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

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

Hi, this is Jing. I'm the CFO of Zeker. Thank you, operator. Good evening, good day, and good night, everyone. Good morning, everyone. Welcome to Zika's second quarter 2024 earnings council call. So I will now read the standard disclaimer. So 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 Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainty. As such, the company's actual results made the material difference 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 forward-looking statements, except as required under Uplift Law. Joining us today from Zika Senior Management are Ms. Anson Hui, Co-Founder and CEO, Ms. Xu Yun, VP of Vehicle Development, Mr. Chen Qi, VP of ADAS, and Mr. Zhang Jing, VP of Smart Cockpit. I am Jingwen, CFO. Our CEO will make his remark in Chinese, followed by an English comment. With that said, I will now turn the call over to our CEO, Ms. Tan.

Hello, investors. Welcome to the JECC 8024.

Hello, everyone. Thank you all for joining Zika's second quarter 2024 earnings call. In the second quarter of 2024, the new energy vehicle market sustained its strong growth momentum, with BEV market penetration rate climbing to a record 28%. However, the competition across the border market remained fierce.

Of course, despite the challenges of the entire economic environment and industry, We are determined to provide the best products and the best user experience. At the same time, we are looking for the next stage of growth to try to improve the brand's reputation. We will continue to invest in cutting-edge technology and focus on improving our operating efficiency.

Despite economic headwinds and industry challenges, Zika remains deeply committed to product excellence and delivering an ultimate user experience. We are relentlessly pursuing the next stage of growth, driven by our efforts to heighten brand awareness, ongoing investment in cutting-edge technologies, and a laser focus on improving operational efficiency.

Today, I would like to make some changes to our press conference. We would like to give more time to our investors to ask questions and answer questions that you are concerned about. We would like to improve the efficiency of our conference. So, in today's conference, I would like to invite the CEO of CFO Yuan Jing, Today I would like to change the pattern of our earnings call and to leave more time for the Q&A session.

and to improve the efficiency. Today, I am very pleased to welcome Mr. Yuan Jing, our CFO, Mr. Chen Qi, our Vice President for the ADAS development, Ms. Xu Ying, who is in charge of our product line Z, and Mr. Jiang Jun, who is the Vice President in charge of our infotainment development. So if our members have some specific questions on our latest technologies, please feel free to raise the questions to them. So now here is my opening, and now I give the floor to the Q&A session. Thank you. To our CFO, thank you.

Thank you, Andy. Hello, everyone. So I will spend the next five to ten minutes to very quickly go through the financials. If we look at our total revenue for the second quarter of this year, it amounts to 20 billion RMB, which is an increase of 58% year-over-year or 36% quarter-over-quarter. As you can see, the total revenue are made up of three parts, vehicle sales, sales of batteries and the components, and R&D service and other services. If we look at the vehicle sales revenue, it amounts to 13.4 billion RMB, with a year-on-year increase of almost 60% and a quarter-on-quarter increase of almost 65%. The cost margin of that segment raised slightly to 14.2% thanks to an increase in sales volume of vehicles in the quarter which are slightly offset by the lower average selling price due to different products and pricing strategy. Revenue from sales, batteries, and the components was 5.3 billion, representing an increase, year-on-year increase of more than 36%, and a quarter-over-quarter decrease of slightly over 16%. The gross margin of the segment for this quarter is more than 20%. Thanks to the kicking of cost reductions, we obtained some suppliers in the second quarter of this year. If you look at the 24 first half numbers, the gross margin is around the 12 to 13%, which we believe will be in line with our overall annual gross margin guidance for this segment. The gross margin for this year will be around 10 to 12%. If you look at the R&D service revenue, it amounts to $1.2 billion for the quarter. represents a more than 300 increase year-over-year or more than 400 increase quarter-over-quarter. Having said that, the absolute amount of that segment, revenue from that segment is also quite small, so we do believe it won't impact on the performance of the company that much. R&D expenses was 2.6 billion RMB for the second quarter of this year, representing an increase of almost 90% year-over-year. was 46% quarter-over-quarter. The increase is mostly due to share-based compensation. The allocation of share-based compensation to my R&D personnel for the quarter is about 530 million RMB. The SG&A for this quarter is 2.6 billion RMB, which implies a year-over-year increase of more than 60%, and a quarter-over-quarter increase of more than 33%. That increase is also mostly due to the share-based compensation, which amounts to 390 million RMB for my SG&A personnel. The net loss for the company for this quarter is 1.8 billion RMB. But if you look at the non-GAAP net loss, which, as you can see, subtract the share-based compensation is 8.2 billion RMB. sorry, 865 million RMB, which implies an year-on-year decrease of more than 36% and quarter-on-quarter decreases of more than 57%. The share-based compensation we recorded for the quarter was amounted to RMB 940 million, and we expect the full-year share-based compensation hit and to my P&L at around 1.1 to 1.2 billion RMB. Let's look at my capex for the quarter. It amounts to RMB 680 million. For the first half, the capex is about 1.1 billion RMB, which is in line with my guidance of around 1.9 to 2.1 billion capex for the year. We also recorded a positive operating cash flow and free cash flow for the quarter. The quarterly operating cash inflow is 1.5 billion RMB, And the free cash flow inflow is around 880 million RMB. So which leads to my balance of cash and cash equivalents and restricted cash at hand at more than RMB 8 billion by end of June. So this concludes my prepared remarks. As Andy promised, we will now turn the call over to the operator to start our Q&A session.

