XPeng (XPEV) 15 Nov 232023 Q3 Earnings call transcript

Hello, ladies and gentlemen. Thank you for standing by for the Third Quarter 2023 earnings conference call for XPeng Inc. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Mr. Alex Xie, Head of Investor Relations of the company. Alex. ahead, go Please

everyone, Call. to Hello, XXXX Third Earnings Conference and you. XPeng's welcome Quarter Thank

and Corporate Mr. Dr. results can financial and Xiaopeng; IR on and earnings Our Vice He today's operating release Zhang, section available management earlier newswire press will Jiaming at Vice of online Mr. today of services call our our -- ir.xpeng.com. Wu; visiting from Mr. we by Finance also team website Investment, include James the CEO, our were view the Finance issued Participants President President Vice and of and Charles Co-Founder, President, and Chairman Accounting; Chairman myself. by

and IR will website. call this conclude call conference will Q&A section be replay Management remarks, with on available of of with will begin our the the session. prepared a A webcast

XXXX. we contain will Reform provisions the today's U.S. continue, Private safe forward-looking statements of that please Litigation harbor Before under the of discussion Securities note made Act

and Forward-looking inherent statements risks involve uncertainties.

such, company Further information any may As as U.S. Exchange today. uncertainties and the risks other relevant applicable filings views these to is forward-looking The assume of Securities law. be from except and the any as with public the Commission. statements company materially in regarding does expressed the different not filed results included obligation and company's update required under

measures. as measures release well release the of conference press GAAP include call reconciliation unaudited as of non-GAAP XPeng's press GAAP this XPeng's measures and the also earnings financial that to a Please note the disclosure financial unaudited contains unaudited non-GAAP earnings unaudited measures.

ahead. He our Co-Founder, Xiaopeng. over now will Please and Chairman to I CEO, the call Mr. go turn

after to a and flow. manufacturing extremely of express deliver Therefore, to I It and difficult our cycle shareholders smart X and like of driving we car such would throughout image, for phase in into and the the I'm your report industry. in [Interpreted] efforts, support turnaround virtuous is the hi, Brent customers Today, cash patience entered pleased to my have quarters improvements sales everyone. initial transformation [indiscernible] to gratitude that free a journey.

with is no determine to technology. with replacement speeding ICE cars to of of massproduction business of the confident significantly above models. coverage great revolutionalizing models. level electrification ready automakers and in resilience growth and has opportunities the energy margin we're competition target throughout this considerable rapid we're growth creating intensified up notable market to the of the And And in and forward, ADAS average. China's improvement reached achieving shortcuts structure There gross The gain and is fourth nationwide whether that competition NAV. smart cost, the industry the is The on technology great new in a only vehicle high experience achievement customer smartification witnessed safety a of high quarter. industry increasingly share been ADAS Going inflection and of are and industry XXXX, have AI the to XXXX, point low in EVs reshape technical different transforming landscape. way is growth sales achieving across

the of During are our first testing XX we XNGP tech of XX, the maps unavailable. where day launched batch on high-definition cities October public in

year. expand of by coverage end XX to the our is to plan Our cities this

and customer country. XPeng ADAS leader that for demand believe and be AI customers throughout and in X a XPeng years its ADAS EV smart preferred ADAS has technology technology wherever surge adoption. in drive and use the the strongly brand Our will I the will they empower for been our next to will pioneer customers. the

the the range cockpit next-gen capabilities domain, to R&D assistant, models, and and large of including we'll full Next our integrate in smart brand-new systems, voice powertrain. unifi and language year, wide consolidate architecture in-house EE stack a NextGen ADAS chassis

to the integrating multiple organizational by I systems. Apart impacted deploy as to this other strengthening and technologies able the vehicles. be senior simultaneously magnitude market we'll EV have in our as the ADAS and will to different integration Making well between and such the brought a models to changes platforms crucial cars team quarters. risks near-term technology and management and have smart results. different road X result, edge global and market, made believe engineering smart our global we corporate of between and from for map our commitment changes various strategies, at products various a realize technologies, significantly structure, cars product rapidly As could our support over capabilities past enhance

and However, the not results. to affect Instead, XPeng did they short-term performance. our the endeavors team, us whole of better-than-expected deliver trust mutual thanks to these changes allowed

of quarter our representing exceeded third quarter-over-quarter. increase a deliveries XX% the XX,XXX, For XXXX, vehicle

