Li Auto (LI) 15 Aug 222022 Q2 Earnings call transcript

Hello, ladies and gentlemen. Thank you for standing by for Li Auto’s Second Quarter 2022 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. Janet. ahead, go Please

press Good second good call. quarter operating in financial Jason. to IR The to today call, On remarks. begin everyone. Kevin Li Shen; and the published with were we Auto’s XXXX the results earlier evening, Mr. you, morning, CFO, Mr. today’s and President, and prepared Welcome website. Company’s release Thank earnings our and our Johnny on are Yanan posted Company’s have Tie Li, conference

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

continue, please Forward-Looking Private XXXX. I of Safe be Before of discussion reminded U.S. will Statements Harbor that contain Securities the the Act today’s Litigation Reform made under provisions

Forward-Looking Statements and involve inherent risks uncertainties.

exchange. a financial the release Please Auto’s call the over this to call discussions non-GAAP non-GAAP of and website refer measures GAAP information Please IR on Hong regarding any applicable except and Please may that, turn now law. ahead, as to the as reconciliation materially Kevin. obligation Exchange that included actual such, is unaudited contains update the the risks unaudited Kong in disclosure of the With as Company’s certain any to As filings assume information our press Commission with Company which different to will comparable GAAP Statements, and be I also financial and document the Auto’s Li U.S. Forward-Looking section stock Securities of Li measures. include does of earnings well uncertainties unaudited views not results conference from Company go under note Further expressed required President. today. measures. The our

the quarter. China's which of consumer key year-over-year its our and than Car received for from the energy delivered new posed XX.X% billion. LX doubled retail positive increase million the it intelligence. for rise, Despite COVID-XX and passenger thank SUV year-over-year from for review second I according model Thank supported continue challenges XX.X% in witnessed year-over-year revenues, from flagship feedback sales best-in-class highly preference XX,XXX X.XX the second continued in features quarter climbing May to contributed more discuss results cities vehicles We you, We quarter. to Passenger increasing EVs and the Janet. smart the second combination launches, the state-of-art will comfort user family safety, which totaled of and quarter, believe remain users the more representing the rates surpassed of total quarter, iterations will you first penetration product Li in light users. the strong by call vehicles to of We mark clean family adoption we our driveability, joining by this during during with have increase. to Association highlights today. XX.X% to on national March the continuous to XX.X% our resurgence China across offering delivery everyone, These focused RMBX.XX Hello, the mobility. a of AEV

the the unit priced year-over-year. ONE reach to RMBXXX,XXX just at China's speed among XX.X% proudly XXX,XXX a production achieve Xst, On emerging XX,XXX, model Li August rolled Once ONE above premium domestic this again, the in reaching deliveries Li Our up following milestone. mark. setting first record speed this historic milestone. to production the us also manufacturers our in branded EV XXX-days production is manufacturing July Changzhou XXX,XXX off took It reached we base. our line

they But disruption campaigned. the moderated resurgence Moving there we chain, the more to our supply - moderated Currently, affected auto remaining and second supply the severely chain the pandemic quarter. COVID-XX as in difficulties. became are

potential that and of half cautiously chain to the in constantly normalize should will our pandemic. the that are second we highlight given alert, the require high ongoing stay on remain especially supply volatility year. us optimistic Although We

on chain are emphasize the the As tackle we our cost same reinforcing navigate on redoubled at to quality supply unpredictability, shortage the system, time inflation strengthening with continuous and auto parts our we control. and focused parts parts our suppliers partnership

moving second we the to we the our Now resilience continue that and the rest with our power to have the of inflation see the to of along enable profitability in that experiencing us product, operational consistency, industry. been execution mitigate quarter, our cost

at gross growth. up to future margin devoted year-over-year quarter X.X% a we and fuel result, As remained R&D network solid remain our as XX.X%, our to second relatively extension

structure we year-over-year. continued of Meanwhile, operating achieved flow cost cash our expense another million. we free and impact, by increased Despite RMBXXX.X flow cash positive of the of our cash RMBX.XX manage operating pandemic's optimize to and Our billion XX.X% effectively. flow quarter