Thank you. We'll now begin the question and answer session. To ask a question, you may press star, then 1 on your touchstone 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. For the benefit of all participants on today's call, if you raise your question in Chinese, please immediately repeat your question in English. Please limit your questions to one at a time. If you wish to have follow-up questions, please rejoin the queue. Thank you. And our first question comes from the line of Tim Hsiao with Morgan Stanley. Please proceed with your question.

Hello, Mr. An. Hello, everyone. Thank you for accepting my question. My first question is about our car model plan. Because today, I mentioned it at the 155th event. The SUV model that we will launch next year and some of the changes will consider using this fork platform. Is it possible to ask Mr. An and the management to share a little bit about the progress of the vehicle planning? At present, there will be a mixed version of the car model. What kind of expectations do we have for the proportion of sales? In addition, when the pure electric and mixed model layout is complete, will there be some overlap with the target market of the leader of the group? This is my question. My question is about the model pipeline, especially regarding the types of the powertrain, because management mentioned at the GD3's out briefing that there's a subsequent large SUV launch next year with that also adopt a PHEV powertrain, the hybrid powertrain. So just wondering if the management can share a bit more information about the plan. In addition to the new launches, will VECUR also launch PHEV versions for incumbent models and what kind of bottlenecks we should be looking for between the BEV and PHEV. In the meanwhile, after having both the BEV and PHEV ready, will Z-currency market partially overlap with that of LinkedIn Co. on their GD Group despite the different spread propositions? That's my question. Thank you.

Thank you, President Xiao. First of all, I would like to briefly introduce the situation of our products this year and next year. In August, we completed the entire FANDAI project in 2001 and 2007. In July 2009, we launched a new model in September. This year, we have completed the project for the existing products. This is the product. For this year, we have two new models. The 7X will be exhibited at the Chengdu Motor Show in late August. It is expected to be delivered at the end of September. The MiG-4 has been in service for four seasons. This is the whole plan for this year's product. I also believe that after the replacement of 001, 007 and 009, we can maintain or improve its sales. We also believe that in the future, This year's CX will further enhance our sales and provide great motivation.

So thank you so much, Mr. Xiao. So I would firstly to introduce our product planning for this year. This year in August, we launched our facelift model year versions for the 001 and 007, and we also launched the upgraded 009 in July. So we have finished the upgrade of all our existing models. And with regards to the new models, we will unveil our 7X SUV at Chengdu Auto Show, which will take place in the end of August. And we plan to start deliveries of Zika 7X from the end of September. With regards to the mix, we plan to start deliveries of this new model from the fourth quarter of this year. So I have confidence that with the upgrade of 001, 007, and 009, these existing models would contribute to and improve their sales. And I also have confidence that the launch of a new model, 7X and Z-Commix, would further support our sales growth.

As for the entire product planning for next year, And with regards to the product in the pipeline for the next year, I announced

at this afternoon's 0175 Geely Auto Holdings earnings conference that we plan to launch a full-size flagship SUV in the fourth quarter in 2025. This flagship SUV would offer two different power chain offerings. One is a pure battery electric vehicle, and the other is a power chain which we call the super electric hybrid.

