ZEEKR Intelligent Technology Holding Limited American Depositary Shares (each representing ten (10) Ordinary Shares)

Hello, ladies and gentlemen. Thank you for standing by for Zeger's first quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Wang Jing, the CFO of Zeger. Please go ahead.

Thank you, Jason. Good evening and good morning, everyone. Welcome to Zeger's first quarter 2022 earnings conference call. Before we continue, please be reminded that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Security and Investigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the Companies Act results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain company filings with the U.S. Securities and Exchange Commission. The company does not take any obligation to update any forwarding statements, except as required under a clickable rule. Joining us today from Zika Senior Management, I'm Mr. Anton Hui, co-founder and CEO, and I am Jingyuan, CFO of the company. Our CEO will make his remarks in Chinese, followed by an English translation. With that, I will now turn the call over to our CEO, Mr. Anton Hui.

Please. Hello, everyone on the line. I'm Zika CEO Anton Hui. Hello everyone, I am Andy An, the CEO of Zika.

Thank you all for joining Zika's first earnings call as a public company.

In the first quarter of 2024, Zika delivered 33,059 intelligent electric vehicles, representing a 117% year-on-year increase.

This doubling of sales made this quarter our best Q1 since our first delivery and secured Zika's position as the top-selling BEV brand in China for vehicles priced above 200,000 RMB.

In April and May 2024, we delivered 16,089 and 18,616 vehicles respectively.

bringing our total cumulative deliveries to over 260,000 units. With the production capacity ramp up for our latest models, including the Zika-001-2024 model year and the Zika-007, we are confident of maintaining strong growth momentum in our delivery volume for the remainder of this year. Consequently, we will accelerate our progress towards our full-year target of 230,000 vehicle deliveries.

Now I would like to share some details of the ZK's recent achievement and our plans across five areas.

product lineup, intelligence advancement, charging solutions, channel service capabilities, and global expansion. 首先在产品投放方面。 Let's start with the latest additions to our product lineup.

It also marked the most advanced 8957 platform and the most number of sound systems and laser radars, etc. This has accelerated the evolution and led the industry to open up a new era of 2.0. It also went through the first wave of production. In April and May, the new GK001 continued to reach the next wave. We launched our ZK001 2024 model year in February this year, boasting over 1,000 upgrades, including numerous industry-leading performance and functionality enhancements.

The ZK001 2024 model year features an 800V ultra-fast charging system, the 8295 intelligent copy platform, multiple speakers, lidars, and much more, establishing the next generation of pure electric shooting brakes with outstanding innovation. Following its initial production ramp-up, monthly deliveries of the ZK001-2024 model year surpassed 10,000 in both April and May, maintaining its position as the best-selling pure electric vehicle priced above 250,000 RMB and setting new gold sales records for global shooting breaks.

On April 19, we also released four ultra-slim 7G MPVs, the Geek 009 Light Gray, and on May 24, we opened the first delivery. On April the 19th, we unveiled

the Zika-009 grant, our deluxe version of the Zika-009, and commenced deliveries on May 24. The Zika-009 grant is the world's only four-seater MPV equipped with LiDAR. It redefines the ultra-luxury in the new energy vehicles era with a series of globally pioneering safety innovations and top-tier luxury amenities, setting a new standard for the ultimate mobility life experience.

For the ultimate mobility life experience. For the ultimate mobility life experience. For the ultimate mobility life experience. For the ultimate mobility life experience. At the Beijing Auto Show this April, we introduced the Zika Mix, our first product for family users and the largest five-seat model in its class.

The ZECOMIX is also our first model built on our SEAM architecture, a groundbreaking platform specifically tailored to meet autonomous driving and future intelligent mobility demands. Positioned as an intelligent living room on wheels, ZECOMIX features a series of innovative technologies that redefine traditional static special concepts and empower a wide range of corporate scenario models.

Qikert 007 was delivered on January 1st this year. In April, we launched an enhanced version of the back-end version. This version has also improved the market competitiveness of the product. In the international racetrack in Zhejiang, Qikert 007 became

we begin delivery delivering zero seven a smart electric sedan on january the first this year we launched an updated 2024 version three months later hosting real wheel drive and an area of extra features to further boost with the model's market competitiveness it's a recent performance at the Zhejiang International Circuit secured its position as the fastest mass-produced model priced under 500,000 RMB.

