Li Auto (LI) 29 Nov 212021 Q3 Earnings call transcript

Hello, gentlemen, thank you for standing by for Li Auto's Third Quarter of 2021 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, Janet Zhang, Investor Relations Director of Li Auto. Please go ahead, Janet.

Rachel. you, Thank good quarter and welcome Li to Good earnings morning, conference third XXXX call. Auto's evening everyone, The Company's the financial press and Stock operating results were today and Hong were Exchange. website releases published and posted IR on Company's the Kong earlier in the call Mr. On we our have President, today's Kevin Yanan Mr. CFO, Shen; our Johnny Founder CEO, Tie with Mr. our to remarks, begin Li; prepared and Li; and our Xiang CTO, Mr. discussion. Kai Wang will join for the Q&A

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

Forward-looking statements involve inherent risks and uncertainties.

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

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

in be transformation part century to ICE We are smart from a electric to this vehicles of once vehicles. excited

an acceptance to of pleased inflection see reaching also are We point. NEVs the user

XXXX. of retail from in NEVs As Association, the rose penetration XX.X% to October, Passenger Car sales X.X% in in significantly China rate the reported by

Li explosive revenue quarterly capacity year year. usher of from growth as XX,XXX an Looking believe once efforts increase with in record to a delivered again out This achieving dedicated appeal Li units, breaking battery users. system as ONE of we underlying year, team the growth compelling chain over heels EREV Thanks May, our this the of in strength ONE partners the XXXX over on launch backdrop results XXX.X% we year of range year highlights XXX% of and sales. successful and large in will the to supply ONE XXXX delivery continuous the XXXX, underpinned quarter, strong to third by Against and a its support extended of our family Li well users. of the

October XXX.X% delivery X,XXX was year-over-year. increasing units, Our

the new intake October. order hitting in challenging of chip magnified of smart record shortage, rapid EV Our effects the industry units remains has of over and industry-wide The the OEM's each development production monthly schedule. robust, a XX,XXX delivery

certain shortage, supply teams. While of lagged impact quarter deliveries the our this of in to total chip light our strong the industry-wide delivery In family we expect lingering enjoying XX,XXX and delivery resolved to the users the to in Despite production. XXX,XXX and the with regions, vehicles. weather month extreme our ONEs shortage, growth XX,XXX endorsement user XX,XXX working problems supply partners of our which constrained we we delivered the COVID-XX also We and of to fourth the expect our exceed diligently be vehicles. our our have by some of are supply November Li internal in ongoing to XXXX semiconductor has between in order conditions chip due product, growth

the the think industry the chains electric smart will into facing vehicle overall accelerates, the to the we persist EV As industry the development future. of challenge supply

with our partners together to continue will to multiple that risk. mitigate take and supply we forward, chain Going actions measures find

the X.X% third the year over quarter, to X.X% up our quarter. margin year and Turning over in gross quarter XX.X% at stood profitability,

focus flow our cash and was relentless reflecting operating cost execution the or RMBX.XX Our on billion third $XXX.X million management. and consistent during quarter,

quarter, of loop products service our expansion integral made of us third sales we manage our sales not to also that progress and notable but in serves feedback and touch which online offline our services. the point network, helps continuously user user During marketing, enhance our the and and for only efficient as platform component direct closed an integrated

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

will penetration we to second-tier covering cities, launch target deepening lower-tier end, stores models. us demand of year more by This than to new our reach surging and in user coverage cities our our awareness retail of We cities, our while China. as XXX increase expand brand will prepare for and continue in first- XXX

the of update. In and for terms zones the in four smarter need voice OTA take update store offers interactive allowing to commands a Tong families. upgrade streamlined The new voice design, also early The carry application Xiang conversations. ecosystem and natural their more the in-car coverage Xue of via providing product Tong more an fun different store and and that the OTA Xue launched entertaining to new from users Xiang separate Xiang application is in application able in-car to can smoother smartphones, we out car, Xue a Li new similar optimization, upgraded Li assistant, in-car an and of September. an control Li full creating supporting experience application without Tong