We are all familiar with the technology of pure electricity, but you must be wondering why we need to use the technology of super-electricity. I would like to ask you the reason. The reason is that through our research on the market and the future market of large vehicles,

So our investors might be very familiar about our pure battery electric vehicle technologies. So you might wonder why we choose to introduce the super electric hybrid powertrain to our future product. So I can explain here. And that is because we listen to the voice of our customers and we understand that in the future when it comes to the larger size vehicles, there is a customer demand base for the hybrid-powered vehicles. So we would have a specific technology launch for the super electric hybrid technologies. I can give you, take you have a quick look and briefly about the advantage of this technology. 简单的表述呢,就是极客的超级电红系统是融合了在,融合了纯电,插混和分层, To simply put, Zeta's electric hybrid is a new form of powertrain that combines the advantage and the benefit of pure battery electric vehicle powertrain, P-head powertrain, and the range extender powertrain. 它能够保证在所有的沉电驾驶的体验情况下, So it can secure an excellent, pure battery electric vehicle's driving experience. At the same time, when it is on the highway, the fuel efficiency is very good. At the same time, we can ensure that our customers can enjoy long driving range.

So after we have a car manufacturing experience, over three decades of car manufacturing experiences,

So we have a very strong technology foundation on the technologies of engines and the gearbox.

So this type of model will be facing the global market and we want to

have some breakthrough in the global big-size vehicles, premium vehicles.

This is the SUV you are concerned about, the large-size SUV. Of course, tomorrow we will also have a series of vehicles based on the 007 architecture. So apart from that,

full-size flagship SUV. Next year, we also plan to launch another new shooting brake model based on the platform of 007 sedan, which we plan to launch the next year. Zika, as a matter of fact, is good at making, delivering, launching the shooting brake vehicles, and we are recognized by our customers, and we have enjoyed very good reputations for that. So we would carry over some good technologies on the current 001 on that new shooting brake vehicles. And I think that can also to further expand our shooting brake products and product line up.

I hope my explanation answers your question. Thank you.

Thank you, Mr. An, very clear. There is a very quick follow-up behind. I just want to ask you about it, because T-KER now has a certain advantage over the entire product and brand. But after the power supply and the power supply are mixed up, will there be some overlap with other companies, such as Linke, the target market? So we have a certain advantage. How do we look at this situation? Thank you.

You asked this question very well. First of all, there is no conflict with the leading brands. We have a brand management committee throughout the company. We are very strict about the management of each brand and each brand. There will be no repeated products. This is one.

So this is a very good question. To answer your question, I can say there's no conflict. Inside the GD Group, we have a branding committee, and we have a very organized and strict management of the different brands to prevent the overlap of the models.

In terms of brands, the positioning of the two brands is different. They are all luxury brands, high-end luxury brands. Linke is a high-end brand. So the brand is different.

Another brand positioning of these two brands are different from each other. Zika is positioned as a premium luxury brand, and Lincoln Co. is a trendy high-end brand with strong personalities.

Another very important information is that This large SUV is a product that is being evolved in the construction industry. It is a highly platform-based and user-friendly product.

Another very key information I want to share with this meeting is that the new flagship SUV, full-size SUV, will be based on an upgrade of existing SEA architecture and with a strong commonality with other products. And of course, I have confidence that our cost management has some special competitiveness. Thank you.

Our next question comes from the line of Tina Hale with Goldman Sachs. Pleased to see you with your questions.

Thank you for answering my question. I have two questions. The first one is about our sales. First of all, will our sales target of 230,000 be maintained this year? If you look at it this way, it may be a little more stressful in the second half of the year. Do you have the confidence to achieve this target now? And in July and August, we made this change in 2009, 2001 and 2007. There are some new policies. I would like to share with the management team about the recent order situation. The second question is that I see that in this quarter, there is a 20% margin for battery and other product sales. It is much higher than the normal level. I would like to ask if there is any special reason for this. Will there be such a high margin in the future? So I can do the translation now. Thanks, management, for taking my questions. My first question is regarding volume. So does management still maintain the 230,000 units volume guidance for 2024? It seems that into the third quarter and fourth quarter it will be a little bit pressure, so wondering if management is still confident on that. And also, since we did some new launches for 009, 001, and 007 in July and August, What has been the latest order trend, if management can share some color with us? And the second question is regarding the second quarter, the battery and other component sales business. The growth margin was actually 20%, much higher than the previous norm. So wondering what's the reason there, and should we expect this high margin to continue going forward? Thank you.