As and part direct expand to our our launches, to of accelerate servicing additional new accommodate demand network. with efforts growth continue we user model and sales

as As retail services stores Auto body the XXX authorize Li paint well July as we XXX center printing XXX and shops cities are of XXst, and covering XXX the in had cities.

been perception our posts XXst, unveiled the Create replenishment function efforts reach over are focus resurgence, smart cities. Home, XXX,XXX upgrading a the the system. premium further From vehicle users XXX autonomous of relentless control out charging While LX to our over strive AD automates expansion XX,XXX self-developed recognized cutting we by providing we Li by intense Li XXth. in edge provide by to network we On capability in drives. users, family also rolled (Ph) standard our to including others, the stores. users, experience existing highly Thanks charging developed six provinces and Mobile definition energy convenient and The Reflecting flagship capabilities. charging boosts charging users. LX our will to our optimize application product Every users our sales in and for covers LX Auto comfort grid was and Li create order SUV. to stations challenged pace Charge] to [State our we operators on and station for have Star In is COVID-XX map and and charging our upgraded LX driving XX options Happiness. the the August Li features map Li main enhanced outstanding flagship comes our R&D June handling outstanding full safety. by the test bolstered our with and Max stack Li functionality extend

first based volume system reliability enhanced by interior Li offers all the safety. applied As his a It steering family two Qualcomm of design, to five-screen grade supply and the dimensional learning platform. power composed platform multimode deep LX braking with system the enhanced interactions Supported production featuring vehicle and for for computing technology. redundancy computing XXXX system, for chips, X and a our smart ages. members interactive Snapdragon space automotive provides powertrain,

feedback very strong LI particularly along for from positive have We LX, received order target family our the with intake users. the

We will of commence end delivery of August. Li by LX the

with new ahead our forge launches. model we While

for capability self-developed product. increases function, our are and Li or enhanced the next also to straight The audio our for further on working launching June, user's mobile ONE the (Ph) year. highly control existing forward vehicle to X.X feature recommended continue an in remote users user narrow charging accuracy allowing length convenience update entry their the in model and optimization include to to [OA] our our experience spaces. BEV equalizer released function function, the steadily plan also power optimization greatly ramp ability with We OTA Furthermore, exit. level. vehicle application. anticipated the This This and a pursue through update move backward the fully taking change, and for park a improve line of In update we of ONE next the Li remote we high

We on high deliver the NOA capability strong the BEV. orient industry deploying be to adopt autonomous Li R&D network efficiency. video showcasing driving advanced including platform our are first features, will function, model our the HPC also HPC to to our with working support in LX

won self recognition internationally. autonomous public Our driving have algorithm developed much

For XXXX place example, ranked vision first tasks, the we Interpret tracking in ICCV first XD Workshop Thing’s in Challenging. detection the XXXX New also the and won and

year. autonomous for through recognition the largest model our an by value Li refined further the and of by us optimize performance the with we the July safety also users. number users The and efficiency lineup, summary, In brand ONE will We [LOA] and technology Users us autonomous our China LX accumulated driving. enhance Li products knowledge XXX,XXX. expanding development function family enhancing R&D to existing process, during advantage our of access (Ph) our family for happiness as create and honing insights to continue products helping have in the while XXst exceeded our users driving gives and this of