In the second half of this year, we will officially launch Geekr Mix and release a new medium-sized built-in SUV. Geekr's product evidence has reached six categories. In other words, in the second half of this year, two new models will be added. In this way, we will build standard products from compact SUVs to medium-sized MPVs in all new market.

In the second half of this year, we will launch two new models. We will officially debut the Zika Mix and the new mid-range pure electric SUV in the second half of this year. These vehicles will expand the Zika product lineup to six models, establishing benchmark products across market segments, including sedans, compact SUVs, and large MPVs. In terms of smart evolution, Next, our accomplishments in the intelligentization.

Geek's intelligentization has always insisted on self-reliance and co-creation, two-legged walking, and from intelligent driving, intelligent driving, intelligent sitting, three dimensions to co-develop and lead industry innovation. Intelligent driving, using the new Geek 001 as an example, such as CCD's electronic identification, dual-channel smoothness, and smart module, and so on, to allow the new Geek01 to have millions of experience.

Geek remains committed to advancing intelligent technologies through both in-house development and collaborative innovation, propelling a synergistic growth in the technology-driven solutions, autonomous driving, and smart cockpits. The Zika-001-2024 model year is a prime example of our technology-driven approach. Equipped with the cutting-edge features such as CCD electromagnetic dampers, dual-chamber air suspension, and the intelligent magic carpet system, the Zika-001-2024 model year delivers an ultimate driving experience.

The self-driving plan of G-KER is about high-speed rail, train and other users' high-speed use. We continue to take the leading position in the industry. On May 15, we also launched the G-KER 007 5S 6.1 version. G-KER launched the automatic train function of the vehicle seat in the industry.

Zika's self-developed autonomous driving solutions prioritize high-frequency user scenarios like highway navigation and parking, further solidifying our industry-leading position. With the launch of Zika 007 OS 6.1 on May 15th, we were proud to introduce the industry's first automatic parking functionality for mechanical parking spaces in mass-produced vehicles. In terms of smart corporates, Zika has adopted an extremely intelligent and open-minded development philosophy. Harnessing our powerful computing capabilities, we continue to push boundaries with innovation across some systems, AI language model interactions, and the open ecosystem. Our Zika-009 grant, the first mass-produced vehicle to feature a dual 8295 chip computing platform, highlights our dedication to pioneering technology. This cutting-edge setup provides independent computing power support for the front and the rear cabins, ensuring industry-leading performance in cabin system responsiveness, graphic and video processing capabilities, and AI large language model computation.

Thirdly, our charging network. We have 800-volt cars and 800-volt batteries, and 800-volt energy-saving networks. Especially, G-KER is currently the world's largest production of 800-volt models. G-KER includes the new G-KER 001, G-KER 001FR, G-KER 009 Guanghui, G-KER 007, G-KER MIX, and other models. In terms of the super-fast energy distribution network construction, in April this year, we have officially landed the world's first 800-kilowatt V3 machine gun. This machine gun is equipped with eight V3 machine guns in the first industry. The wind power of a single gun can reach up to 800 kilowatts. According to the new GECO-001 test, SoC from 10% to 80%, super-fast, actually only used 11 minutes and 28 seconds.

CKS is at the forefront of innovation in ultra-fast charging technology. We have pioneered a three-pronged 800-volt ultra-fast charging ecosystem comprised of our vehicles equipped with an 800-volt electrical system, 800-volt batteries, and an 800-volt charging network. Notably, Zika is the world's top manufacturer of mass-produced 800-volt vehicles, including the Zika 001 2024 model year, Zika 001FR, Zika 009 Grand, and Zika 007. In April this year, we proudly unveiled the world's first 800-kilowatt V3 ultra-fast charging station. This state-of-the-art facility boasts eight industry-leading V3 ultra-fast charging piles, each capable of reaching peak power of 800 kilowatts. Actual tests on the Zika-001 2024 model year demonstrated remarkable efficiency. with the state of charge increasing from 10% to 80% in just 11 minutes and 28 seconds.

