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 third 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. Yuan Jing, the CFO of Zeker. Please go ahead.

Thank you, Operator. Good evening and good morning, everyone. Welcome to Zeker's Third Quarter 2024 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 Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain 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 on the applicable law. Joining us today from Zika Senior Management are Mr. Anton Hui, co-founder and CEO, and myself, CFO. Our CEO will make his remark in Chinese, followed by an English translation. With that, I will now turn the call over to our CEO, Mr. Tan.

Hello, everyone. Thank you all for joining ZK's third quarter 2024 earnings call.

Recently, ZK's domestic market sales penetration rate has broken 50% in three consecutive months. Of course, ZK has also created a new single-segment delivery record. In the third quarter, it delivered 55,003 units and achieved the same ratio.

Recently, the domestic market penetration rate for new energy vehicles has surpassed 50% for the three consecutive months. Meanwhile, Zika achieved a new quarterly delivery record with a total delivery of 55,003 units, reflecting solid growth both year-over-year and quarter-over-quarter.

It has also surpassed 25,000 units. It has also renewed the delivery height of several brands in a month. In the past 24 years, it has delivered nearly 170,000 units. Combined with the current internal order trend and the potential of the entire market consumption at the end of the year, in the next two months, In October, our deliveries surpassed 25,000 units, setting a new monthly record.

for the Zika brand and propelling our cumulative deliveries for 2024 to nearly 170,000 units. With current order trends and the anticipated year-end market demand, we are targeting a new monthly delivery of over 30,000 units in each of the next two months. As such, we are confident of achieving our annual goal of selling 230,000 units.

Now, I would like to share the progress we have made across products, operations, and innovations. It has also become the second standard product of G-KER's single-month delivery to break through 10,000 units. And in a more mainstream SUV market. It has been on the market for 50 days. G-KER 7XC delivery to break through 20,000 units. It should be said that it has refreshed the luxury and heavy-duty delivery record. Thanks to the strong support of the system, the production and supply chains and channels of CX have made rapid breakthroughs, not only ensuring the delivery and delivery of the market, but also bringing a bigger opening for G-KER all-wheel drive. At the same time, G-KER 001 and 009 This number exceeds the number of super luxury four-seater models of this year. The sales of the second to the tenth plus the total, 009 Guanghui has surpassed. On the product front, the ZK7X has become the second model to use monthly deliveries exceeding 10,000 units, marking a robust achievement in the highly competitive mainstream SUV market.

The ZK7X delivery exceeded 20,000 units within 50 days, Since its launch, once again, break the delivery record of luxury pure electric vehicles. Supported by our robust operational system, we rapidly ramp up production, supply chain, and distribution for the ZK7X, enabling immediate deliveries upon launch and expanding market potential for the entire ZK lineup. Meanwhile, models like the Zika-001 and the Zika-009 continued to lead in their respective premium segments. In particular, the Zika-009 grant delivered exceptional performance, achieving 1,500 deliveries within just 159 days since its launch, surpassing the combined sales of the second to tenth highest-selling premium four-seeders This year, the very good market result of ZK009 also contributes positively to our gross margin.

In terms of business, ZK's sales volume has increased significantly, promoting the overall sales improvement of the company. The company's overall sales revenue in the third quarter is more than 14.4 billion yuan, which is also a high. At the same time, due to the continuous optimization of the product structure, scale effect, and innovation advantages, the company's profitability is continuously improving. So in the third quarter, our overall net profit has reached 15.7%. In China, we are currently accelerating the expansion and innovation of this channel. In September, the 100-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-hundred-

In terms of operations, the surge in our delivery volumes has driven substantial growth in the company's overall revenue. In the third quarter, our vehicle sales revenue exceeded 14.4 billion RMB, setting a new record. Thanks to continuous optimization of our product mix, economies of scale, and our innovative advantages, the company's profitability has constantly improved, with the vehicle margin reaching 15.7% in the third quarter. At the same time, we accelerated our domestic one-stop channel expansion. The 100 Zika houses was launched in September. bringing the total number of Zika health nationwide to over 110. Internationally, we have entered over 40 countries and regions, covering markets in Europe, Asia, Oceania, Southeast Asia, and Latin America, steadily advancing our global strategy for the coming year.