Additionally, deliveries flow vehicle for we inflow. with over X cash quarter. in setting the achieved RMB in a positive billion cash of confident We're new record free fourth

Our million units. over -- target is XX,XXX sorry, X units

models traditional will is electric pure our NPV, wheel that with we architecture. flagship from SUV sales Guangzhou smart September, gross and bringing strong of the NPV new the price competitive not and industry-leading be perfectly engineering. that maps, technology XX. record-breaking to possible to in of In month a segment, marketing. any delivered in stands so, deliveries in doing differentiated the on introduce become and the superior and from XX,XXX XNGP, the early units design of will XXXX made the technology range vehicle base. In top-selling in This presell EV the as market. market XPeng on NPV the XX the our enabling We're among equipped advantages Moreover, price over XX vehicle are highly capabilities built the that been Show This X,XXX validation has XPeng the By PX. reduction January advancement of agile. models BEV cost broader top-selling with steering X.X we GX sales the X-seater the margin technical version. secured higher October, of original that GX, spot NPV to will we a its start Auto has rear segment. In maneuvering delivered combine XX the top and With found These success never a EV large thanks XPeng's model volume X,XXX start-ups quarter smart It on the radius electric XXX,XXX maneuvering October, XXXX. than XX rely more NPV RMB Regarding MPV we easier and we for making the a October, first market. effective to the showcase comes GX top not through announce was architecture. beginning and in and is In of launched achieved market. In the it MPV the a out of relevant vehicles SUVs excited to that X.X XXX,XXX RMB with SEPA similar addition over technologies much that high-definition during The product of with a X become we're again. We're electric customer launch on confident ability highly models a does and GX seller plan benchmark electric delivered. were our the space SEPA to turning SUV. standard on sales, a based configuration, the over the on GX create new November at in XX other XXXX, of technologies

and a growth mobility to accelerate intend Leveraging new greatly we with segment. DD, that the expand will China's market in brand A XXX,XXX our Additionally, EV brand leading platform, market. sales we our EV share price in the new believe introduce class partnership RMB technology this our

This track on beginning the quarter of to just model wider to that launch to We costs will committed driving a edge XXX,XXX the develop technology the we're an smart autonomous market currently is enable will to under our us allowing brand, This with XXXX. segment. reach EV in that Mona a a believe product in give the of the first models an exciting move at models third in the us segment journey, the under USD keeping and market boundaries of pushing this Ocean segment, RMB team audience Our over price mass XX,XXX. technology launch point date significant Mona, or Blue expected other is in and of control. both

investment first X quarters partners. President, top-tier Tier during X more project, Min, cooperation been this new dealer significant year stores a it of X making network, cover meeting XXX vehicles. expanding luxury to and specializing Tier Wang program the over sales Our our to recruit We and for competent more established the Jupiter has within in months Ms. more low-performing secured efficient, and X closed overhaul stores faster Song We XXX with groups launched cities. flexible and franchisee almost a

the XXX These and openings most store new our As into sales end sales we and year of we're to of early our and drivers X growth in accelerating become upgrades beyond. or expansions, the by XXXX important network innovations of goal year. next for reach the quarter, fourth marketing, with the will coupled expanding head [indiscernible] and rapid stores

comprehensive clarify opportunity [indiscernible]. cooperation with We strategic Volkswagen's helped detailed September, our in which the Volkswagen in late discussion senior the had I strategic partnership, regarding had headquarters During the long-term for visit to a our blueprint management Mr. Group's and technology. Bloom

strategic which also we're deeper reduction corporation swing. on cost strategic results year. is the progressing effectively, the and meaningful expect We in models in explored Currently, chain platform, developing is international market. GX opportunities full jointly the generate in based also to The supply supply cooperation in the chain in next the we

reach exceed learn the and the XX% in the end entire in given marketing by practice enhance gross reduction accelerating margin cost next cost we To The has XXXX industry. control, year. to OEMs design, me of of reduction or from of will which process progress best profit of confidence the in manufacturing even cost goal our and of increase the progress it, significantly the the R&D