By the end of May, the self-made charging station has reached 1,076 stations. Of course, this includes the special factory stations, and 487 charging stations have been launched. The total number of charging stations has now reached more than 2,600. The storage capacity of the 800V super-fast charging station is the first in the industry. Uh, uh, uh, By the end of May, Zika owned 1,076 self-built charging stations, including 487 ultra-fast charging stations and a total of 2,615 charging piles. We own the largest number

of 800-volt ultra-fast charging piles in the industry. Furthermore, Zika Apps Charging Max seamlessly integrates high-quality third-party charging networks, expanding our coverage to over 340 cities and over 790,000 charging piles. We are currently accelerating our 1,000 stations, 10,000 piles plan and expect to expand our network to 1,000 ultra-fast charging stations by the end of 2024 and a total of 10,000 ultra-fast charging piles by 2026. Fourth, our channel service capabilities.

Uh,特別值得一提的是。聚合了體驗,零售,交付,售後等全鏈路一站式服務體驗的即刻加的模式呢,已經開設了64家。即刻加也極大的提升了我們在網絡的形象和交付售後的服務能力。 By the end of this May, Zika has established more than 392 Zika retail stores worldwide including 380 in China.

Notably, we currently have 64 Zika houses offering one-stop experiences ranging from test driving, sales, delivery, and after-sales services. It's a strategic move that will significantly bolster our brand influence and enhance our delivery and after-sales service capabilities. Zika houses significantly leverage Zika's synergy strengths and its advantages in traditional vehicle sales network, empowering us to provide our customers with a seamless and superior one-stop experience. This approach has garnered widespread acclaim in the market and a high level of customer satisfaction.

This year, we focus on diversifying the area of construction in three or four-line cities. As we progress through the remainder of this year, we will deepen our diversified channels expansion efforts with a particular emphasis on expanding the reach of Zika space in Tier 3 and Tier 4 cities

This would amplify our presence across different market segments, unlocking greater growth potential, and helping us realize our full-year sales goal. Last but not least, global expansion.

At the end of May, we have entered more than 20 countries and regions such as the Netherlands, Sweden, Thailand, We expect that by the end of this year, GECO will enter the European market with six to eight By the end of this May, we have established a presence in over 20 countries and regions, including the Netherlands, Sweden, Thailand, the UAE, and Saudi Arabia.

Both the Zika-001 and Zika-X have commenced deliveries in Europe. Furthermore, we plan to introduce right-hand drive versions of Zika-009 and Zika-X in markets like Singapore and Hong Kong China in the third quarter of this year, marking our entry into the global right-hand drive market. By the end of this year, we plan to enter the luxury markets of 68 European countries, as well as the markets in Southeast Asia, the Middle East, Latin America, and Australia, expanding our footprint to a total of 50 countries and regions worldwide.

At the same time, we are also proud of the strategic advantages and profound co-efficient assistance given by the mother company Jili Control Group, which can immediately have an effective market challenge in the global framework. We will also continue to lead the technology breakthrough and product innovation to further consolidate its leadership position in the industry.

In short, the aforementioned achievements have bolstered our overall competitiveness, propelling our sustainable long-term growth and progress. With the strategic advantages and synergies we derive from our parent company, the Geely Group, Zika is well positioned to effectively navigate the global landscape and address market challenges. we remain committed to pioneering cutting-edge electric vehicle technologies and driving product innovation, further solidifying our industry leadership.

With that, I would hand over the call to our CFO, Mr. Yuan Jing,

to review our first quarter financial details. Thank you.

