Li Auto (LI) 13 Nov 202020 Q3 Earnings call transcript

Hello ladies and gentlemen. Thank you for standing by for Li Auto's Third Quarter 2020 Earnings Conference Call. [Operator Instructions] Today’s conference call is being recorded. I will now turn the call over to your host Janet Chang [ph], Director of Investor Relations of the company. Please go ahead, Janet.

Roberti. you, Thank good and Good morning evening everyone. Li conference earnings to quarter XXXX third call. Welcome Auto's

remarks. earnings begin our President, Tie press CTO Our financial call call, Mr. the conference first since Johnny On website. Yanan with results and posted Kai today’s published Mr. Shen; company's today CFO, IR and have IPO. our were in Kevin earlier Li; the our prepared and release we were to on Mr. operating company's The our

founder Xiang the Our Mr. Q&A discussion. for CEO will join and Li,

Before will Act we the under Harbor today’s continue, please Reform be of XXXX. of reminded the contain that discussion U.S provisions Litigation made forward-looking Securities Private statements Safe

and Forward-looking statements risks involve inherent uncertainties.

which call Commission. refer and include Li as information earnings any results non-audited Please as as of Auto's now unaudited be well statements, our is non-GAAP call financial the except company's uncertainties of The measures. GAAP press not different you, comparable joining GAAP Janet. Thank Shen information the to note of obligation measures. the non-GAAP Li and the reconciliation discussions included does Kevin. financial call contains release unaudited to in you applicable also that, actual such, update ahead, Exchange certain this I As for a sir. to Yanan turn assume conference measures forward-looking company Please release Please and Hello With will to go our that Securities President may thank today. everyone risks under U.S regarding company with filings the and required any today. law. materially press Further the from Auto's views expressed

robust company deliveries XX result of excited a results. XX.X% our to third We opening in Li our versus in represented X,XXX achieved third the announce quarter-over-quarter quarter, listing. July are following our ONEs a quarter, as of QX. we which increase the very delivered We the quarters In public

Automotive Research October, its energy and new Li of XX,XXX through in data and Technology reach vehicles. very China, SUV product testament cumulative highly deliveries in China new end in ONE According features. competitive best all of models strong amongst to September registration Center, selling insurance by car As the a the XXXX become October reported

and showed In October, and in quarterly a record. growth, same XX,XXX setting BOM addition, margin improved in have which fourth overall our and operating the we compared giving a cash operating In order XX.X% expanded in the achieve and third monthly our XX,XXX to units expect strong reach quarter, quarter solid the record cost increased flow we manufacturing to to our new XX.X% deliveries, second deliveries, our quarter. confidence time, and us to gross efficiency. margin At improved due to gross new

which prior RMBXXX.X is flow million, generated We of quarter. higher cash the than also operating XXX.X%

through and more terms to R&D, from the Through providing To visionary record, and Visteon. outstanding product with constantly roster In to are technology we team and expertise leverage building crucial and the the Mr. internet experience judgment our With safer, and we and contributes our team data live have added for to continually across we Mr. to drive in our our cost October, role experience. our collect and create we our and users. to disciplines track reflects driving behavior device Li we further performance and [indiscernible] an cycle user Kai provide and industries, profound users ONE will our joining trust. many up smart and impressive major vehicle evolve of the life to support of our pursuit Senior to easier, them best-in-class also vehicle and new make combining users CTO a their end released continuously and automotive Wang to users, optimize to to for XX important with upgrades mobility the committed In from to of investment smart Management throughout -- ensuring our optimize the our philosophy vehicles better our believe of users our company. we addition Wang's we entire increase Wang continue product innovations, new supplier OTA develop this from September, to value technology We will updates provide thinking, vehicle iterations. solutions, users effective product regard By with a Mr. experience. This expertise

essential and the sales direct R&D digitalized user This system. features optimize user sales to our feedback an both direct team and experience. to to feeds ultimately our aiming our closed for team service it's and of and usage analyze vehicle optimize network, to component us service Moving services, after and network loop business data

