effective way going forward, while significantly reducing marketing expenses. We have already flattened out the management hierarchy in our sales network. Furthermore, we are enhancing our network coverage, increasing competitive capabilities in our frontline sales staff, and developing XPeng's powerful data-driven sales touchpoints. in order to achieve significant strides in sales growth.
spk07: performance, price control, and many other aspects are very clear and clear. As everyone knows, in the current market, the new orders are very weak. Recently, we have shown an obvious upward trend. Our new orders in February have increased by 100% compared to January of this year. And the orders after the PGI listing are strong. Our new orders in March are much better than in February.
spk21: On March 10th, we officially launched the new P7i sports sedan, which is an upgraded version of our highly successful P7 model. Deliveries to customers also commenced in this month. I'm pleased to see our in-store traffic and test driving volume both hit new heights in recent months following the P7i's launch. This new product's smart features, styling design, and performance, among other clear advantages in Vibery with similar products, were well-received among customers. Amid the market's prevailing weakness in new order intake, our results outperformed the market. Our new order intake in February increased 100% over the previous month. With the strong momentum of P7I orders following its official launch, we expect to see a considerable month-on-month growth of total new order intake in March. This marks an initial success following our comprehensive transformation, which has also boosted our company morale.
spk07: Our second heavy-duty new model G6 will be released in Shanghai and will be officially released and delivered at the end of the second quarter of this year. G6 not only has the most advanced electrification and automation technology in the range of 200,000 to 300,000 new energy SUVs in the price range, but also in terms of space, battery life, shape and interior. The advantage is very prominent. We believe that the G6 will become one of the top selling models in this market. After mass production, it will achieve a monthly sales target of 2 to 3 times that of the P7. We will also launch a new pure electric 7-seat MPV in the second half of this year. This car will satisfy the needs of family customers who are looking for more space and energy self-sufficiency.
spk21: Our second new product model coming up this year, the G6, will make its debut at the Shanghai Auto Show. Its official launch and vehicle deliveries will occur around the end of the second quarter. The G6 will bring the most advanced electrification and smart mobility technologies to the 200,000 to 300,000 yuan price NEV SUV market, with unrivaled interior space, range, styling, and interior decoration, we believe the G6 will become the top-selling model in its market segment. Following the ramp-up of G6 mass production, we expect G6 monthly sales target to be two to three times that of its P7 predecessor's sales. In addition, in the second half of 2023, we'll launch a brand-new BEV seven-seat MPV. This new MPV model is designed to cater to customer cohorts that demand a larger interior room while serving the needs of our family customers for a human machine co-pilot.
spk07: 最近一段时间,以CHAT GPT-4.0为代表的能工智能应用, 让数以亿计的用户看到的生成式AI模型的巨大前提。 这次我感到非常的兴奋,这标志在未来类似机器大佬的通识能力, will enter a new stage, and they can be localized to make the implementation of automated driving in the future will have a new concept and efficiency improvement, and make automated driving faster from L4 to L5 in the future. We look forward to GPD's relevant technology and Xiaopeng's car business. Every part of the process will have more coincidences, which will bring a disruptive breakthrough for our user experience and operating efficiency.
spk21: Recently, ChatGPT 4.0 and other AI-based applications have created a buzz among hundreds of millions of users on the massive potential of generative AI models. I am also very excited about this. It represents a brand new phase of artificial general intelligence with on-premise deployment that does not rely on cloud end. which not only redefines the pathway to realize autonomous driving, but also increases its efficiency. Given this development, there is an even higher possibility that autonomous technology further advances from L4 to L5. We expect to incorporate GPT technology deeply into XPeng's business across the board to create groundbreaking user experiences and exceptional improvements to our operational efficiency.
spk07: 从3月下旬开始,我们的X-NGP将会在广州、深圳、上海这三个城市多车型加速落地。 通过城市NGP的OTA,我们在中国率先量产了基于Transformer的BEV思绪网络X-Lite。 这在深度学习算法的开发运动员取得了里程式的进展。 In the second half of this year, based on X-Net's in-depth learning algorithm, X-NGP will no longer rely on high-resolution maps. This can achieve the coverage of dozens of cities across the country. From our current test results, the new version of X-NGP clearly surpasses the actual use of similar technology in the United States. I believe that Xiaopeng's automated driving technology and user experience will also be able to overcome this problem.
spk21: In late March, we began accelerating the OTA rollout of CDNGP, compatible with multiple models in several cities, including Guangzhou, Shenzhen, and Shanghai. Through CDNGP's OTA, we took the lead in mass-producing the transformer-based BEV time series network, or XNet, in China, which achieved a milestone in deep learning algorithm development and application. In the second half of this year, XNGP, powered by XNet's deep learning algorithms, will no longer depend on a high-definition map. That said, XNGP will be supporting drivers on more urban roads across over 10 cities in China. Results from our testing showed the new version of XNGP outperformed PEER's actual on-road performance in the United States. This leads us to believe XPeng's autonomous technology and its customer adoption is approaching a pivotal turning point.
spk07: Scenarios, customer experience, and software cost. These three are the core of Autopilot. From the perspective of the scenarios covered by Autopilot, we have entered from high-speed scenarios to high-frequency and high-definition scenarios for users, and we are about to further open all scenarios, that is, scenarios that include community roads and non-public roads point by point. And in the third quarter of this year, will be promoted from the current three cities to multiple cities across the country. In terms of customer experience, we realized for the first time during last year's test that it is a very important psychological level for customers to be able to drive their autonomous cars at ease. In other words, they can feel safe and at ease when driving their autonomous cars at ease, allowing the machine to help us drive the cars while we are in control. Through several OTAs from the end of last year to now, We believe that every year, the XNGP OTA can increase the machine's driving age by one year. That is to say, in the next two to three years, we will achieve a three-year driving experience with a golden age. The 100-kilometer control rate in the city will drop once or less. In addition, in terms of cost, we plan to make the BOM cost of XNGP next year, including the cost of software and hardware BOM, a significant drop. and from the current software and hardware sales to software and hardware separation sales, allowing the highest level of full-automatic value to become Xiaopeng's all-round standard, and allowing more users to have the ability to use the latest full-automatic value. I believe that Xiaopeng will make a complete breakthrough in the above three directions, and will create huge value for our users, and build our technology chain, and bring us long-term and sustainable large-scale growth and profit.
spk21: We have built notable leadership in smart technologies as well as customer adoption of smart technologies compared with peers. We're driving our technology roadmap and commercialization pathway to cross over the inflection point and reach an accelerated growth curve. While keeping high safety standards remains a top priority of our technology advancement, will also be focused on rapid development to improve scenario coverage, user experience, and software and hardware cost optimization. In terms of scenario coverage, we have expanded the usage of the advanced technology from highway scenarios into city scenarios, where ADAS are used at high frequency and even become an essential driving tool. Going forward, we'll strive to further broaden ADAS usage to more end-to-end driving scenarios such as internal compound waste and non-public roads and expand our geographical coverage from three cities to more major cities nationwide beginning in the third quarter. In terms of user experience, we have achieved an important psychological barrier. We have achieved an important psychological barrier for customers to use autonomous driving to relieve drivers. That is, drivers can let the machine safely take the wheel, resting assured that they are acting only as a supervisor. Looking ahead, we expect that through continuous OTA upgrades, XNGP's driving skills will escalate every year and in two to three years reach a level that is equivalent to a human driver with three years of driving experience. We also expect that the number of manual takeovers per 100 kilometers will be reduced to one or fewer. Regarding cost efficiency, we plan to cut XNGP's BOM costs significantly next year and adjust our sales model from one that bundles cells of software and hardware to one that splits the cells of software and hardware, which is going to enable autonomous driving on all of our new vehicles and allow more customers to use the latest autonomous driving capabilities. In pursuit of breakthroughs in the aforementioned three realms, we'll bring great value to our customers and build our competitive edge in technologies, delivering long-term sustainable revenue growth, at scale and with improved margin contribution. It has been said that the past five-year period was the golden age for new energy vehicles. I believe the next five-year period will be the golden age for autonomous driving. During the five years to come, XPeng's highly advanced autonomous driving technology and our efforts in optimizing our organization and making up for our weaknesses will help XPeng accelerate our ability to gain top market share.
spk07: I think a very, very, very important point is that a company must also have super-strong cost control ability. So this will also be the core ability of Xiaopeng to win the competition in the future. We will use platform modularization and a lot of basic innovation to promote our low-cost strategy in these two directions. From this year, Xiaopeng's pure electricity platform, electronic electrical structure, Powerful system, smart service, and software will all be equalized and into a truly systemized state. This will allow us to use faster, lower cost to provide users with better experience and better quality products. At the same time, it will effectively make it easier for our suppliers and partners to get a double profit. In the past, Xiaopeng's technical research and development capabilities The direction of the development is reflected in the limited performance and performance. In the future, our development capabilities will be more reflected in maintaining the function and performance at the same time, but the cost will be greatly reduced and its behavior will be standardised. We have already designed a very clear execution route diagram. Through many methods, such as technology innovation, configuration efficiency, and so on, from this year to next year, the cost of automobiles will be reduced by more than 50%. to reduce the cost of the whole car's power and hardware to about 25%. I am very happy that our current design, development, supply chain, and manufacturing teams are cooperating together. We are very confident that through innovation, in the future, the cost control will be very good. This is equal to a huge increase in our product value.
spk21: In the face of fierce competition, in addition to our leadership in autonomous driving and aesthetic design, while greatly improving our product planning abilities, marketing efficiency, and organizational capabilities, I believe more powerful cost control will be the core competitive edge that will enable XPeng to secure its leadership in the EV market. We'll advance the platform-based approach and technology innovation to propel our cost reduction strategy. Entering 2023, we're applying a full platform engineering approach for our BEV vehicle platform, electrical and electronic architecture, powertrain system, and ADAS software and hardware development. This signals that we are entering a new phase of car making in a unified system. In this way, we're able to develop products with superior product quality and customer experience at a faster pace and at a lower cost. In the past, our R&D strengths were primarily manifested by our leading product performance. In the future, our R&D strengths will be underlined by maintaining the leading performance while achieving remarkable cost reductions. We have mapped out our strategic execution roadmap with associated cost reduction, including an over 50% decrease for autonomous driving costs and about 25 degrees for vehicle hardware costs, including power chain, over the 2023 to 2024 period by means such as technology innovation and optimized configurations. I'm pleased to see that the design technology R&D, supply chain, and manufacturing teams are now working in a synergistic way to make our efforts and products more competitive through innovations.
