XPeng Inc.

Hello, ladies and gentlemen. Thank you for standing by for the first quarter 2024 earnings conference call for Xpeng Inc. At this time, all participants are in 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 call over to your host, Mr. Alex Shee, Head of Investor Relations of the company. Please go ahead, Alex.

Thank you. Hello, everyone, and welcome to Xpeng's first quarter 2024 earnings conference call. Our financial and operating results were issued via 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 team will include co-founder, chairman, and CEO, Mr. He Xiaopeng, Vice Chairman and President, Dr. Brian Gu, Vice President of Corporate Finance and Investments, Mr. Charles Zhang, Vice President of Finance and Accounting, Mr. James Wu, and myself. Management will begin with 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 price release and this conference call include the disclosure of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. EXPON's earnings price release contains a reconciliation of 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.

In addition, we also made profit from the collaboration and output of the automation technology based on the realization of the smart electric vehicle business. This creates a new and unique model. Xiaohong Motor has been in business for 10 years. It has been developing and investing in high-strength technology such as smart electric vehicle platform, EEA electric motor structure, and smart driver. At present, it has been converted into good financial returns. Then in the era of AI about to be overthrown and rebuild China and even the world's 7015, Xiaopeng also first realized the negative energy output of the self-developed technology and produced an objective and consistent income and profit. This will have a profound impact on our profit model and will also make Xiaopeng more confident and insist on continuing the global technology innovation and leading the change of the technology in the automotive industry.

Good evening, everyone. In the first quarter of 2024, Expo announced the delivery of 21,821 smart EVs, marking a 20% year-over-year increase. Notwithstanding significant market competition, our first quarter growth margin expanded substantially to 12.9%, doubling from the previous quarter with an increase of 6.7 percentage points. This development underscores XPON's innovative approach to enhancing profitability and international market potential through the provision of smart technologies based on its smart EV business. This has created a completely new, unique model. Over the past decade, since its inception, XPON has consistently made a robust investment in R&D for smart EV platforms, electrical, electronic architecture, and Advanced Driver Assistance Systems, or ADAS for short. These strategic investments are now yielding positive financial outcomes. As artificial intelligence continues to redefine the auto industry in China and globally, Xpeng has been at the forefront of exporting its in-house developed smart technologies, resulting in significant recurring revenue and profits. This achievement is poised to profoundly impact the company's profitability model, instilling confidence in paving the way for further technical advancements as Xpeng continues to lead the technology transformation within the automotive sector.

At the end of the first quarter, our equity cash is 414 billion yuan. With the greatly improved cash and abundant cash, we can pay more attention to I'm very happy that Xiaopeng We know that companies have been thinking about this for a long time and making such changes. And now the changes are very stable. Next, we will firmly promote the adjustment of the entire change and accelerate the introduction of key talents to continue to improve the company's organizational capability and strategic intelligence. Through the highly integrated AI intelligence system platform of today's small and medium-sized enterprises, we are confident that we will be able to launch

At the end of Q1, we had RMB 41.4 billion in cash. With our significantly improved growth margin, this healthy cash position allows us to concentrate more on strategic initiatives for the future. Our strategic transformation is not solely focused on boosting sales volume as the past. We are also dedicated to achieving excellence in quality, efficiency, and overall enhancement of the company's competitiveness. By leveraging our strengths and addressing any weaknesses, our goal is to become well-rounded and pursue larger scale and profits in the long run. I am very delighted to say that we have been able to start this thinking and have this vision much earlier on than our peers. Moving forward, we will vigorously drive this transformation whilst accelerating crucial talent recruitment and improving organizational effectiveness in strategic execution. We have confidence that with our hyper-integrated, comprehensive intelligence technology platform, Xpeng is well-positioned to efficiently launch highly competitive models worldwide and lead the widespread adoption of AI-powered smart cars.

Since this year, Xiaofeng Motors has been recruiting. In many fields, we now have top talent joining us, including autonomous driving, brand marketing, styling and design, etc. We will introduce some of them to you in the near future. We will also accelerate the ability of marketing, customer experience, styling, etc. to increase to the most advanced level of the industry. We want to turn good technology into good customer experience and good products. We have to use good marketing to pass on the value of technology and products to our customers better. So in terms of short-term infrastructure, we are leading in the industry in terms of AI capabilities and our overall technology development system support. We will quickly implement a global scale layout. So we did a better job of finding the products for our customers. So we believe this is also our long-term advantage.

Since the beginning of 2024, Xpeng has been actively recruiting top talents in address R&D, brand marketing, style design, and other key areas. We will soon introduce them to you. Our goal is to rapidly elevate our marketing, customer experience, and design capabilities to industry's most cutting-edge levels. This will enable us to effectively translate our advanced technologies into compelling product experiences, and utilize the marketing strategies to better communicate the value of our technology to customers. With our weaknesses properly addressed, our industry-leading AI capabilities, comprehensive R&D frameworks supporting rapid global scalability, and customer-oriented product design will better serve as the competitive edges that set us apart and drive our success.

In the first quarter, our flagship model X9 became the champion of the pure electric MPV and the pure electric three-seater model. I think the success of X9 fully demonstrates that product category innovation and technical innovation are more effective means of competition. In the next few years, we will continue to rely on X9's good reputation and experience, continue to enrich our high-end series of product lines, provide large family users with more advanced self-development technology,

During the first quarter, the X9, our large seven-seater flagship model, emerged as a pop seller in the pure electric MPV segment as well as the pure electric three-row model segment following its market launch. The success of the X9 firmly establishes product innovations and technological advancements as our most effective competitive edges. Moving forward, we will confidently build on this success to enrich our premium product portfolio. Our aim is to provide family customers with the most advanced smart EV technologies in large vehicles, delivering signing, space, comfort, and opulence akin to luxury cars priced above 1 million RMB.