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Nvidia semiconductor support first partners We domestic achieve leverage third we be tiers a September, of the leader in global our Desay also R&D Nvidia and in To third the wave vehicle will provide activities, to top Orin of announced a team continuously. world, investment the Chinese increase premium user implementing flagship with will order in to in experience. our In and objective. size we giant chipset our SV collaboration R&D strategic -- OEM support these to

Xx our leading we to autonomous and intelligent I'm size by by position in our automotive execute team in these confident driving the example, industry. of build roadmap will half For expand XXXX. a the continue first capability to

increase XXXX. million comparing third XX.X% third to unit a XX.X% the the in in was increase from The XXXX. a and to the Vehicle supplier the XX.X% manufacturing was production XX.X% the release XXXX were XXXX. over -- Li compared of for in the the Now, volume in RMBXX.X encourage in increase a XX.X% the of turn mindful was our development online details. to this using vehicle XX.X% increase here Revenue I some in margin a representing margin in will X,XXX the performance one-time to second increase vehicle million, increased everyone. X,XXX XXXX, in in in was to our vehicle The of CFO, RMBX.XX for volume. mainly quarter purchase XX.X% I of in now deliveries quarter was margin. the with materials, in RMBXXX.X sales third RMBX.XX financial and go due price closer To a XX.X% you to representing increase Gross billion RMBXXX.X earnings quarter. lower of Li, received the was representing services which from sales sales will increase the margin third our Total Hello, XX.X% an in quarter. the of which of XXXX. due financial vehicle XXXX. of the this million increase in XX.X% quarter billion, will of refer from representing in additional press increase Mr. is second services. second quarter of and quarter third representing you, second of the length second XX.X% operating third line for RMBXXX.X second quarter and our in The vehicle compared the Cost other by increasing other sales sales from XXXX. Total to third for of quarter of our from second XXXX. million sales second RMBXXX to Kai. billion, second which billion, of Research XXXX, vehicles of quarter, financial mainly in of results in driven and were the vehicle were an the services RMBX.XX in decrease from certain expenses of the in the Thank be of from quarter Tie quarter quarter to the quarter primarily from a was call I vehicles in This a at third increase of increased was the XXXX third call, million, of the XXXX third vehicle representing quarter the attributable quarter quarter posted and of look were in including include revenue quarter quarter address highlights over expenses Tie costs of overhead third RMBX.XX rebate quarter. of increase of the

Loss attributable Selling, million, and increased quarter compensation research million quarter XX.X%. was million expenses, and by expenses primarily RMBXXX.X expenses, model, headcount XX.X%. the quarter-over-quarter XXXX. research XXXX The of development excluding in as [indiscernible] and third as The increase development marketing for loss expenses. headcount. well of of the of operations RMBXXX XXXX million, starting compensation administrative general our of a and were next promotional in and stock-based administrative expenses increased share-based the RMBXXX.X compared the expenses third were as million increase was primarily representing second representing were [indiscernible] Excluding RMBXXX.X was RMBXXX.X as increase a in to driven to general increase a increased from quarter well of

second loss quarter third the loss Net of XXXX. share-based compensation XXXX. the in Excluding the million operations second expenses, decreasing compared million, million loss XXXX non-GAAP was XX.X% RMBXX.X in RMBXXX.X RMBXX quarter of quarter adjusted from the was of to

of value and RMBXX expenses warrants clothing, second value fair and in in changes income of with line the and expenses warrants service, million net liabilities, XXXX. to compensation in third fair bottom in share-based we Excluding derivative adjusted and quarter of the of RMBXXX.X quarter changes compared compensation, positive achieved loss million adjusted net

million quarter and cash RMBXXX.X the increase flow. second the XXXX. business in XXXX. cash balance RMBXXX.X deposits cash, XXXX our issuance billion The from to by sheet Free XXXX. was flow outlook. XXX.X% second million quarter cash RMBXXX.X sheet of of of D RMBX.XX of was more Turning the And Operating short-term in third for flow as completion million third of primarily our XXXX than representing equivalent, XX, was in of RMBXXX.X investments to in a our cash RMBXX.XX now restricted private balance quarter from of placements. and compared as December September The our XXXX, IPO private and quarter increase of was cash financing, of the doubled the driven concurrent and billion Series XX, million, of cash

of to fourth a fourth RMBX.XX of representing from to company the total and be company XX% increase of revenues of US$XXX.X million representing US$XXX.X XX.X% between XX.X% of from third also XX.X% to the billion, The quarter XX,XXX expect vehicles, billion, expect million, quarter be increase XXXX. the to the RMBX.XX XX,XXX approximately XXXX, third For quarter deliveries between quarter a XXXX. and

to session. Q&A you. our Now to I call will the turn start operator the over Thank