In terms of innovation, I think it is mainly reflected in the intelligentization aspect, especially in the intelligent driving. We are in the intelligent driving. With the power and evolution of the large-scale models, the speed of the self-proclaimed heavy-duty frame is much faster than expected. The maturity of the product and the speed of the full volume delivery have also achieved the fastest industry. On the high-speed NVP, Finally, we talk about the innovation, especially for the intelligent functions such as ADAS. Empowered and evolved by the end-to-end large model,

Zika's self-developed SEA autonomous driving is iterating at a pace far exceeds expectations, setting new industry benchmarks in terms of product maturity and full-scale deployment speed. It has become one of the top players in the industry in aspects like NZP, on highways, intelligent parking, and active safety. Moreover, the newly launched Zika Mix has taken the lead in the whole industry to achieve full scenario smart parking functionality.

I can talk about some specific plans here. At the end of October, Hohan Zhijia 2.0's unmanned city NVP has been distributed across the country two months earlier than expected. Before the end of this year, At the end of October,

the market-free urban NZP of SEA Autonomous Driving 2.0 started nationwide batch rollout two months ahead of schedule. By the end of this year, we will achieve the rollout of the map-free urban NZP for all 2025 model years of the ZK001, the ZK007, and the newly launched ZK7X and the ZKMIX. which is equipped with the SE Autumn Driving 2.0. This comprehensive nationwide rollout will ensure that Zixia owners enjoy seamless driving experience on every road across the country.

We will also release and show our latest driving experience at the Guangzhou Motor Show tomorrow. Please stay tuned.

Tomorrow at Guangzhou Model Show, we will have a launch event to showcase our latest technologies breakthrough on ADAS. And we invite our investors to watch the show, live stream shows.

In addition, I would like to share with you that the entire GD Kongguo Group released the Taizhou宣言 in September this year. and announced a new phase of the company's strategic transformation. Through strategic focus, strategic integration, strategic coordination, strategic documents, and strategic talents, the Group has made five major decisions. The entire base control group focuses on the automotive industry, and the deployment of the technology ecosystem to improve competitiveness and achieve steady progress.

Last but not least, I would like to share with you that in September this year, Geely Holding Group released the title manifesto announcing that the group has entered a brand new stage of strategic transformation. The group will adopt five major measures, namely strategic focus, strategic integration, strategic coordination, strategic stability, and strategic talent. It will concentrate on the core business of automobiles, lay out the technological ecosystem, enhance its competitiveness, make progress while maintaining stability, and promote the sustainable development of the company. 作为落实这个台州宣言的战略呢,

These key measures, this afternoon, the GDK officially announced the optimization of the G-K, the G-K shareholding structure, to smooth the shareholding relationship, to reduce related transactions, to eliminate the industry competition, and to achieve a firm and unyielding deep integration and efficient integration of internal resources.

As a crucial measure for implementing this strategic framework of the Title Manifesto, this afternoon Julie Holding has officially declared the optimization of the shareholding structures of Zika and the Lincoln Co. This move aims to rationalize the shareholding relationships, cutting down the related party transactions, and eliminate competition within the same industry. facilitating the in-depth and efficient integration of internal resources.

Geely Holding will transfer the 11.3% of its shares in Zika to Geely Automobile.

After the completion of this transaction, Geely Automobile's shareholding in Zika would increase to approximately 62.8%. Meanwhile, the shareholding structure of Lincoln Co. will be optimized to promote comprehensive strategic synergy between Zika and Lincoln Co. Zika will hold 51% of the shareholding in Lincoln Co., and the remaining 49% will continue to be held by the wholly-owned subsidiaries and the GD Automobile.

Okay, I think I'll do some opening comments and some sharing. I think we'll go straight to the Q&A section next time, so that we can be more efficient.

So with that, I think we can move on to the next agenda for our Q&A.

Yes, this is Gene CFO. So maybe we can move directly to the Q&A session, and you can provide your instructions and host the Q&A, please.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. 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 yourself to one question at a time. If you wish to have a follow-up question, please rejoin the queue. The first question today comes from Tina Ho with Goldman Sachs. Please go ahead.

So, thanks very much, management, for taking my question. So, my first question is, with perspective to Zeker, the listed company, how do you think about the M&A with Lincoln Co.? And what kind of impact or benefits is it going to bring to the Zeker company? Thank you.

Okay, this question is very good. Why do we need to regroup and regroup and regroup? I think this transaction is not a simple regrouping of two companies. I think it is the regrouping of both sides' business. It is the optimization and integration of management and business teams. Through this regrouping, So very good question. Why Zika needs to integrate the link and code? So this deal is not just simply to combine the two companies, but to deeply integrate to the two companies' business.

and optimize their management and the leadership team to bring the better synergies to the new Zika and create better value for the shareholders.