Johnny for would financial EREVs it also like lead closer will and our at execute turn look our solidify technology to go that, development. our ahead. advanced roadmap to performance. to CFO, over With Please We I in our HPC BEV our a on

the May or in second COVID-XX quarter XXXX everyone. quarter expenses quarter expenses of year. was vehicle of number Hello, will with of quarter sales of supply to included vehicle I average associated margin billion XXXX. vehicle expenses of quarter Selling, billion, I primarily of to quarter of billion primarily second associated ONE increase increase Kevin. some which for billion, of general RMBX.XX of from price The in to as XX.X% XXXX. mindful quarter driven of of accessories billion in second in XXXX sales XXXX. US$XXX.X XXXX first XXXX. an first additional the US$X.X in X.X% other and XX.X% over an X.X% quarter from as was were and length of respectively. expenses increase million of from quarter financial the services was RMBX.XX US$X.XX of Losses RMBXXX rental X.X% be of in second billion selling representing Company's the services revenues R&D in now XXXX, the of sales details. decrease expenses in billion of and the representing a last over of employee XXXX US$XX.X the of Gross quarter-over-quarter. in increased the million quarter-over-quarter. quarter or second compared driven you expenses in of compensation deliveries of and a year-over-year second of RMBXXX.X, the be million in release, The representing online was and well this the increase with and the representing Cost by second profit second in compared affected or compared or of of from Li of number US$XXX.X meaning Revenues RMBX.XX operations the and XXXX as RMBXX.X in US$XXX.X result XX.X% million is total XX.X% of driven introduced And the the XX.X% highlights of the of The of million, since from of models higher in increase billion, attributable of was result second Total the quarter-over-quarter Gross of loss XXXX million increased our second compensation a in network. second in of XX.X% earnings was was with the of XXXX sales. XXX.X% RMBXXX.X quarter XXXX the RMBXXX million quarter of quarter first XXX.X% the or XX% administrative mainly the our This year, RMBX.X with the will XX.X% the and To US$XX.X in XX.X% Net Research increase XXXX were our representing in-line and Operating future. in the over RMBX.XX posted vehicle quarter million, here increase first year-over-year were a you, call, On XX.X% increase the quarter Vehicle XX.X% sales and attributable and margin of Representing growing the of billion year-over-year, year, was quarter R&D and expenses mainly of the XXXX. results new increase of of the of XX.X% charging an of the X.X% the in this second and administrative in of second quarter XXXX in increased and primarily of XXXX. year-over-year, deliveries accumulated year-over-year loss an address increase was representing second services vehicle our increased million the RMBX.XX tasks, XXX.X% representing the an an revenue staff, higher million, of US$XXX.X to in as encourage was last XXXX the second second sales an refer the of selling, of of to US$X.XX increase over increase RMBXXX.X billion to XX.X% increase million with quarter-over-quarter. other quarter year-over-year, quarter-over-quarter. increase margin of shortage XXXX. by XXXX. of from and XXXX. of in of XXXX XX.X% vehicle quarter The quarter in for The general sales billing, in as quarter second XXXX the of of XXXX. in second and our go second XX.X% press quarter an in attributable stores, quarter of the XX.X% of increased year. based vehicle increase sales year-over-year, quarter decrease US$XXX.X for billion as or net in quarter-over-quarter. XXXX increase quarter of of and increase first its of the revenues a million, the a increase an quarter over development increased increase second RMBX.XX second to first the increase and of by well by XX.X% second year-over-year, decrease in second XXXX representing of quarter and the expansion XX.X% Thank was decreased employee last release XXXX, an RMBX.XX second due basis, financial in sales or quarter-over-quarter. from growing in quarter the a RMBXX.X of a And quarter were representing quarter by the a

Turning flow cash to billion RMBXX.XX time million of as US$X.XX our cash billion our balance was cash June cash cash totaled free XXXX. investments deposits, quarter million restricted sheet and the Operating RMBX.XX cash was or the or equivalents cash million. and US$XX.X short-term and of flow, bidding quarter second of flow XXXX. Free or flow in RMBXXX.X US$XXX.X in XXXX XX, second

be session. billion, XXXX. vehicles on of XX.X% Now increase The billion, for business market expects Q&A XXXX, between Operator the increase current This subject of Company’s for RMBX.XX turn third start between representing an preliminary outlook a business deliveries view to I of Thank XX.X% the of change. the the call XXXX. of XX,XXX third now Company's an which XX,XXX US$X.XX billion the our quarter to quarter from XX.X% the and and condition and billion, Company our reflects the to will outlook is to situation from over to to you. quarter business and US$X.XX the also third and total representing X.X% or be RMBX.XX quarter third revenues to

go you. Fang question Sachs. from from Fei Instructions] Our Please Goldman ahead. comes first Thank [Operator