Thank you, Kishan. Hello, everyone. Now I will go through our key financial results for the first quarter of 2024. Due to time constraints, I will address our financial highlights here and I will encourage you to refer to our earnings release for further detail. Our total revenues will remain be 14,736.8 million or U.S. dollar, $2,041 million in the fourth quarter of 2024, representing an increase of 71% for the fourth quarter of 2023 and a decrease of 9.9% from the fourth quarter of 2023. Our total revenues are compromised of three parts, vehicle sales, sales of batteries and other components, and sales of R&D services and other services. Revenues from vehicle sales were going to be $8,174.1 million or $1,132 million for the fourth quarter of 2024, representing an increase of 73% for the same period of 2023 and a decrease of 22.8% for the fourth quarter of 2023. The year-on-year increase was due to increased sales volume of Zika vehicles The Q-on-Q decrease was due to seasonality that impact of delivery volumes as well as the lower average selling price primary cost as a change in our product mix. Revenue from sales of batteries and other components will remain be $6,318.5 million or US dollar $875.1 million for the first quarter of 2024, representing an increase of 82% for the same period of 2023 and the increase of 56.5% for the fourth quarter of 2023. The year-on-year and quarter-on-quarter increase were mainly attributable to the increased sales volumes of battery packs and electric drivers as well as the growth of battery components overseas. Revenues from research and development service and other services were RMB 244.1 million or USD 33.8 million for the fourth quarter of 2024, down by 42.4% for the same period of 2023 and decrease of 85.9% for the fourth quarter of 2023. The year-on-year and quarter-on-quarter decreases were mainly due to the decreased sales of research and development services and out-licensed technologies to related parties. Gross margin overall was 11.8% for the first quarter of 2024, compared with 7.9% for the same period of 2023 and 14.2% for the first quarter of 2023. The year-on-year increase was mainly attributable to the increase in vehicle margin. The quarter-on-quarter decrease was mainly due to a decrease in vehicle margin, as well as increasing the percentage of revenue from sales of batteries and other components, which had a lower gross margin than vehicle sales. If you look at my vehicle sales, vehicle margin was 14% for the fourth quarter of 2024, compared with 10.1% for the same period of 23, and 15.3% for the fourth quarter of 2023. The year-on-year increase was primarily attributable to the procurement saving as the cost of auto parts and materials decreased. The quote-on-quote decrease was mainly due to the delivery of new vehicles models, as well as change in the product. And the expenses would then be $1,925.3 million or $266.6 million for the first quarter of 2024, representing an increase of $6.7 million for the same period of 2023 and a decrease of 39.1% for the fourth quarter of 2023. The year-over-year increase was attributable to increased employee composition as a result of a growing number of staff as well as increased expenses to support our expanding product portfolios and intelligent technologies. The quarter-on-quarter decrease reflected fluctuations due to different design and development stage of our new products and technologies. SG&A expenses were RMB 1,951.5 million or USD 270.3 million for the fourth quarter of 2024. representing an increase of 51.9% for the same period of 2023 and a decrease of 11.6% for the fourth quarter of 2023. The year-on-year increase was due to increased employee compensation as a result of a growing number of staff, as well as increased marketing and promotional activities for Zika vehicles in China and overseas, and the increase in rental and related expenses due to expansion of my offline channel. The quarter-over-quarter decrease was mainly due to decreased marketing and promotional activities. Lots from operations will remain be 2,086.9 million, or US dollar 289 million, for the first quarter of 2024, representing a decrease of 11.2% for the same period of 23, and a decrease of 29.3% for the first quarter of 2023. Net loss or RMB 2,022.1 million or US dollar 280.1 million for the fourth quarter of 2024 representing a decrease of 18% for the same period of 2023 and a decrease of 31.2% for the fourth quarter of 2023. Our balance of cash and cash equivalents and risk cash or RMB 3,791.1 million or US$525.1 million as of March 31, 2024. So that concludes our prepared remarks. Jason, I will now turn the call to you to start our Q&A session.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we'll pause momentarily to assemble our roster. And also for the benefit of all participants on today's call, if you raise your question in Chinese, please immediately repeat your question in English. And our first question comes from Tina Huao from Goldman Sachs. Please go ahead.

Thank you for your time, Director Guan. Congratulations to Geek for achieving excellent EQRC performance after IPO. Then I have two questions here. The first one is to see that in fact, the sales of the first five months of this year are rising steadily. Recently, from some possible one-line channels, it can be understood that there may be some decline in the number of orders in the near future. So I would like to ask what kind of sales policy we may come up with in the second half of this year to maintain an average of 23,000 per month from June to December. This is the first question. Then I will translate it first. Thanks, Benjamin, for your time and congratulations on the very strong results after the first quarter after our IPO. So my first question is regarding our sales policy. Obviously, we see that in the first five months, because volume delivery has been climbing month after month. But recently, we've been hearing from some channels that recent order momentum seems to be slowing down a little. So wondering what would be our sales policy into the second half of this year in order to maintain or reach our average 23,000 units per month annual target. Thanks.