Okay, the first question, let me answer it. Mr. He, first of all, we are still full of confidence in the goal of 230,000 units in the whole year, although the pressure is relatively high. In the case of 90, 11, and 12, if this month is not calculated, in the next four months, I will roughly calculate about 250,000 units per month.

So thank you, Ms. Ho's questions. So I will take the first question. And with regards to our full year sales target of 230,000 units, we still have confidence, full confidence, despite that we are facing some pressures. I have done a rough calculation to achieve that sales target in the months between September and December. We need to deliver 25,000 vehicles per month. 001 007 009 have completed the delivery. After the delivery,

Although it has been affected, we can see that our orders are growing. As of today, it is expected that it will not be more than 30%. As for this month's sales, due to the exchange of products, there will be a loss. So I expect that the total sales should be

So with regards to the 001, 007, and 009, which we have already upgraded, of course, we are seeing that we got some feedback from the media outlets on the strategy of product launch. But despite that, we are seeing a growth of our orders intake. and we forecast that their orders for these three models would increase by over 30%. And with regards to the sales volume over this month, as we just launched the new models, so the factories are still ramping up the production, but still, I think I forecast that we can report over 20% month-on-month growth.

Since the release of the clue, it's been almost a week. There has been a significant increase in the number of orders. The number of orders has increased by 30%. There has also been a significant increase in the number of orders.

After we launched the new model in the past week, we saw that our lead intake increases significantly, and our test drive applications also hit record high, and our orders intake climbed by 30%, and the turnover rate also improved significantly.

and basic sales. As TX and MIX went up, because TX started to pay off in September, we are very confident that TX will perform well in the clothing market. Because some of the products, through some professional media reviews, I think some of the content has been seen by everyone.

So these existing models lay good foundations for our sales volume for this year, and we also plan to launch two new models, Zika 7X and Zika Mix, in the remaining of this year. In September, we plan to start the delivery of 7X, We have confidence that it can achieve a very good performance in its segment. As we already reported by many professional industry media, the product is very competitive, and it will compete with Tesla's Model Y. As for the MiG-2, it will be released in April.

I expect it will be released in November. And Zika Mix, as I explained this afternoon, we plan to launch it in the Q4 this year. Actually, I can go further.

to go into more detail here to say that we plan to start the delivery of Zika-Mix in October. This model is highly innovative. So with the introduction of Zika-7X and Zika-Mix, these two new models, we hold the view that they will support our sales growth in the remaining of this year.

Another very important thing is the overseas market of Zika. With regard to the overseas market, after two years of cultivating our global market,

I can share with the investors here that in the fourth quarter of this year, we will report a significant growth in the overseas market, the sales volume compared to the third quarter.

Let me say one more thing here. As you can see, we completed the delivery of 001 and 007 in August. In fact, we completed the delivery of 009 in July.

And also we launched the upgraded 001 and 007 in August and upgraded 009 in July, also as a way, as in our strategy to prepare for the new product launch in September.

So we have a product upgrade and a new product launch in the month of July, August.

September and October in a way to ensure that we can have a good sales performance in the high season usually take place in China in the end of this year. So this has been the strategy and we are very carefully implementing this strategy. And Mr. Yuan Jing, our CFO, will take the question on the battery. Thank you, Andy.

So with regard to the revenue from sales of batteries and the components, you can see we reported maybe about $5.3 billion revenue for the second quarter of this year. It represented a year-on-year growth of 36% and quarter-on-quarter decrease of 16%. The quarter-over-quarter decrease was mainly attributable to the lower sales of battery modules in the China domestic market compared with the previous quarter. If you look at the margins as you pointed out, the second quarter business margin for this particular segment is around 20%. This is mostly due to the kick in of cost reductions from our suppliers in the second quarter this year. But if you look at the overall first half this year gross margin for that particular business segment, it's around the 12 to 13%. And going for the look at the full year, we'd be looking at anywhere between 10 to 12% business cost margin for that particular segment. So I would say the increase or the spike of the margin in the second quarter for this segment I think will be smoothed out throughout the whole year.

Thank you. Yeah, next question, operator. Thank you. Yes, thank you. The next question is from the line of Ming-Sin Lee with Bank of America. Please proceed with your question.

