Li Auto (LI) 30 Aug 212021 Q2 Earnings call transcript

Hello, ladies and gentlemen. Thank you for standing by for Li Auto's Second Quarter of 2021 Earnings Conference Call. And at this time, all participants are in listen-only mode, and today's conference call is being recorded. I will now turn the call over to your host, Janet Zhang, Director of Investor Relations of the Company. Please go ahead, Janet.

(ph). Annie you, Thank good and morning, evening everyone. Good Li to Auto's Second Call. Conference Earnings XXXX Quarter Welcome and were the operating press financial Company's The results today, are website. release published and posted INR on Company's earlier the in today's we our Mr. President, On call, have and Mr. Kevin Yanan CFO, Shen, our to prepared remarks. Li, with, begin Tie John

founder Mr. and Xiang Our our Wang Kai Mr. and discussion. us join CEO, will for Li, CTO the Q&A

Securities made, of reminded Before today's discussion Private statements please the forward-looking provisions harbor be that Reform XXXX. ended continue, of safe we contain the Act Litigation US will

Forward-looking statements involve inherent risks and uncertainties.

to a that, of results call interim which announcement, the and Kevin. also well law. the obligation as Exchange non-GAAP Company's Auto's the Hong risks be as measures. such, in and Commission, ahead, the this Company statements any As from our of President. of is to U.S. I information, financial wills over Exchange Kong note Company. uncertainties assume GAAP any contains Company release website unaudited the measures release will and financial Li does results Please unaudited today. now actual press GAAP refer certain to regarding may the includes not in earnings comparable conference matters. update to information call and/or press unaudited discussions applicable except the forward-looking With materially Please non-GAAP as the of Li reconciliation Auto's turn Please that go and announcements with published required Further different filings included the The expressed Stock Securities and on

for joining thank Janet. you, call our you Thank today. everyone. And Hello,

Company. Stock A Hong are started proud shares main on on for a XXth, First of opening Kong August board our trading chapter ordinary new of we our the that Class the exchange all,

also by the We all and are we received from honored support humbled investors.

as financial significantly proceeds listing, support Kong This will Hong the primarily of strong net for base provide sales due protection R&D our the and as initiatives rates. $X.X and over [Indiscernible] network billion enhanced strengthened direct shareholders. which well for expansion, our our With with servicing

to our being seriously. continue alike. take and for out Work and value users, will We responsibilities publicly-traded associated employees our shareholders, a long-term to creates our Company the vision build with

Next, second-quarter key highlights of the moving to results. our

Our Li been since ONE its on performer has XXth. debut XXXX exceptional an May

ONE mobility performance. endorsements Our more user comfort, optimize enhanced intelligent rave XXXX of It received kilometers, Li features outstanding has boasts range and its X,XXX a an and cockpit. and reviews NEDC strong for

achieved Our second-quarter increasing units, deliveries year-over-year. XX,XXX XXX%

new SUV is topped a In making the features, data sales SUV Our insurance leading China New registration Research a to in & by product ONE's ONE to China. testament powerful Center. categories highly new It in July competitive hitting Li reached July, Li a domestic?iEV? car deliveries reported charts Technology record. manufacturer Energy X,XXX, us and Automotive Large according

While performance achievements, are does popularity these run and ratings the not exciting and today's yesterday's Li win ONE's game. strong home

and We dedicated. will to be disciplined continue

to We ourselves and and trust, will strive our earn loyalty users. services the products constantly to in surpass of support,

and the collaboration of us partners. Our helping have record-high They assistance semiconductor been ongoing the been the possible supply have deliveries our not shortages. without would chain navigate

to Turning profitability.

quarter, quarter-over-quarter. Our X.X% from and margin X.X% XX.X% up reached gross year-over-year this

and second and quarter, we quarter, cash deepen second to during operating RMB or flow the high In our direct for broaden million billion model operating prospective was ourselves city sales XXXX Our US$XXX our from to coverage and demand users we accelerated launches X.X the network. China the expansion beyond. capability. Thus, across demonstrating our of aimed increasing consistent in servicing further prepare and address new

servicing covering shops XX and XXX centers in are cities. we and Auto cities had XXXX, Li paint XXX As operating authorized of July and stores XXX XXst, retail body

year-end our reach stores. We are to track on of target retail XXX

to of cities recent taken footprint autonomous servicing semiconductor monthly retail undelivered us our geography August, lower-tier to sales XXX%. direct regions, police store co-coverage This Tibet. months, backlog. China. deliveries and an extended has network, our opened has industry-wide provinces, in shortage administered The In affected resulting in have China Mainland, we and Lhasa, a We centrally in in [Inaudible] the in

industry As we exceeded order enhance our XX,XXX flexibility new our best utilize and to June, our alternative in to tried solutions acquire sources.