Thank you, Gina. This is Gene, and I will answer the first question. So if you look at the numbers, you probably recall that we launched our 007 in December last year and started delivering them on the first day of January. and we launched all new Double One on the 27th of February and delivered them on the first day of March. So as you can see, the two new vehicles did indeed contribute a lot in terms of the overall, all the momentum for my vehicles. If you look at my pipeline, we will continue to introduce more and more vehicles in the coming months. We have already announced the Double Nine Grand version, on the 19th of April, and started delivering them a few weeks ago, and also ZicoMix. We have announced them in Beijing Auto Show. And in the next few months, we will continue to launch, say for example, all new double ones, and we start delivering ZicoMix and we'll have this mid to large size SUV that's going to be our key volume contributor in second half and as well as next year. So when it comes to new products, we do think we have a very strong product portfolio to sustain this kind of order momentum. And in addition to that, you probably realize that we will be continuing push for international expansion by sending up more and more dealers in the global international market. You probably saw in the news that we have signed up dealers in Mexico and the rest of the world quite aggressively. And by the end of this year, we hope we're going to sign up more than 58, to sign up dealers covering more than 58 countries and regions. So export is also going to be one of the contributors for me to reach my overall sales for this year.

I would like to add one more thing. We have just talked about speeding up the layout of the three or four-line market channel construction. I think this is a market downturn. I think this should be a big help for our sales.

And one more point from Andy. We are accelerating our channel expansion in the Tier 3 to Tier 4 cities in order to expand our presence in more segments. That would be helpful to our future order intake. Thank you.

Thank you, Mr. An and Mr. Yuan. Thank you very much, management. And my second question is about our... Then we can maintain the competitiveness in the entire industry. So my second question is regarding operating expenses. So first of all, in terms of SG&A, just wondering how many stores are we planning to add in total for 2024? And then the second question regarding R&D expenses. So what kind of sustainable level do you see the R&D expenses at in the mid to longer term in order to maintain our technology competitiveness in the industry, especially given nowadays more and more R&Ds are going into software development. Thank you.

Thank you, Tina. So as you probably see, by the end of 2023, so last year, we have set up 342 customer touchpoints, including Zika centers, Zika spaces, Zika houses, Zika homes, and delivery centers. By end of the year, we're looking at more than 520. So we will probably not increase the number of Zika centers because we think we have pretty much covered all tier one cities in China. But we're gonna expand to, as Andy just mentioned, more tier three, tier four cities. We're gonna further improve the efficiencies of my old Zika spaces as I have more vehicle lineup. I have more and more brand influences so I can probably get a better space in shopping malls and other places, and I will expand the number of bigger homes. That is my channel expansion plan for this year. As you mentioned, for the R&D, last year my R&D is around 8 billion RMB, so in this year we would increase the R&D spending. And as you mentioned, some of the R&D spending will go to software development, especially if you take into consideration my ADAS advancement, as well as the Smart Cockpit's full in-house stack self-development. But also if you look at my new vehicles, you probably see from your last question, we can introduce a fairly large number of new vehicles in a very short time frame. So we'll spend a little bit more on that as well. Overall, we'll be looking at around $10 billion on the expenses for this year. But obviously, the exact number is still being, you know, we're still looking very, very closely, let me put it that way, at how we spend this amount and whether we can be more efficient in terms of especially vehicle development and software development.

Thank you.

Thank you. Let's go to the next question.

Next question comes from Tim Hisao from Morgan Stanley. Please go ahead.

Thank you, Mr. An and Mr. Yuan for accepting my question. Congratulations on your first performance after the launch. I have two questions related to the product. The first question is about hybrid. We have seen that the demand for the hybrid market has been very strong since this year. So I would like to know, in addition to pure electric vehicles, will JEC consider exploring the opportunity of hybrid vehicles in the future to expand the customer base? I have two questions. Both are related to the product. The first question is about PHEV because we noticed that the demand of PHEV in China surprised on the upside over the past few quarters. Will Zikr at a certain point of time consider to further enrich its product portfolio by adding PHEV or other type of powertrain on top of the current pure EV offering? If so, how will Zikr clearly differentiate the product proposition of a PHEV or BEV from existing product in the market and to effectively differentiate from peers or sister companies in the group? That's my first question.