I would like to emphasize that this is not a simple merger. It is a resumption of business. After this resumption, we should say that we have quickly expanded the scope and market space of new Zika products. The market share of Chinese commercial vehicles is from 18.7% of the Chinese market share of 250,000 to 500,000. This is the market share of the market owned by G-KER. If we integrate G-KER, its market space can expand to the market. So the new Zika after the integration would have a much expanded market and potential.

Previously, Zeek had segments focusing on the vehicles priced between 250,000 RMB to 500,000 RMB, making up around 18.7% of the Chinese domestic passenger car market. After the integration of the Lincoln Cove brand, we can expand our segment in the segment priced between 150,000 RMB to 300,000 RMB. meaning that the new Zika can have a product offering in around 60% of Chinese domestic passenger car markets. So that would significantly boost the potential for our future growth.

We not only gain a good share in the growth market, but we also see that the market is growing faster. So not just about pure battery electric vehicles, we can have a great potential.

And also, as we all understand, the sales of the PHEV products are growing quite quickly in the Chinese domestic market. So after the integration, we can also have a great potential in that area as well.

So after the integration, we can significantly reduce the risk

or the competing, the two brands competing with each other. I think this is also a very important topic that are interested by many investors. So this year, if we combine the sales volume of Lincoln Co. and Zika, that would already exceed 500,000 units. So based on that, the new Zika, after integration, would try our best to quickly reach the 1 million units annual sales to become a premium new energy vehicle brand that can achieve a 1 million annual sales volume.

Okay, let's take a look at our vision. Let's do some supplementation. Oh, there's one more thing I want to emphasize. After the whole reorganization, it's still up to me to do the direct management. There hasn't been any change. I also believe that after the merger, our co-operation, the sufficient co-operation, can quickly show value.

I would also like to emphasize that I highlight that after the integration, I will directly oversee the business operations of the two brands, no change. And I sincerely hope that after today's integration, we can achieve a very good synergy and to quickly bring very good new values for all of us. Thank you. Now I will hand over the floor to our CFO for further information.

Thank you. Thank you, Mi-san. Yes. Excuse me. So as Mi-san mentioned, from today on, Lin & Co. and Zika will become one integrated company held by one management team. So we have a very definitive trajectory for the overall integration strategy and we have specific execution teams in each of the business sector to look at a detailed planning of the future business development of this company. So we will introduce a little bit about the overall source from the senior management level at a very high strategic level in terms of integration and synergy So just as we mentioned earlier, just as brands like Volkswagen and Toyota, when those companies operating those multi-brand strategies, we will have the two brands relatively separate from each other when facing the customers, such as the sales channel development. But as we move towards The back office of this business, such as R&D, manufacturing, supply chains, we will start to push integration and start demonstrating synergies as soon as possible. For example, the two brands of Zika and Lincoln Co. will now start to move to slightly different, differentiated, but very specific positions. For Zika, we will brand ourselves as a global luxury technology brand and covers mainstream luxury markets. For Lincoln Co., it will be positioned as a global new energy vehicle brand, covers mid to high-end markets. The two brands will cover different sectors of this market and maximize the overall coverage of this particular company. For sales channel, in China, Lincoln Co. has around 437 sales channels, and Zika has 442 sales channels. The two brands will have separate sales channel development in Tier 1 and 2 cities, but as we move to lower-tier cities, Zika can work together with Lincoln Co.' 's channel and start demonstrating synergies. For the aftermarket channel, we will start integration and synergy as well. At this moment, Zika operates 128 authorized link and code service centers. The service standards are based on link and code service standards, but managed and monitored by Zika's aftermarket sales team for the customer experiences. As we started to integrate the two brands, the business operation for those kind of authorized service center will be more and more smooth. In the future, for places and cities that have Zika home operation and Zika house operation, Zika house service network will replace those authorized service centers. But for cities and regions without Zika house planning, we will still work together with the Link and Code Service Network. Specifically, In lower tier cities where there is sufficient Zika, existing Zika clients, we will also have related link and code service center to provide services. Then let's move to products. We will start reviewing and reshuffling the product line up of these two brands, making sure the specific market for each of the brands and adjust the pipelines of each of these brands. We will reduce number of products, especially in perceived overlapped products in those different markets. In mid to long run, Zika brands will move towards mid to large luxury vehicles, whereas Lincoln Co. brands will move to mid to small size high-end vehicles. Specifically, Zika will focus on vehicles that have a wheelbase of more than 4.8 meters, that is, Class B to Class D. Some of the Class C and Class D vehicles will be powered by a plug-in hybrid power chain, and the rest of Zika's vehicles will all be powered by BEB power chain. For Link&Co, they will focus on Class A, B, and C vehicles whereas the Class A vehicles will have BEV powertrain and the rest will have a plug-in hybrid powertrain. So in B class and C classes, the two brands will be differentiated by the powertrain and the product definition. In technologies, we see tremendous synergies in architecture, powertrain that is including BEV powertrain and PE powertrain, EEA, Smart Cockpit and ADAS systems. We will continue to fully integrate all those aspects in both Lincoln Co. and Zika vehicles. For example, the architecture, we will unify the architecture of those two brands to SEA and GEA architecture. And we'll unify the EEA into ZEA architecture. and we will unify the hardware and OS for the smart cockpit. We'll have differentiated user interface or human machine interface at the vehicle level. In addition to that, we'll continue to see tremendous synergies and cost savings in sales marketing, that is, from a less number of vehicles sold and more more volume for each of the models, with synergies from manufacturing in terms of increased utilization, and we see synergies in the supply chain in terms of more vehicles sold and less models. For finance, HR, and other back office support departments, we will continue to see tremendous synergies after the integration. This is a brief introduction of what we see in terms of the synergies. At this moment we have only announcements of this transaction and detailed financials will first be provided by 0175 shareholder circular and later we will also provide a US GAAP financials for Lincoln Co. in our 2024 full-year financials. Tina, I hope it satisfies your question.