spk07: From the perspective of cash flow, at the end of last year, our cash flow exceeded 3.8 billion RMB. In the past few years, including this year, 2023, we will complete investment in two major production facilities. At the same time, we have built three powerful vehicle platforms. This is enough to support our future production capacity and vehicle platform launch. Then I believe that this will also greatly reduce our capital start. At the same time, our development direction will be more focused on the most suitable long-term direction and make the user feel and achieve standardization. And this can make a huge difference in the scale cost. We will continue to improve the performance efficiency of the whole process. For example, at present, we are in the sales system through the optimization of the door chain layout to improve electricity efficiency. I believe In terms of cash liquidity, our cash on hand at the end of 2022 amounted to over 38 billion RMB. As we have nearly completed our investment in our two manufacturing bases over the past few years, including this year, our capex will decline substantially.
spk21: We have also established three powerful vehicle platforms that can support a series of new model launches over the next three years. Our R&D will further concentrate on initiatives that best correspond with long-term trends and further differentiate our products in terms of customer experience and cost. We'll also pursue improvements in our operating efficiency throughout the entire process. For example, within our sales operations, We strive to improve same-store efficiency by optimizing our store network. We believe these cost optimization efforts will strive to deliver material results beginning in the coming several months, including in the second half of this year.
spk07: to expand our scale and market share, to form sufficient scale advantages in software and hardware. This is our first strategic goal. Although in the automotive industry, the period of adjustment of products and management today is much more difficult than that of the Internet and other industries, and the period of time needed is also longer. But I am still willing to sacrifice short-term sales to pursue a more patient
spk21: It has always been my intention to build a successful company that can grow in scale instead of a small company in a niche market or just any generic company out there. Expanding our scale and market share to achieve economy of scale in both software and hardware is the primary goal in our long-term strategy. Although the product and management adjustment cycle in the automotive industry is more difficult than other industries and takes a longer period of time, we are still willing to sacrifice short-term sales and more patiently pursue greater victories in the medium and long term. 惊喜的是,随着我们当前在管理上做的大幅度且快速的调整,以及当前我们在产品组合上
spk07: I have strong confidence that from the third quarter of this year, the sales of small and medium-sized enterprises will see a large growth of the same ratio and return ratio, and a higher proportion than that of the industry.
spk21: Excitingly, as we rapidly implement adjustments and changes to our management, in addition to instituting a host of upgrades and iterations in our product portfolio and marketing capabilities, we have seen encouraging changes and positive results. I'm firmly convinced that beginning in the third quarter of this year, XPeng's monthly sales number will achieve significant growth, both sequentially and year-over-year, as well as be much higher than the industry's average growth rate. 我相信才会形成下一个阶段持续稳定的高速被爆发跟巨大增长
spk07: I would reiterate that our current focus is on building and improving our capabilities in organization, product design, marketing and cost control.
spk21: Continuous efforts in refining, management, and accelerated new product launches in the era of autonomous driving will lead us to the next level of exponential growth. We'll continue to strive for this goal. Lastly, we expect our total vehicle deliveries to be between 18,000 and 19,000 units in the first quarter of 2023 and revenue to be between 4 billion and 4.2 billion RMB.
spk07: Thank you, everyone.
spk21: I will now hand over to our Finance VP, Dennis Lu.
spk03: Thank you, Mr. He, and hello, everyone. Now I would like to provide a brief overview of our financial results for the first quarter of 2022. I will reference RMB only in my discussion today unless otherwise stated. Our total revenues were RMB 5.1 billion for the first quarter of 2022, a decrease of 39.9% year-over-year, and a decrease of 24.7% quarter-over-quarter. Revenues from real estate sales were RMB 4.7 billion for the first quarter of 2022, a decrease of 43.1% year-over-year, and a decrease of 25.3% from the last quarter. The year-over-year decrease was mainly attributable to lower vehicle deliveries for the G3 and P7, while the quarter-over-quarter decrease was mainly due to lower vehicle deliveries for the P5 and P7, with partial offset by the newly launched G9. Growth margin was 8.7% for the first quarter of 2022, compared with 12% for the same period of 2021, and 13.5% for the last quarter. Vehicle margin was 5.7% for the first quarter of 2022, compared with 10.9% for the same period of 2021, and 11.6% for the last quarter. The year-over-year and quarter-over-quarter decreases were mainly explained by the increased sales promotion. R&D expenses were RMB 1.2 billion for the first quarter of 2022, a decrease of 15.3% year-over-year, and a decrease of 17.9% quarter-over-quarter. The year-over-year and quarter-over-quarter decreases mainly in line with timing and progress on new vehicle programs. SG&A expenses were RMB 1.8 billion for the first quarter of 2022, a decrease of 12.9% year-over-year, and an increase of 8% quarter-over-quarter. The year-over-year decrease was mainly due to the decrease of the commission paid to the franchise stores associated with lower vehicle deliveries. The quarter-over-quarter increase was mainly attributable to higher marketing, promotional, and advertising expenses to support vehicle sales. As a result of the foregoing, lost-farm operations with RMB $2.5 billion for the first quarter of 2022, compared with RMB $2.4 billion for the same period, 2021, and RMB $2.2 billion for the last quarter. Net loss was RMB $2.4 billion for the first quarter, compared with RMB $1.3 billion for the same period a year ago, and RMB $2.4 billion for the last quarter. As of December 31, 2022, our company had cash, cash equivalent, restricted cash, short-term deposit, short-term investment, and time deposit in total are under $38.3 billion. To be mindful for the length of our earnings call, I will encourage listeners to refer to our earnings press release for fuller details of our financial results for the fourth quarter and full year 2022. This concludes our prepared remarks. We will now open the call to questions. Operator, please go ahead.
spk23: Thank you. If you wish to ask a question, please press star then 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star then 2. If you are on a speakerphone, you will need to pick up the handset to ask your question. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. For the sake of clarity of order, please ask one question at a time. Management will respond and then feel free to follow up with your next question. Our first question will come from Tim Hisile of Morgan Stanley. Please go ahead.
spk10: Because we now know that the electric car market of 200,000 to 350,000 people is currently the main focus of small and medium-sized cars. It is also a major source of sales growth. But over the past period of time, we have also seen that Tesla and other new power partners, BRD, and other new car brands are aiming for this. How do we see the development of this competitive framework? Especially like yesterday, BRD also targeted their 200,000 Han, So my first question is about the competition because the market with pricing segment of 200 to 350,000 RMB or 30 to 50,000 US dollar is expanding stronghold and the key volume driver. However, if you look at what happened over the past few quarters, I think Tesla, EV startup, BYD, and even traditional car makers, EV brands, are getting more aggressive in this pricing segment. And I think yesterday, BYD just upgraded its Han EV and Tan DMI to focus on the $200,000-plus market, and Tesla might consider having another round of price quads. So how do you think about the competitive landscape in this pricing segment? And how could X10 make sure that its upcoming models, including G6 and the model next year, could stand out in the crowd of competitors? Will we be more pricing aggressive with more manifold cost down in the following quarters? So that's my first question. Thank you.
spk07: Thank you. That's a very good question. I think recently, In the first two to three years, the price spiral will be extremely aggressive. The gasoline car will face the biggest challenge. It comes from new energy vehicles and electric vehicles, so the gasoline car will definitely counterattack. I believe that the price of the power battery's production and the raw materials on the top of the power battery will exceed the production capacity and the raw materials will obviously decline. a lot of automobiles have set a certain foundation. Under these two circumstances, I believe that many automobiles companies will take a more aggressive approach, with market scale as a priority, to make a lot of movements. I have repeatedly mentioned that Xiaopeng's strategy is to make the scale better. And I think that in order to make the scale better, in addition to Xiaopeng strengthening our advantages, including the automatic driving, on the other hand, I think the most important point is the cost. In fact, in the past, Xiaopeng's technical innovation was mainly for the function and performance. Today, we have several departments, and when we look at it from the original 25 to 30 million as the main one, and now look down and see 200,000, When we have 250,000, 300,000 in these three areas, we have seen a lot of opportunities that can be greatly reduced, including the cost of our internal marketing, and the cost of development that does not create customer value, as well as the cost of our entire hardware. So in the future, I believe that one of the very important things for Xiaopeng is how to make the scale of automatic driving and autonomous vehicles to the forefront, even to the first. At this time, we will definitely continue to take advantage of the higher status of the market in the new model and the new model. This is our overall strategy. Thank you.
spk21: Thank you for your question. It's a very good one. Basically, we expect the market to experience a series of price cuts by different OEMs in the coming couple of years because of the very intensified competition or competitive landscape in the current market, especially for traditional OCE cars. card makers because we expect to see a lot of oversupply of capacity in the market as well as some reduction in raw material pricing which will lay a good foundation for a different price cut to be expected in the near future and as a result different brands and different players in the market will launch a series of price cuts in order to expand their market share. Now, as I mentioned in the prepared remarks that the current first priority for XPeng is to optimize our organization as well as to expand our scale. And in addition to that, we also will continue to improve our autonomous driving capabilities as well as optimizing our design language. Now, next to it, we also will prioritize the cost optimization. In the past, we mainly focused on the development of the functionalities and the overall performance of our products. Now, when we expand our targeted price range to cover more than $250,000 and $300,000 to actually a little bit lower to $200,000 RMB, we realize there's actually a lot of room for improvement in terms of cost reduction, for example, just to reduce our overall bond costs in the R&D sector and also to integrate our software I mean an aspect of our software and hardware design as well. That is why in the coming future we will first of all prioritize the scale development as well as improving our autonomous technology and overall product quality and performance while improving our cost structure in many new areas especially to be reflected in our newly launched products to be expected, and also we will expect some strategic price reduction in the near future as well, so as to expand our market share and promote deliveries. Thank you.
spk07: We can see that only about 50 used car brands have sales in China. I think there may be only 25 after five years. Then after ten years, it may only be between a few to ten. What does this mean? It means that today, whether it is 100,000 a year or 500,000 or 700,000 a year, the car company cannot survive for 5 to 15 years. The minimum number that can survive in China is that it will reach 3 million a year. If Xiaopeng, in the entire strategy adjustment last year, must think that there is no basic hardware scale and basic software scale, there is no way that China can survive. This does not mean that it can become the first. This is the basis for survival. So this is what we think in the next five years, or even ten years, use technology innovation and strictly control the cost to reach the first scale in the market, in order to be able to really make a living. Looking back in 2017, there were about 300 car-making startups and 70 passenger vehicle makers in the market.
spk21: By now, there's only 50 players left, and in five years' time, maybe there will be less than 25, and in 10 years' time, less than 10, which means that by that time, the annual deliveries of each single car makers will not be 100,000, 50, you know, half a million or 700,000, it needs to be at least 7 million in order to survive, which means that we need to have a solid foundation in terms of our hardware and software capabilities, as well as our cost control capabilities as well in order to just survive in the market and the fears and intensify competition, not you know, letting alone becoming the winner in the competition. And that is why in the coming five to 10 years, our priority will be to solidify our leadership in our technological R&D capability, as well as our cost control.
spk22: Thank you.