Let's margin, expect look important term. is flow quarter. of us new long positive significant free had in cash RMB in at technology-driven of achieve quarter at our With approximately X cost in our during reduction, We stronger same flow. flow cash the a in products billion end gross the the XXXX, the quarter. profitability at to even scale we RMB we an cash in This to billion in positive see for resulting fourth improvement milestone XX.X cash and over generated third the and the

between ahead, deliveries be XX.X% with our growth we're to of a units of quarter projecting the total in XX.X%. and XX,XXX to fourth rate Looking XXXX, quarter-over-quarter XX,XXX vehicle

and revenue period. We be billion XX.X XX.X expect between this during to billion our RMB RMB

believe We and are XXXX our to more which in scale strategy, organization we committed expand to XXXX. accelerate implementing enable produce will from will favorable beyond. our the transformation and This, of results fourth growth us turn, in and primarily in marketing our quarter

technologies, EV smart to on our and is capitalize market improve from arising aim our in share. opportunities dominant Our a organizational growth efficiency leadership gain

VP is the I'll financial EV ultimate over top XPeng establish XXXX XXXX. Thank you, the to Finance, James discuss now Our -- XXXX. with call goal to to everyone. the turn our as of of by our quarter smart company that, for third And Mr. performance Wu by

Thank Xiaopeng. you,

our brief for quarter provide today, only otherwise reference to a of like overview I'd Now unless third of I'll my discussion XXXX. stated. financial RMB results in the

of of Our quarter in of an XXXX, of increase XX.X% attributable third sales total GX XX.X% The were sales Revenues from accelerating were revenues quarter-over-quarter and of an year-over-year the to third an of the billion quarter third year-over-year RMB of quarter-over-quarter. X.XX quarter-over-quarter. year-over-year X.XX RMB and of for mainly increases increase increase XX% the growth for were vehicle quarter and the the billion representing an XXXX. increase XXXX, XX.X%

margin second of for period the same quarter and compared the XX.X% negative XXXX for for XXXX. third of with XXXX was X.X% negative the Gross of quarter X.X%

attributable impact this gross as prior in negative to we the margin end would been production, the quarter. breakeven Excluding of quarter, described have GXi the the for

primarily with the quarter RMB life its compared cost to increased secondly, promotions and the The margin to impact billion in attributable percentage was and new for vehicle production of in vehicle inventory to with Moto period margin; same of as year-over-year a XXXX, the quarter-over-quarter GXi The the negative XX.X% points energy subsidies. related amounting decrease the second mix of negative explained on X.X% X.X% of third reduction. improvement quarter battery by: and the expiry write-downs cycle, negative our rest the Vehicle was for the we finish the X.X increase product of first, XXXX. X.XX for was of and XXXX sales

quarter and progress third timing and a the for billion programs. the and vehicle X.XX a year-over-year RMB were expenses of development representing R&D decrease XX.X% of new mainly XXXX, quarter-over-quarter quarter-over-quarter. were in decrease X.X% The of decreases with line of year-over-year

of year-over-year quarter franchise primarily third an commissions paid quarter-over-quarter the increase increases for billion higher The attributable stores. to X% to year-over-year representing X.XX XXXX, and RMB an were expenses SG&A the were X.X% of and of increase quarter-over-quarter. our