Thank you so much.

The next question comes from Tim Sao with Morgan Stanley. Please go ahead.

Thank you, Mr. An and Mr. Yuan. This is my question. I have a question. I would like to continue with the integration. In addition to the technical products, we have seen a lot of challenges in the overseas market this year. I would like to know if the integration will lead to a better future in the overseas market through Linke's brand or channel. Or this may also promote our next year's So my question is about the Exmo market, because apparently the Exmo market has been quite challenging to Zikr this year, given the geopolitical headwinds. Could the integration with the LinkedIn code overseas business help Zikr to find an alternative way to tackle the overseas challenges? So that's my question. Thank you.

Thank you, Tim. This is James. So we do have a very detailed discussion between Linkenco and Zika in terms of the overseas expansion. As you mentioned correctly, both markets, we are still at our initial stage when it comes to non-European international market. So we do have a very careful planning session in this aspect. The conclusion we draw from those planning sessions is that we need to have a very detailed and very specific models and unified models for a different market. And we have to have a coordinated strategy when it comes to dealership negotiations in different areas in the international market. Also, very importantly, we have leverage on each other's existing infrastructure when we're expanding into international markets. There are different types of international markets that we will adopt different strategies. For example, in countries or regions where both Lincoln Co. and Zika have existing infrastructures, we're making sure that we have very close discussions among the two teams in terms of vehicle introduction and price. Say, for example, in Israel and Saudi Arabia, when both of the brands are Say for example, in Saudi Arabia, some of the Zika's brands will be put into Lincoln Coast Health Channel, and some of the branding team from Zika will be integrated into Lincoln Coast team. In countries and regions where we have Zika's parents, but without Lincoln Coast parents, we will have differentiated strategy as well. Say, for example, in Mexico, we will introduce BEV model from Zika. We have already introduced BEV model from Zika. In that case, we will not introduce BEV model from Link&Co, but the PHAVE models from Link&Co to that particular market. And in Mexico, Link&Co will rely on the existing infrastructure that is set up and utilized by Zika for their local expansion. in countries and regions that Link&Co has entered, but Zika haven't entered. So for example, in Vietnam, we will have Zika brand utilizing existing Link&Co sales infrastructure and sales channel and have a shared aftermarket networks. So as you can see, we do believe there's a tremendous synergy to be realized after the two brands has been integrated on the one umbrella.

I would like to add one more thing. The cooperation between Link and WoWo is doing very well in Europe. I think there are already more than 30 cooperation partners with WoWo channels. In the future, there will be more than 100 more. So I would like to add one more point. Currently in Europe,

Lincoln Co. is cooperating quite well with Volvo on the sales channel expansion. This year, Lincoln Co. would already open over 30 new dealerships and then would further expand to over 100 dealerships in Europe. There will be very good positive moves around the Lincoln Co. regarding the sales in Europe. Of course, Lincoln Co. in Europe would focus on the PHAF vehicles because those models are not subject to the additional tariff by the EU authorities. For Zika, we would fully utilize and leverage all these good resources for our Europe ramp-up.