从今年三季度起,我们将会开启在三年内 推出多款全新造型的一个强劲的产品周期的开市。 它会覆盖10到40万这个价格代的主要的细分市场。 这其中包含了多个像X9一样 专注品类创新的新五种产品。 All of our products will stick to the leadership of smart driving. At the same time, through multiple product training, in terms of price range and design, to satisfy different customer groups, including China and even the global participation needs. Our goal is to create a super brand that covers a wide range of customer groups in the world market, just like a mass-produced car. And let AI driving become the most important category.

In the third quarter of this year, we will embark on an extensive product launch cycle, introducing a number of new models within the next three years. These models will cover major price segments ranging from RMB $100,000 to RMB $400,000. Like the X9, our new models will come with disruptive innovations to target new segments. All products will feature cutting-edge ADAS technologies And with various product series, we will cater to diverse customer needs in pricing and design, both home and abroad. We are committed to establishing a Volkswagen-like super brand in the EV space with a global market presence and a wide-ranging product portfolio that caters to broad customer groups, ultimately bringing AI-powered vehicles into the mainstream.

So the first model of the Mora product series is the A-level pure electric car, which will be released in June this year. And in the third quarter, it will be officially launched and the scale will be increased. I believe that this is a high-quality product. Even in terms of the value of all the cars in the 200,000 series, it must be the highest and most intelligent. At the same time, the cost is quite competitive. I believe that Mora will become a super star product in the A-level pure electric market. Our new A-Class electric sedan

The first model of our Mona series of products will debut in June and officially launch and commence mass delivery in the third quarter of this year. This groundbreaking product boasts exquisite styling, advanced intelligence, and highly competitive cost structure, making it a potential favorite among younger consumer groups within the R&D 200,000 price range. We are confident that it will set the standard in the A-class BEV market. Over the next two years, we will introduce several additional products based on the A-class platform. In addition, we are determined to target the RMB $100,000 to RMB $200,000 price segment, where the highest sales volume is with our high-level add-ups.

In the fourth quarter of this year, we will also deliver a brand-new B-class pure electric car model. This new car is based on our latest technical scale technology base model. We expect it to become a hit in the B-class pure electric market in the second half of the year. The contribution of this B-class new car plus the MOLA model makes us very confident that in the fourth quarter of this year, it will achieve a significant growth in the amount of pure electric cars.

In the upcoming fourth quarter, we will be launching a new Xpeng-branded B-class battery electric sedan. We have successfully achieved a 25% cost reduction through technological advancements for the first time with this model. We expect it to become a best-selling B-class BEV model in the second half of this year. With the incremental volume from this new B-class model and mona, We are confident of substantial year-over-year growth in monthly delivery volume in the fourth quarter.

从5月20号的AI Day开始,我们将融合了大模型的AI天机系统, 包括了自动座舱和自动驾驶的能力, 已经全量推送给我们的主力车型。 这在中国汽车的行业是率先实现了第一个无高清地图, 第二个端到端。 the mass production of the automatic driving model. This is ahead of the current generation of 1 to 2 generations. If we don't use high-resolution graphics at all, we can make Xiaopeng in the third quarter of this year, our XMGP will not only realize the city that everyone has hoped for before, but also we hope to reach every road. And in the future, this can make Xiaopeng's automatic driving value more efficient to promote to the world. And what does the rise of the mass model mean? After the automatic value capability, it is possible to have the previous倍数级别的提高,将程序员人为编写的规则方式修订为用模型来进行训练跟推理使用。那么接下来小鹏汽车的软件跟AI升级,会从原来的平台构建进入到快速升级的超快构体,以后会按月进化,那么XNGP的价格又会快速的提升。那么我们的计划是, On AI Day, May the 20th, we began the full-scale rollout of our AI-powered in-car operating system, XOS 5.1 or AI 10G OS.

This cutting-edge large model-built system seamlessly integrates AI technology into smart cockpits and others. XOS 5.1 is available to all owners of our major models, solidifying exponents of position at the forefront of the non-HD map and end-to-end AI model applications in China's auto industry, which means our technology architecture is a one- or two-generation model ahead of our competitors without using any of these HD maps, and which also means that by third quarter of this year, XMGP not only would be able to roll it out in all the national roads, and we would be able to drive on all the roads around China, and from end to end to Huskers in all the cars, which means that going forward in terms of autonomous driving capabilities, in each quarter we would be able to see exponential times of improvement. And this would mean that in terms of the old way of a human-made method of rules and the coding method, this will be revised into the training of models and based on the algorithms. We aim to have XMGP accessible on all the roads nationwide by third of the quarter, as I have said. And our end-to-end AI model will enable us to rapidly advance our software and AI technology on a monthly basis. And we predict that by the end of 2025, we will be able to elevate the city road others' experience to match of that of the current highway NGP, which means only one manual takeover per hundreds of kilometers of driving.

XMGP will be more flexible and even exceed the average performance of most people in the world. Starting from the start of the new car in the fourth quarter of this year, more users will enjoy the XMGP service of Xiaopeng's highest level, MAX. This will greatly accelerate the spread of high-end self-driving cars and quickly expand the size of our XMGP team. Use a lot of data to replicate I believe that AI model technology will bring the new AI experience to our car owners in the next 10 months. It will also improve the performance of high-level and even higher-level autonomous vehicles.