spk10: Okay, thank you very much, Mr. Feng, for sharing this detail. My second question is about the channel. Can you share some of the strategies of the channel this year? In the report, Mr. Xiaopeng also mentioned a parallelization of the sales network. In addition, we also saw that in China, in addition to the first and second-tier cities, the growth of new cars in the low-tier cities may be faster in recent years. Each family is also in the downfall of the channel marketing system. Can you please share with us, Mr. Xiaopeng, some more details about this in this area? We originally had a mixed model of direct sales and marketing. So my second question is about the sales network. Could you please help to update us the expense-to-channel strategy this year? Well, Tier 1 tier cities, the wealth status is strategically critical. The growth in the lower tier cities in China will soon outpace the higher tier cities and become a key growth driver. So quite a few EV makers are targeting to pantry into the lower tier cities. So how is X-Pen going to grow its presence in the lower-tier cities? And in the meantime, will the company change its hybrid business model consisting of the direct sales and the dealership? Will there be any material changes in the upcoming quarters? That's my second question. Thank you.
spk07: Thank you. Our new president, Wang Fengying, is far ahead of me in terms of channel research. So in the middle of a month, he discussed with me about the channels. I believe that there are a few places that are very clear about the channels' strategy this year. I think the first one is that we will continue to push the supply and authorization firmly forward. And I believe that the proportion of authorization over time will be relatively increased. This is the first point. The second point is that we will definitely flatten the management of the channels. This is a very important point for us this year. Thirdly, our channel will definitely turn the channel that mainly focuses on sales into a channel that has more 4S functions. So these are the points that we are currently working on this year. Thank you.
spk21: Thank you. Our newly recruited senior management member, Ms. Wang Fengying, actually is way more experienced than me in terms of channel distribution. And one month after her enrollment, she already had numerous discussions regarding our distribution channels and our network development. So for this year, we have several strategies in place already. First of all, we will maintain our current model of having directly run and franchise stores. in order to promote our sales and distribution. However, the mix from franchise stores will increase. And the second point is that we have and will continue to flatten out our management structure so as to improve the overall service quality as well as to improve the profitability and efficiency of our distribution channels And the third point is that we will actually expand the functionality of those kind of channels to include not only sales purposes or functionality, but also to increase forest function as well, so as to provide a more comprehensive set of services to our customers. Now, one of our upcoming next steps, which I can review right now, is that we don't believe that it would be very effective to have a large number of small distributors or small channels Rather, we prefer to prioritize the development of quality channels to improve our overall service and distribution efficiency. Thank you. Regarding the second part of your question, which is the channel network in Tier 3, Tier 4 cities, first of all, we will work with our partners to expand the channel and network. In addition to that, we will also design and curate appropriate products suitable for Tier 3, Tier 4 cities, and we do have some facelift products upcoming to be expected.
spk22: Thank you.
spk08: Thank you very much for all the insightful updates. Thank you. The next question comes from Paul Gong of UBS.
spk23: Please go ahead.
spk17: Thank you for accepting my question. My first question is, we have seen Mr. Feng come here for several months. I am actually quite curious. As someone who has 30 years of experience in the automotive industry, he may be the most experienced old man in the automotive industry. What are his thoughts on the current status of Xiaopeng Automotive? My first question is regarding, say, on the arrival of Ms. Wang Feng Yin's new role as a president, what has been her biggest criticism on the Expo motor for the current situation and what is her plan to change it?
spk07: Yes, it's been about a month and a half. I think he has two biggest criticisms about the company. For me personally, there is only one. He thinks that our planning and marketing are not good enough. We have seen a lot of problems. We all know that the happiest person is the one who sees the problem and can solve it. The most afraid person is the one who can't see the problem and thinks he did a good job. Now, this is a very interesting question. Ms. Wang has been with us, has arrived for more than one and a half months.
spk21: Her biggest criticism for the company is twofold. The first one is on the planning side and the other is on sales and marketing. I mean, this is definitely a very positive sign because it is better to see the problems and have solutions rather than, you know, being fully complacent without seeing the root cause of the problems. And so right now we are in full force to correct some of the mistakes that we previously had. And personally, you know, I feel a lot of pressure from Ms. Wong because she is working seven days a week. And right now we are all following this trend of being very, very diligent at work. So that is a lot of pressure on me.
spk17: Okay, then my second question is what the audience mentioned just now, which is that a discussion on GPT has been quite hot recently, and it also talks about its potential use on smart cars. Can you share with the audience what kind of scene we can imagine in the long term? How does this technology land or create an experience? So my second question is regarding your interesting comment on the GPT's application into the smart vehicles. Can you give us some kind of some example? How do you imagine such kind of technologies to be used in the long term in the smart vehicles? And if so, shall we pay for certain technology royalty or kind of technology servicing fee on that?
spk07: GPD, I believe, will have value for Xiaopeng in the short term, medium term, and long term. If we talk about the value for the long term, I think one of them is that when Xiaopeng When it comes to high-level autonomous driving or when it comes to off-road unmanned driving, you will find that the car can be used as a transportation tool, but if you want to make it smarter, it will find that it can't solve a lot of problems. Because these problems have been solved by the driver in the past. So after GPT is deployed locally and connected to the cloud, I believe that the basic L4 will be able to do the real full-scale L4 and even do L5 further. I think this is a huge to push this speed forward. Regarding how GPT can be implemented in the car industry and how to pay for it, I think for GPT, at present, I think more should be done in the software service, education industry, or in the similar document editing industry, which will produce quick results. But for hardware, because the combination of hardware and software is not the same as pure software and pure software. So from our point of view, we are more willing to look at the landing of GPT in other software-based technology industries. After that, we will see that there may be multiple GPT variants in China. We will be choosing how to go in this direction. So about the cost, now there are many joint partners talking to us about these things. But in fact, for us, the current cost is still very high.
spk22: Thank you for your question.
spk21: Now definitely chat GPT and related AI technologies will provide a lot of values for our mid-term and long-term development. Now when we look at autonomous driving technology or capabilities, the lower level or medium level kind of autonomous driving technology always face the conundrum of being not smart enough as human drivers because cars definitely can be very capable as a driving vehicle but in terms of decision making a lot of it comes down to the intelligence level so the fact that chat TVP AI technology allows on-premise deployment as well as cloud and connection will actually be a catalyst in terms of the development of autonomous driving technology all the way from level 4 to level 5. Now, in terms of the potential fee or cost of adopting the technology, first of all, we will look at the near-term application in the software side, which will be much sooner than its application on the hardware side because its application In the hardware, we're talking about integrating the software together with the hardware, which is quite a different story from just applying it on the software side. And we mainly will look at some of the key areas in, for example, education and also document processing, language processing, etc., And definitely, we expect to see a lot of variations of related GDP technology in China. And we will select the right partners for XPeng in the future, according to our developmental pathway. And right now, we are in conversation, actually, with a lot of potential partners. And in regards to the potential cost, we believe it's quite minimal. Thank you.
spk08: Thank you very much.
spk23: The next question comes from Ben Wong of Credit Suisse. Please go ahead.
spk15: Hello, everyone. I also have two questions. The first question is about cost reduction. We heard from the company that the cost of electric cars has dropped by 25%. I'm very excited. I'd like to ask if the company has any specific methods to achieve a 25% drop, because this is a very important figure. Is it, for example, a single charge or other methods to achieve a 25% drop? Can you explain the details a little bit? This is the first question. The second question is to ask about G9. Because G9 has not been selling well recently. What are our plans for G9 to become a better selling product? Because G9 is expected to sell as well as P7. Do we still maintain such a trend? Patrick has two questions. Number one is about your cost deduction. You mentioned about 25% cost in the vehicle components cost, which is very amazing. Can you give me more detail about how you can achieve that? For example, do you use the integrated die casting to do the cost of cutting? That is very important. The second question is about G9. G9 actually has been doing not good recently, but previously you have seen G9 volume be even higher than P7. How you can maintain the G9 sales momentum and what's your maintenance patterns for G9? Thank you.
spk09: Yes. To be honest, I think the 25% reduction in cost does not mean that the children are good.
spk07: It means that the cost control of the children in the past is not good enough. For example, as you just said, we will launch the new G6 this year, including our entire range. For example, we saw a new formula on the pack of this car. can greatly reduce the cost of 40% to 50% of this pack. In addition, we are doing the whole platform design of telecommunications. I believe that the platform design of telecommunications, plus our comprehensive technology growth in the entire large battery life, we can have a fairly large space for the cost of telecommunications and the original telecommunications. In fact, this is a whole car, in power, in configuration, Thank you for translating for me.
spk21: Yes. Specifically speaking, the cost reduction target of 25% is not amazing per se, but it definitely indicates that in the past, we definitely still were not doing good enough. There's a lot of room improvement in terms of cost reduction. And right now, we are seeing multiple ways to actually reduce our cost of manufacturing and overall production. production. For example, as you mentioned, we have some new technologies in our hardware, the integrated stamping techniques that can help us to reduce the cost of manufacturing the whole car. And also in terms of pack of the whole vehicle as well, we have some viable methodology that can help us to reduce the cost by about $52,000. 60%. In addition to that, in terms of the overall chip and battery, we are now employing or adopting the whole vehicle platform engineering technique that can also help us to drive down costs. So as a result, there is a mix of methods and a range of ways for us to reduce costs in terms of our power chain, overall whole vehicle platform engineering architecture scale and also different configuration as well so overall in the coming period in the second half of the year first half of next year and also the second half of next year we have set them a set of different developmental stages goals in terms of our cost reduction and the effect can be expected thank you oh it's you I don't like that and he
spk07: Today, more than 300,000 pure electric vehicles are facing great challenges. But I am still very confident that G9 will have several actions in the future, including some of our configuration is on the rise, so it will start to pay off later. And XMGP on G9 and on the new P7i will start to achieve good results. Because when G9 has started to deliver certain batches, we can see that there are more and more good reviews. At the same time, including the whole Xiaopeng, after the release of PGI, including, I believe, after the release of G6, the traffic flow of the door stores will have a considerable increase. At this time, I believe that there will be a good situation for G9. In March, we have seen that the sales of G9 have risen to a certain extent compared to February, especially in our few important cities. 所以我相信G9的整体的今年年内的,我们目前还是保持,虽然有挑战,但是我们还是在追求我们的目标,谢谢。 Now in regards to the deliveries of G9, definitely in the price range of 300,000 RMB among all the G9s,
spk21: BV arrivals, there's been a lot of challenges in pushing itself. However, in the near future, we do have several moves in place to boost sales deliveries. The first one is that we're ramping up several configurations, and the second one is by implementing the XNGP function on G9 as well as on P7I, which we believe will greatly enhance the attractiveness of G9 as a product. In addition to that, we are now gathering a lot of positive feedback from our customers who have received their G9 in terms of the product quality and overall performance. In addition to that, we believe that the launches of P7i as well as G6 will boost food traffic in our stores as well as encourage interest in G9 as well as part of the market. you know, product line. In addition to that, we are now already seeing, you know, reinvigorated sales or deliveries in March compared to the month before, which was February in the market. And so we are still very confident that we can, you know, we are on the right trajectory to meet our delivery target for G9 for the year.