quarter. of through for with company entered billion into As value with of XX, X.XX quarter of loss the up the our billion ADS. share measured quarter a purchase On to July third and billion foregoing, profit period the result per of and Until value operations loss the RMB RMB loss RMB X.XX Volkswagen RMB liability from the an XXXX. in company's third quarter Fair this to the XX transaction loss were the ordinary price for a forward X.XX second in fluctuations of billion resulting of agreement for of for RMB Group closes, for XXXX, X.XX derivative the for purchase same was on a fair XXXX X.XX% shares compared noncash were issue our X.XX XXXX, of billion XXXX. USD agreement of fixed

third net RMB excludes was loss, loss X.XX which for with for on billion the fair period X.XX compensation the and second the billion XXXX XXXX, second same of XXXX share-based X.X XXXX. period billion of of was billion third XXXX. RMB billion with the of RMB RMB Net compared Non-GAAP for the and expenses for XXXX loss RMB and of quarter quarter X.XX quarter same quarter X.XX for derivative billion liability, of for RMB compared value X.XX

cash total driver company RMB short-term and cash higher cash main had XX.XX As The This the Operator, encourage our and refer earnings To equivalents, more of of to be September results. investments in our Xiaopeng balance. We'll to I listeners call, details billion. XX, flow of as was our go concludes QX, questions. XXXX, quarter mindful line free earlier, would in financial deposits the open cash, third mentioned time of length positive restricted earnings our our ahead. prepared cash quarter-over-quarter remarks. the on our for press to please release now for

[Operator Tim with Instructions] Hsiao Your from first comes question Stanley. Morgan

is competition. first So question Language] about my [Foreign the

ecosystem, That's channel my such we As have players cross [indiscernible] and the difficult are like that advantages remain the carmakers We noticed versus a to replicate. company XPeng quite companies division following up that as of shortcomings How the tech Xiaomi for Huawei makers. take well question. in noticed the there that more for companies would challenging make as quarters? first

you Thank question. for is [Interpreted] your This much Xiaopeng. so

very I question, by and question. for started mean my question your thinking I in in Now on my not but easy question good invest always this And past XPeng. of like went been company. I'd Internet then the a of is first an an experience. to reviewing start path has a years also, I experience. international many entrepreneurly to with

ways lot in you an business, give are When the there I in me and net Internet was different saw Let we a example. mobile to landscape. competition, of that compete

of with lot to actually a on aspects. or a traffic, you the relying in or the different media For lot in good lack saw the capabilities And that way not sectors. different ecosystem And that turn players realize make of a is abilities there different or shortcomings and problem has crossover in are acquiring different different PLA up traffic people that traffic transferable. is that that is to you from example, for the of

the cetera. an traditional so -- audience Audience example. not you phones, rely watching give on Let TV, same me from may mobile be traditional heavily who et

own lot are enter new a from sector. players capabilities you different And leads to across different domain ecosystem also of tried right actually or who competitions so failures. lot seeing their But a using a that actually of sectors to now,

from also players industry lot see the and you from Internet real well. example, tech of the the companies as estate, a smartphone and For

So other when really our we ourselves we to sectors, capability. to from compare down have against players internal these come

to example. have at our for look strength, as what have We we

well manufacturing as We are as our strong capability very chain very with as strong and our also capability AI We're technology. the well. supply with

really focus partnerships. already different ourselves that So we and and the we differentiate have crowd using on actually from stand help is to us what expand out can what

been started in been vehicle we've for -- we format. expand other our different investing by, example, committed to example, our ecosystem actually For have very

and We have cetera. cars, flying invested in our robotics et technology

have our And with with also technology, global expansion et supply sales chain future also well. and and foundation our announced for services also in in announced to partnership August, DD, We A-class share including Volkswagen marketing expand aftersales also aspects, build to robotaxi, vehicle as different partnership in and in cetera. a mobility platform, tech segment the our leading market our the we

shortcoming we to strengthen a foundation of and already up as capabilities we just some on core examples different our our can in by through have, try building carmaker. of make how we competency, And combining that the partnership, the our that the Now manufacturing is these overall for are technology which strong ecosystem. this believe we actually our capability

[Foreign Language] the targets the design et cetera. I question cost So in about pricing the production second power the think because as cut as earlier call, company efficiency, XXXX the XX% by to my and company optimizes mentioned is