Our XMGP is expected to achieve driving capabilities that are equal to or surpass those of human drivers in complex scenarios. This will soon be possible as our ADAS technology architecture is powered by advanced end-to-end AI models with extensive training using massive amounts of high-quality data, underscoring our competitive edge in data. With our B-class sedan model commencing delivery in the second half of this year, broader customer base will soon have access to AI-powered ADAS features. The widespread adoption of high-level ADAS will accelerate and rapidly scale up our XMGP fleet, which in turn will generate tremendous amounts of data to expedite AI model training and iteration. Large AI models will bring our owners an unprecedented AI-powered driving experience, boosting the penetration of smart EVs equipped with high-level ADAS features.

We have expanded to more than 20 providers. In the first half of the year, we have established cross-border relations with countries such as Western Europe, Southeast Asia, Middle East, and Australia, and will continue to open new small and medium-sized stores. In early April, Xiaopeng's nearly 1,000 machines were exported to Europe, and the total was more than 500 million yuan. In May, the left-hand version of G6 has begun to release prices and accept orders in the European market. We expect to launch the right-hand version of G6 in three seasons. Regarding the international market,

This year, we will expedite our expansion into drive sales and profit growth. We plan to expand our overseas sales network from Nordic countries to over 20 countries worldwide. In the first half of 2024, we established partnerships with the leading auto dealership groups in Western Europe, Southeast Asia, the Middle East, and Australia. New sales stores have gradually opened under these partnerships. In early April, we shipped nearly 1,000 G9s worth over IMB 500 million to Europe. In May, we announced the setting price and started accepting pre-orders for the G6 model with a left-hand drive in Europe. We plan to introduce the right-hand drive G6 in the third quarter. Highway and GP tests in the overseas markets are progressing well, too. Our product is strength. such as ultra-fast charging and smart technology, are highly valued by overseas dealers and consumers. Xpeng is confidently positioned as a niche to a high-end tech-savvy brand in international markets, offering superior product experiences and eco-friendly smart EV models.

We are constantly deepening our long-term strategic partnership with the general public, and the scale of the partnership is also rapidly expanding. On April 17, we are very happy to announce that Xiaopeng Motors and Dazhong Motor Co., Ltd. have reached the third strategic cooperation in less than a year. Xiaopeng and Dazhong will jointly develop the most leading electric motor armor in the industry for Dazhong Motor Co., Ltd. in the Chinese market. This platform will accumulate the electric motor armor technology of Xiaopeng Motor Co., Ltd., which is the latest generation based on central motor and pre-controlled motor, from 2026. We hope to work with our partners in the automotive industry around the world to find more opportunities to cooperate with each other in the era of AI self-driving, and create a greater strategic value of co-operation. From the beginning of this year, platform and software service revenue has become an important source of income for us. Our strategic partnership with the Volkswagen Group is rapidly deepening and expanding. Within just one year of establishing our partnership,

On April 17, we announced our third strategic cooperation project with Volkswagen. This project involves the joint development of industry-leading EV architecture for Volkswagen's EV platform designed for the Chinese market. This platform, which will be applied to China-produced Volkswagen-branded EV models starting from 2026, will integrate Xpeng's latest generation of EE architecture based on centralized computing and domain controller technologies. We are confident in our ability to leverage more mutually beneficial cooperation opportunities with Volkswagen and create significant strategic synergies as we lead the global automobile industry's transition into the AI-powered driving era. Since the first quarter of 2024, Our platform and software services have become a significant driver of our earnings. This clearly showcases XPON's innovative and unique business model, setting us apart from the traditional auto companies. Our cutting-edge smart technologies not only enhance monetization through XPON's branded EV sales, but also through partnership with a world-leading auto OEM. This will result in an expanded market presence and increased financial returns for our company.

However, we have already seen the positive impact of these adjustments. We expect that the total supply of the second quarter of 2024 will be 29,000 to 32,000. The same ratio will rise by 25% to 37.9%, and the return ratio will rise by 32.9% to 46.6%. The income is expected to be 75 to 83 billion yuan, and the same ratio will rise by 48% to 63%. I would like to reiterate that

In this ultra-competitive market, we should not only have our eyes on the scale of the sales, rather to focus on becoming a well-rounded player in the market. Despite the headwinds in the auto market in the second quarter, we have already observed a positive impact from our ongoing organizational and transformative changes. That said, We anticipate that the total delivery volume will range between 29,000 and 32,000 units in the second quarter of 2024, reflecting a year-over-year increase of 25% to 37.9% and a quarter-over-quarter increase of 32.9% to 46.6%. Furthermore, we predict that our second quarter total revenue will fall within the range of RMB 7.5 billion to RMB 8.3 billion, representing a year-over-year increase of 48.1% to 63.9%. We anticipate witnessing more transformation-driven results in the latter half of this year. Starting in October, we will be poised to enter a fast-track growth phase, confident in achieving significant breakthroughs in sales volume, margins, cash flow, and AI-powered audit systems, and this is for the long run into the future as well. Thank you, everyone, again. With that, I will now turn the call over to our VP of Finance, Mr. James Wu, to discuss our financial performance for the first quarter of 2024. Thank you, Xiaopeng.