spk08: Thank you. The next question comes from Nick Lai of J.P.
spk23: Morgan. Please go ahead.
spk14: In Hubei, we can see that there is no price that can not be sold in the industry. I would like to ask, how do we look at this year's sales marketing expense? Will it be higher or will the sales marketing expense go down after new products? This is the first question. Thank you.
spk09: Thank you.
spk07: I think that 15 years ago, there might not have been a product that could not be sold, as long as the price could not be sold. That's right. But I think from today's perspective, I think the accuracy of this sentence will be more and more discounted. This is from my point of view. At the same time, I want to say that this year, Xiaopeng's sales cost will definitely be significantly lower than before. This is something that we are now very clear about. I think what you mentioned in your questions might
spk21: I think what you mentioned in your questions might be viable 15 years ago, which was that you can basically sell anything as long as they are cheap enough. However, it might not work today. We still believe that product quality speaks volumes. So for this year, in terms of our overall marketing and pricing strategy, we have set up different aggressive goals. for example, the second half of the first quarter, as well as for the upcoming several quarters of the year. So we definitely expect a lot of reinvigorated deliveries or sales outcome for the rest of the year.
spk14: Thank you, Ms. Xiang. My second question is about the battery price. I believe the price of batteries in January last year
spk07: I think this is a better way for the entire industry to promote electric vehicles in the future Compared to motor vehicles and gasoline vehicles, there is a stronger competitiveness. From our current communication with our partners, we are very confident that our price will be lower than the industry price. This is what we see at present. But this is just a follow-up to the industry. It's the same or a lot lower. Recently, we are adjusting the power of the power supply, battery, pack, etc. We have seen a lot of things through the unification of the battery, the ironification of the part of the power supply, and the cost-performance ratio of the battery. This means that the battery can run more than 10% to 20% of the real battery life, which is a series of actions. Now, in regards to battery supply, first of all, in January last year, we saw this pricing inflation happen in the industry, which
spk21: really encouraged the development of hybrid vehicles in the market, but rather much, you know, but hurt a lot of development in the EV sector. However, this year, we are happy to see that the pricing of batteries have come down. And this newly launched price war in the industry, led by a lot of battery makers, especially the leaders, It's definitely a very good sign or very beneficial for development of BEV and can help us to improve our pricing competitiveness as well. Now, so far, based on our conversation with our various suppliers, we are confident that the price reduction, the degree of the price reduction, you know, by Xiaopeng supplied by our supplier partners will be more aggressive than the industry average. And that's just from the outside. Looking internally, we also have... discover different ways to optimize our cost structure to reduce our costs in terms of the power chain of batteries as well as packed by for example integration as well integrating some of the parts as well as replacing traditional NCM or NCA batteries with LFP batteries also by extending the usage or the driving range that it can support per battery by about 10 to 20 percent you know all of these ways can help us to better drive down our battery cost and you can actually see the effectiveness or outcome in the coming 12 months.
spk08: Thank you. The next question comes from Ming Li of Bank of America.
spk23: Please go ahead.
spk16: Thank you for accepting my question. I have two questions. The first question is about the new product. In the past, we have mentioned that the sales after G9 may be 2-3 times of P7. In fact, after the launch of PCI, the order has responded quite well. I would like to know, My first question is regarding the product. competitiveness of G6 because the management team just mentioned they expect G6 in the future, the stabilized monthly sales could be two to three times of P7. But because G6 is in a similar price segment of P7, so what is the product competitiveness to give you the confidence? Thank you. This was the first question.
spk07: Sorry, I can't talk about the new product that hasn't been released yet. This is the first time that G6 will be brought to the Shanghai Motor Show in mid-April. I can briefly talk about a few things. The first thing is that the G6's battery life has been greatly improved. Because we will use the weight of the car as a whole, and the weight of the car as a whole will be very different. And then our CIB technology and our heat management technology and our wind resistance ability So the battery life of this car is beyond our imagination The second is that the space of this car is much larger than the space of our friends So when you sit in the back seat, you will find that this space is full, including its internal shape I'm sorry, I really cannot review too many details regarding our yet-to-launch models, but you can expect to learn more about G6.
spk21: in April this year in Shanghai Auto Show. But something that I can mention about some highlights of G6 is, first of all, it has a longer driving range supported by our optimized weight of the whole vehicle, driven by our integrated stamping technology, as well as better heat management and wind resistance management technology as well. In addition to that, the interior space of G6 is It's amazing, especially if you are looking at the second row of the car. The seating area is pretty spacious. And another characteristic to G6 or highlight is its aesthetic. The design language follows the X-Peng style, which is going to be very appealing to our customers. Thank you.
spk16: Thank you. My second question is related to batteries. Just now, Mr. Xiaopeng also mentioned that we now have a new PEC technology in our company, and we also have a new battery platform technology. I would like to know if, for example, in the portfolio of G9 products, there is also a super fast charge battery product. I would like to know if, for example, uh uh uh uh uh So my second question is related to the battery technology. So in the future, will you consider to use a different type of battery, for example, like a cylindrical type of battery. And besides that, regarding your current odors backload, G9, you already provide the high-voltage phase charging battery. Is that ratio high enough, or if it is not high enough, is this because the charging infrastructure is still not enough, or consumers feel comfortable based on the current normalized battery pack size?
spk07: Yes, in fact, we have already planned all the new cars and large remodeled cars from G9. In this big bag, it is all 800V fast charge and carbon fiber. And we will firmly continue to deploy the super fast charge. So the 800V fast charge can not only charge faster on the super high speed fast charge, it can also be obtained on the original charging station. Compared to other cars, the charging speed is much faster. This is the first thing I want to say. The second thing is about the future modularization of telecommunications. This is what we are working on. But it has not been announced yet. But we will still keep the possibility of using different models and different needs in the future. Including the possibility of using a large pillar.
spk21: Regarding G9 and all of our upcoming new models and facelift versions, all of them will be equipped with the fast charging capabilities suitable for 800 voltage and also silicon carbide fast charging technology. And we will also expand the construction of this fast charging infrastructure as well. Now, what I would like to mention is that this fast charging technology will not only work on the dedicated charging pile, but also in the original charging pile as well. So you can actually speed up the charging by using the technology on both charging piles. In addition to that, we also have to put in place our modularized optimization technology to optimize the batteries as well as the chip in the design of those new vehicles. So we are open to the possibility of adopting cylindrical batteries in the future.
spk23: Due to time constraints for this call, I'd like to turn the call back over to the company for closing remarks.
spk11: Thank you once again for joining us today.
spk13: If you have further questions, please feel free to contact ExPen's investor relations through the contact information provided on our website or the Pearson Financial Communications.
spk23: This concludes today's conference call. You may now disconnect your lines.
spk08: Thank you. Thank you. Thank you. you So, you Thank you. Thank you.
spk23: Hello, ladies and gentlemen. Thank you for standing by for the fourth quarter and fiscal year 2022 earnings conference call for Xpong Inc. At this time, all participants are in a listen-only mode. After management's remarks, there will be a question and answer session. Today's conference call is being recorded. I will now turn the conference over to your host, Mr. Alex Shia, Head of Investor Relations of the company. Please go ahead, Alex.
spk13: Thank you. Hello, everyone, and welcome to XPeng's fourth quarter and fiscal year 2022 earnings conference call. Our financial and operating results were issued by our newswire services earlier today and available online. You can also view the earnings press release by visiting the IR section of our website at ir.xiaopeng.com. Participants on today's call from our management will include co-founder, chairman, and CEO, Mr. He Xiaopeng, vice chairman and president, Dr. Brian Gu, Vice President of Finance, Mr. Dennis Liu, Vice President of Corporate Finance and Investment, Mr. Charles Zhang, and myself. Management will begin with the prepared remarks, and the call will conclude with a Q&A session. A webcast replay of this conference call will be available on the IR section of our website. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the relevant public filings of the company as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that EXPON's earnings press release and this conference call include the disclosure of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. EXPON's earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. I will now turn the call over to our co-founder, chairman, and CEO, Mr. He Xiaopeng. Please go ahead.
spk07: Hello, everyone. In 2022, Xiaopeng Motors' delivery volume has surpassed 120,000 units. It is ranked 10th in the list of new energy vehicles in China, with a growth of 23%. Looking back, the industry competition between the macroeconomic economy and new energy vehicles in 2022 has brought many challenges. Our performance has also been under pressure. But in another way, Fortunately, these pressures have also helped us to see the challenges of the industry earlier than most companies in our company. I think I am very happy that we started to act quickly at the end of last year and started to analyze, dig and solve these problems earlier and started to solve these problems this year. Since the end of last year, we have decisively carried out strategic review and adjustment, and greatly expanded and promoted the optimization of the entire organizational price. and the core to strengthen the short-term version of the comprehensive capability. We choose to self-defeat and carry out a real 20-person business on a higher level and platform. I think Xiaopeng is about to take a turning point because we have seen what our goals are, what our advantages and disadvantages are. We not only have confidence in the growth of sales and market share, but we are now paying more attention to the basics, including organizational capabilities, regularity capabilities, marketing capabilities, and full-scale improvement of cost capabilities. Hello, everyone. In 2022, XPeng delivered more than 120,000 electric vehicles, a year-over-year increase of 23%, and ranking number 10 among emerging EV makers in China, as measured by vehicle insurance registration volume.
spk21: Throughout the year, a challenging macro environment and increasingly intense competition in the NEV market placed pressure on our performance. Amidst this pressure, we saw an opportunity to become a first mover in tackling the challenges faced by industry and examine inhibitors to our business growth at the same time. At the end of last year, I rapidly and decisively conducted a review of our strategies and implemented a series of significant adjustments to our organizational structure with a focus on improving areas of weakness. We have decided to start the change with ourselves and revamp XPeng's business with a startup mindset on an elevated platform with new angles. I believe XPeng is approaching an inflection point. as we have clearly identified what our goals are and what our strengths and weaknesses are. We're now building recovery momentum in ourselves and market share expansion. As we do this, we're placing a high premium on improving our organization and cost efficiency to fortify our strong foundation and better position our company for sustainable growth over the long term. Our overarching goal is to make XPeng a leader in the Chinese EV market and ultimately win the global EV race.