However, quite days test pricing very the power, to carmakers be these the of without lot strategies the outsource their passively. likely depleted and like and constant of just price pricing cost enhancing the might respond by benefit BYD savings especially a cutting, on still

pricing That's my So how power into does second XPeng its reduction plan on the top question. cost to strengthen of XXXX?

in very, pricing in I to bargaining term, all, opinion And become the [Interpreted] and Apple strong is First we that with of power definitely power pricing has automaking, the very long power. want your agree very important. which

other affect cost the same now, is One well in Definitely, scale, sales really As can and that by of And OEM, cost several strengthening as the way well branding our differentiation. as capability are and pricing overall actually around believe our that all, the the aspects well. very it's to also there an well reshaping as that is important the process as and capability brand we value as our we are customer that differentiation. of we right It image a our scale as is the other power. brand. control our as our carmaker, important of our contributing is build

advocate [indiscernible] Ms. innovation. and a is somatic big also President, Our internal on

as our pricing So cost, will commitment into second XXXX the we controlling gain sales in power. going as effort differentiation brand and well in and order XXXX, volume, to building bigger going continue up our forward, and our our our

with Ming-Hsun comes Your next Bank of question Lee America. from

[Foreign Ms. stores is continuing. after Language] sales the XPeng, So Wang joined channels reforming

you So on do target your And the reform? your besides to we -- long-term have regarding progress also evaluate dealership have any about metrics direct sales and to any percentage? that, channel do

[Interpreted] Thank your for you question.

costs, Now I from She background you Changhong, leading our Wang. little address she about wall, developing President, Ms. by giving OEM, Great been has of company. the in a would controlling channels overhaul this information to and excellent like comes bit of traditional innovative systematic also and

which to mean into to XXXX. So months our the in of phone dynamics quarter stores XXXX channel of the first for QX, she's And mean, franchisees, control or we of currently having what all together different of we channel kinds observing of of going the -- cell I have. future joined cater stores to had have in time coming -- past spent We our but already we innovation few to total a hybrid will -- our the this I have company, all that used or going QX reform, lot changes actually she of set a channels. with for some the pricing into strategy

market cities our to launch Tier going about, that XXXX. we market cover more We X, environment also and we're Tier also consideration into cities And X, well. take expansion example, X future the future just Tier Tier models are but talking X not also as for competition, significantly to in

to franchise as the in to to long plan aim but we well. services stores only better X,XXX of we plan at us in long term, going the more least across our So doing that have us the to open can sales mid- mid- provide capable services our can And centers network to least new of X that to we allow that a have not customers. sales, term, also help to XXX service total And at extensively. to expand into country QX, stores

and because to build experience, we of And so of modes. for XXXX, will stores stores of a are year see in sales, time and XXX in QX growth of that to up allow their well the could in different a new can capability more as also time to over the going going and takes that cities sales it growth total those see those we're time by regions. be us deliveries in so areas because build stores and have we and the our next end QX And when believe to time, of the actually deliveries lot we lower-tier and China in

we very of terms In equip and service wide the of them the their different terms can of of can a performance to things our as control, them qualities aspects, and we control, stores with remain control in and procedures, well. strong do tools, range the more of maintain going control of and the pricing NPS, lot evaluate empower we to those and we the a strong will of are different we stores price extent can including from

of believe growth it we improvement And stores, expect there. for there see very a is XXXX, agree lot the by in I terms for our of a see important we efficiencies efficiencies Because we stores. of store. of of in of Now uptake keep the the still the with performance that efficiencies And huge of we overall the improving room our that terms currently, you. to

business. my is to So question Language] related [Foreign second export

few of a shipped market. also cars to you thousands overseas October, in So

will you locally? the build select you to or you overseas models the current do on product regarding will few operated that consider you you for will more think overseas will So or And stores models market? direct more in portfolio, a your future, distributors all export rely the