Thank you. Thank you, Tim, very much. So to answer your first question, firstly, at Zika, at this moment, we continue to focus very precisely into premium battery-powered electronic vehicles. We do think there's a very large untapped market, very large untapped customer demand with regard to premium BEVs. If you look at some of my competitors, say, Mercedes C-Class, BMW C-Series, Audi A4, you know, they continue to sell tens of thousands of vehicles a month. And those markets, we do think, can be, you know, obtained by brands like us. In addition to that, if you look at, you know, not only Zika, but Geely Group, Holding Group as a whole, you probably realize that within the whole Geely Group, we do have power chains. of different variants. And we do have the technology in terms of, you know, how to leverage them and provide with our customers different types of traffic chains. But as I mentioned in the very beginning, at this moment, we're continuing to focus on BEVs and we want to, you know, get 100% comfortable with our position in the BEV sector, 100% comfortable in our leading positions before we think about other options.

Thank you, Mr. Yuan. My second question is about this product and new product at the end of this year. Because Mr. An mentioned that we will launch this medium SUV at the end of the year. So I also want to know about the management level. What kind of expectations do you have for the monthly sales and profits of this first SUV? If the target is currently a level of this 001 and 007. On the other hand, because we also see that the competition in the market now has gone white during the SUV period. My second question is about the new models. Because according to the management, Zika will launch the mid-size SUV by end of this year. What's management's expectation for the scale of multi-cells and the margin of the first SUV model? versus the existing W01 and W07. Despite a more sizable addressable user base, SUV market has been pretty crowded in China. So how do you think about the first SUV could effectively differentiate from peers' upcoming models, for example, like Tesla Model Y, and the new models from other local brands? That's my second question. Thank you.

Sure. Thank you. Thank you, Tim. So if you look at the overall competition, you know, as Andy mentioned earlier in his beginning remarks, that you can see, you know, my double one, double nine, sorry, my double one, double seven are market leaders in their respective market segments. And you probably remember, you know, last December when we had these discussions about the new or new double sevens, you know, there are competitions, you know, in the market with regard to to meet large sites in the premium brackets and price brackets. And so I think we have demonstrated our ability to define a product and find a selling point for our customers to actually choose those particular vehicles. And we have demonstrated with double one, we have demonstrated with double seven. If you look at the overall vehicle history and how we do this, you probably can see that we started from a very clear advantage that is our hardware and chassis. The safety of the vehicle, the handling, the drive ranges, the EV powertrain, et cetera, et cetera. It's been very good. It's been well recognized by our customers. And then we gradually step up in terms of softwares. We spend a lot of investment in smart cockpits. We spend a lot of investment in ADAS. We use our own in-house food stacking, in-house solutions when it comes to ADAS. So, step by step, our customers, some of the customers who hesitate to make a decision just because they see a lack in terms of the smart experience and the intelligent experience, they were convinced. They were convinced that they are buying a better and better product. you know, similar service with 001, similar service with 007. And we do think, you know, we will be leveraged the very successful SE architecture hardware, the handling, the safety, et cetera, et cetera, when it comes to the all new SUVs we're going to introduce in the latter half of this year. But on top of that, our latest smart cockpit systems, Our latest ADAS systems, all those smart functionalities that we've been improving in the last few years is also going to be a very, very big and important differentiator in our vehicles when our customers are looking at my models comparing with the rest of the pack. If you look at my competitors' line-up, you have a little dog, which is not exactly priced at the same price bracket with us, At Expo, they do not have SUV offerings for the latter half of this year. Some of my other competitors, they may have some offerings, but some of their refreshments have been proven not up to the medium ones of these Chinese customers, although they may receive better responses, feedback from international markets, but it's because the Chinese customers, they need the ones that are quite different. And we do believe, you know, when it comes to Chinese market, when it comes to this specific product, we will be at the edge.

Let me add a little bit. This year, in the second half of the year, two new models were launched. One is a luxurious medium-sized SUV. The car is expected to be officially released in about five meters, five meters up and down. uh, uh, uh, This is a medium-sized SUV. There is also a mixed car. This car is a product with extreme subversion and innovation. You can see the situation of the product in the car exhibition and some related information. This car is also a masterpiece in terms of product innovation.

I would like to make two points. First of all, in the second half of this year, we plan to launch two completely new models. The first one is a premium large-size SUV. The length of the vehicle is expected to be around five meters. a very big market, very big segment, and we expect that this segment will continue to grow in the future. After we launch the vehicle, we expect that it would have a positive contribution to our sales and our gross margin. Our second model to be launched later this year, yes, we can mix. This is a highly innovative, highly disruptive model, the information of which you might have already read from the press and from the report from the auto show. This is highly innovative, a masterpiece, and with this vehicle, we defined what the future home would look like.