Thank you, Mr. An and Mr. Yuan. I have a question for Mr. Yuan. In the next one or two years, will the price of domestic new cars continue? In addition to the scale effect, what other aspects do you think So in next one to two years, the price competition in China will likely continue. So besides the economy scale, companies think in what area that you can continue to reduce your cost and to improve your gross margin, especially when you consider to choose the Pure Vision solution for your AIDA solution in order to reduce the cost. Thank you.

Thank you.

Mr. Li for the question and it is right that the competition in the new energy vehicle industry remain quite fierce. So to ensure we have potential and good strength in the future competition, I have some thinking about the cost management.

I have a few things to say. First of all, I just mentioned the scale. As you can see, our Aohan structure This is a scale-based platform-based effect. This is also a difference between us and other automakers. First of all, with regard to the platforms and the scale effect,

I think the beauty of our SEA architecture as a platform strategy gradually to show to us and in the second quarter we have already reported quite a good growth margin. So I forecast that in the third quarter and the fourth quarter it will remain good and probably it is possible that the growth margin level would improve in the third quarter and the fourth quarter. So this is actually a big differentiator of our company compared to the other auto makers because we have over 33 decades of car manufacturing experiences and we deeply understand that the benefits were brought up by the platform strategy.

This scale is also reflected in our manufacturing. We are all applications of the existing production capacity. So in terms of our supply,

And they also, we also share the fact, use, utilize the existing manufacturing capacities under GD Group. And so that's why we enjoy very good contract manufacturing service at a very competitive cost.

Now it has started to play an active role in the industrial chain. Specifically, now, for example, in 3D, we have a battery, an electric machine, and an electric control. These are all self-made by us. Even the carbon-fiber chips that have already reached the electric control, we also have self-made. So these are the three points. For example, we have achieved full-time self-employment in terms of electrification. For example, in terms of intelligentization, we have achieved full-time self-employment. For some of the core, important, cost-efficient controllers, for example, left-hand, right-hand, these hardware, not only software, full-time self-employment, hardware, we also design them ourselves. and part of the outsourcing and outsourcing. So this is just a few examples. So we have already achieved the ability and ability of the industrial chain. I believe that other companies do not have this condition yet. This is what we have been planning for many years. Now we are going to start the second phase.

After years of efforts devoted to this industry, we also built up our capabilities to vertically integrate the technologies and the manufacturing. With regards to the e-powertrain, we have our in-house technologies for the batteries, e-motors, and e-controllers, and we have our in-house manufacturing facilities for these components, especially for some very advanced very cutting-edge technologies such as the silicon carbide chips in some controllers, we have our in-house R&D and we have the capability to make them via our in-house facilities. Secondly, with regards to the intelligence functions, we also have built up the full-stack in-house technologies, especially on some new high-value product controllers especially around the infotainment and ADAS. We have our technologies for the software, and especially on the technology around the hardware, we have our capability to design them, and we go with some contract manufacturer suppliers to make our hardware designed by our in-house engineers. So these are just some rough examples, but they can tell the story that we have the capability to do our vertical integration. And this is a key differentiator that I don't believe many of our competitors have. And that's a result of years of efforts on those cutting-edge technologies.

This product also can have a very good effect of scale. We can supply those products and technologies to other sister brands including like Volvo and Smart.

So the cost accordingly would also be lowered. And also with regards to globalization, as we push forward our global strategy, we also can enjoy a higher growth margin in the other markets. Okay, thank you. Thank you.

Thank you. In terms of value, do you need Chen Qi to add more? Do you need more detailed techniques? Yes, thank you, Andrew.

And Mr. Chen Qi, our Vice President for ADAS Development, would answer your question from the latest ADAS.

Let me simply add to what you just said. The point you mentioned about the end-to-end, I think the end-to-end is definitely a direction. In fact, we have already formed a team to develop and we have already achieved certain results.

So I will take the questions on the ADAS. With regards to the end-to-end capabilities, of course, this is what the industries are working on. And actually, inside our company, we also built up a team to do research and develop this end-to-end capabilities. And we have already achieved some good results.

But how to achieve the end-to-end capabilities? This is where everyone may have some differences, some differences. Different companies have different approaches to achieve this end-to-end. Some might use the one model end-to-end. Some might take some steps to achieve the end-to-end.

and that people have different approaches, and that the end target is the same as to achieve the end-to-end.

Because there are some... the process is inexplicable. So this is also based on our consideration, that is, now the speed of collection may be a little slower, because we need a lot of data to train or to collect, to train. So we will also follow some rules.