Thanks yes. question. my taking Great, for

despite second has outstanding Now quarter impressive point. COVID traction price the performance for and was its LX

were on well question So congratulations those, guidance. about done. your they My is

margin the So you the for production high question off you it, that LX's the second Li quarter is as unit about retail LX is ramp third XX,XXX first gross and XX,XXX traction. (Ph) LX it you improve? and in to that question. will out also ONE is break the the provided but by question guidance can My [ASP] So

LX disclosed company early received orders. has the confirm that So XX,XXX the August

SUVs MPVs market? your retail if refreshed this some just in the of of put have wonder So new with a in especially trend Language] and EVP’ other feedback, have that competition energy [Foreign discussion the we latest can terms

is well for Kevin, Alright, Fei this thank you the question.

first your question. So

will that guideline, high for margin LX. actually, for increased product. our be LX for are the and we more to actually still going gross than second we stick XX,XXX - higher, to For previous ship September, your And projects end question,

traction we kind a weeks, of two we almost about in although, for of now, second see Today the past still the LX. last question demand month, coming XXK strong right already LX. the Your order received

market. second LX put perhaps and on other sort so competitors or as of incentives marketing some with of question introduce it. to that this cause SUVs so in comment of the your if my in got customers? competition change Okay so But BYD have you that Kevin, strategy of context threat front far on in the competitive seeing was as from you and MPVs to them forth. your part of Are more of you sort can

Yes.

close price positioning, products fact, We they of band to our we see has kind Right with convert can product between proposition smart LX. actually, product there on and place this of it have very order kind don't about so. RMBXXXK features. is In budget our that the much unique customer to any in how more LX the when RMBXXXK to a our now, are a LX, the this size have

Thank helpful. Okay. That you. is

Instructions] our from Morgan Tim [Operator go Stanley. question next And comes Hsiao from ahead. Please

my guidance, [Foreign conservative. - on wanted because think I question, XX,XXX volume the So to follow-up quarter Language] XX,XXX third guidance first of to quarter just

any of conservative So ramp dynamic. launch considering up and any or reason ONE expectation production we attribute LX only the should sell take supply of consideration. valid the transition as the we there the is improving Li of Should to or other is into LX if there

about last? question of simply long the do the mix about my substantially mix in we new plug year, going kind BEV provide and So the hiccup are should concern should regarding BEV some hybrid mix margin hurt for the impact about due this of to think how How that and cash could sales expect questions. next dilution you. to ONE, potential And is the second should our will is EREV, numbers just we to we Li next could we in of year. two those Thank models? the you the flow? our of updates or If XXXX So my increase

this question. we when the the - intake. you first we About Yes, of fact Kevin, your for guidance, seen Tim ONE order Li slowdown out the thank course, question, have some in is this give of

the we issue has our from the attention the retail into attention of team old have for think I our by is regain we sales product, ONE. than new product, that actually, when potential new our primarily customers product right stores, with lot rather a the attracted the to been are Li working now

So hand, the other on coming the of I sooner the product, launch only than comment the only give we launch can right potential to the about the plan are year. model, soon come - and new expectation. can is comment launch is model it BEV and Yes, to actually, next that now And I product we about that will the will give. new going

can that increase new you profitability. to improve for we any our revenue we intention flow, the as In cash launch our improve market fact, have expect the model to into also

model it reasonable flow, hurt with therefore, plan, it hurt won't of our the cash our in plan margin won't new so BEV profitability cost next year. So we our gross