Another point is that Zika has entered the market through its international deployment this year. Another positive point is that this year Zika entered into many countries globally

And we have won very good recognition by the customers as a luxury, pure battery electric vehicle brand. And the price tag for these vehicles in those markets are higher than many of our competitors, showing that we are already enjoying a good brand premium in many markets. Thank you. Thank you, Andrew.

Andrew, I'm sorry, can I ask you a quick question? So, just a very quick follow-up. Fintech Seeker now has a position as the only or the most important high-end brand within the group. Will Fintech Seeker have the opportunity to integrate other high-quality assets in GD Group? Thank you.

I think first of all, we can be sure that in addition to the transactions that have been announced so far, the company has not considered any other potential transactions or products that have been purchased. Okay, I have to make it very clear this time. As for this, I also saw some comments online today. So I also served as the chairman of G-Xing Technology. In fact, I think the collaboration between G-LINK and G-KER, the collaboration between G-LINK and G-KER, the collaboration between G-LINK and G-KER, So in response to your question, I can say very clearly for sure here that apart from all the announced deals,

At GD Holding Group, we are not considering any other potential deal or M&A. With regards to some rumors, online rumors, that I have become the chairman of Polestar China, I would like to say that Lincoln Co. and Zika deeply integrate with each other to achieve a very good synergy. And regarding the other brands under GD Holding Group, We are also exploring different types of synergy. So this is normal, and I can say for sure here that most of my time and energy will still be on the Zika brand's operations, the Zika company's operations. I'm also the president at the Jilly Holding Group, but at the Jilly Holding Group, I'm more spending on time on the group level strategy and the synergies around the brand.

好,谢谢。 谢谢安总。 The next question comes from Ming Li with Bank of America. Please go ahead.

So after Zika and the link merged, Will you consolidate your technology path for your smart cabing and your autonomous driving software? Thank you.

This is my first question. Okay. Thank you. Let me answer some questions. After the merger of Linke and Geek, I think the co-operative effect has been greatly reflected. So thank you. So after the integration of LinkedIn Co. and Zika,

we can achieve very positive synergies. So after the announcement, the publishment of the filings, we will do deeper planning and execution. But here I would like to share some of my strategic thoughts on what we would do after the integration here.

For example, in terms of brand, we have a relatively independent double-brand strategy. Then, the key brands are mainly So first of all, regarding the branding, so we would have two independent brands.

under our new company. And ZK is targeting at mainstream luxury vehicle market sectors, and the Lincoln Co. is targeting at mid- to high-end vehicle sectors. And the price tags, the pricing of the two brands are quite different from each other, clearly differentiated, and we are targeting at the different market segments and sectors.

So regarding the products, we would differentiate the two brands in the areas of size of the vehicles and the powertrain of the vehicles.

we will reduce the number of the new models and to reduce the competition between the brands.

I don't want to go into too much detail. The third point is about technology. What we are concerned about in terms of technology is that in the future, new energy vehicles will focus more on platforming in terms of electrification and automation. So in terms of technology, we have mechanical and electronic structures. So regarding technology, which is a very highly interested area among the investors, we believe that in the era of smart new energy vehicles, we need to have the platform strategy.

So in the areas of mechanical architectures, electrical and electronic architectures, smart cabins, ADAS, and e-powertrain. So in two or three years' time, we strive to reach and maximize the platform strategy among the products under the new company.

For example, we have the smallest number of industrial constructions. Now we have CME, SPA, and Haohan. We will further improve the architecture. For example, the electronic architecture will be a set in the future. Linker and GKE are the same. For example, the frame will be the same in the future. It will all use a self-sufficient system. For example, for a warehouse, we can use hardware. For some of the software at the bottom, the middle part is the same. But for the application, we can use Linker or GKE or GKE OS.

For example, when it comes to mechanical architecture, currently the two brands of vehicles use different architectures including CMA, SPA and SEA. In the future, we will streamline the architectures that our products are developed based on. Secondly, when it comes to the EE architecture, in the future we will unify and to use one VA architecture for other products under the new company. When it comes to the ADAS, in the future, we will also unify the solutions and to rely on our in-house development system. When it comes to the intelligent cockpit, of course, when it comes to the user interface and the human-machine interactions, we can be different. So the Lincoln core will still use the FlyMe and the Zika will use the Zika OS. But when it comes to the backend, we will achieve very good synergies.

So when comes to the supply chain management,

We would strive to have a better economy of scale, accordingly to lower this cost. When it comes to the manufacturing, we would further improve the utilization rate of our capacities. When it comes to the supportive functions, corporate functions, including human resources, finance, the legal and IT, we would further streamline the organization to achieve a higher efficiency.