Asia Southeast plan for any have market? you do Lastly,

Brian. it's Ming,

Let me address question. your

of currently correct expansion, hybrid international countries. we the Regarding that the in sort model employ Nordic you're

as we're collaborative to more agents partnership use well direct own as for either going have stores We using to But and specific agents. markets. model going distributors probably opt partnership our or forward, of a

that's going be mix to towards shift more partnership-oriented probably will So model. the the likely

terms Europe currently you starting saw for there in have products In already. of that PXi we markets, international and currently GX

launching will product global as a GX next year. be We

I So would it's international of design that only say product subset for not approve use, our the and will all products. we

And So mentioned ones for plans the year I products we global markets. for the currently also, are decided well. we as have that right-hand driving models next

the For be GX plan roll the example, by right-hand end first year, likely of model on our to out we next driving based to model.

with we'd Asia that, able market. Southeast So be to tackle

other So and also our be we'll as well. right-hand be driving in at definitely that sight, looking markets model would

Your next comes from Hou Tina Goldman with question Sachs.

regarding question So our first sales Language] my volume. [Foreign is

to sales quarter that be volume. flat according fourth and guidance, seems December So our versus it will November volume October the

in specific conservative? just there we've industry? is here? any the trends So being observed wondering Are that we what just reason Or the is

the then is margin. regarding And second gross question

of impairment in the excluding vehicle gross 'XX. third GX, mentioned, the management So breakeven loss quarter was margin

vehicles the So XX,XXX time the margin was quarter XX.X%. of was actually then, XXXX. in back of over vehicle fourth we And then last gross the units delivered

the in gross what differential margin? wondering just is So leading to

for the And even Obviously, pretty year, that, next actually X on this because margin ASP of we're ahead to gross see this that management into margin year, then gross reduction expectation -- average track, an how by see know also quarters we expecting related much we year our a declined are X% is progress. factor But decline the that enhancement. year-over-year. we this great price mentioned cost to

So of guidance? year terms margin how much are factoring next the in into of competition gross in we

Brian. is this Tina, So

this reflect reach your months. average first the quarter, us confidence of of it's the Let important very for made me question. our a XX,XXX The on progress think in milestone per think, first XX,XXX recent to answer month. I guidance we've We actually

macroeconomic would that well very, we important as is, quarter. milestone this backdrop think, giving competition this the considering by I also we're So is also fourth facing say, I in And for us. as are a the guidance,

well very have of at are the because target reflective is this our guidance I We But we've a the market also with this the think as obviously, we as momentum hope we realistic backlog confident intake. in seen and us. the that for order moment, the is already

I'll process hand comments. to James the now And over for growth

to reduction we from, Yes, a mentioned, as the margin the earlier, we perspective, removed the And you this impact on in will quarter. this first subsidy in -- a secondly, from EOP compare if And gross year-over-year perspective. GX have impact Tina. has energy impact new the is -- GX margin this the basis, came talked vehicle as our about booked even we From as obviously an of all, XXXX, margin going EOP the well. final And into be been on from market. that has that

trying to for the as we are -- You been throughout journey. did well improve I mention our dynamic market competitiveness as product ASP has reduced over time. our well we've believe this that's product overall a because

a great version in older Xiaopeng profitability gross our of see margin product higher mix This in Hopefully, improve we GX us launched our question. factor we particularly gross proving as GX. that the will margin meantime, improve profit And XXXX, become our to your proving new is we than we margin In to to fourth drive believe, quarter. the is X as that continue answers of mentioned, vehicle our as point QX in is products. expect meaningfully, actually a we for our do positive, the