December. and plan Li ONE Li With upgrade ONE our in XXXX to we these Meanwhile, users grow. upgrades, evolve release to NOA our to continues

and confident family with provide ADAS users safe, that convenient XXXX functions ONE enhanced, effective will with Li We functions. NOA are

be with Following Li the XXXX NOA all through upgrade OTA, ONEs will feature. this equipped

provide to dominant are year regard in by NOA a family to We this end, in gaining over XX,XXX users leadership prepared China.

power charging. to high we HPC of support progress BEV, our good terms developing In are making technologies

demonstrated XXX kilometers, minutes test than more XX range the only completed a battery with XC that and driving have can charging. We of on support vehicles pack it

capital vehicles, the proceeds drive and to more we introduce raised to technologies. our will EREVs primary to development BEVs deploy ADAS cockpit Aiming With in electric product and our made needs advancements competing we BEVs. with serve for and parallel family an listing, smart both through and upon capacity. and base production catering R&D recent build in scheduled dual operational expanding users' our in and construction vehicles success headway and be of base important XXXX Beijing. manufacturing to in officially ICE will the as in base also we is commenced our October The premium manufacturing production our In

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

year-over-year Total XXX.X% quarter sales third quarter-over-quarter. increased with XXXX from an were time quarter. or of of in or Revenues of the This sales, which the the I Hello, third and in or our now here expenses Kevin. developments. to of and billion as increase year associated deliveries year. the by quarter as quarter will expenses representing driven revenue an over increase highlights of financial expenses RMBX.XX third you, over of expenses stalls, The quarter this million, rental The I delivery third and over in this the $XXX.X third our the over margin $XXX.X encourage mainly of The second as staff financial $XXX.X billion, compensation for vehicle vehicle or XX.X% of increase rental the million, release quarter million of billion the SG&A XXXX. of the of well credits driven in an of the SG&A vehicle to this the through and of Vehicle RMBX.XX activities quarter XXXX with was million quarter RMBX.XX from increased distribution address of third from XXXX quarter as revenue second from XXXX constraints, the third third $XXX.X The in XXXX the the margin. representing driven for was Gross million this Thank well driven billion quarter XXXX an the over XXX.X% network. a from million, with third over in third quarter billion XX.X% in the quarter XX.X% year. average quarter network. XXXX. vehicle marketing XX.X% the representing with margin $X.XX representing as details. the from R&D billion in in quarter or higher an price XXXX other billion XX.X% quarter. of in year-over-year RMBX.XX compared and million quarter increased of the XXX.X% quarter. and product XXXX or quarter were XXXX. increase representing of was second an of quarter increase you attributable and expansion XXX% everyone. primarily compared walk was increase of the and RMBXX.X were Loss by year you increase in in second and expenses and result quarter year primarily in of accessories by was with increase quarter employee increased of regulatory RMBXXX.X sales increase refer from services to primarily XXXX quarter XXXX. the expansion and decrease research XX.X% as in and year, year-over-year of and Operating in quarter of were quarter quarter quarter. this XXXX employee our profit in selling Gross and in a million, of year press expenses an third of was XXXX over third costs of line of an of year third sales. of will year-over-year quarter Cost loss attributable RMBX.XX over from promotion decrease quarter. or and with increase expenses quarter services some an representing was The XX.X%, XXXX representing sales margin of RMBXX.X XXXX of XX% quarter quarter quarter XXX.X% second over results and XXX.X% XXX.X% the XX.X% and increase million, further the of over $X.X included million the of in accumulated XXX.X% increased the compensation XXXX in an billion, R&D year quarter of over in in or new of billion was of charging Due third second quarter. over XX.X% Li was quarter was the growing in million, of third with as services in quarter, of XX.X% compared a Net the XXXX in XX.X% operations RMBX.XX to of XXXX by the higher of and RMBX.XX and the $XX.X to over the increase increase growing of of of the in in second third increase expenses associated increase quarter XX.X% vehicle development increase over quarter RMBXXX.X the increase to to increased of third third of $X.XX third XX.X% were sales an decrease earnings the decrease of year ONEs compensation of the XX.X% quarter of billion other of XXXX well increase distribution a and mainly representing associated Company's XXX.X% was sales employee mainly primarily vehicle or in increasing third $XX.X million, an year revenue The quarter RMBX.XX compared year attributable year quarter. Company's or XX.X% XX.X% sales SG&A the was third second of increased quarter increase third and attributable over with and the quarter quarter a and increase $XXX.X the the