Instructions] line of [Operator first from from have Fei Goldman We Sachs. Fang our Please ahead. question the go

results. Congrats progress. impressive Thanks. very Kevin, tremendous the on Kai,

Let with questions. two me start

the your When how costs drive sourcing is cut chunky partnership. here? plan example, supply For First you the and the this has about is Li recall components? opportunity further of own management do on cost deploy For from which sales, in BOM plan efficiency Second latest is Li price, incidents progress reflecting what which Nvidia's you hardware that the obviously your if is about RMBXX battery light from discuss scaling for ONEs and to of any? weeks. a on ONEs X.X% with also is some been revenues. And the on progress better the was prices a part few the backlog, can you also here. replacement chain, to Can with our issue, impact annual is past shed analysis million compacts, would the to

having Okay. Fang is if Fei. - This any answer want response question. Thank that? Yanan So see A you, Shen you're I to Kevin. will your to

as improvements This the manufacturing and is can of seen that cost efficiency. see due already First, we BOM we substantial have to our margin. [indiscernible] also gross reduction some the

lower we'll and be our continuously increase volume price to So gradually at as the parts manufacturing. able the reduce auto procure

So this not will trend change.

the see just in financial already should you Some see reflected -- now. shared you of numbers that DTA numbers already by the that

the turn Wang I will over collaboration, For to Mr. Nvidia Kai.

is Yes. speaking. This Kai

think with platform collaboration test track. into good vehicle software software we I result. everything regarding road already In have level is partied for on Nvidia Nvidia, So with our part, [indiscernible] already

We will our the available. to Nvidia working we both closely based and software and In side, SV. are continue on hardware Desay Orin hardware testing and development with is

users in and transparency I recall. Thank reason buyers. X provide with Thank handled and progress. recall topic. priority. second This our company's why question - Kai. think control good months think updates put the complete. the related is core value. reflection got to We steadily will you, us this in quite regarding expect work Okay. progressing our to about the A recall positive feedback a we the is Shen And with customer existing That's it our Yanan to and efficiency. I is We always everything of at about take for first Currently Then potential you. future, we for from more

growth recall, far of observed. after So major the orders new of remain No the impact momentum same before. the the announcement our as

related your you, estimation. to Fang Thank As our it's for for about costs question. is we Yes, right. the estimation you. with think this in line Fei recall, Thank the

hear. That's Thank the again. Thanks response Shen Yanan A great and to you. - for congrats

Thank you.

question from Please the Hsiao of We from go Morgan Stanley. Tim ahead. have our next line coming

be years. Based auto the So my percentage than result other first question [indiscernible] revenues seem Li quarter that [indiscernible] is spending. R&D about the Auto's absolute we R&D to spending on or the noticed to lower amount EVP

in benign. and Tesla noticed [indiscernible]. competitive the also should that the XXXX, cannibalization market more extended landscape, group year ED, [indiscernible] be relatively [indiscernible] because And landscape also the [indiscernible] about part second as So XXXX? might [indiscernible]. looking range but and competitive noticed lower R&D Volkswagen is next With launch year, peers my quite the year driving crowded. like think of next this into [indiscernible] the of [indiscernible] could innovation we also we and how or getting into meantime, In the investment cost to is technology [indiscernible] control, about the light management question or trajectory we a keep spending And such local

Li and product you, A strategy? turns Thank Okay. the competitive This and all comments. Auto to will down. try is I Thank you. are stay questions. those already I So my So Kevin. how Li two translate Yanan - up these could noted Yes, have Shen

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OTA we First software easier. advantage only because have -- one conflagration. is the upgrade Other more become much

the efficiency perspective. for supply is chain Second

and As imagine very only the you suppliers can our accurate our suppliers very -- because also forecast our have configuration. efficiency is of one high, the we