From my experience, let's take a few examples. For example, R&D investment. I believe that after the two sides join forces, our R&D investment will be reduced by 10 to 20%. What does that mean? If both brands spend R1 billion on R&D investment, in the future, R2 billion can be reduced to R21 billion to R41 billion. This is more objective. For example, when it comes to the supply chain and procurement, I think it's no problem to create a 5% to 8% reduction in the cost of the BOM. For example, in some support departments, we can reduce the cost by 10% to 20% through the optimization of the organization, which is definitely no problem. From all aspects, we can definitely do it. The cost will be greatly reduced. The cost will be reduced. At the same time, our efficiency will be faster. We will be able to achieve the whole profit as soon as possible. This year, we promised to balance under the situation of the Hong Kong Expressway. So we So from my experiences, I think after we integrated the two companies, we can achieve a 10 to 20% R&D expenses reduction.

And when it comes to the procurement purchasing, we can achieve a 5% to 8% bond cost reduction. When it comes to these corporate supportive functions, we can also save around 10% to 20%. In all areas, we can lower our costs and to boost our efficiencies and strive to be profitable as soon as we can. Earlier this year, we said that we aim to achieve break-even per Hong Kong financial report system. We still stick to this target, and I think that we have good potential to achieve that. Our next goal, of course, is to be profitable per the U.S. accounting system. Our management team worked hard to achieve that. Quickly.

Thank you. I don't know what else you want to say. Any other comments? Yes, I'm sorry.

I have a second question. It's about the hybrid. Because recently, many of the next year's hybrid or real-time products in the car market will generally use this pure electricity process uh uh uh So recently, we find many auto companies layer plug-in hybrid product, the pure battery mode driving range will increase a lot in 2025. And especially after you merge with Lincoln Co. Will you learn any advantages for link and code? Because link and code, some of the models, PHEV, sell very well. So, yeah, what is the plan after the merge?

I think this question is very good. In fact, this is a great opportunity So let's talk about Linke first. In the future, Linke will use Geely's EMP system, which is a super power supply system. The performance of this system in the market should be highly recognized by users. Of course, there is still the next generation in the future. This is a relatively small number, 1.5. As for this G-Class, it is actually already developing a new set of new, new, a new set of this super power technology suitable for large vehicles. This is already under development. This system will be equipped with Very good question. And I believe that the PHV vehicles

can be a very good growth point for the future of a new Zika company. Let's start with the Lincoln Co. Lincoln Co. currently are using the EMP, Powertrain Developed by Geely, and it is well received by the customers, quite positively. And Lincoln Co.' 's product lineup in their next generation, they would also use the EMP platform. but equipped with a smaller engine, which will be 1.5 liters. When it comes to the Zika, Zika currently is engineers working on a new super electric hybrid system, more suitable for the large size vehicles. For the future Zika large size vehicles, including SUV model and MPV model, we would use that self-developed architecture. I can say with pride that our architecture and our technologies are far technologically leading than our peers in the market. Of course, details of that technology I am not able to share here due to the compliance issue. We would soon in the future to hold a formal event to explain all the details and the advancement of that architecture and technology to the public.

Of course, I can talk about some of the features of this car. I think, in fact, this is a global car. When I say global, I don't mean China. Global luxury cars, large luxury SUVs, represented by BBA, For example, GLS, this kind of large-scale luxury SUVs are basically still available now. Then we are thinking that this market is very luxurious in the future. At the same time, it is also very energy-saving. The feeling of manipulation is a kind of experience of manipulation. a kind of battery-saving control system. At the same time, it does not cause anxiety. Whether it is in the city or in the highway, city saves electricity, highway saves oil. In fact, this market is very big. We must quickly have a good representation in the global market of this new luxury SUV market.

But I would like to share some highlights of the vehicles we are currently developing. When we look at the global luxurious SUV segment, we can see that it's mostly dominated by the legacy brands such as Mercedes-Benz, BMW, and Audi. Taking Mercedes-Benz GLS as an example, these models are all equipped with conventional gasoline powertrain. In the future, if we can draw out good models that are highly fuel efficient with great handling without any kind of range anxiety, can save oil, gasoline in the urban scenario, can save electricity in the urban scenario, and save a few on the highways, I think that model would enjoy and have a huge potential in the market. So for Zika, we would quickly to roll out such a good large size SUV for the global market.

So our plan here is to unveil the vehicle.

at the Shanghai Model Show in April, and we would start deliveries in the second half next year. Thank you.