Turning to flow. balance our and sheet cash the

quarter. was or and billion Operating in cash $X.XX cash billion equivalents, flow quarter of of RMBXX.XX XXXX cash, as third time was $XXX.X XXXX. cash restricted deposits RMBX.XX the Free September billion XX, third or short-term million. Our and flow $XXX.X billion in cash RMBX.XX or the million investments totaled

Now for our business outlook.

business revenues For to also increase The billion and Company the deliveries XXXX, vehicles, total the the the and representing call conditions, quarter shortage, Company Company's quarter change. be the view XXXX. to to you. operator are preliminary and of the $X.XX $X.XX XX,XXX turn to increase session. current outlook our and XX,XXX This XXX.X% to from RMBX.XX the an and the XXXX. of industry-wide to be of situation the billion, semiconductor fourth fourth expects of between fourth of representing all fourth particular market over quarter subject XXX.X% ongoing I the quarter billion now the expects XXX.X% XXX.X% to between Q&A an from RMBX.XX billion business or which start Thank on reflects will in

and first line of ask of gentlemen, question [Operator we Sachs. will Fei session. now Ladies Goldman the Your question-and-answer Fang comes the begin your from Please instructions] question.

else market? call, terms is product the about from what of the differentiate you mentioned refresh is second HPC XC I in there hurdles. The the opportunity. for terms expansion. My competitive pack XX,XXX the intake first heard the Also, on features upcoming have have correctly, backlog Other on of management which than [Changzhou] the Very next us battery key your The can units product production impressive quarter. of that very was about question obviously pipeline. in you for in Thanks impressive, test question this your thought October your that, BEV shared you launch? timeline is if that

next So level? can when the you monthly ramp look production up at that year, towards if Thank you think you. do

repeat Chinese, Fang, your question you Fei can in also please?

[Foreign course. Language] of Yes,

we the Thank good This first To your is XC Fei. you, Fang battery for question, HPC, progress. Kevin. besides made

of high-voltage system, our air-conditioning progress hand, other infrastructure. the made progress also on lot we on also charging the made a the high-power On

now, we're plan, support of per actually, our first the terms factory can timing, in on XX,XXX now, by of shortage. terms BEV HPC ramp-up half our chip gated roughly is of right in to Right production still So And track launch already product our month. second in production the our XXXX.

right basically, assuming production we ramp the will shortage after year New certain next a our XX,XXX So, Chinese expect up resolved. Year, to chip extent will to be more than the

Thank That's color. helpful very you.

Thank you.

of Your next Hsiao question question. the Morgan Tim line Stanley. from comes from your ask Please

management Hi, the tracks for one the got questions, any to teens. Congratulations thanks and previous taking margin questions. our because a on great ahead first much target I've margin, two team. about my gross of result high of expansion

expect more meanwhile, margin early next aggressive So further persist that the given favorable gross trajectory the of should leveraging quarter gross consider volume margin? into upward quarter, scale promotion Auto fourth upcoming we Li or scale boost to to And [Foreign on will in of Language] year? the the back

Johnny. is this Tim, Hi,

think to year's control team, we before, shortage. of the this price supply we I margin as internal despite current due the ONE, XXXX gross team, of and was the new guidance. the effort semiconductor our Li guided previous mainly On still our higher average also, cost cost the it margin, selling want chain is, to keep

promotion to currently, has waiting to do the promotion, need long, of six more customer no wait too so yes. For the let customer to eight time, about weeks the

So, two we that. three won't months, least currently, do in to next the at

year, intake second orders for the to the we the order times, any question, you the weeks. Company concerned can about volatility? rate and six vehicle because of will Chinese fails I next worry up such Language] or early on end deliver year, to the as avoid would wait new If are the should new to or Year, towards substantially rising Company before or Li order mentioned, [Foreign be as wait a cancellation Got precaution fall take this to the basically as ONE My long follow it. times eight New want the