Of course, some processes are not easy to explain here, but we are gathering a large amount of data with regards to the ADAS, and we have built up our own policies to regulate our system.

So this is our strategy on the end-to-end. And with regard to the approach of a pure vision ADAS, this is a way to achieve a good ADAS. But in our company, we have a strategy that's based on different positioning of the different models to decide which kind of ADAS sensors would be equipped

on the more specific model. Some might carry the PureVision system and some might carry a system equipped also with a LiDAR.

So the 007 which we launched at the beginning of this year, we also have a variant which is based on a PureVision ADAS solution. In the case of Cambria, it has its own history. For example, under conditions such as dark light, strong light, and so on, it is actually unrivaled in terms of its powerful algorithm. So in some cases, I think that in addition to the function of laser, there may not be much difference in the function, but it will be much better in terms of performance experience or safety.

So because of some disadvantages of the camera in some ultra-dark scenario or ultra-light-bright scenario, even though we have a strong algorithm in our system, that cannot overcome some of those advantages of the cameras. So that's why I think that LiDAR can help us. Even though we're equipped with LiDAR, the functions might not add, but still we can achieve a higher safety and a higher ADAS performance.

So technology-wise, we are working on the Pure Vision ADA solutions as well as the solutions empowered by LiDAR.

But at the end of the day, we would decide which solution to be equipped on specific models depending on the model's specific positioning.

I hope I answered your question.

Yes, this is my question. Thank you for your understanding. I will ask one more question. Because on August 13, we also launched the 2025 model of GECK001. The automatic driving solution is also replaced by Invida. I would like to know, after the replacement of 2025 model, I would like to know how the consumer's experience of the new self-driving vehicle, feedback, and assistance to the order will be. I will also translate the English. So in August 13th, Zika 001 has upgraded its autonomous driving solution based on NVIDIA's chips. So what is the consumer feedback, and how does this help the orders on 001?

Thank you. Thank you, Mingli. So as you can see, our customers actually recognize the capabilities of our own in-house ADAS system, as evidenced by the acceptance of the 7th ADAS system. Within the orders received regarding to the 25-year model of 1, a vast majority of the orders received are using the in-house ADAS system.

Thank you.

Thank you. Thank you. Thank you, Ming. Our next question is from the line of Dan Lin Ren with CICC. Please proceed with your questions.

Hello, Mr. An. Good evening, Mr. Guan. I'm Dan Lin, the center of the vehicle analysis team. The previous questions have been very comprehensive. I have two more questions to ask. The first is, do we have any expectations and guidance for the subsequent seasons of vehicle sales? The second is, I would like to ask Mr. Guan about our CAPEX planning and allocation plan. I've got a couple of quick questions. First, what's the outlook or guidance for our gross margin on local sales going forward, like quota by quota? And could you give me a bit more detail on how we are distributing our capex? Like how much are we investing into our charging stations or into our autonomous driving system?

Thank you, Janine. This is Gene. So, as we communicated earlier to the investor community, at the beginning of the year, we had a guidance of around 15.5% of vehicle business segment gross margin, and that guidance still remains valid. And as you can see, in the first half of the year, we achieved a 14.1% vehicle segment gross margin. In the second half, we expect to, say, for example, introduction of all-new Double Nine and increasing sales and increased economy scale due to more and more vehicles being sold, et cetera. We hope to achieve a slightly better vehicle business segment performance. With regard to the CAAT hacks, as mentioned earlier, for the first time this year on the US GAAP, we had a CAAT hack of about $1.1 billion. Among this $1.1 billion, about 800 million are regarding to fixed assets investment. The rest are related to software, et cetera, et cetera. And in the second half this year, we expect to continue investing in terms of capital expenditure, including opening up new stores, investing in the battery, battery pack segment, infrastructure investment, et cetera, et cetera. And overall, we'll be looking at about 1.9 to 2.1 billion KPACs for the full year. If you look at the charging network expansion, the charging network and management and the expansion plan are handled by a company called Haohan Energy. which is managed by our company, but financially 70% owned by J.D. Hody and 30% owned by us. So it is an associate company. So the kit hacks related to the charging network expansion is not included in my financial statement.

Thank you. And that concludes the question and answer session. I would like to turn the conference back over to Mr. Yuanjie. Yeah, operator. Yes.

Sorry, operator. Yeah, so I think we maybe can have another 10 to 20 minutes if there's more questions.