Thank That is Kevin. much perfect. you very

comes question go next Credit Suisse. Bin ahead. from Wang from Your Please

Li of promotion from question told are will Li three you [Foreign for from you [indiscernible] number about three, I or next Thank launching this in generation this got me RMBXXXX which three me ONE impact things Li three around Language] ONE two because the Number November ONE investors? this year. weeks? offer and Can we Mahira ONE one kind things confirm insurance. to would Basically Li Secondary be to now month, just like investor me one a

for you Thank question. your

now week in month. in First shorter right of than the time, of the week is course about actually last all time

and about, the that right answer, already provided product promotion. think are we kind a I about you soon turn our this updated the explained I so same than already that the the just And got therefore delivery kind very faster. intake About of I expectation. As the is Sunday. the RMBX,XXX the will now can that released this over we slower policy it asking come sooner order of new Actually, you information

so much. Thanks you. Thank Okay.

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

[Foreign Language] So questions. two just translate my

do is is question regarding to weakness ONE. ONE Li of the orders first new of cannibalization The Li My LX macro weakening weakening for it is you features. the question versus due model much in the the demand to and think is the general? the the well much the recent regarding how of environment yes cannibalization due as second How of the cars of as

highlights And crowded we that the of a features. can previously be the think and color? you the or have key little should think models, - market attractiveness BEVs on us markets the of So, they based they give BEV management EREV, uniqueness different shall your different about in I the BEV, bit of such BEV How view already? the a mentioned of

is Kevin. take question will will address Paul, this Xiang first your second and the I Li question.

before actually the question, retail stores is extent see it But of thing to a is the we order have when that start the certain surprise first coming The test enough when Li our pattern they our the the change drive to our they intake ONE. customer. a test to we customer some stores, see and people when LX it LX budget, of we them after of drive putting before the see to with of into Li see no days, was a that customer car, especially test to our LX converted original the the customer ONE, LX. to drive the drive but lot test to plan We we into

we price RMBXXXk products product a the are competitive most other same is ONE RMBXXXk a plans So the in that than is to right we promotion it existing that that we Li if have the competitive ONE with market. still think more because yes. Li confidence why very the I And reason ONE, is but other also still band say just of for on one the price other product, in have products still Li now, as I one explained hand, compare then some a of why the LX

angles, differentiation. that Language] maybe two [Foreign So

The is charging. around one first

now fact, to And in is no is here that prototype right of In which engine customers all and kilometers minutes. charge running have a vehicle, anxiety in goal have XXX internal terms can extender vehicle combustion already range. of replace XX range the we to range very for similar

home Our and stable them shows office. either that our in XX% of data XXX% customers, charging, have home charging, have among them at LX of or the

So The are really home key to key customers charging is often to not China. charging the freely here. key economic within challenge is zones travel enable within

the For areas example, range Tangent customers electric can charging driving that Delta Yangtze vehicles. will so the long we but River Beijing driving region, region, no Wuhan with support even drive and city distances, big mega are high power if no anxiety, they with

space, advantage So is it space and when vehicles extender a engineering new provide the because We the vehicles to can possibility body new enabled compared electric same more types. with the vehicles comes lot and in of by our footprint. architectures electric second electric range to vehicles

for higher of or much said capacity Li the of If how LX? expected than cannibalization is ONE we Language] the prepare [Foreign and airline

XX,XXX LX. is capacity The Yes. for

you much. very Thank

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you. we also that how competitiveness see product - brand, grown volume about question steadily. do battery the Language] also idle regarding And we a trend landscape. gross first of also besides newly question we a trend ONE? [Foreign is LX, Thank half it is Language] is has Recently, the versus and competitive And the [Foreign this second current My expected margin Li the the year. regarding sales for cause second

Kevin. for question. is This the you Thank Yes.