to shortage Going our with impact and mitigate our semiconductor forward, we'll to closely the collaborate on minimize partners supply the chain continue production.

of base. catering to ONE Li portfolio we our our of even to broader success to proven needs family-user working are families, to the product Given the appeal diversify an

increasing manufacture long XXXX, to an penetration be our volume with the we increase to and a EREVs agreement superior next-generation Company new local investment automobile a first we models. manufacturing firmly Beijing. a with also for be in X platforms and develop On sometime. launched medium with subsidy our X extension overall platform are the wholly-owned China, confident in an platforms be development [Indiscernible] plant the launch project models a BEV term. in we and in Limited Holdings development; vehicle Do these to also Shark have form for platform future released rate and will is This the to our our to with new vehicle Company next-generation costs signed [Indiscernible] Xingchen The replacement?ICE? expand subsidiary smoothly in the new and to XXXX. Whale Power EREV, smart believe under August signed we of model expansion models We July, support the Sichuan further the capacity the for XXXX; reconstruction In and of will that China -- an MOU production progressing Province, sales of system. the and XXth, collaboration in AEV

of international high-quality will taking of We plans action. will the markets, continue R&D to share in our to respect as market domestic EREVs keep both of core comp capabilities our it always one expand development and directions. to view and to ratio. companies market. we make the before With further provide strategic products the the smart production The leverage strategy

As has right the we market, the just different to our product a customers that winner, be to many domestic not attract participant develop and doing car overseas, in to requirements a shares with the from are tastes mere want global customers. Company

up to dedicated have find the plans and winning team are on the a working to market, overseas a We formula. we meticulously set

corporate effective response citizens, relief users. organized we to in emergency are province, engaged As people we to proud passionately the social relief including to activities in have [Indiscernible] donations our the In with support people, help July, in need. to

three also adjacent the we in the provinces join have mobilized We efforts. all excess rescue trailers, to

smooth posts, of back services them We for all extension possible our free provide in with as replacement flood-damaged warranty inspections for transition vehicles. and our vehicle efforts help and we charging such normalcy. to for addition, users made disaster-stricken In way to free parts, replacement any a reassure

achieved rating in a MSCI us we XX AA April, the automotive making companies. ESG Lastly, leader ESG in rated among

integral continue undertake region vehicles as view and of families an part will to build we responsibilities, to smart electric this social forward, Going our that make happier.

turn will Mr. call review second I to in our to Li our the performance this Tie CFO, quarter. financial over Now,

release details. you constraints, Thank XXXX. further you, second you to Kevin. quarter walk financial financial press highlights and our encourage Hello, for the everyone. here to our our I will of results will for to refer address earnings I time of through Due now the some

of Vehicle was quarter of XX.X% vehicle primarily Gross due margin XX.X% the representing sales Our quarter-over-quarter. million the in in and of driven quarter included its RMB of was a The billion first by increase compared which quarter average sales the to other the since services ONE cost quarter-over-quarter. in the of X.XX Li May. $XXX.X in RMBX.XX of XXXX or quarter margin from our the of of on mainly RMB an by stores, the increase XXXX the quarter US$XXX.X growing quarter-over-quarter. the sales the first second late quarter $XX increase million XX.X% compared in second These XXXX, driven in due charging Li first representing increase in with or XXXX. XXX.X XX.X% with million vehicle with increase other increase in in the an or sales from second from Revenues of the RMB XXXX. of billion higher an over XX.X% in were delivery second of price RMBXXX.X our vehicle XXXX million, XXth, in sales The increased US$XXX.X services revenues of quarter quarter were in first XX.X% was services quarter ONE and The release XXXX representing $XXX.X vehicle X.XX increased deciding accumulated total from sales. was or XX.X% in XXXX. from the million, in to sales, RMB X.X launch higher profit XXXX. of of billion billion XXXX second million, was was the accessories, revenue or or quarter mainly million May increase second and quarter first line This