Now, let me provide a brief overview of our financial results for the first quarter of 2024. I'll reference RMB only in my discussion today, unless otherwise stated. Our total revenues were $6.55 billion for the first quarter of 2024, an increase of 62.3% year-over-year and a decrease of 49.8% quarter-over-quarter. Revenues from vehicle sales were $5.54 billion for the first quarter of 2024, representing an increase of 57.8% year-over-year and a decrease of 54.7% quarter-over-quarter. The year-over-year increase was mainly attributable to higher deliveries, particularly the Model X9 in the first quarter of 2024. The quarter-over-quarter decrease was mainly attributable to lower deliveries of the G6 and the 2024 G9, compounded by seasonal impact, which is partially offset by contribution of the X9. Revenues from services and others were $1 billion for the first quarter of 2024. representing an increase of 93.1% year-over-year and an increase of 22.1% quarter-over-quarter. The year-over-year and quarter-over-quarter increases were primarily attributable to the increases of revenue from technical research and development service related to the platform and software strategic technical collaboration with the Volkswagen Group. Gross margin was 12.9% for the first quarter of 2024. compared with 1.7% for the same period of 2023 and 6.2% for the fourth quarter of 2023. Vehicle margin was 5.5% for the first quarter of 2024 compared with negative 2.5% for the same period of 2023 and 4.1% for the fourth quarter of 2023. The year-over-year and quarter-over-quarter increases were primarily attributable to the cost reduction and the improvement in product mix of models, partially offset by the inventory provision and losses on purchase commitments related to the model P5, with a negative impact of 3.2 percentage points on vehicle margin for this quarter, as management lowered the P5 forecasted sales due to the expected stronger market amounts for the upcoming new vehicle models. R&D expenses were $1.35 billion, for the first quarter of 2024, representing an increase of 4.2% year-over-year and an increase of 3.3% quarter-over-quarter. The year-over-year and quarter-over-quarter increases were mainly in line with the timing and progress of new vehicle programs. SG&A expenses were $1.39 billion for the first quarter of 2024, which is flat on a year-over-year basis and an decrease of 28.3% quarter over quarter. The quarter over quarter decrease was mainly due to lower commissions to the franchise stores and lower marketing, promotional, and advertising expenses. Fair value gain on derivative liability relating to the contingent consideration was $0.18 billion for the first quarter of 2024 compared with $0.03 billion for the fourth quarter of 2023. This non-cash gain was resulted from the fair value change of the contingent consideration related to the acquisition of DD's smart auto business. As a result of the foregoing, loss from operations was $1.65 billion for the first quarter of 2024, compared with $2.59 billion for the same period of 2023 and $2.05 billion for the fourth quarter of 2023. Net loss was $1.37 billion for the first quarter of 2024, compared with $2.34 billion for the same period of 2023, and $1.35 billion for the fourth quarter of 2023. As of March 31, 2024, our company had cash and cash equivalents, restricted cash, short-term investments, and time deposits in total of $41.4 billion. To be mindful of the length of our earnings call, I would encourage listeners to refer to our earnings press release for more details on our first quarter 2024 financial results. This concludes our prepared remarks. We will now open the line to questions. Operator, please go ahead.

Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. For the benefit of participants on today's call, if you wish to ask a question to management in Chinese, please immediately repeat your question in English. For the sake of clarity and order, please ask one question at a time. Management will respond and then feel free to follow up with your next question. Your first question comes from Tim Xiao with Morgan Stanley.

Thank you for accepting my question. I have two questions. First of all, congratulations to Grace on the progress of the public cooperation project. I would like to ask if you can make a scale of the revenue of the platform software technology for the first quarter of the public cooperation. In addition, will the contribution of the next few quarters be expected to rise? In addition, the revenue of the electronic electrical structure agreement announced last month, will there be a chance to recognize it this year? This is my first question. So my first question is about revenue contribution from the collaboration with Volkswagen. Can the management roughly quantify the contribution of the service revenue from Volkswagen in first quarters? And we know that it's recurring, so will it continue climbing quarter over quarter in the following months? And is there any chance that the revenue from the new agreements related to the e-architectures could also come through within the year? So that's my first question. Thank you.

Hi, Tim. This is Charles. So the platform software collaboration revenue from Volkswagen has been recorded in the service and other revenue in Q1. As you know that it is recurring in nature. So I think that going forward, every quarter we will be able to book such platform software technical services revenue. So in Q1, we booked multi-hundred million RMB platform software services revenue. And I think that we believe that in the subsequent quarters, such revenue will be more than what we booked in Q1. And so obviously, I think that given the nature of the platform and the software revenue, it is very high margin business for us. And we believe that with our vehicle sales business and also the platform and software technical services revenue, our company level GP margin can be sustainable at the low to mid-teens percentage GP margin. And therefore, I think that we, as Xiaofeng pointed out, that we created a very unique business model in the auto industry. In addition to that, and we will continue to deliver our cost reductions through technology and also the supply chain and to further improve our vehicle GP margin. To address your question regarding the revenue from the EE architecture and the We expect that the revenue from the e-architecture will start to be recognized from the second half this year. Thank you.

Got it. Thank you very much, Charles. My second question is related to the self-driving driver. As we saw earlier, President Xiaobo mentioned that the self-driving driver to improve the driving capability of the four-wheel drive to the third quarter of this year, so that every road in the country can be opened, and a four-wheel drive will be realized next year. In this process, is it also possible to understand whether small and medium-sized vehicles need a corresponding increase, a relatively large increase in the deployment of R&D personnel and resources? In addition, how much time do we expect small and medium-sized vehicles to be able to transform this technology lead into a growth of new car sales or achieve a technological transformation? So, my second question is about Tom's riding, because we noticed that X-Pen is to leverage entry and large model to upgrade X-GenGP by third quarter of this year to cover basically overalls in China, and with the chief of level four vehicle autonomy next year. So, to achieve that target, should we expect X-Pen to manifold increase R&D spending during the period And when do you think such a technological leadership can translate into upside to new car sales or potential monetization opportunity? That's my second question. Thank you.