I Language] follow-up. a quick very just have [Foreign

the which reduction models cost can the from benefit cost the are that reduction, technology, of improvement terms in cost reduction? So

of the models top-selling we our advancement. more we up But [Interpreted] benefit will technology models, are reduction. into effort have driving among All going the driven that to the cost reduction by put cost

comes Paul question Your UBS. next Gong from with

my lower. And sold not the generally it's our brand how stores at regarding but than is So also be differentiate Is question going I should be Mona understand simultaneously? really brand. of brands, to of pricing much is to Language] first the positioning point the too the brands? we main our lower [Foreign current available X Mona positioning the

for information regarding of more Mona preparing next spending separate [Interpreted] and actively I -- going or right about channels One lineups. after-sale XXXX. that positioning, I talk can now, I channels is XPeng next terms this to year. going We'll that to are address Mona to Mona going brand channels mean disclose from our apart sell thing it's We are launch in services. current with the of there's separate can And have for definitely share we to new -- year,

think between comments, business model regarding global is globalization So footprint my of Language] have leverage the to and that [indiscernible] reach? terms Would market? with global the and going earlier Volkswagen OEMs, you products your second [Foreign discussed Chinese question global the the [indiscernible] in do your accelerate global How you regarding with market. market

Paul, is the I here. will this address question. Charles

of is chain are Volkswagen and efficiently. X the partner, first also And joint based the has think the platform to been on on very model initiatives capabilities. soon. all, international our manufacturing think footprint think going think of strategic GX global a achieve the going on exploring milestone that I has And think market for really -- development I are the we Volkswagen. I collaboration supply we And -- I I with we're our

comment also can and partner Thank wouldn't lot you. leverage same strengths company's the We I think from learn there's international other's we model. other market. a areas in each of our on collaboration

Your with Securities. Citic next Wu from question Pingyue comes

the cars we how demand strengths markets. our How -- [Foreign utilize for the to markets? my lower-tier of sell the do lower-tier think in question And first those in we cities? Language] is So do about

this year? on? development second total for What [Foreign about is will And question like be amount Language] will research XXXX. the -- My will and increase money spent R&D next the where

[Interpreted] first question. your Let me address

the as going are our in those And channels we for Tier right now, X what well, future we market -- other X offering markets. including city we're the lower-tier product now well. specific driving we customers. what not a disclose I And ADAS reform offer going position audience standard distribution to lower-tier say capabilities the meet Tier to Mona much cities demand right and our we lower-tier lineups lineup, technology a our And to mean, to -- new to can by for top-notch also products. configurations information, cities' in and that are all Regarding are I can autonomous capability as to aim but I is those as to going see too way

a expenses, been the quarters, lot year to thought R&D the in lot in we've fee. and of starting putting actually second this actually, question our R&D past your X in we've of Regarding the on done a beginning reduce from --

also have of several advocating me overhaul first rationale module-based is put examples. started that X.X. everything organization, we on you designed this to the expenses. in did thing And When allow us our Let been same the R&D cut architecture SEPA give we restructuring the we to the

put [indiscernible] We expenses their our expenses also encouraged asked overall R&D suppliers front. on our and R&D reduce the to into have actually to the

overall parts R&D thing and that last so we that allow cut to we even another that can mutual our can integration tools systematic that compatibility R&D The thing our -- more did expenses further. actually different says team of equip was be with and better

we to into are capabilities. actually several going strengthen So XXXX, going

The overall first our [indiscernible]. X design is

in which also also critical will our strengthen manufacturing. We is craftsmanship,

to development smartification our our to for our also international R&D the long-term put long-term I continue also will intelligence for and the -- in mean, of to do globalization we R&D products. strengthen prepare capability. in And will improve some well. as strategy -- our the We'll market efforts also We our improvement for

it's in year. of R&D absolute this going our So XXXX, terms value higher of than expenses be to the in definitely

CICC. Chang The with next question comes from Jing

regards only factor This become few question the will next we is in autonomous the which X Okay. Language] key to years. [Foreign believe my driving,

to practice the competitive very a the we So will maybe cooperate that X seen years, next it to companies quickly have be the with do many be to Will it or take chosen We other of much in of automating to industry? see see dirving. OEMs X time? reship in autonomous landscape to how expect traditional also longer the