million, or increasing development million were Our gross XXX.X was was were RMB models. RMB $XXX.X quarter-over-quarter. cost margin XXX.X an expenses expenses high XXX.X and U.S. in million research RMB XXXX, XXXX the or dollars XXXX or in or quarter representing increase quarter-over-quarter. expenses Company's or share-based compensation expansion increased network. the in XXXX share-based primarily million XX, of headcount Loss and second $XX rental the and with quarter increase XX.X% were promotion will the of an an quarter, XX.X% increase second over and and loss quarter loss the $XX.X increased Net from million increase in million quarter quarter the activities, representing an million mainly with compared the expenses in of in of RMB million operations representing million increasing expense increased and compensation an net of XX.X the RMB quarter distribution of billion and first was cost vehicle increase second RMB and million RMB first which attributable future activities Company's XXX quarter RMB with in million in representing compared an second driven margins. selling, of quarter dollars, The XXX.X Excluding excluding was development share-based --XX.X% XXXX, first $XXX.X the XX.X% increase of second of non-GAAP, first compensation first our of XXX.X quarter loss of XXX.X loss million non-GAAP net the quarter-over-quarter, increase over XXXX million, expenses XX.X% XXXX the excluding of US$XXX.X Research or the million million. expenses, XXXX of expenses quarter-over-quarter. RMB well expenses, representing compared of to million, compared quarter-over-quarter. the X.XX XX.X% research to was The XXX second as primarily U.S. attributable R&D million the XX.X% marketing of vehicle by research U.S. million XXXX. Development XX% development in operations XX of expenses the XXX.X an XXX.X general quarter was the loss the from increasingly were for non-GAAP of XX.X to in XXXX, million the quarter [Indiscernible] Non-GAAP XXXX. Operating XX.X% the with XXXX was as of increase $XX.X $XX.X or our or was first RMB were administrative in cover of or quarter second net the in

in billion cash flow second our was $X.XX outlook. deposits, as for or short-term second and RMB our XXXX XXXX. equivalents, Free of business XXX.X cash, Operating $XXX million sheet investments, June and RMB flow; total XXth, flow turning time million. And $XXX.X and to restricted cash balance X.XX our of RMB billion XX.XX cash million cash or the or quarter. cash was now in Now, billion, quarter the

our to representing quarter and XX,XXX third third $X.XX, from increase also increase preliminary X.XX quarter an subject market operator reflects particular, outlook X.XX XXX.X% all the For and the The session. billion, I to conditions. third situation view from current now the facilitate COVID-XX XXXX. global semiconductor of of third-quarter XXX.X% deliveries vehicles, expects the billion shortage, business be due representing turn In and is call of to between ongoing XXX.X quarter to the Company Company will approximately Thank you. XXXX. the to be Company's industry-wide of billion of or business XX,XXX expects of and the change. to to XXX.X% the $X.XX the Q&A pandemic, XXXX, an RMB between to the revenue total RMB This the and which

have to additional [ Operator X call, participants And instructions]. you questions. And Q&A the Operator yourself we for queue. standby And if questions, compile please instructions]. benefit the of roster. while limit on re-enter please the you today's all can

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line the from is Sang Sachs. of Goldman question of Fay first Our

open. go is ahead. Please line Your

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and The second and your [Indiscernible] down intention is experience? What think safety in are about customer if things you [Indiscernible] thoughts assisted order risks a Do to there around bit is any driving driving regulatory regulation. development? to on the regulatory autonomous perfect slow

Yeah. Fei, this Kevin. Thank Fang, is for the question. you

to new we development own have product products. strategy schedule launch and the for think I our cycle,

generation we are and BEV platform. the platform, the also our basically, of next our IED So development, HPC accelerating

we'll EREV be As us. based before, big new next-generation And models year. platform for our brand year roll we a our XXXX next out on shared will

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is is I ADAS standardize industry, the vehicle think overall there the electrical for smart to the of technology the MRIT solution. requirement and intention a

healthy is to I overall, ensure us development solution. to launch thing. with we future, will the ADAS be the this we the when basically this the need in think And a industry. I cautious think product is This more good as impact of

our effort ADAS take a will the launch our will was original fully but into plan, function us no strategy. develop think is But overall not so more to -- that's it Yeah. there change. focus the our think before I in market, on change I