Sure, yes, sir. I can bring up our next question. That is from the line of Bin Wang with Deutsche Bank. This is your question. Hello, I'm Bin Wang.

Thank you, Mr. Leader. My question is about the price. If we change from Model I to Inveda, will our price increase or decrease? This is the first question. The second question is that Anthony said that there is a high-end version of Inveda in Geely. Maybe there will be a low-end version in the future. Can you ask whether the low-end version will be used in the future? And when will it be used? And when will it be used? And when will it be used? My question is about a top-driving solution. You actually may upgrade from a mobile solution to NVIDIA. So what's the impact for the cost margin? Meanwhile, you have suspension within a GD group. Then you have two versions of the HIDAS. One is the high-performance, likely high-price version. The other is the low-performance, but lower-cost version. So what's your product scope for different solution? And for the product upcoming in 2025, 2026, will that all go for NVIDIA solution? Thank you. First of all, the system of Inuita is higher than mobile in terms of cost.

But in 001 and 007, especially in 001, At the same time, I think after the product was released last month, both in the Chinese market and overseas markets, it was very popular and the orders were very good. As you all know, the trade of 009 is very good. It can be said that it is very good. So for the trend of future trade, I think it should be said that it can achieve our I think we should have confidence in the goals set for the year 2015. Regarding what I talked about today in the 0175 press conference, it is mainly because of its system. It is mainly focused on high-value products It is a low-cost high-performance car. Currently, there is no plan to introduce this high-value car.

So if we compare the system level cost, the NVIDIA-based ADAS systems cost is higher than the mobilizer solution. So after we introduced the new 001, the ADAS system cost is actually higher. However, that higher cost can be offset by the scale effect, as well as the cost reduction of the battery part. In the future, I don't see that as an impact factor to impact our gross margin. And secondly, with regard to the 009, after we launched the all-new 009, we received very strong customer feedback from the China market and the overseas market, and we received a very good number of orders intake. And as we all know, the gross margin for the 2009 model is quite good, quite high. So I think that with the momentum and we have confidence to achieve the 15% gross margin target for the whole year. Answering your second question, this afternoon at 0175's earnings conference, I explained that inside our group, we have Zika with the focus on the high-end ADAS solution, which will be based on the NVIDIA component. The Geely and the Galaxy, they were more focused on the lower-cost ADAS system. At this stage, we have no plan to introduce Geely's low-cost ADAS solution on Zika product.

Can you hear me? Yes, we can hear you. I just want to have an update on the export volume target this year. Thank you.

The expansion of the European market has slowed down our progress. The focus is on slowing down the speed, but also on improving the efficiency of our single-storey stores. In general, it will affect our sales. In addition to the European and American emerging markets, We are still advancing according to the plan, without being affected. If we are well prepared, if the international market is affected, we will work hard to make up for it from the domestic market. But the total sales of 230,000 are still full.

To be honest, the 30,000 global market sales target we set in the beginning of this year, actually, we are facing some big challenges. We are under pressure, especially after the EU Commission introduced the hiked tariff on the China-made EVs. We slowed down our expansion pace in the European market. But at the same time, we are improving our operational efficiency to mitigate the situation. With regards to the other markets, we are moving forward our strategy, implement our strategy, and we are also ready. If we fail to achieve this 30,000 sales target for the global market, we will strive to boost ourselves in the domestic Chinese market. So we remain confident about achieving the 230,000 unit sales target for the whole year. Thank you. Thank you.

Thank you. As a reminder, to ask a question, you may press star, then 1 on your touch-tone phone. If you're using a speakerphone, please skip back to your handset before pressing the keys. For the three-way question, please press star, 2. Thank you. Thank you. And our next question is from the line of Paul Gong of UBS. Please proceed with your question.

Thank you for accepting my question. The first question is still about this It should be said that today at this auspicious press conference, Anzhong mentioned that this mobile AI program will continue to improve. But if we look at it, the program of Invitat will also improve. In the future, will the gap between them be enlarged or reduced? Anzhong also mentioned many times that platformization and scale-up to control cost. So my first question is regarding the comparison between the mobile solution versus the NVIDIA plus LiDAR solution. You have mentioned earlier today that even the mobile solution would further progress in terms of the technology. But as a forward-looking, do you expect the technology gap of the two solutions to converge or to further apart? And you have also mentioned, emphasized a lot on the scale and platform-wise. From the relatively limited volume of Z-curve still allocated into two solutions, isn't that a dilution of your limited volume scale?