spk07: We have adjusted and upgraded the management team from the top. Wang Fengying, who has more than 30 years of experience in the automotive industry, has joined us. Fengying will be fully responsible for Xiaopeng's product planning, sales, brand market, and the entire large product organization. Fengying has a deep background in industry experience and market dynamics. Special excellent and strong support This will help Xiaopeng's products more accurately grasp the customer demand And greatly improve our ability and efficiency in the brand market sales service At the same time, we also adjusted the management structure to make it more flat and huge From February of this year, all of Xiaopeng's design teams, R&D teams, production teams, supply chain teams, organization management teams, and process management teams will report directly to me I believe that in the next few months, our overall planning ability, decision efficiency, and execution efficiency will be significantly improved. These adjustments have effectively activated our execution and operation power. I believe that in the long term, I will continue to pay attention to how to achieve several times the efficiency and customer value under the same number of people through management. And how to greatly reduce the cost of the whole chain through technology innovation and management innovation.
spk21: What excites me is that our strategic adjustment has induced meaningful results in the first quarter of this year, which gives me confidence that we will achieve sustainable and greater breakthroughs in the next few quarters. My first step to the organizational restructure started with changes and upgrades in our top leadership. Ms. Fengying Wang has joined our team as president of the company, bringing us more than 30 years of experience in the automotive industry. Feng Ying is taking full responsibility for our product planning and sales operations, and is also in charge of our product platform management scheme. Her extensive industry experience, in-depth market insight, and strong execution capabilities will help our product capture customer demand more accurately, while greatly improving efficiency in our sales and services divisions. At the same time, the adaptations to our management organization are geared toward a flatter and more concentrated structure. Since February, all design, R&D, production, supply chain, and organizational management functions directly report to me. I believe that these shifts will significantly improve our planning capabilities and lift the efficiency of our decision-making and execution in the coming months. More importantly, these adjustments have effectively refreshed our execution and competitiveness. For the foreseeable future, I will remain focused on lifting the labor efficiency across our organization by multiple times so as to generate increased customer value with the same headcount and greatly reduce costs across a full range of processes through technology and management innovation.
spk07: and product design, we will start to rely more on the value of the customer and the realization of the value and differentiate to innovate. We will adjust our configuration combination in the subsequent models, including new models and modified models, to unify the modular design of the entire car and the consistent design of the car. In the design of the interior and exterior, because Xiaopeng's users all have a high pursuit of beauty, At the moment, I have directly managed the styling team and started to build three styling front-end teams at the same time to engage in creative competition. I believe that we will continue to significantly improve our interior and exterior design space. At the same time, when we promote NPS users, we define it as one of the core goals of the assessment of multiple business departments in the company. We collect and reply every month. NPS assessment will drive us in product planning, With regard to our product planning and design, we concentrate on customer perceived value and product differentiation in our innovation. We'll make substantial changes to future product model configuration mix
spk21: whole vehicle modularized design, and consistency in smart features. In terms of interior and exterior styling and design, to meet XPeng customers' high standards for aesthetics, I am directly running the styling design division and building three teams that compete with each other to generate creative ideas. These initiatives will continuously improve our interior and exterior styling and space design capabilities. At the same time, I incorporated the Net Promoter Score, or NPS, into the core performance indicators for a variety of business functions and required feedback collection on a monthly basis. The NPS performance evaluation will anchor the transformation of our product planning, design, and development toward a customer-centric pathway. I believe our new products, our OTAs, and new services to come will demonstrate substantial progress. 在品牌营销方面,我们将围绕全自动驾驶这个核心差异点打透。
spk07: improve users' awareness, expand our market, and start our current focus from the 1st and 2nd line market to the 3rd and 4th line market for deep promotion. Currently, we have completed the initial integration of brands and market teams and reaffirmed the overall strategy. This will help us to effectively improve the quality, effect, and flexibility of sales in the coming months, and greatly reduce sales costs.
spk21: In terms of branding and marketing will harness our core differentiation in autonomous driving to the full extent and enhance customer perception. We are broadening our addressable market expanding our penetration from tier one and tier two cities to tier three tier four cities. So far we have completed a preliminary merge between our branding and marketing teams and refreshed our overall strategy. This will help us improve the quality, effectiveness, and flexibility of marketing activities in an effective way going forward, while significantly reducing marketing expenses. We have already flattened out the management hierarchy in our sales network. Furthermore, we are enhancing our network coverage, increasing competitive capabilities in our frontline sales staff, and developing XPeng's powerful data-driven sales touchpoints. in order to achieve significant strides in sales growth.
spk07: 三月十日,我们的主力车型P7的升级款P7i正式上市, 并且在当月就启动交付。 我很高兴地跟大家分享, 在P7i发布后,我们的进电量和试驾量都达到了最近好几个月以来的最高水平。 我们的客户欣赏P7i在智能、 in terms of performance, price control, and other aspects. As you all know, the current market is very weak in terms of new orders. Recently, we have seen a significant improvement. Our new orders in February have increased by 100% compared to January of this year. And the orders after the PGI were strong. Our new orders in March are much better than in February.
spk21: On March 10th, we officially launched the new P7i sports sedan, which is an upgraded version of our highly successful P7 model. Deliveries to customers also commenced in this month. I'm pleased to see our in-store traffic and test driving volume both hit new heights in recent months following the P7i's launch. This new product's smart features, styling design, and performance, among other clear advantages in Vibery with similar products, were well-received among customers. Amid the market's prevailing weakness in new order intake, our results outperformed the market. Our new order intake in February increased 100% over the previous month. With the strong momentum of P7I orders following its official launch, we expect to see a considerable month-on-month growth of total new order intake in March. This marks an initial success following our comprehensive transformation, which has also boosted our company morale.
spk07: Our second model this year, the new G6, will be presented at the Shanghai Motor Show and will be officially released and delivered at the end of the second quarter of this year. The G6 not only has the most advanced electrification and intelligent technology in the range of 200,000 to 300,000 yuan, but also in terms of space, battery life, shape and interior. The advantage is very prominent. We believe that G6 will become the top of the market in this market. After mass production, it will achieve a monthly sales target of 2 to 3 times that of P7. We will also launch a new pure electric 7-seater MPV in the second half of this year. This car will satisfy the needs of family customers who pursue greater space and energy self-sufficiency.
spk21: Our second new product model coming up this year, the G6, will make its debut at the Shanghai Auto Show. Its official launch and vehicle deliveries will occur around the end of the second quarter. The G6 will bring the most advanced electrification and smart mobility technologies to the 200,000 to 300,000 yuan price NEV SUV market, with unrivaled interior space, range, styling, and interior decoration, we believe the G6 will become the top-selling model in its market segment. Following the ramp-up of G6 mass production, we expect G6 monthly sales target to be two to three times that of its P7 predecessor's sales. In addition, in the second half of 2023, we'll launch a brand-new BEV seven-seat MPV. This new MPV model is designed to cater to customer cohorts that demand a larger interior room while serving the needs of our family customers for a human machine co-pilot.
spk07: 最近一段时间,以CHAT GPT-4.0为代表的能工智能应用, 让数以亿计的用户看到的生成式AI模型的巨大前提。 这次我感到非常的兴奋,这标志在未来类似机器大佬的通识能力, will enter a new stage, and they can be localized to make the implementation of automated driving in the future will have a new concept and efficiency improvement, and make automated driving faster from L4 to L5 in the future. We look forward to GPD's relevant technology and Xiaopeng's equipment business to go through each link and make more coincidences, and bring a disruptive breakthrough for our user experience and operating efficiency.
spk21: Recently, ChatGPT 4.0 and other AI-based applications have created a buzz among hundreds of millions of users on the massive potential of generative AI models. I am also very excited about this. It represents a brand new phase of artificial general intelligence with on-premise deployment that does not rely on cloud end. which not only redefines the pathway to realize autonomous driving, but also increases its efficiency. Given this development, there is an even higher possibility that autonomous technology further advances from L4 to L5. We expect to incorporate GPT technology deeply into XPeng's business across the board to create groundbreaking user experiences and exceptional improvements to our operational efficiency.
spk07: 从3月下旬开始,我们的X-NGP将会在广州、深圳、上海这三个城市多车型加速落地。 通过城市NGP的OTA,我们在中国率先量产了基于Transformer的BUV思绪网络X-Lite。 这在深度学习算法的开发应用员取得了里程space的进展。 In the second half of this year, based on X-Net's deep learning algorithm, X-NGP will no longer rely on high-resolution maps. This can achieve the coverage of dozens of cities across the country. From our current test results, the new version of X-NGP clearly surpasses the actual use of similar technology in the United States. I believe that Xiaopeng's automated driving technology and user experience will also be able to withstand the turning point.
spk21: In late March, we began accelerating the OTA rollout of CDNGP, compatible with multiple models in several cities, including Guangzhou, Shenzhen, and Shanghai. Through CDNGP's OTA, we took the lead in mass producing the transformer-based BEV time series network, or XNet, in China, which achieved a milestone in deep learning algorithm development and application. In the second half of this year, XNGP, powered by XNet's deep learning algorithms, will no longer depend on a high-definition map. That said, XNGP will be supporting drivers on more urban roads across over 10 cities in China. Results from our testing showed the new version of XNGP outperformed peers' actual on-road performance in the United States. This leads us to believe XPeng's autonomous technology and its customer adoption is approaching a pivotal turning point.
spk07: Xpeng's autonomous technology and its customer adoption are approaching a pivotal turning point. From the perspective of the scene, customer experience, and software cost, these three are the core directions of autonomous driving. From the perspective of the scene covered by autonomous driving, we have entered from high-speed scenes to city scenes with high-frequency and high-definition users, and we are about to further open the whole scene, that is to say, scenes that include community roads and non-public roads point by point. And in the third quarter of this year, will be promoted from the current three cities to more than one city across the country. In terms of customer experience, in the middle of last year's test, we realized the first time to allow customers to use the self-driving driver to drive at ease. This is an important psychological level, which means that it can feel very safe and at ease when driving, and it is easy to let the machine help us to drive, while we only need to monitor ourselves. Through several times, from the end of last year to the current OTA, We believe that every year, the XNGP OTA can increase the machine's driving age by one year. That is to say, in the next two to three years, we will achieve a three-year driving experience with a golden age. The number of 100 kilometers in the city will drop once or less. In addition, in terms of cost, we plan to increase the cost of XNGP BOM next year, including the cost of software and hardware BOM, to a large extent. and from the current software and hardware sales to software and hardware separation sales, allowing the highest level of full-automatic value to become Xiaopeng's full-scale standard, and allowing more users to have the ability to use the latest full-automatic value. I believe that Xiaopeng will make a huge value for our users in the three above directions, and build our technical balance, bringing us long-term and sustainable large-scale growth and profit.