So, in addition to what Ms. Tan just mentioned, as I discussed earlier, in the B segment and C segment, where we have the largest addressable markets, Lincoln Co. and Zika will tap this market utilizing different power chains. In addition to that, you can see in the future, we will continue to further streamlining the platforms and drive chains of both battery electronic vehicles and the plug-in hybrid vehicles. At this moment, as Misa mentioned, some of Lincoln Co.' 's vehicles still run on the legacy CMA platform or SPA platform, but in the future we will unify the PHAVE platforms into, sorry, unify LinkenCo's PHAVE platform into that of Zika's. And that will ensure us to enhance the profitability of each of the models and also improve cost savings and enhance our bargaining power along the supply chain. I hope that answers your question, Ming.

Yes, thank you, Director Yuan.

The next question comes from Wenjian Jing with CICC. Please go ahead.

Hello, Director Yuan. Thank you for answering my question. Thank you for the collaboration and mobilization of the company just now.

Let's go faster. You can speak English directly.

Okay, okay, okay. I have two questions about the intelligent driving. We all know that Zika has made significant investments in intelligent driving and has achieved excellent progress. How can Zika maximize the results of its intelligent driving efforts? Will it empower other brands in the future, creating new opportunities for revenue growth? That's the first question. Thank you.

Thank you. So for Zika, I think it's very, very clear that our ADAS solution, especially our high-performance ADAS solutions, will be adopted by Lincoln Co. as well. So in the future, both Zika and Lincoln Co.' 's high-end ADAS solutions will be based on the current NVIDIA chipset and in-house software algorithm solutions that currently the Zico team is working on. On the other hand, obviously, within the big GD group, there's two different ADAS branches, and the more cost-efficient ADAS branches will provide ADAS solutions for link and code vehicles that target at a more cost-conscious population.

Okay, thank you. The second question is about, is there any update on our cooperation with Waymo, and will there be any deeper cooperation after that? Thank you.

Yes, so with regard to the Waymo cooperation, we are still working with them according to the agreement that we had with them back in 2019. So all the testings and other test drives and trial runs are working smoothly in U.S.

at this moment.

So we will start deliveries of batteries of vehicles from the first half of next year to them.

Thank you.

The next question comes from Ben Wong with Deutsche Bank. Please go ahead.

Thank you. I just have one quick question. What's your guidance for the number four quarter this year growth margin? Because we found that you actually introduced the zero interest rate promotion for volume in the number four quarter. Do you actually have a better volume in the next So, combining two factors, what's your guidance for number four quarter margin? Thank you.

Thank you, Bin Zong. So, for the fourth quarter growth margins, given the fact that we have already seen a tremendous customer demand in terms of orders, and also, if you look at the product mix, we continue to see very strong demand from our customers for our high-end, high-margin Zika double-line models. We do believe the fourth quarter margins, especially the vehicle business margins, are going to continue to improve.

Thank you.

At this point, first of all, you can see that our interest rates are constantly developing in a good direction. This is just the beginning. I believe that after the future is in the hands of Linke, I think the interest rate will be better. So as investors can see that in the past quarters, our ZKZ vehicle margins kept growing. And I think after integration with Lincoln Co., the gross margin level will see further positive improvement

And next year, we will roll out large-size, luxurious PHV vehicles that can further contribute to the healthy improvement of our growth margin.

So I would like to emphasize again that this is a very good resumption of business. This is not a simple stock market change. This is very important.

So I would like to highlight again, this is a very good business integration, not just simply to combine the two companies.

So please, next question.

The next question comes from Jialu with BOCI. Please go ahead.

Yeah, thank you. Yeah, thank you for taking my question. I have two questions. One is about our sales distribution integration. As we know now, Lincoln Co. stores relies on dealers. Why Zika most adopts their own direct sales? So following the consolidation, will Zika use the Lincoln Co. sales dealer to achieve faster expansion? I mean, will Lincoln Co. share the same store to sell their individual cars? Yeah. Yeah, this is my first question.

Yeah. The GECO model actually requires investors, but we are responsible for sales. So GECO continues to adopt the GECO model. After the merger, I think, because many of GECO's leaders So I said that after the integration, we would keep two independent brands and they would remain their respective business approach.

So Lincoln Co. would remain to use the dealers and Zika would remain to sell directly to the customers. But I'm not sure if our investor colleagues are aware of Zika house model that we are currently applying in the domestic Chinese market. So there are investors that invest in the stores and Zika's colleagues are handling the sales at the facilities. So after the integration, Zika will continue to use the D2C model, but we would invite more Lincoln Co. investors if they are interested to help us to expand our sales reach in the tier 3 to tier 5 cities, lower tier cities in China, and to further expand our sales outreach in those markets. Zika is a young brand, so most of our stores are in the tier 1 and tier 2 big cities. we have not yet, we have yet have a very good outreach in those tier 3 to tier 4 cities. So after the integration, I see very good opportunities for us to attack those markets.