Mobile product planning is a model that we preserved on 001. This model is actually the same as the previous mobile product. We also promised our domestic users that we are a responsible enterprise, so we will continue to treat and maintain it. The second point is that mobile products are used in the international market. The international market also uses mobile. Because from the current research on some of the laws and regulations of each country, such as privacy data, and so on, the mobile program is very good for the international market. So if you combine the international market with the domestic part, in fact,

So with regard to the MobileEyes solution, we actually, if you look at our product lineup, we still have an offering of a 001 model based on using the MobileEyes solutions. And we, as a responsible company, have made a commitment to our customers that we will keep iterating the technologies and offering the maintenance services to this software. And with regards to the overseas market, because a mobilized solution can meet the regulatory requirements on many areas and also on the privacy. So after study, we chose to use the mobilized solution on all products that are sold in the overseas market. With that, I think we can achieve a good scale to manage a good cost well.

Secondly, MobileEye and Geek are strategic partners. They announced it to the public in the past. Their support for the project is getting bigger and bigger. The degree of opening up is also getting higher. And with the continuous integration of our previous cooperation, our efficiency will be higher.

Also, Mobileye is a strategic partner of Zika. They have already publicly announced that they will keep upgrading the technologies and that they will be more open on these collaborations. After years of working with each other, we can now work with each other quite efficiently. Quite competitive cost level.

I don't know if it's clear. This is very clear. The second question is about this MIX. It should be said that our 7X is a product that can be built very high. It is a large number of blocks in the mainstream SUV. But MIX has never been in the domestic market before. But this year at the Beijing Motor Show, the number of people who watched it is very high. So for MIX, we should regard it as a small-scale market, a segment market model. Or is it possible to exceed expectations from a black horse? So my second question is regarding the MIX. On one hand, it never existed in the China market, so theoretically it's in the niche market. But on the other hand, it has received a lot of attention during the Beijing Auto Show earlier this year. So do you expect this model to be more like the niche markets, relatively small volume, or is it likely to significantly exceed in terms of the demand?

This question is very interesting. First of all, I think G-KER is a company that is driven and led by technology. It is a company that is driven and led by technology. It is also a innovative company. Our product strategy is also to build high-end and luxury products. It starts from the hardest work and also goes on a changeable path.

So this is a very interesting question. Zika actually is a highly innovative tech-driven company. And in our product strategy, we start by launching the high-end product. And those are very differentiating products in our product lineup.

At first, when 001 came out, everyone thought it was a small-sized model. But in fact, it has met the needs and experiences of users. It has become a big market. As for the MIX, I think it is also very innovative. It can bring users better experiences and more innovative

So when we launched Zika-001, it was regarded as a niche market, niche segment model. But in the end, because it offers very good user experiences to our customers, it is a popular model now. So Zika Mix, same story, it is a highly innovative product. And we strive to offer very unique and new innovative experiences and functions to our customers.

Another very important thing is that we are not only satisfied with the domestic market, but I think we have also done a good job in the future of the travel market. This is something that other companies do not have. From the choice of women, you can see that

And more importantly, Zicomix can not only meet the requirements from the private purposes, it can also be a perfect model for the mobility services. So you can tell, you can see at this point from the choice made by Waymo.

This Zicomix and Waymo CM-1E are on the home platform.

As a matter of fact, Zika Mix and another model, internally coded CM1E, that is used by Waymo Project, they share the same platform, and the commonality level is very high.

We have actively deployed this car for future L4 trips. It has been found.

And we also have a good hardware embed on the model that can support the level 4 autonomous driving for the future. We are approached by many mobility companies in China and outside China on the collaborations on this. Thank you. Thank you very much.

Quite helpful. Thank you. Thank you. As a reminder, to ask a question, you may press star 1 on your touchtone phone. If you're using a speakerphone, please pick up a handset before pressing the star keys. Thank you. Thank you. That concludes the question and answer session. I would like to turn the conference back over to Mr. Yunxing for any additional or closing comments.

Thank you. Thank you all for joining this call. As always, if you have any questions, please feel free to contact us or any of your banks, and we'll be happy to have a separate session with you. Thank you very much, and have a good day.

So, in the end, I would like to express my appreciation on all your investors and analysts' participation on this call. Zika, as the new NVIDIA co-brand, has come to report even better results to the industry in the future. Thank you.