首先纠正一个说法,就是明年我们希望能够达到整L4的能力, 而不是达到L4,因为L4本身还需要硬件, 需要政策法规的重复才行,这是第一个。 实际上整个的大模型实际上是, will impact the development of all the companies now. It means that the people who were writing the rules will now have to make changes. In the end, there will be a model to create the rules. So there is no obvious increase in the overall number of people. On the contrary, we have more people who can do full-scale related things. I believe Now, it is very difficult to determine the speed of the big model after it is launched. The speed of the experience and the ability to speed up the change. In the past, it was easier for people to write programs. For example, I have more people and I have more time, so I can do it. But according to the size of the data, according to the ability of training, according to the ability of the model, I think that in 2025, I originally thought that in 2025, in the latter part of 2025, the automatic driving ability will form a very strong steel frame. Now, after the big model, it is possible that this time will be earlier, but next year, this, this, 2025 will be earlier. Thank you.

Thank you very much for your question. And before I answer your question, there's one correction to make, which is that we hope to achieve the ability of L4 next year. However, we know that being able to actually implement that would also need to have the hardware as well as the rules and the regulations to catch up. So that's point one. And point two, with respect to the large models, and we know that AI large models is going to have a huge impact on all the companies involved. And therefore, as we say, in the past in terms of the rules and regulations people have, and those need to change. And the large models will actually generate these new rules. And thirdly, we don't actually need to increase our manpower at the moment, and we have about the same amount of people working, continue to work on globalization. In terms of how fast it's going to take or what the speed is going to be like, I would say that it's hard to say, it's hard to quantify. In the past, when we relied on human power, one would be able to say how many people we would need, how much time we would need. However, with large models, it's about the scale, the algorithm, and the speed, etc. My original thinking was that it's going to be the latter half of 2025, And now we'll see faster development of technology and AI. And I think that it would be earlier than 2025 or possibly next year. So we'll wait and see.

Your next question comes from Ming Lee with Bank of America.

你们好 那我这边也是两个问题 那第一个问题呢 是有关于这个 就是之后的一些车型的一些 有没有更详细的一些说明 那主要的话 第三季的这个Mona Project 它的就是2B车跟2C车 它的这个节奏大概会是怎样 然后接着的话 能不能讲一下就是说 因为明年之前有提到说 应该每一季都有 So my first question is related to more details of your new product pipeline. So in the second half, you will have two products. The first product is related to Mona project. So could you give more details regarding the launch timing for the 2B version and also the 2C version? And for the next year, the product pipeline, could you also give some guidance regarding the numbers of your monobrand product and also your sponsor brand product? Thank you.

First of all, I would like to explain that all of our models, our main customers are all 2C models. We will not consider large-scale models in the 2B field, including Mora and all of them. So when Mora was designed at the beginning, it was designed with the highest quality. So in the case of high-quality, we do not think that it has a huge penetration in the 2B market. After the third quarter of this year, we will have different cars in different quarters. Some quarters will have more cars, and some quarters may only have remodeled cars. At the same time, from the third quarter of 2024 to the second quarter of 2026, we will continue to have related models. We will not be able to share this specific product plan with the general public. However, we have already shared these two products this year. Thank you for your understanding.

Thank you for your question. And first of all, in terms of all our car models and the mainstream offer that we bring to the market would still be for the 2C market, and the 2B market is not really our focus, including Monarch. And for Mona, this brand ends, as we say, because what we are looking at is building this to the most beautiful and aesthetic cars out there in the market. Therefore, we do not really see this having too much of a big penetration rate into the to-be market. And the second seed, starting from Q3 this year, following onwards. And in each different quarters, we will have different CARB models being launched in the market. And some quarters, perhaps there will be a few more different models. And in certain quarters, perhaps this will be simply an updated version of an existing model or a mixed version model, so to speak. And starting from 2024 to 2026, we will continue to roll out different car models into the market. And in terms of the specifics, I don't think that I'm in a position to release further details to the market at the moment. And our plans, as you have already heard in my previous presentation.

So this Mola will be a series of cars. We will come back next month with... This market will share some of our thoughts on Mora. Today, I would like to repeat what I just said. Mora has a very good value. And we hope to have a good profit. And we hope to have different levels in Mora, including the highest level of this smart price. We can take this price from the original, from the current 200,000 yuan above the main price range, to this 200,000 yuan below. These are our thoughts on Mora. Thank you.

So the second part of my answer to your question and for the Mona series and actually going forward and next month we will have more to share with the market in terms of our thinking about this series. And as I said before, for Mona series, we are looking at building a car that is the most beautiful and the most aesthetic on the external, and in addition, we also hope that this is a car that will bring the company a good amount of profit, and it will also cover various grades of intelligent or autonomous driving, and we hope that in the past, for autonomous driving, it was mainly for the cars in the price range of above $200,000, and with Mona series, we hope to bring the autonomous driving into the car with a price range of within $200,000.

Okay. Okay. Uh, Last week, Xperm brand officially entered the Hong Kong market. Also, in the next few months, Xperm will enter more and more countries, especially South Asia. So right now, based on your product launch in the overseas market and also the progress of entering a new market. Right now, are you ahead of your original target, which you mentioned that the total volumes will be a few times more than 10,000 units? And will you incur more R&D expense because you will also provide XMGP functions in the overseas market?