That's Kevin. a very helpful color. Thank you,

you. Thank

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-- Kevin. to an fighting we shortage. the answer especially question are industry-common months, now, in you, COVID-XX have we And is the we the the competitors. Thank will been become facing situation in the for that situation about overall COVID-XX we situation other is shortage COVID-XX supply next Right And due past the I industry outlook common it's Tim. This We shortage not the The getting shortage. predictable. quarter, supply. first the think is every believe the better. the will single-biggest balanced. is the don't more This if several But an I day from?ST.? our situations. than are Malaysia, for industry better

you on for risk a still it's Yeah. do this? to comment want us. John, So

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details Yeah. One Great. for to more in for track you. BEV we've release will sure thing is the XXXX. made on we think I Thanks sharing. fights, in ready Beijing Thank the For the launch future. get

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Please Lee line is of Our next [Inaudible] your open. Hsun is Securities. go ahead, the from line question of Ming

regarding first in the improvement language] the question Thank you. [Foreign especially My gross margin quarter. is second chain, [Indiscernible]

of question. you. close also quarter the car also to, you're third could on is but question, on Power regarding This more increasing, and decreasing, the elaborate collaboration could details is sell and so course, collaboration of us first you also S&P give [Indiscernible] second is trends. comment Thank more Your the quarter My with your you EREV? my

-- Lee, from primarily the to the the due the suppliers. costs Kevin. reduce. will amortization our partially of increase, the have perspective, question, volume reduction also quickly, from the besides And because first the one, thank of sales some you. of increase price, your therefore of cost This we the bond is [Indiscernible] Very sales

increase. So margin in gross that's the result

XX%. gross gradually third continue the the I overall and will be the quarter margin think XX improve for also. quarter to will still fourth year, margin see between that see this the We gross to blended somewhere for will

Xinchen especially is -- been venture a Company in . our joint The with Actually, second [Indiscernible] partner BMW. about Xinchen your have China, question is second leading with they long-term a [Indiscernible] engineering

manufacture to share. our venture, have this venture with develop joint XX% EREV And Xinchen. jointly we this next-generation Thank for the and Lee. joint have of We engine you,

Thank you.

you. Thank

question is go ahead. the of next Our open, Credit line Suisse, line Wang from is please Bing of

about got questions. I've you. borrowing. Thank Number long-term X X,

in long-term to So billion. X.X out our borrowing we found the second quarter actually got

you you X That's Given the on X, hand. so big have of explain Number why guidance. much end the a number volume tapped question. at [Indiscernible] jump is the Can June? have cash

You guidance, number What very and actually August ended but XX-K, we September [Indiscernible] year, [Indiscernible] it [Indiscernible]. Thank by should of the much the units seems XXXX. on guidance be price we're think profit So about maintain actually, at could doing XXXX, you can X.X quarter And guidance? you. In the units. low maybe XXX,XXX year on sort to how million go next September should yours XXX,XXX volumes next units. if about the are XX-K third-quarter for we be

long-term of in First April. of all, a lot of because them [Indiscernible] [Indiscernible] the

[Indiscernible] . So the It's yeah.

Yeah. Wang Kevin. for question. This Bing Thank the you is

to of of taken impact potential already we Yes. when third we of risk the the the guidance COVID-XX think give the militia. consideration out have quarter, I for the

be don't to we want aggressive. too therefore, So,

XXs. think today I is So already the

the number. for X year, And of see our days, plan, I will think yeah. August next within is in So the range Yeah. your estimation next you our the

Li to want increase we course, further Of monthly delivery of the ONE.

Thank you.

you. Thank

from Chang open. of of CICC. line Liu line The question Please next is Our the is go ahead.

system. down -- I high-pressure acceleration then key Could year of second some give SG will question extra Could expenses. my My on updates us and full and expenses? in models [Indiscernible] you about translate my our is guidance launching to give on the the second you January is XXXX. financial the question question. charging some be our you. the especially some us development, on -- And its Thank pure details on and an first miles quarter,

Yeah.

for Tony for So &A, Quarter. mentioned, SG&A, to network and also are this rental is and year is And marketing promotion the year, of I activities our just the increased expenses. this SG XXX. high And our adhere the our towards in and keep and RMB. (ph). continue around the whole in guidance, so retail Second R&D, stores to as expand And second expansion also question. the Well, car more the the to which . -- half of for still second of the target X [Indiscernible] billion want is we will the we