At the same time, we can also share in the harvest system. In the logistics system, we can share even more. So in the future,

And also, when it comes to the after-sales services system, we can achieve a very good synergy, so as the logistics systems. So I think in the future, when it comes to the marketing, sales, and the services, we can achieve good synergies.

My second question is about our combined sales target for New Zika, that is one million units by the end of 2026, which is quite positive as it is double from this year. So I just want to know that any detailed breakdown for individual brands of Wicker and the Lincoln Co. at all if we have some preliminary breakdown by region. Thank you.

Liu Jia, it's like this. We haven't made it clear that we must achieve a million in 2026. Because this is a goal that we have set together. We hope to achieve it as soon as possible. Okay, that's it.

So we didn't say that for sure that it is our very tremendous target to achieve 1 million annual sales target in the year 2026, but we want to as soon as we can to make our company at 1 million annual unit sales level. When it comes to the details business case, I apologize that I cannot give you a detailed breakdown here. For further information on the sales guidance, we would publish in January alongside the 0175's full annual sales report.

Thank you, Mr. An. I hope the new Zika will get better and better.

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

So quickly, the first question is, just now you mentioned that you are going to eliminate the number of models to consolidate on the large volume model. Do you have an optimal number of the number of the models?

This question is like this. Because now, first of all, the result is that I can't give you a clear result today. I only did some early understanding and some product planning for the future of these two brands. So I apologize that I cannot give you a detailed

figure in response to your question, but I have already conducted some good study about the current product planning with the two brands. After today's announcement, the teams at both brands are working very closely with each other to roll out a more detailed product planning update for the future years. Today here, I will not give you a detailed answer, but we will try to answer that as soon as we can.

But the principle of the entire product planning process is there. That is to say, according to the size of the model, according to the energy method, the difference in energy, and each model must be labeled on each model.

We have already laid out the principles for registering future products at the two brands, depending on the brand's positioning and the size of the vehicles and the powertrain setups. And we also have a very solid goal that all the future products needs to be the benchmark in their respective segments.

So for the next year, Zika will roll out two new models, while LinkedIn COVID will roll out another two new models. So new Zika next year will roll out four new models.

at the different sectors.

Thank you.

Thank you.

The next question comes from Eugene Thao with Macquarie. Please go ahead.

So my question is about the old Zeker which is asset light but with the link acquisition I think that also means you require the link manufacturing facilities. So does that mean that the new Zeker business model is shifting away from asset light and being more of a traditional OEM? And if that's the case, does that mean you would consider acquiring the main production facilities of Zephyr from Geely Holdings, like the main coal plant?

Thank you.

Yes, this is Jin, and thank you for your question, Eugene. So when we set this company up, set this Zephyr up, we're starting from a blank sheet of paper, and we are a start-up. Hence, we're adopting this asset-slide business model. And when we're considering these Link&Co transactions, obviously Link&Co is a fully integrated business and it incorporates, at this moment, three manufacturing facilities. So when we conduct this transaction, we bring in the three manufacturing facilities. As Mr. An mentioned earlier, we will continue to see how to fully utilize those manufacturing facilities by optimizing and restructuring the models that will be manufactured at each of these sites. At this moment, apart from this link and code transaction, we do not have any further plan or discussion with any third parties or GLE group with regarding to additional manufacturing facilities or other .

Okay, I think I'll add a little more to what I just said. I think what I just said about product planning and technical planning is very important. Regarding product planning, I think I'll clarify it a little bit more. Based on the different positioning of the brand, the size of the vehicle, and the way of energy, as well as the construction, it must become Hi. Hi.

When it comes to the product planning, in the future when we register new products, we need to analysis based on the brand that the model would belong to and whether it did fit to the brand positioning as well as the size of the vehicles and also considering the powertrain of the vehicles and also considering whether this vehicle could be the benchmark in their segment. So these are all the factors that we will seriously consider when we register new products.

Thank you, operator. I would like to turn the conference back over to the company for any closing remarks.

Thank you.

So thank you all once again for joining us today and thank you all for your support to our companies and we our management team would work hard to deliver

a good result to all our investors' community in the future. Thank you again. Have a great day.

If you have any further questions, please feel free to contact Mr. Yuanjin, our CFO. We will try our best to give you good answers. Thank you all.

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