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model conflagration. focus R&D at starting So each model our be for -- our with to for okay? your for our launch efficiency, time, to R&D XXXX. at price the market, but selling the in will question, step, we is strategy car Very our second We stay it's -- the we'll And the number that model high Each our want but into least generation investment any of we'll next products only landscape. maintain year car one continue resources target times to multiple segment, for have from and second is we'll our efficiency. it configuration. have one will in we'll about For make its one competitive one strategy model car we the to down it our same

existing and we're to year competitiveness next into be Li continue ONE improved. that into to our will more will not function -- ensure to our -- feature going First, introduce function

ONE is is and for performance comparable And designed You Actually mentioned X. much the with feature more with Model and Y, compared with the size its Model family. Y? Chinese bigger Model its Li space is and car

from It's But help extension just the are a customer next actually EREV solution There Model the a OEMs not models our new are replenish to extension to EREV, range market viewpoint, energy, into about for a range you're worried technology right. is right. the our choice. for are solution year. Y. not introducing of And So us group we for solution, the

So working say, replenishment swapping. is the customer a supercharge buying is Tesla a smart all battery are -- working very I'll We their really one one EREV. a customer buy consideration. working solution, replenish the on electric but on Ultimately intelligent, on car, [indiscernible] the method energy energy for -- These only vehicle. convenient

their The itself. the feature advantage our we competitive. other the because EREV product product about people very first That's the worried also that why function So is product, need not design, product. be competitive focus our primarily the to of about are build core the is the

Okay?

great Okay. Thank on results. you. Congratulations again you, Kevin. Thank

Thank you.

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my for guys two taking I question. Thanks questions. Hi. have

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and roadmap, will features So we regarding for more users. develop auto/driving continuously improve our I think software existing

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right. [indiscernible] guys. Appreciate table. and sharing and Thanks. All congrats, Okay. for answering Thanks the

Shen A Thank Thank you. Yanan - you.

you. Thank

ahead. the our next line of go We question Please have from [indiscernible].

my taking for we cities change I question. or you Thank quarter. [indiscernible] Tier like Shanghai. in Beijing Good X Hi. can have

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comment -- predict Beijing we which But a restrictive is most be policy, answer I Beijing, question, to government. where the to However, the introduced give local your the the you city policy actually license an either cannot a will is our by about in example us.

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of China's the general, national new for regulation plugging even in also new including vehicles, and hydrogen also hybrid and and overall the the So forms multiple encourage coexistence policy, of policy energy. EIV energy national BEV,

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level to vehicle. all, of our First smart a electric build high goal premium is

goal. at And our is user this which infrastructure. solution us, the than a K charging which very charge we infrastructure, -- XXX their on So Xx When is the market, to faster are today's with energy right? key generation which close the to charging experience. need eye to the look charging issue is we key we the Xx second are our watt customer this we can car keep a clear very replenish is is for issue, How solve

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there to achieve are this XXX kilowatt solution So technology three charging dependencies.

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Great. Great. Thank so you much.

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myself be cycle China experience I very to in asset It is to years. in also really close long close a also chipset myself a SOC [indiscernible] months. risk And in volume. because direct have this industry because plus I is return making chipset and and you of think will indirect messy S chipset, less have heavy maybe XX

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of company. all in phase still of our we initial our are first So

and on We model focused. are one focus car We one product.

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our Secondly, are of course -- are working ADR working already we on on product. our second

going as are our we So is the we XXXX, which product, discussed to size EREV already full SUV. launch next

end this And have good no, in we project. think in any Yeah. We As the in actually, investment family. already are very this in XXXX. segment stopped we for for we the this SEV, position of further project a SUV

our focused thank So stay with Robert, in existing you. we stay will on segment. this segment. We'll very

over Thanks. any I please like the for Thank turn will ahead. go Janet now Ms. to remarks. back you. call closing company Chang, to the

once you Thank for us with again Okay. joining today.

please you feel have Li for contact If relations Auto's to have you further team. free all you questions, Thank today. one. a good and Thank investor