Kevin. is This Yeah.

the our models, we share port battery, of for milestone. sample for To terms R&D the a already foresee we new HPC, have in heath super-fast That's track on charging also some For of design. BEV we ready. And process. HPC are big example, the milestones,

and the already year. our we plan have to first pilot charging concept Yeah. station design within have We this finished

you. Thank

is The of line open. is the line UBS. go ahead. Fang Our [Indiscernible] of next question Please from

Gong UBS. Hi. two have of if this line, is I I'm not sure questions. this Paul my is

half our on How from PUV have one the EREV is second versus the positioning. we different should you do segments we spending versus is the BEV Starting different the And -- is much etc, split quickly. the let in going be year-over-year? positioning recall, BEV second each versus and of terms and for R&D is regarding the of of your to year, of the my focused -- your the be NPV, the regarding etc. how size first on going think next to of the How question spent focused the for how My EREV both. Sedan, think split [Indiscernible] you is XXXX, position How driving. The and on how to forward. SUV about a smaller and going next much the segment? more the this year, autonomous me larger -- this forward, should vehicle, [Indiscernible] questions much on portion more going on the And EREV the BEV translate

Paul, yeah.

take Let is first This question. the me Kevin.

differentiate car when a or So on actually we have future, factor. these same not the at in BEV EREV based the the time, and we form X do size

So cover different designed size will, XXX these X all trains, the band users. on RMB. from each have XXX these to will the cars cars price family based developer driving basically, to of for a we power And

concerned the difference have If I between think a on they will They will we about good If charging don't based range believe choose to Yeah. choose choose and infrastructure. they they and they BEV. key is are preference. infrastructure, access the have these anxiety charging good X will BEV's customer they more -- [Indiscernible]

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you. Thank

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our line -- the is Su [Indiscernible] next open. ahead, of Please Next . is question Ying line Bo of your from go

join how flexibility, Are maybe that of pricing in, models. be the XXXX. period a is, lot they the second maybe again. market And maintain we our of in question this considering newcomers -- is is margin lot concentrated what's or and power [Indiscernible] to XXXX, year share [Indiscernible] the pricing And newcomers question first by our maybe in a going to new the My more trying is high launch items. a that sector, strategy? of have

colors? So us X some next of could you. or like technical you X we how Thank products. expect So [Indiscernible] the years do give computation

is Thank you, Kevin. This Bo. Ying

on view, price the about our all, of the not designed, we will of pricing. products. a Otherwise, we unless issue, of the see for each based we point these And From competitiveness products, price the point point. of First alter

I answer we'll price wider Yeah. way in more volume band. [Indiscernible] definitely, your think launch to question gain to another well, cover

future, the And increasing. also, That's say, we going from size volume XXX K as to to our is cover Segment we future to the the they RMB. design the our going our product probably will -- some XXX by yeah. price not That's that about products. are to cover way, market mentioned different stick -- of points. starting between competition So different choices. the I increasing, RMB XXXK our Yeah. is key to And to X to philosophy. That's in XXXK between will increasing the segment. think price of of We're K the XXXX, products we only reduce

to the That's of one EREV customers. continue our that why to anxiety completely market. That's is to we strategy. the issue believe our overall issue. solve our you we customer, core midterm-long-term have we're to we launch competing to next-generation our an we already and that So solve products. and have one EREV EREV for solution solution to this range is that's designed in have the We'll we're we anxiety why first going PV the see want the Yeah. deliver why -- That's values

is why first have the new whale we other the solutions. platform. solve this the we This shark charging choice. hand, and opportunity also issue range to the with That's On see anxiety high-power

We We the our segment. want our to growing family catering car focus choice. to only choice of want target we our to we all family demand is this customer the is And car, members. the design when design needs on see second The users. the

we on development. will focus driving development autonomous cabin The the and thing the solutions to smart is also solution that third continue

So we'll these three block X building -- things product We things. are of think to stick believe competitiveness. we'll key we Yeah. these the don't fundamental our

Thanks, Thank Kevin. That's you. very helpful.

remarks. Janet as are conference for reaching the like Company Ms. end the And we I'd of call Zhang, to you. the please back go closing over to turn our call, Thank ahead.

Thank for us you once today. [Indiscernible] you Thank again joining

a free Auto's you, you in-retro team. have for questions, and Li If to feel further have all any that's please Then relations one. today. Thank contact good