Tim, this Kevin. is

because reach them lead expect any to due that terms from the delivery. don't order the roughly we cancellations delivery with other expect normally, we take they agreement time, we'll customer, when can prolonged our an all, of we'll before see First the of in

when basically, order, they the set already have delivery. expectation So give us they the for the

very Great, thank you much.

question. Please Your Credit the ask next Suisse. your line from question of Bin of Wang comes

got one about I've you. the guidance, Thank guidance. is volume questions. XXXX two Number

question for may cost The is battery [indiscernible] be year, the because Language] [Foreign outlook about battery increased. next costs second

question. will the first I take

chain Company, I believe, a it we not robust take Maybe second the plan very next year. current the I supply shortage, next think think time you Kevin for year. the have But is for give the right due should the guidance question. the to to could within

no right the we course, within all now, that [indiscernible] jump terms price But all know year, for Of in with costs plan we increase material the raw a have see batteries. we far, this big of to so

I impacted pack. Also, we one think are Yes. as have EREV. battery do less we less They

Thank you, great.

you. Thank

ask from line Please of Your question. Securities. next the of Ming-Hsun your comes Lee BofA question

I have management. questions. you, two Thank

new The service? well functions Secondly, contribution in as upgraded first in Thank Could the functions you of could the to this the question Language] as December. the you. be and you regarding more [Foreign on credit potential elaborate the fourth quarter elaborate of third sales NOA also, is more XXXX? new in quarter

I the Johnny. this will first, second take question is

last have think beginning off year's sales. I sold EV already all from the we credit

So, the credit over basically, XX last year. million, RMBXXX around with EV all for

won't we fourth revenue a quarter. have for the lot So more

question, For pass Kai. will I the to first

This is Kai speaking.

the regarding of NOA our million question, so kilometers. So which December, NOA model your Since over in has and first so scale makes we be will China. our in feature default, far, by biggest have a released ONE Li NOA December XXXX lots testing, OTA feature release update our in

this peers. compared think probably is our Thank I difference the you. biggest with So

you. Thank

your of of next ask the question. [Operator instructions] UBS. Gong Your line Paul question comes Please from

are my two taking questions. questions. there for Basically, Thanks

pipeline. The first one is regarding order your

does Li have rising on in into Language] competition [Foreign models more Auto some this? peers already action or environment, consider accelerated the your How launch products have new or adding new We that observed models pipeline. this

Kevin. is this Paul,

quarter the and details we start XXX XXX quarter. introduced of the in our reveal terms will third next second to in of the to the the will year actually, launch deliver In market event. at be future our product, More

Although the keep want is launching now, ONE for by to volume to level still we of see we our level. market, also of reached of the products single value This example, a the model. to new reaching lot schedule. delivered benefit when [residential] our a Right Highlander scale is getting its the to Highlanders, own close the Li

very We one models, lot rather to of small than big volumes. sell but a launch model with choose sell will volumes quickly only

different Our slightly philosophy than is peers. our

would that ADAS little seems similar a getting What chips the question second power. relatively each now high different adopt LIDAR, competition ADAS differentiation everyone the by would other. Nvidia in forward. It this calculation the use going bit makers longer My Language] different systems time? with regarding are the is forward, Everyone car for in key is Okay. [Foreign function going ADAS to that the

speaking. is This Kai

we related intelligent. we technology is But user eventually previous in Regarding as experience train quarter, massive topic, explained, most to the experience, thing. your to algorithm in you it the this ADAS order automated think already believe I user make to data need achieve important ADAS more

faster As customers. we every by Li user progress single much, is experience default believe Therefore, biggest, of Thank because with to we fleet, competitors. speed say, you. base can you know, up our our development customer NOA of than to our important by feature the have make Auto, the basically, we very reach safety our complete speed let's the using

you much. thank Okay, very

[Operator ask your of Your Chang next question the of Please comes Liu instructions] question. CICC. from line

great that Could is second which see how us, share is and taking by regarding my the RMBXXXX rising XXXX cost congrats Language] [Foreign of of model, than question on quarter, material? cost the quarter first it's My the RMBXXX,XXX by question, we vehicle caused in maybe result. how and you Yes, rises highest quarter, more per and to XXXX. third the cost, because for is the thank you much the rising caused since with price much reason the the also is