So research? in of contrast, can details you advantages share our some our of in-house

you This your Xiaopeng. Thank for [Interpreted] question. is

it similar to terms in will adoption era development for development. very And rapid the this experience. future, rapid from whole optimistic rate wider see be stage the more -- in in Because are back years actually [indiscernible] huge we're of in cultivating in are more warming are new we of It's penetration X we vehicles usher very to the the saw think I ADAS where this are the we the in in see XXXX. uptick rate new industry development more improvement. upcoming adoption. the as first definitely going upcoming to XXXX participants think, an XXXX, to And market terms us seeing of of embracing technology of stage a in this penetration era who and willing to in that technology get that for to optimistic and ADAS We remember helping very excited educate of well. of also there the I the are right about industry ready technology energy and And back adoption, now, the the for younger who exciting market. technology that I more in all, new adoption the up still to a we readiness are audience try are ADAS customers we're

of advantages in-house still having control technology regarding of the a customer safety we have X technology, though the well. the And examples as full of I also I even to the can wider cell strengths name this second thing few, development affordability our that or mean, a in capability, both localization, you. there's them. production. are is give a the seeing long that cost stack strength Now trying of and is they of want list experience to embrace R&D of are Because just terms base in

cost to can And stack us having advantage that it capability and development control allow us well. technology to is their timely the that very allow another as full of definitely upcoming embrace cutting-edge better. So capability having good

the as year, that and not new having technology without of struggling in adopt is to who stack our capability, actually be of emergence models full application that capability peers past would example, which For domain we end-to-end the and us allow R&D well. full lot do technology, large this possible saw application of new this of language are happening with a

And capability very or have, more coupling capability. EE domain, to another [indiscernible] tighter for to tighter R&D car would voice to AI ADAS like and we we next-gen make that with unified with point need actually good architecture, assistant manufacturing the example, And seeing I more integration the embrace proud we and that lot that and this are technology is just tighter to our actually of coupling with And but level, AI of that well. a technology. currently and on hardware we thanks that, AI are hardware doing together the as stack very not with capability. software also capable are R&D full And requires

And question last the is Lai JPMorgan. Nick coming from with

product brand also point content? the [indiscernible] guidance territory. XXX,XXX. At under with and call, in likely the I new the equipped the results be indicate reconcile quarter same the sedan positively turn margin Language]. recall that product are the that which And high-end do we the with will How of still in also at [indiscernible]? time, the launching still will so will with second [Foreign vehicle more we pricing XQ equip Is may A to same the ended new competition about segment segment Mona RMB advanced is a low-end much product. time,

James. is This Nick. Thanks,

So I'll by questions X answer your one.

turn see QX. reconfirm, of will cost to by of QX mentioned battery QX. fourth in that as reduction some we through this margin all, confirm end better And compared earlier, the a question. I of we came our bolstered is products And positive believe do to did towards quarter vehicle mix of your level First to

for cost coming and over full barring better quarter time. we'll a QX, reduction stable through the So of lithium see prices

to our XXXX, meaningfully a even earlier. cost or more we on as reduction versus continued cost full basis. improved Going also gross into year And margin expect mentioned our XX% do bolstered by targets, achieve Xiaopeng is our be XXXX this reduction to

next gross will better have point GX, I'm highest the year for portfolio. this the highest sorry, -- XX example, launch, be as at product amongst which product We mix will XX, in we margin our

our obviously, well. the we'll we'll have products new better coming platform year, SEPA -- from X.X next And margin be as

a see And very question competitive we expect great related perspective improve of benefit achieve cost cost from the us to we you're And first we've allocation, lastly, our our company which good is cost from to scale. more targeting a A has and expense lastly, It help second segment, Mona the Mona scale, Mona on sales will as do seen a controlled a will associated margin. scale correct. your the therefore, because and entire all, to of the all, Mona, do of control and perspective. process, but planning very sales

Thank not terms should you. bottom be it from drag So profitability. perspective line of a a in

the As call I'd there to back questions further remarks. for the to now, company turn no are over like closing

once today. us for Thank again you joining

Communications. please contact on questions, Axon's contact further to feel the Investor have our Relations you Pearson website through If information or provided free the Financial

concludes call. This today's conference

now Thank may lines. your You disconnect you.