Amy, it's Brian. Let me address your question. First of all, regarding our overseas plan, I would say this year we are, as you can see, accelerating our pace of international development. We are targeting to roll out to more than 20 countries with our industry-leading technology advanced EVs. The exact number of markets obviously also correlates to the type of models that we can make available to these markets. For example, right now in Europe, we're already selling the G9 and P7. We're launching the left-hand drive in G6 this month. We'll hopefully deliver very soon. In other markets, for example, in Southeast Asia, and you point out Hong Kong, we're launching the right-hand drive in G6. I would say probably in a couple months, and also will probably be followed with the right-hand driving X9 to be delivered probably by the end of this year or early next year. So as you can see that the whole international expansion is on track. We think the original guidance we gave in terms of number, in terms of tens of thousands, As well as this quarter, we would like to achieve more than 10% of our overall delivery number is still valid. So those are the right guidances we want to give on the international expansion. And regarding the technical XMGP-related smart driving technology, we are actively now testing a number of overseas markets, currently also working with regulatory bodies to make sure that these compliance with and also developing regulations in these markets. The development is actually not going to make material increase in our overall R&D. First of all, I think we are still very targeted in the number of markets that we want to bring the subsets of our XMGP capabilities. But again, also just echo what Xiaofeng just mentioned, our capability of development also has been increasing now with the help of AI and large model capabilities and also removing the need for the map as well as using the large language model to accelerate the development in different scenarios also will benefit our development overseas. So in all, I think we will look forward to seeing some of these capabilities being made available by later this year as well as early next year in some of the overseas markets. And also at the same time, we don't see material increases of R&D expense because of that effort.

Thank you, Brian.

Your next question comes from Bin Wang with Deutsche Bank.

Thank you. Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan My first question is about the number four quarter this year. You're actually very confident about the number four quarter this year. If you just say that, the volume will have very high growth. If we assume there will be, say, 50% growth, and last year in number four quarter, the monthly volume will be $20K. So if it was $30K, what's the breakdown between the existing products, an upcoming Mona and the F57 large-sized sedan? Meanwhile, it came common about the margin, because we see three parts for the margin. Number one is the cost reduction. Second is the export. have a higher margin and still want additional EEA income from Volkswagen. So is that growth margin close to 15%? Thank you.

Hey, Bing. It's Brian. Let me just respond. First of all, in the fourth quarter of this year, you will see that our Mona product will be in full delivery and also will be launching the delivery of the B segment sedan. Those two products will contribute very meaningfully into the monthly delivery in the fourth quarter, but at different stages, as you can tell, because the starting of the delivery is different. So we are very excited about the prospect of both products in terms of generating significant volume. I would say, assuming both models are in full delivery months, I think the monthly numbers we anticipate seem to increase over last year's comparable monthly delivery number is achievable. That's what we believe. Again, I'm not going to give you the exact number as well as breakdown, but that's how we envision the delivery number growth. But also what I want to emphasize is that, as you just heard, that these two products is only the beginning of our super product cycle that will last probably for the next 18 to 24 months. And also because the early next year, and we will also have additional products as well as updated models to be launched in the subsequent quarters. We want to make sure that the growth profile maintains stable as well as under control. We actually want to make sure the additional volume that we want to achieve on a monthly basis is growing in a more stable and sequential manner rather than episodical, you know, big bursts like, you know, some other model launches you've seen. So I think that's, you know, kind of probably lasts until the remaining of next year given the other models will later hopefully will give you a prelude in the next few quarters of earnings. In terms of margin, I would like to comment, first of all, I would say the MONA model, even though it's an A-class sedan, we are still anticipating healthy, positive margin contribution from this model, and also in healthy quantities. For the B-segment sedan, we think it's going to be higher margin than probably our current models, except the X9. So both will contribute materially to the gross profit mix. And also, as Charles mentioned, the contribution from Volkswagen will continue to become a steady recurring income. At the same time, we anticipate additional contribution from EEA collaboration. So with all these contributions as well as our sort of view currently on the potential gross profit margin for the new products, we are maintaining healthy low to mid-teen margin gross profit for our overall business by the end of this year.

Okay. Okay. And the second question is that we do see our peers actually launch the EIV version and want to have a big increase. What's our plan for our power chain? Will you also launch the EIV version for the product? Thank you.

We generally don't want to answer the future clear product planning, because this is a planning system. I think what we can answer today is that in the field of flying vehicles, we will use the real-world solution to solve the real-world problem in flying vehicles. But in flying, we are pure electricity. This can be very clear. If we have any related product plans in the real world, we will share them with you. Thank you.

Thank you for your question and generally speaking we would not be very willing to disclose any information in relation to our product designs because it is simply still in the planning stage and going forward this is something that we would be looking at being implemented in our flying cars and in terms of the And I can say that for the flying party and the auto party, it will be BEV. And so for the further details, it is better that we wait until the product actually becomes more concrete when we have more detailed plans and more ready to share with the market. Thank you. 我想补充两个我们对真诚的看法。

I think the first one is that hybrid is a real demand for customers. There are a lot of car owners now. In the past year, I believe in the future, there will be more than a year. This hybrid technology, including真诚, is a scene with a huge demand for use. But we also surveyed a lot of users. After they accepted the hybrid, they found that I only used a few times a year. But they often need to charge. So they started to accept more pure electricity products. So we will speed up the construction of super fast charging, even S5 super fast charging. Recently, we have been building very fast, to speed up the user's experience. I believe that many mobile car owners will change to pure electricity in the next car. This is the first need we see. Please translate for me. Thank you.

So please allow me just to supplement a few points. And my first point is that, yes, indeed, in the past one year and in the next year to come, we will see that there is quite a lot of demand coming from the market, from the consumers for PHEVs. However, you will see that a lot of these consumers, they will realize that despite having a PHEV and out of a year, in terms of the times that they actually go to the petrol station and to get it filled up, it's very little, only just a few times. And by having this experience, more and more consumers actually have more confidence in BEVs and in pure electric vehicles, so to speak. And at the moment, we are also seeing working hard on the construction and the building of our Ultra X5 series of products. And I do believe that for consumers having experienced PHEVs and for the next car model, and it is very likely that they will go for BEVs.