We are currently relying on technology innovation and product innovation.

Zika brand has always strived to be innovative in technologies and to create new products, new types of products to gain our core corporate competitiveness. Thank you. So these are some of the information about the new models we plan to launch this year.

Thank you. Thank you, Tim.

And I'll let us go to the next question.

The next question comes from Ming Sun Li from Bank of America. Please go ahead.

So recently, I think the market is waiting for EU to decide the latest tariff rate. And the things Anjong just mentioned, you have more plan to enter more countries in EU. So what is your priority for your business? prioritize the profitability in the local market, or will you prioritize the market share gain in the local market?

Thank you. Thank you, Ming. So maybe I'll address this first, and if Andy has any further comments, then he can hold on. But firstly, and most importantly, we cannot comment on any government policies. and we've been waiting for the European Commission to make the decisions and we'll adjust our policies as we see fit. But again, we will be in compliance with all relevant laws and regulations in all jurisdictions we operate in. If you look at European markets, obviously, we do have very big international expansion ambitions for this year. But as I previously communicated with some of you, the key markets for us is going to be Latin America, Southeast Asia, as well as Middle East. So although we have been expanding in Europe, we do think it may take some time for the actual south in Europe to be ramping up in a very, very significant way. And not that we're not investing in these jurisdictions but we do think it may take some time. But more importantly, if you look at the product, we do think the product we've been offering European Union, the Double One, and Zika X, are suitable for the needs and wants of local customers. We're not just selling Europe, you know, the long-term new SUVs and sedans that sell good in China. If you look at Double One, it's a crossover shooting brake, you know, very, very unsuitable for places like Scandinavian countries and Germany, et cetera, et cetera, where people drive station weapons. If you can add a small, compact, very nimble and flexible CTSUV, you know, perfectly suitable for South France, Spain, Italy, those markets. So we do think, if you look at products, we are offering a very, very competitive product, which in turn, hopefully, will give us a little bit of edge in terms of pricing, in terms of competition. And then lastly, but also very, very importantly, if you look at my business model and overall GD Group's global manufacturing footprint, you probably realize that we do have a more flexible localization options, comparing with most of my competitors. My business model, you probably know that we do 100% counter-manufacturing. That means I can leverage all of Geely Group's global manufacturing footprint. At Geely Group, obviously, we do not only have manufacturing facilities in China, but also in Southeast Asia, in Western Europe, as well as in the U.S., I'm sure. So those flexibilities provided by my business model, by my being part of a very big and successful global GD group, I think give us a flexibility that is almost unparalleled in the Chinese EV industry. Okay, maybe next question.

Do you have the latest update and guidance regarding your sales and marketing expense, R&D expense, and also your CAPEX? Thank you.

Thank you, Ming. So as you're probably aware, being a public company, I'm sort of constrained in terms of what type of guidance I can give. Earlier, we do give a guidance of around maybe $10 billion in terms of one day. When it comes to SG&A, obviously, that is driven by myself. And what I can tell you is that I will have a much better SG&A discipline in terms of SG&A percentage to my overall sales revenue, that is gonna be definitely better than most, if not all, of my competitors at comparable sites, revenue sites, but it's very unfortunate I can't give you a very precise SG&A guidance. When it comes to CapEx, as you can see, we are running a very asset-like model, in a sense that we do not have our own vehicle manufacturing facility, so my overall CapEx is actually quite controllable. If you look at my numbers last year, I spent about 1.9 billion RMB in terms of capex, and I will be looking at similar, if not higher, number of capex for this year as well. Yeah, that's all my questions. Thank you. Thank you. Thank you. So, Operator, I think it's probably time for us to conclude this meeting.

I would like to turn the conference back over to Mr. Wang Jing for any additional or closing comments.

Thank you, Jason. This is Jing. Everyone, thank you once again for joining us today. It's very unfortunate that we have to conclude the meeting now. I understand there may be more questions from attendees in this meeting. Please feel free to contact the IR team or my PFC finance PR company for any questions. Thank you very much for joining and have a nice day. Goodbye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.