Johnny. is This

we achieve generally, ONE. our think still I target margin desired gross to the on Li

currently, be that floor supply of are XX% year. chain product. will it the and achieve under pressure we a we the before, a design cost last mentioned we it's As we as pressure, But to expected finally

from a have mix some it's semiconductor lot a impact chain parts. of Also, manufacturing those have we quarter. a it's the So, net-net side, and the we measures - increase benefit effort there's supply for also so of our each from

Language] [Foreign

Li the Xiang some Kevin. made is gross translate. will on This comments margin. just I Mr.

very therefore not Our considering margin development. philosophy they the of margin is company. gross invest on for a generation a cannot money in is we they especially how some very have us, money we important gross technology development, their technology previous the R&D. companies, R&D a the thin on look spent technology Most healthy is If product enough are of the enough at

want and so also, margin R&D. the product that to keep can development, invest So, technology very in not our is on the healthy on that but a will the more development thinking only we we we gross invest technology XX% more

Yes, the My question network. you. of thank second sales expansion regarding is

to see, third we XXX is end the which the have which by over already stores target, this of quarter, As we of our close by end was stores year. XXX

please sales our year? Language] plan you of also update could our and year network for So, [Foreign expansion next this

on are XXX XXX cover we now, year Right to Kevin. end is stores retail the by China. track to around This within achieve

our least initial to the retail double stores. is year, plan of Next number at

you. Thank

question the Chung comes next Citi. ask Please your of of Jeff Your question. line from

XXX% first potential regards per support about quarter November in backlog. month first run monthly supply shipment, Would higher similar that the Secondly, XX,XXX in you. in around chip units to rate. next actual order the Language] my production October? the November be So, the year? Can [Foreign the the question Thank momentum than to XX,XXX is is to

you, Kevin. Jeff. Thank This is

has order of ESP constraint the been by so also was Bosch from our have question, is The intake order why the October Bosch, that double therefore see shortage final and delivery. not XXX% we of around is supply. will radar First delivery. the the you solved. the This actually impacted millimeter That's month, supply only be radar the number millimeter supply intake delivery both the

possible. to quarter to ESP are with first we try question, this will be much to second in Bosch as component. Your have right Right constrained year, Bosch now, actually, the solve of now working we the as continue by next still headlight is we

Thank you. [Foreign Language]

Jeff. you, Thank

instructions] Please [Operator ask question. comes next Lou Your BOCI of of your from the Research. question line Jia

questions. Hello, ratio compared BOCI I management. level. to target about last R&D now, with in second SG&A Language] Changzhou year, expansion One We Beijing, XX% but for Changzhou are plant know to question This ratio. new that seen that plant have so what know about that [Foreign [Foreign SG&A so want building for We is just two I any what are about year, Research. so the SG&A is is spend is the ratio that [Lou for Actually, increased the have we I want My the know management Jia] capacity. in know mentioned we from the this our plans Language] have levels we XXXX? detailed that EREV, plant? capacity ratio

Thank you, Kevin. this is Lou Jia,

the with to for plan - the term, to the the I immediate we all, of longer this XX% for volume for highlight SG&A and is give our plan plan level that to a SG&A is we further especially next can the First step, control decrease you to growth, to percentage.

So, slight a the especially aggressive our expansion promotion this one you on because the and also the hand, SG&A increase increased on SG&A sales percentage. year network is see

total is capacity XXX,XXX we the do XXXX. for double terms our and end reach capacity units. That's actually to XXXX our of capacity, plan In capacity of standard a the can by near of XXX,XXX our annual plan with shift,

Thank you.

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

for call. all good Hope That's everyone. you have today's Thank Okay. one. you a

call. for conference Thank today's concludes participating. This you

now may You disconnect.