spk21: We have built notable leadership in smart technologies as well as customer adoption of smart technologies compared with peers. We're driving our technology roadmap and commercialization pathway to cross over the inflection point and reach an accelerated growth curve. While keeping high safety standards remains a top priority of our technology advancement, will also be focused on rapid development to improve scenario coverage, user experience, and software and hardware cost optimization. In terms of scenario coverage, we have expanded the usage of the advanced technology from highway scenarios into city scenarios, where ADAS are used at high frequency and even become an essential driving tool. Going forward, we'll strive to further broaden ADAS usage to more end-to-end driving scenarios such as internal compound waste and non-public roads and expand our geographical coverage from three cities to more major cities nationwide beginning in the third quarter. In terms of user experience, we have achieved an important psychological barrier. We have achieved an important psychological barrier for customers to use autonomous driving to relieve drivers. That is, drivers can let the machine safely take the wheel, resting assured that they are acting only as a supervisor. Looking ahead, we expect that through continuous OTA upgrades, XNGP's driving skills will escalate every year and in two to three years reach a level that is equivalent to a human driver with three years of driving experience. We also expect that the number of manual takeovers per 100 kilometers will be reduced to one or fewer. Regarding cost efficiency, we plan to cut XNGP's BOM costs significantly next year and adjust our sales model from one that bundles cells of software and hardware to one that splits the cells of software and hardware, which is going to enable autonomous driving on all of our new vehicles and allow more customers to use the latest autonomous driving capabilities. In pursuit of breakthroughs in the aforementioned three realms, we'll bring great value to our customers and build our competitive edge in technologies, delivering long-term sustainable revenue growth, at scale and with improved margin contribution. It has been said that the past five-year period was the golden age for new energy vehicles. I believe the next five-year period will be the golden age for autonomous driving. During the five years to come, XPeng's highly advanced autonomous driving technology and our efforts in optimizing our organization and making up for our weaknesses will help XPeng accelerate our ability to gain top market share.
spk07: I think a very, very, very important point is that a company must also have super strong cost control ability. So this will also be the core ability of Xiaopeng to win the competition in the future. We will use platform modularization and a large number of technical innovations to promote our low cost strategy in these two directions. From this year, Xiaopeng's pure electricity platform, electronic electrical structure, power systems, smart service, and software will all be standardized, and enter the stage of real institutionalization. This will allow us to use faster, lower cost to provide users with better experience and better quality products. At the same time, it will effectively make it easier for our suppliers and partners to get a double profit. In the past, Xiaopeng's technical research and development capabilities The direction of development is reflected in performance and functionality. In the future, our development capabilities will be more reflected in maintaining performance and performance at the same time, but we need to greatly reduce costs and make it standard. We have already designed a very clear line map of execution. Through many means, such as technology innovation, configuration, and so on, from this year to next year, the cost of automobiles will be reduced by more than 50%. to reduce the cost of the whole car's power and hardware to about 25%. I am very happy that our current design, development, supply chain, and manufacturing teams are cooperating together. We are very confident that through innovation, in the future, the cost control will be very good. This is equal to a huge increase in our product power.
spk21: In the face of fierce competition, in addition to our leadership in autonomous driving and aesthetic design, while greatly improving our product planning abilities, marketing efficiency, and organizational capabilities, I believe more powerful cost control will be the core competitive edge that will enable XPeng to secure its leadership in the EV market. We'll advance the platform-based approach and technology innovation to propel our cost reduction strategy. Entering 2023, we're applying a full platform engineering approach for our BEV vehicle platform, electrical and electronic architecture, powertrain system, and ADAS software and hardware development. This signals that we are entering a new phase of car making in a unified system. In this way, we're able to develop products with superior product quality and customer experience at a faster pace and at a lower cost. In the past, our R&D strengths were primarily manifested by our leading product performance. In the future, our R&D strengths will be underlined by maintaining the leading performance while achieving remarkable cost reductions. We have mapped out our strategic execution roadmap with associated cost reduction, including an over 50% decrease for autonomous driving costs and about 25 degrees for vehicle hardware costs, including power chain, over the 2023 to 2024 period by means such as technology innovation and optimized configurations. I'm pleased to see that the design technology R&D, supply chain, and manufacturing teams are now working in a synergistic way to make our efforts and products more competitive through innovations.
spk07: From the perspective of cash flow, at the end of last year, our cash flow exceeded 3.8 billion RMB. In the past few years, including this year, 2023, we will complete investment in two major production facilities. At the same time, we have built three powerful vehicle platforms. This is enough to support our future production capacity and vehicle platform launch. Then I believe that this will also greatly reduce our capital start. At the same time, our development direction will be more focused on the most suitable long-term trend and make users feel and achieve standardization. And this can make a huge difference in the cost of scale. We will continue to improve the efficiency of the whole process. For example, at present, we are in the sales system, through the optimization of the store layout to improve the electricity efficiency. I believe In terms of cash liquidity, our cash on hand at the end of 2022 amounted to over 38 billion RMB. As we have nearly completed our investment in our two manufacturing bases over the past few years, including this year, our capex will decline substantially.
spk21: We have also established three powerful vehicle platforms that can support a series of new model launches over the next three years. Our R&D will further concentrate on initiatives that best correspond with long-term trends and further differentiate our products in terms of customer experience and cost. We'll also pursue improvements in our operating efficiency throughout the entire process. For example, within our sales operations, We strive to improve same-store efficiency by optimizing our store network. We believe these cost optimization efforts will start to deliver material results beginning in the coming several months, including in the second half of this year.
spk07: to expand our scale and market share, to form sufficient scale advantages in software and hardware. This is our first strategic goal. Although in the automotive industry, the period of adjustment of products and management today is much more difficult than that of the Internet and other industries, and the period of time needed is also longer. But I am still willing to sacrifice short-term sales to pursue a more patient
spk21: It has always been my intention to build a successful company that can grow in scale instead of a small company in a niche market or just any generic company out there. Expanding our scale and market share to achieve economy of scale in both software and hardware is the primary goal in our long-term strategy. Although the product and management adjustment cycle in the automotive industry is more difficult than other industries and takes a longer period of time, we are still willing to sacrifice short-term sales and more patiently pursue greater victories in the medium and long term. 惊喜的是,随着我们当前在管理上做的大幅度且快速的调整,以及当前我们在产品组合上
spk07: and the ability of the marketing system. We have already seen a remarkable rapid change and effect. I have strong confidence that from the third quarter of this year, the sales of small and medium-sized enterprises will see a large growth in the same ratio and return ratio, and a higher proportion than that of the industry.
spk21: Excitingly, as we rapidly implement adjustments and changes to our management, in addition to instituting a host of upgrades and iterations in our product portfolio and marketing capabilities, we have seen encouraging changes and positive results. I'm firmly convinced that beginning in the third quarter of this year, XPeng's monthly sales number will achieve significant growth, both sequentially and year-over-year, as well as be much higher than the industry's average growth rate. 我相信才会形成下一个阶段持续稳定的高速被爆发跟巨大增长
spk07: I would reiterate that our current focus is on building and improving our capabilities in organization, product design, marketing, and cost control.
spk21: Continuous efforts in refining, management, and accelerated new product launches in the era of autonomous driving will lead us to the next level of exponential growth. We'll continue to strive for this goal. Lastly, we expect our total vehicle deliveries to be between 18,000 and 19,000 units in the first quarter of 2023, and revenue to be between 4 billion and 4.2 billion RMB.
spk07: Thank you, everyone.
spk21: I will now hand over to our finance VP, Dennis Liu.
spk03: Thank you, Mr. He, and hello, everyone. Now I would like to provide a brief overview of our financial results for the first quarter of 2022. I will reference RMB only in my discussion today unless otherwise stated. Our total revenues were RMB 5.1 billion for the first quarter of 2022, a decrease of 39.9% year-over-year, and a decrease of 24.7% quarter-over-quarter. Revenues from real estate sales were RMB 4.7 billion for the first quarter of 2022, a decrease of 43.1 percent year-over-year, and a decrease of 25.3 percent from the last quarter. The year-over-year decrease was mainly attributable to lower vehicle deliveries for the G3 and P7, while the quarter-over-quarter decrease was mainly due to lower vehicle deliveries for the P5 and P7, with partial offset by the newly launched G9. Girls' margin was 8.7% for the first quarter of 2022, compared with 12% for the same period of 2021, and 13.5% for the last quarter. Vehicle margin was 5.7% for the first quarter of 2022, compared with 10.9% for the same period of 2021, and 11.6% for the last quarter. The year-over-year and quarter-over-quarter decreases were mainly explained by the increased sales promotion. R&D expenses were RMB 1.2 billion for the first quarter of 2022, a decrease of 15.3% year-over-year, and a decrease of 17.9% quarter-over-quarter. The year-over-year and quarter-over-quarter decreases mainly in line with timing and progress on new vehicle programs. SG&A expenses were RMB 1.8 billion for the first quarter of 2022, a decrease of 12.9% year-over-year, and an increase of 8% quarter-over-quarter. The year-over-year decrease was mainly due to the decrease of the commission paid to the franchise stores associated with lower vehicle deliveries. The quarter-over-quarter increase was mainly attributable to higher marketing, promotional, and advertising expenses to support vehicle sales. As a result of the foregoing, loss from operations was 2.5 billion for the first quarter of 2022, compared with RMB 2.4 billion for the same period, 2021, and RMB 2.2 billion for the last quarter. Net loss was RMB 2.4 billion for the first quarter, compared with RMB 1.3 billion for the same period a year ago, and RMB 2.4 billion for the last quarter. As of December 31st, 2022, our company had cash, cash equivalent, restricted cash, short-term deposit, short-term investment, and time deposit in total are under $38.3 billion. To be mindful for the length of our earnings call, I will encourage listeners to refer to our earnings press release for fuller details of our financial results for the fourth quarter and full year 2022. This concludes our prepared remarks. We will now open the call to questions. Operator, please go ahead.
spk23: Thank you. If you wish to ask a question, please press star then 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press star then 2. If you are on a speakerphone, you will need to pick up the handset to ask your question. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. For the sake of clarity of order, please ask one question at a time. Management will respond and then feel free to follow up with your next question. Our first question will come from Tim Hisile of Morgan Stanley. Please go ahead.
spk10: Because we now know that the electric car market of 200,000 to 350,000 people is currently the main focus of small and medium-sized cars, and it is also a major source of sales growth. But over the past period of time, we have also seen Tesla and other new power partners, BRD, and other new-generation car brands aiming for this. How do we see the development of this competitive framework? Especially, like yesterday, BRD also targeted their 200,000 So my first question is about the competition because the market with pricing by segment of 200 to 350,000 RMB or 30 to 50,000 US dollar is expanding stronghold and the key volume driver. However, if you look at what happened over the past few quarters, I think Tesla, EV startup, BYD, and even traditional car makers, EV brands, are getting more aggressive in this pricing segment. And I think yesterday, BYD just upgraded its Han, EV, and Tan DMI to focus on the $200,000-plus market, and Tesla might consider having another round of price quads. So how do you think about the competitive landscape in this pricing segment? And how could X10 make sure that its upcoming models, including G6 and the model next year, could stand out in the crowd of competitors? Will we be more pricing aggressive with more manifold cost down in the following quarters? So that's my first question. Thank you.