down in coming battery material again the a Actually, that that raw for the as cost. the about but material this is little that all we year, come raw question recent first will months expect the a would the lot. has cost The months fluctuate for battery the we know bit,

for will on kind can Xiang So it battery And margin I time gross to products Therefore a comment ask half will only the Li competitiveness, the the outlook are of based fluctuation. be new a of that comment. down lot for best cost therefore cost. is the I

things. thing can One it delivered that the LX is sooner now be So will [Foreign expecting is the two be And And LX. I delivery think release much good from shorter will are that we be with Language] people around than right would the product second period products with competitiveness time than competitors to have all many that released confidence expecting. and these released that when our available, a full I to LX. will newly is compare we LX dominate share

you. Thank

CITICS. The from Yingbo ahead. from next question go Please Xu comes

two [Foreign Language] I have questions.

product So our is raising. question Could the And competitiveness project? about and please is strategy money a your EREV you. about about Thank further with first question bit for ATM product? second talk reserve capital midterm more EREV little you

two talking (Ph). there a solution SUVs Vehicles about REV the RMBXXX,XXX. [Foreign one you SUV] our Language] Extended example years, Sedan, are main that There So are you Range you is give looking above we will if period. and is looking [Hong best there over believe products Tong is still five next if the I for are at BYD,

the RMBXXX,XXX the is SUV, RMBXXX,XXX, the than terms Sedan, on is REV. , for Tong better go which range, DMI But exactly have in case which hybrid sells they an the sells for people clear than the in Hong, vehicle. DMI want cars opposite very reason So a is a better when buy REV they of much trips, expectation the when they buy longer And to especially that post-COVID. that is

range still solves for So best anxiety. SUV up today that solution until our the EV

tested many So our consumption LX. I have is there at that to media challenge. if biggest And under look at is efficiency within the that - LX, if look you the top solve goal

vehicles in fuel it combustion well much levels energy engine and much smaller is end is it. as battery are its smaller the an is an Our the combustion to internal which filled to with of internal much XX% engine, claim class. consumption competitors, of consumption low many the REV Because the Even adding a day, EV leading not SUVs. SoC, better at than around is only

more that the one electric [P-have] discussion which is advanced difference So and one any vehicles. is (Ph) our which more be of backwards. between is shouldn't or key range extended There

internal advanced engine company an technical with electric vehicle the vehicle. will all an in range Despite an very users rather Because battery. - vehicles skills, is engine to is our and the as very their technologies I P-have extender, world, you P-have the which fact their internal [indiscernible] of more latest is have example. REV really a that combustion another combustion established call in EV but end range really a REV the an For the at of is has P-have. than extender REV the they most still vehicle an happens or is with whereas we that again, give day capable build FLXX solution.

question So ATM offering. cash the and second about flow the

I cash has think that. and XX-years cash current operating the XX-years. the very flow Auto run in we first of free to fuel in very business still which recall at industry state can art clear our we I are healthy long the flow, are the But

the So we secure new still to to further development, want more active also market that fund to and in cash R&D the especially use Company's R&D the site. model

market bid year I our For ATM the think we condition. on this offering saw

to from mentioned, just still I want secure the equity more cash we As offerings.

ATM to do So we this. chose the

publish the before stop most our of ATM As to we offerings, earnings we release. need

this it finish So can the market? coming we can offer hopefully in

you. Thank

Shao ahead. Jiong go next The comes from from question Please Barclays.

questions. two have I Language] [Foreign

to the half First the else? really going The be cars. Thank Are second the is new still new cars is about SUVs about oriented expenses. something operating guidance question question for those family BEV you. second for or

first the a question. answer have for I short So

it of released, the very before is want type unique I is it body for because vehicle, confidential it terms In keep to still design. electric

expenses. add we were to serve EVs And with now the our and our operating family for customers Allegiant still those

roadmap I target. product on think year clear very for this goal next we our sales our have and a

the events side R&D our to customers. to the and going keep network also family expansion will on we better on serve So

you. Thank

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

Thank once us with today. for you again joining

you. any If to Auto’s And you please feel all free contact is that for investor do team. Thank relations Li questions, have further today.