The difficulty of crossing is much higher than from pure electricity to real estate. But we believe that the current generation of real estate has seen a lot of challenges. For example, there are a lot of challenges encountered in globalization. China's cars are mainly driven in cities. Some overseas countries are cities and high-speed cars. They all have a considerable proportion. So the current experience of high-speed real estate has a lot of problems. So in another perspective, for children, In addition, in terms of the technology and the movement from these cars and into the EVs, actually it's quite a jump in terms of the technology. And you can also see if we look at it from

globally, and for instance, in certain countries in Asia versus certain countries in Europe or elsewhere, and sometimes certain parts could only run on a certain path or certain roads, et cetera. And we do think that it is not as simple, it is not as straightforward as what we hear from the market. And we do think that we would need to be very cautious and we need to maintain very vigilance. And for XP, obviously, we will also continue to watch the space very carefully.

Your next question comes from Paul Gong with UBS.

Now there is some feedback from the industry saying that if TSMC uses end-to-end as soon as possible, there will be uncertain factors. Just because it doesn't necessarily have a result, if it makes such a decision, it doesn't necessarily have a precise grasp. And there is also feedback that after the model starts to get bigger, its update will be slower. I don't know what kind of thinking Xiaopeng has on this side. So my first question is regarding the end-to-end big model. There has been some feedback in the industry saying that it involves uncertainty in terms of the decision-making, and also it makes it more difficult to figure out why the decision was made in that way. And also the feedback is when the model becomes larger, it kind of slows down in terms of upgrading. So how does Xpeng think about this issue? This is my first question.

Yes. When we first started to make the Dunlop model, we had the same idea. We all have a lot of worries. But with the progress of technology, we have seen the huge value of the Dunlop model. We all know that there are many factors in all large models. But the most important thing is how you construct Your controller is like your brake system, your black box safety system. So what I think is better about this is that in the past, we have done a lot of things related to safety, control, and safety games. So there are a lot of things that we can continue to do in this. Thank you very much for your question. Yes indeed, in the very beginning

We did worry about it, and however, with the advancement of the technology, we can now see the huge value that end-to-end large models can bring. And, of course, with the technologies, there are always uncertainties, and what we need to do is to make sure that we are able to keep an eye and ensuring the safety of the black box, of the control of the vehicle, et cetera, and as well as the end-to-end capability. And, secondly, we are also building a large-size analog model to help us to carry out the various pilots and the trials

Regarding the second question, I am not particularly able to understand it. I can try to explain it. In fact, the automatic driving model and the large circular model are not completely the same. In fact, you can think that on the basis of Transformer, to understand the logic of the entire model, you have to write it yourself, not use a large circular model. When you have the ability to use the large model yourself, you don't need such a big data change. With respect to your second question,

I'm not entirely sure if I have understood what you are trying to get, but I'll try my best to answer. And I would say that from an autonomous driving model versus a large language model, these two are actually different. And looking at it from transformers, and this is not open source, and if we do have our own model, actually we would not need to use such amount of data as what the industry requires or says to be in, for instance, 30B or whatever, and we would be able, once identifying the appropriate model, and we would be able to work on that basis and to move forward. Thank you. 好的,我的第二个问题是关于渠道的,就现有的一个渠道的话,往往是在一个比较好的一个内地点,但是面积相对是比较小的。

So my second question is regarding the distribution channel. So far, I can see that the stores are mostly in some prime location, but with relatively limited area. As Xpeng gradually launched more new models and expanded the portfolio, including Mona, do you see the need to expand the average size of the stores or the area of the stores, even at the cost of, say, shifting out from the most prime location?

We have been optimizing the channels. For example, we are now doing channel descent. We are currently covering more low-end systems. In the past, we mainly covered high-end and mid-high-end systems. Secondly, we will definitely increase the number of SIFs. SIFs can provide better support for services and multi-task systems. Thirdly, Thank you for the translation.

Thank you for your question. And first of all, we have always continued to optimize our channels. And for instance, we are looking at going into the lower tier cities and to try and cover as many lower tier cities as possible. In the past, we have mainly focused on the high-end and the mid-end tier cities. And secondly, we do believe that 4S stores or these comprehensive stores would be able to provide the better support of services. And thirdly, even with the new stores that we open up in the malls, and again, we are not going to open them up with a huge area of floor area, because we do believe that even with an appropriate amount of space available for these stores in the mall, and the conversion rate of successful order is actually very high,

And in addition, in terms of our plans for store openings into four last year, we can see that

It has been well recovered in Q1 and Q2 this year, and we predict that by Q3 this year, we will have about 600 stores.

Thank you very much. That's quite helpful.

非常感谢,很有帮助。 Your next question comes from Tina Hao with Goldman Sachs. 感谢王立成的时间。

Yes, I have two questions. The first one is about our Mona brand. In terms of 2C, we can see that this market may have some product models. And then we may have high-quality models on one hand, and on the other hand, we can compete with these products. And then maybe this... Let me just translate. So in terms of our Mona brand, So for the 2C customers, what are some of the competing models in the market? And then also for the customers with this price segment, they might have less demand in terms of the smart functions and higher demand for like the pricing. So aside from I think the vehicle design, what are some of our key competitive advantages in this segment? Also, do we have any sales volume target for the 2B part of Mona distribution. Thank you.