spk07: Thank you. That's a very good question. I think recently, In the first two to three years, the price roll will be extremely aggressive. The gasoline car will face the biggest challenge. It comes from new energy vehicles and electric vehicles. So the gasoline car will definitely counterattack. So I believe that the production capacity of the power battery and the price of the raw materials on the top of the power battery, one production capacity will exceed and the raw materials will obviously decline. So this is against the electric car. I believe that many car companies will take the market scale as a priority to take a lot of action. As I mentioned earlier, we will do our best with Xiaopeng's strategy. I think that in addition to Xiaopeng strengthening our advantages, including vibration driving, we also need to improve the design of the car. I think the most important point is the first cost. In fact, in the past, Xiaopeng's technical innovation was mainly for the function and performance. Today, we have several departments, and when we look at the original 25 to 30 million as the main area, and now look down and see 200,000, When we have 250,000, 300,000 in these three areas, we have seen a lot of opportunities to significantly decrease, including the cost of our internal marketing, as well as the cost of development that does not create customer value, as well as the cost of our entire hardware. So in the future, I believe that one of the very important things for Xiaopeng is how to make the scale of automatic driving and autonomous vehicles to the forefront, even to the first. At this time, we will definitely continue to occupy a higher position in the market in the future and in the new models and new models. This is our overall strategy. Thank you.
spk21: Thank you for your question. It's a very good one. Basically, we expect the market to experience a series of price cuts by different OEMs in the coming couple of years because of the very intensified competition or competitive landscape in the current market, especially for traditional OCE cars. card makers because we expect to see a lot of oversupply of capacity in the market as well as some reduction in raw material pricing which will lay a good foundation for a different price cut to be expected in the near future. And as a result, different brands and different players in the market will launch a series of price cuts in order to expand their market share. Now, as I mentioned in the prepared remarks that the current first priority for XPeng is to optimize our organization as well as to expand our scale. And in addition to that, we also will continue to improve our autonomous driving capabilities as well as optimizing our design language. Now, next to it, we also will prioritize the cost optimization. In the past, we mainly focused on the development of the functionalities and the overall performance of our products. Now, when we expand our targeted price range to cover more than $250,000 and $300,000 to actually a little bit lower to $200,000 RMB, we realize there's actually a lot of room for improvement in terms of cost reduction, for example, just to reduce our overall bond costs in the R&D sector and also to integrate our software I mean an aspect of our software and hardware design as well. That is why in the coming future we will first of all prioritize the scale development as well as improving our autonomous technology and overall product quality and performance while improving our cost structure in many new areas especially to be reflected in our newly launched products to be expected, and also we will expect some strategic price reduction in the near future as well, so as to expand our market share and promote deliveries. Thank you.
spk07: We can see that only about 50 used car brands have sales in China. I think there may be only 25 after five years. Then after ten years, it may only be between a few to ten. What does this mean? It means that today, whether it is 100,000 a year or 500,000 or 700,000 a year, the car company can not survive between 5 to 15 years. The minimum number that can survive in China is that it will reach 3 million a year. If Xiaopeng, in the entire strategy adjustment last year, must think that there is no basic hardware scale and basic software scale, there is no way that China can survive. This does not mean that it can become the first. This is the basis for survival. So this is what we think in the next five years, or even ten years, use technology innovation and strictly control the cost to reach the first scale in the market, in order to be able to really make a living. Looking back in 2017, there are about 300 car-making startups and 70 passenger vehicle makers in the market.
spk21: By now, there's only 50 players left, and in five years' time, maybe there will be less than 25, and in 10 years' time, less than 10, which means that by that time, the annual deliveries of each single carmaker will not be 100,000, half a million, or 700,000. It needs to be at least 7 million in order to survive. which means that we need to have a solid foundation in terms of our hardware and software capabilities as well as our cost control capabilities as well in order to just survive in the market and the fears and intensify competition, not letting alone becoming the winner in the competition. And that is why in the coming 5 to 10 years, our priority will be to solidify our leadership in our technological R&D capability as well as our cost control.
spk22: Thank you.
spk10: Thank you for sharing the details, Mr. Feng. My second question is about the channel. Can you share with us some of the channels' strategy this year? Mr. Feng also mentioned the sales network in the briefing. In addition to the first and second-tier cities, the growth of new cars in the low-tier cities may be faster in the coming years. Each family is also setting up a downfall in the channel marketing system. Can you tell us So my second question is about the sales network. Could you please help to update us the expense to channel strategy this year? Well, tier one, two CDs, they will stay strategically critical. The growth in the lower tier cities in China will soon outpace the higher tier cities and become a key growth driver. So quite a few EV makers are targeting to pantry into the lower tier cities. So how is Xpeng going to grow its presence in the lower tier cities? And in the meantime, where the company changed its hybrid business model consisting of the direct sales and the dealership Will there be any material changes in the upcoming quarters? That's my second question. Thank you.
spk09: Thank you.
spk07: Our new president, Wang Fengying, is far ahead of me in his research on channels. So in the middle of his tenure, he has been discussing channels with me several times. I believe that there are a few places where the channel strategy this year is very clear. I think the first one is that we will continue We will make sure that the supply and demand will move forward firmly. And I believe that as time goes by, the proportion of supply and demand will be relatively increased. This is the first point. The second point is that we will definitely flatten the management of the channel, provide better training and better services, and improve the profit and profit-making efficiency of the entire channel. This is a very important point for us this year. The third point is that our channel will definitely The main sales channels have become more of the channels with 4S functions. These are the channels that we have decided to move forward this year. But we are still discussing the next step of new thinking. We will share this with you step by step. But there is one thing that can be explained. We don't think that a large number of small channels Thank you. Our newly recruited senior management member, Ms. Wang Fengying, actually is way more experienced than me in terms of channel distribution.
spk21: One month after her enrollment, she already had numerous discussions regarding our distribution channels and our network development. So for this year, we have several strategies in place already. First of all, we will maintain our current model of having directly run and franchise stores in order to promote ourselves and distribution. However, the mix from franchise stores will increase. And the second point is that we have and will continue to flatten out our management structure so as to improve the overall service quality as well as to improve the profitability and efficiency of our distribution channels. And the third point is that we will actually expand the functionality of those kind of channels to include not only sales purposes or functionality, but also to increase forest function as well, so as to provide a more comprehensive set of services to our customers. Now, one of our upcoming next steps, which I can review right now, is that we don't believe that it would be very effective to have a large number of small distributors or small channels Rather, we prefer to prioritize the development of quality channels to improve our overall service and distribution efficiency. Thank you. Regarding the second part of your question, which is the channel network in Tier 3, Tier 4 cities, first of all, we will work with our partners to expand the channel and network. In addition to that, we will also design and curate appropriate products suitable for Tier 3, Tier 4 cities, and we do have some facelift products upcoming to be expected.
spk22: Thank you.
spk08: Thank you very much for all the insightful updates. Thank you. The next question comes from Paul Gong of UBS.
spk23: Please go ahead.
spk17: Okay, thank you. Thank you for accepting my question. My first question is, we saw that Mr. Feng came here for several months. I'm actually quite curious. As someone who has 30 years of experience in the automotive industry, maybe the richest veteran in the automotive industry, My first question is regarding, say, on the arrival of the Ms. Wang Feng Yin's new role as a president, what has been her biggest criticism on the Expo motor for the current situation and what is her plan to change it.
spk07: Thank you.
spk21: Now, this is a very interesting question. Ms. Wang has been with us, has arrived for more than one and a half months. Her biggest criticism for the company is twofold. The first one is on the planning side and the other is on sales and marketing. I mean, this is definitely a very positive sign because it is better to see the problems and have solutions rather than being fully complacent without seeing the root cause of the problems. And so right now we are in, you know, full force to correct some of the mistakes that we previously had. And personally, you know, I feel a lot of pressure from Ms. Wong because she is working seven days a week. And right now we are all following this trend of being very, very diligent at work. So that is a lot of pressure on me.
spk17: Okay, my second question is, as Mr. Peng mentioned, the talk about GPT has been very popular recently. It also talks about its potential in the use of smart cars. Can you share with us what kind of scene we can imagine in the long term? What kind of experience can this technology create? So my second question is regarding your interesting comment on the GPT's application into the smart vehicles. Can you give us some kind of some example? How do you imagine such kind of technologies to be used in the long term in the smart vehicles? And if so, shall we pay for certain technology royalty or kind of technology servicing fee on that?
spk07: GPD, I believe, is valuable for children in the short term, medium term, and long term. If we talk about the value for the long term, I think one of the values is that when children When it comes to high-level autonomous driving or when it comes to off-road unmanned driving, you will find that cars can be used as a transportation tool, but if you want to make it smarter, it will find that it can't solve a lot of problems. Because these problems have been solved by the driver in the past. So after GPT is deployed locally and connected to the cloud, I believe that the basic L4 will be able to do the real full-scale L4 and even do L5 further. I think this is a huge to push this speed forward. Regarding how GPT can be implemented in the car industry and how to pay for it, I think GPT is currently more suitable for software services, education, or similar literature and editing industries. But for hardware, because the combination of hardware and software is not the same as pure software. So from our point of view, we are more willing to look at the landing of GPT in other software-based technology industries. After that, we will see that there may be multiple GPT variants in China. We will be choosing the path of small companies in this. So about the cost, now there are many nuclear partners talking to us about these things. But in fact, for us, the current impact on our cost is still very small.
spk22: Thank you for your question.
spk21: Now, definitely chat GPT and related AI technologies will provide a lot of values for our mid-term and long-term development. Now, when we look at autonomous driving technology or capabilities, the lower level or medium level kind of autonomous driving technology always face the conundrum of being not smart enough as human drivers because cars definitely can be very capable as a driving vehicle but in terms of decision making a lot of it comes down to the intelligence level so the fact that chat TDP AI technology allows on-premise deployment as well as cloud and connection will actually be a catalyst in terms of the development of autonomous driving technology all the way from level 4 to level 5. Now, in terms of the potential fee or cost of adopting the technology, first of all, we will look at the near-term application in the software side, which will be much sooner than its application on the hardware side because its application In the hardware, we're talking about integrating the software together with the hardware, which is quite a different story from just applying it on the software side. And we mainly will look at some of the key areas in, for example, education and also document processing, language processing, etc., And definitely, we expect to see a lot of variations of related GDP technology in China. And we will select the right partners for XPeng in the future, according to our developmental pathway. And right now, we are in conversation, actually, with a lot of potential partners. And in regards to the potential cost, we believe it's quite minimal. Thank you.
spk08: Thank you very much.
spk23: The next question comes from Ben Wong of Credit Suisse. Please go ahead.