这个问题实际上是该我们Mola的发布会来去描述的。 我觉得Mola我们可以看到购车用户实际上需要高颜值满足他客户需求的车。 If it is lower than the price of other cars, we used to have a model called 10,000 US dollars, every 10,000 US dollars, the sales of the whole car will increase by one to two times. In fact, when it is more than 200,000, we all see such a trend. This is a major milestone in the competition of new cars. If we can lower some of the price on this, the specific price will be told to you when we have a press conference. We believe that its scale demand is very large. It will be now. two to four times the size, or at least. But in the past, why no one has made a car with a capacity of 100,000 to 200,000 people? It's beautiful, it has a good space, and it's intelligent. It's because it can't do it. I think that Xiaofeng, in this, together with our partners, we have developed this for four years. With such a big development investment, I think we can finally start preparing. I think this is our overall thinking. So from another perspective, your question, in the field of 2C, we see some current ones, there are some cars that are sold a lot, between 20,000 and 50,000 units a month. But we feel that in fact, we still have a very big difference in positioning with it, which makes it meet a lot of the needs of technology users. In the past, there was no such thing. Thank you for helping me translate it first.

Thank you very much for your question. And actually, this question is better asked in our Mona products launch event. Anyway, I'll make a few comments. And first of all, for this Mona product, as introduced and presented earlier, this is a product with very high beauty as well as external aesthetics. And in addition, it also comes with a cheaper price. And we actually have a model, which is what we call the $10,000 rule, which means that every time the price goes down by $10,000, you will see that the sales of that product will actually go up by one time or actually go up by two times. And this model has been validated in our old experience with our other vehicles, of a price range above $200,000. And now, if we would be able to implement this and to give a bit of a price discount for Mona series and in terms of the specific price reduction, we will talk about that in our Mona product launch. And I believe the sale that we are looking at is actually huge. And I would say it's about two to four times of the present level. In the past, For $100,000 to $200,000 price range, nobody was able to provide the consumers with a car that is not only beautiful, has a good space, but also a smart car with very good technology. After four years of hard work and R&D and so much investment into this, finally XP has been able to come up with a product, Mona, that is able to meet all the above demands. In other words, If you look at our competitors at the moment, yes, some of them say that they can sell 20,000 to 50,000 units of cars per month. However, I can assure you that for our monoproducts, you would see a huge difference between our car versus the competitors' cars because not only that we are able to provide the beauty, to provide the space, but also to provide this space range of a price with a good technology and the good smart driving functionality that it was this need that was not able to be met in the past.

So about the demand for automation, we have been discussing and thinking about this for a long time. I think there are two. First, we will give to satisfy some of the users who may not need a strong intelligent version. But I will share an example of a mobile mobile network startup. That is, mobile mobile users in the high-end users of voice are often not high-end users with high data flow. On the contrary, users who make fewer calls are high-end users with high data flow. So from our part of the data, I think, in fact, in the 10 to 200,000 level of users, more people need high-quality smart values. It's just that he thinks it's too expensive. Once he gets this high-tech product, but he can afford to pay the price, it will be a huge attraction. I think in this situation, in the next year, in 2025, everyone will see this data change. Thank you.

So to answer your second question, and with respect to smart driving or autonomous driving, and I would say that it is likely, yes, that some of these consumers, they may not need very highly advanced functions, and we will possibly be looking at a strategy that is stratifying and giving out different levels of ADAS to the consumers, yes. And I would actually like to quote the internet thinking that when I was establishing my business and something that was quite popular in the industry back in those days and what it says is that for the mobile phone users, actually, they are not the high-end generators of the data. It is rather that the people who are making fewer phone calls are the high-end data generators. So to adopt that analogy or that thinking, and if we look at the 100,000 to 200,000 RMB price range and this is actually the group of consumers that would need more of the autonomous driving functions. It's simply that in the past, this was out of their price range and they were not able to afford this. Once they are able to afford this, they would be all over the autonomous driving cars in this price range and I do believe that next year in 2025, we will see this coming into a reality.

So Tina, also this is Brian. Let me just comment on your question on the 2B segment. You know, what we see in this price segment product, the successful C to C product will also be used quite prevalently in 2B channels as well. So I think a success of this product, even though not targeted at the 2B segment, but still will have significant use cases applied to 2B mobility use. And also with our partnership and collaboration with Didi, I think that multi-purpose sort of use case will be very, very prevalent in our user base for Mona.

Thank you. I would like to follow up on 2B. We should still expect So just to quickly follow up, so for the 2B part, should we still expect 100,000 units in the first 13 months and then 100,000 units in the next 12 months? Is this still a reasonable expectation? Thank you.

The agreement we have with DD is still valid. We still provide such an incentive for MONA to be used in DD system. If they achieve those in volume, I think the incentive will still be valid. Yes.

So this is mainly SAP to DD, how many they want to purchase?

No, I think if you read our agreement, which is made public available, it is actually an agreement that if the Mona product is used in the DD system, in the mobility ecosystem, they could, up to a certain number, they will receive additional incentives. It does not relate to their own purchases.

Okay, thank you. And then the second question is about our software service income. Because I did see that So my second question is in terms of the software services revenue. So we see started recognition and has been very helpful in terms of our overall margin and profitability. So because our collaborative agreement with Volkswagen is not exclusive, are we actually actively exploring similar collaboration with other partners?

Hi, Tina. I think that our strategic collaboration with Volkswagen actually creates a very strong value, strategic value to each other. For example, we are collaborating on the technology, and also we are collaborating on supply chain, and also during the process we also identified opportunity to work more closely going forward in other areas. We believe there are a lot of things we can do as a strategic partner to each other. However, I think that from the collaboration perspective, our collaboration with Volkswagen were not exclusive to each other. So therefore, I think that we are also open-minded to looking for the strategic collaboration opportunity with other players. However, I think that what we value most is that we see how we can bring value to a partnership and create value to each other, not just a supplier-related relationship.

That does conclude our question and answer session. I'd like to turn the call back over to the company for closing remarks.

Thank you once again for joining us today. If you have further questions, please feel free to contact Expanse Investor Relations through the contact information provided on our website or the Pearson Financial Communications.

This concludes today's conference call. Thank you for participating. You may now disconnect.