spk15: Hello, everyone. I also have two questions. The first question is about cost reduction. We heard from the company that the cost of electric cars has dropped by 25%. I'm very excited. I would like to ask if the company has any specific methods to achieve a drop of 25%, because this is a very difficult number. Is it, for example, ETS pressure relief or other methods to achieve a drop of 25% cost? Can you give us some details? I actually got two questions. Number one is about your cost deduction. You mentioned about 25% cost in the vehicle components cost, which is very amazing. Can you give me more detail about how you can achieve that? For example, do you use the integrated die casting to do the cost of cutting? This is very important. The second question is about G9. G9 actually has been doing not good recently, but previously you have seen G9 volume be even higher than P7. How you can maintain the G9 sales momentum and what's your maintenance patterns for G9? Thank you.
spk09: Yes.
spk07: To be honest, I think the 25% reduction in cost does not mean that the children are great. It means that the cost control of the children in the past is not good enough. For example, as you just said, we will launch the G6 this year, including our entire range. For example, we saw a new formula on the pack of this car. can greatly reduce the cost of 40% to 50% of this pack. In addition, we are doing the entire platform design of telecom. I believe in the platform design of telecom, plus our comprehensive technology growth in the entire large battery life, we can put the cost of telecom and the original telecom have a considerable amount of down payment space. In fact, in this is a whole car, in the power, in the configuration, In terms of scale, it is a very large combination. In fact, today, in terms of autonomous driving, or in terms of the whole car, we can see a relatively clear route map. How can we complete several stages in the second half of this year, the first half of next year, and the year after next year? Please help me translate. Thank you.
spk21: Yes. Specifically speaking, the cost reduction target of 25% is not amazing per se, but it definitely indicates that in the past, we definitely still were not doing good enough. There's a lot of room improvement in terms of cost reduction. And right now, we are seeing multiple ways to actually reduce our cost of manufacturing and overall production. For example, as you mentioned, we have some new technologies in our hardware, the integrated stamping techniques that can help us to reduce the cost of manufacturing the whole car. And also in terms of pack of the whole vehicle as well, we have some viable methodology that can help us to reduce the cost by about $52,000. 60%. In addition to that, in terms of the overall chip and battery, we are now employing or adopting the whole vehicle platform engineering technique that can also help us to drive down costs. So as a result, there is a mix of methods and a range of ways for us to reduce costs in terms of our power chain, you know, overall whole vehicle platform engineering, architecture, scale, and also different configuration as well. So overall, in the coming period, in the second half of the year, first half of next year, and also the second half of next year, we have a set of different developmental stages goals in terms of our cost reduction, and the effect can be expected. Thank you.
spk07: Wang Yijijiu, I think overall, Today, more than 300,000 pure electric vehicles are facing great challenges. But I am very confident that G9 will have multiple actions in the future, including some of our configuration is climbing, so it will start to deliver later. And XMGP on G9 and on the new P7i will start to achieve good results. Because when G9 has started to deliver certain batches, we can see that there are more and more good reviews. At the same time, including the whole Xiaopeng, after the release of PGI, including, I believe, after the release of G6, the traffic flow of the door stores will be greatly improved. At this time, I believe that there will be a good situation for G9. In March, we have seen that the sales of G9 have risen to a certain extent compared to February, especially in our few important cities. 所以我相信G9的整体的今年年内的,我们目前还是保持,虽然有挑战,但是我们还是在追求我们的目标,谢谢。 Now in regards to the deliveries of G9, definitely in the price range of 300,000 RMB, you know, among all the G9s,
spk21: BEV rifles, there's been a lot of challenges in pushing itself. However, in the near future, we do have several moves in place to boost sales deliveries. The first one is that we're ramping up several configurations, and the second one is by implementing the XNGP function on G9 as well as on P7I, which we believe will greatly enhance the attractiveness of G9 as a product. In addition to that, we are now gathering a lot of positive feedback from our customers who have received their G9 in terms of the product quality and overall performance. In addition to that, we believe that the launches of P7i as well as G6 will boost food traffic in our stores as well as encourage interest in G9 as well as part of the market. you know, product line. In addition to that, we are now already seeing, you know, reinvigorated sales or deliveries in March compared to the month before, which was February in the market. And so we are still very confident that we can, you know, we are in on the right trajectory to meet our delivery target for G9 for the year.
spk08: Thank you. The next question comes from Nick Lai of JP Morgan.
spk23: Please go ahead.
spk14: In the case of Dongfeng Motors in Hubei, we can see that the price of products that are not sold in the industry can not be sold. I would like to ask, how do we look at this year's sales marketing expense? Is it relatively high or will the sales marketing expense go down after new products? This is the first question. Thank you.
spk09: Thank you.
spk07: I think that 15 years ago, there might not have been a product that could not be sold, as long as the price could not be sold. These words are right. But I think from today's perspective, I think the accuracy of these words will be more and more discounted. This is from my point of view. At the same time, I want to say that this year, Xiaopeng's sales cost will definitely be significantly lower than before. This is something that we are now very clear about. I think what you mentioned in your questions might
spk21: I think what you mentioned in your questions might be viable 15 years ago, which was that you can basically sell anything as long as they are cheap enough. However, it might not work today. We still believe that product quality speaks volumes. So for this year, in terms of our overall marketing and pricing strategy, we have set up different aggressive goals. for example, the second half of the first quarter as well as for the upcoming several quarters of the year. So we definitely expect a lot of reinvigorated deliveries or sales outcome for the rest of the year.
spk14: I believe last year, the price of batteries in January
spk07: I think this is a better way for the entire industry to promote electric vehicles Compared to motor vehicles and gasoline vehicles, there is a stronger competitiveness. From our current communication with our partners, we are very confident that our price will be lower than the industry price. This is what we see at present. But this is just a follow-up to the industry. It's the same or a lot lower. Recently, we have been adjusting the power, including the power supply, battery, pack, and other series of systems. We have seen a lot of things. We have unified the battery, made the part of the three-point battery iron, and made the battery of the same frequency more than 10% to 20% of the actual battery life. Now, in regards to battery supply, first of all, in January last year, we saw this pricing inflation happen in the industry, which
spk21: really encouraged the development of hybrid vehicles in the market, but rather much, you know, but hurt a lot of development in the EV sector. However, this year, we are happy to see that the pricing of batteries have come down. And this newly launched price war in the industry, led by a lot of battery makers, especially the leaders, It's definitely a very good sign or very beneficial for development of BEV and can help us to improve our pricing competitiveness as well. Now, so far, based on our conversation with our various suppliers, we are confident that the price reduction, the degree of the price reduction, you know, by Xiaopeng, supplied by our supplier partners, will be more aggressive than the industry average. And that's just from the outside. Looking internally, we also have... discover different ways to optimize our cost structure to reduce our costs in terms of the power chain of batteries as well as packed by for example integration as well integrating some of the parts as well as replacing traditional NCM or NCA batteries with LFP batteries also by extending the usage or the driving range that it can support per battery by about 10 to 20 percent you know all of these ways can help us to further drive down our battery cost. And you can actually see the effectiveness or outcome in the coming 12 months.
spk23: 好的,谢谢。 The next question comes from Ming Li of Bank of America. Please go ahead.
spk16: new products, because in the past, I mentioned that the sales after G9 may be 2-3 times the price of P7. In fact, after the PCI is listed, the order has been replied quite well. I want to understand that because G6 and P7 or PCI should be at a similar price range. In addition to G6, My first question is regarding the product. competitiveness of G6 because management just mentioned they expect G6 in the future, the stabilized monthly sales could be two to three times of P7. But because G6 is in a similar price segment of P7, so what is the product competitiveness to give you the confidence? Thank you. This was the first question.
spk07: Sorry, I can't talk about the new product that hasn't been released yet. This is the first time that G6 will be brought to the Shanghai Motor Show in mid-April. I can briefly talk about a few things. The first is that the G6's battery life has been greatly improved. Because we have integrated the weight of the car into the car. Our integrated pressure will be very different. and our CIB technology, and our heat management technology, and our wind resistance capability. So the battery life of this car is beyond our imagination. The second thing is that the space of this car is much larger than the space of our friends. So when you sit in the back seat, you will find that this space is full, including its internal shape. I really cannot review too many details regarding our yet-to-launch models, but you can expect to learn more about G6.
spk21: in mid to low April this year in Shanghai Auto Show. But something that I can mention about some highlights of G6 is, first of all, it has a longer driving range supported by our optimized weight of the whole vehicle, driven by our integrated stamping technology, as well as better heat management and wind resistance management technology as well. In addition to that, the interior space of G6 is It's amazing, especially if you are looking at the second row of the car. The seating area is pretty spacious. And another characteristic to G6 or highlight is this aesthetic. The design language follows the X-Pan style, which is going to be very appealing to our customers. Thank you.
spk16: Thank you. My second question is related to batteries. Mr. Xiaopeng just mentioned that we now have a new PEC technology in our company, and we also have a new battery platform technology. I would like to know if there is a product like G9 in the product portfolio, such as super fast charge battery products. I would like to know if there is a product like G9 in the portfolio, such as super fast charge battery products. Uh, uh, 那另外也想請教說未來的話 我們這個關於電池的技術 那會不會也開始 比如採用更多不一樣的 比如說像是大圓柱的電池技術等等 這是我的第二個問題 So my second question is related to the battery technology So in the future, will you consider to use a different type of battery, for example, like a cylindrical type of battery. And besides that, regarding your current backload, G9, you already provide the high-voltage phase charging battery. Is that ratio high enough? Or if it is not high enough, Is this because the charging infrastructure is still not enough, or consumers feel comfortable based on the current normalized battery pack size?
spk07: Thank you. Yes, in fact, we have already planned all the new and large reformed vehicles starting with the G9. In this big package, they are all 800-volt fast-charging and turbochargers. And we will firmly continue to deploy the ultra-fast charge. So the 800V fast charge is not only able to charge faster on the ultra-high speed fast charge, it can also achieve a faster charging speed than other cars. This is the first thing I want to say. The second thing is about the future modularization of telecommunications. This is what we are doing. We are working on it, but we haven't announced it yet. But we still want to keep different models in the future, with different needs, including the possibility of using large elements.
spk21: Regarding G9 and all of our upcoming new models and facelift versions, all of them will be equipped with the fast charging capabilities suitable for 800 voltage and also silicon carbide fast charging technology. And we will also expand the construction of this fast charging infrastructure as well. Now, what I would like to mention is that this fast charging technology will not only work on the dedicated charging pile, but also in the original charging pile as well. So you can actually speed up the charging by using the technology on both charging piles. In addition to that, we also have to put in place our modularized optimization technology to optimize the batteries as well as the chip in the design of those new vehicles. So we are open to the possibility of adopting cylindrical batteries in the future.
spk23: Due to time constraints for this call, I'd like to turn the call back over to the company for closing remarks.
spk11: Thank you once again for joining us today.
spk13: If you have further questions, please feel free to contact ExPen's investor relations through the contact information provided on our website or the Pearson Financial Communications.
spk23: This concludes today's conference call. You may now disconnect your lines. Thank you.
Disclaimer

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