蔚來 (NIO) 2022 Q2 法說會逐字稿

Hello, ladies and gentlemen. Thank you for standing by and welcome to the NIO Inc second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. Please note today's conference call is being recorded. There will be a presentation, followed by a question and answer session. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad.

I'd now like to hand the conference over to Ms. Eve Tang from Capital Markets. Please go ahead, Eve.

Good morning and good evening, everyone. Welcome to NIO's second quarter 2022 earnings conference call. The Company's financial and operating results were published in the press release earlier today and are posted at the Company's IR website.

On today's call, we have Mr. William Li, Founder, Chairman of the Board, and Chief Executive Officer; Mr. Stephen Feng, Chief Financial Officer; and Mr. Stanley Qu, Senior VP of Finance; and Ms. Jade Wei, VP of Capital Markets.

Before we continue, please be kindly reminded that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the Company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in recent filings of the Company with the U.S. Securities and Exchange Commission, the Stock Exchange of Hong Kong Limited and the Singapore Exchange Securities Trading Limited. The Company does not assume any obligation to update any for statements, except as required under applicable law.

Please also note that NIO's earnings press release and this conference call include discussions of unaudited GAAP financial information, as well as unaudited non-GAAP financial information. Please refer to NIO's press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures.

With that, I will now turn the call over to our CEO, Mr. William Li. William. Please go ahead.

(Interpreted) Hello, everyone. Thank you for joining NIO's Q2 2022 earnings call. NIO delivered a total of 25,059 vehicles in Q2 2022, representing a 14.4% increase year over year. In July and August 2022 NIO delivered 10,052 and 10,677 vehicles respectively, marking increases 26.7% and 81.6% year over year.

During this period, the Company's vehicle production and delivery were faced with challenges from the COVID-19 pandemic, extreme weather conditions and supply chain uncertainties. We will work closely with our supply chain partners to further accelerate the production and delivery of our vehicles.

Benefiting from the continued demand for premium electric vehicles, and NIO's outstanding products and service competitiveness, we believe the vehicle deliveries will win its robust growth in the second half of 2022 with the delivery and production ramp-up of ET7, ES7 and ET5, based on the NT2 platform and the upgraded 2022 ES8, ES6 and ET6. We expect the total delivery in the third quarter of 2022 to be between 31,000 to 33,000 units.

In terms of financial performance, despite the significant increase in battery cost in Q2, the vehicle gross margin reached 16.7%, contributed by the deliveries of ET7 with high specifications, part of the orders with adjusted prices and refined management of sales policies.

Next, I would like to share some recent key highlights of our R&D and operations. As NIO's first products are based on the NT2 platform, the ET7 has demonstrated strong product competitiveness in the mid-large premium sedan segment with its industry-leading software and hardware platforms, and the smart digital experience.

On 15 June, NIO launched the ES7 of a mid-large five-seater SUV. Based on the NT2 platform, inheriting NIO's high-performance DNA, the ES7 boast ultimate driving and handling and the safety performance, creating comfort and the intelligent experiences beyond expectations. In addition, ES7 offers an elective tow bar as an option, enabling a new auto experience with a towed touring caravan.

Since the start of user test drive, in August, the ES7 has been well received in the market, and kicked off deliveries at scale, starting from 28 August.

We have also launched the 2022 ES8, ES6 and EC6, fitted with new digital system Alder, which comprehensively enhanced the perception unit and computing power. The three products offer richer digital cockpit experience and have strengthened their competitiveness in the market.

The mass production [incorporation] of the ET5, a mid-size smart electric sedan based on NT2, is also in full swing, while its performance and configuration have been further optimized and enhanced, compared with those at the time of the product launch.

With pure and progressive designs, ultimate performance and outstanding intelligent experience, the comprehensive competitiveness of the ET5 far surpasses the peers in the same segment. We are confident that ET5 will become one of the most popular mid-sized premium sedans. The production order confirmation of ET5 will start from 9 September, and the first batch will be delivered to users on 30 September.

With regards to digital systems, we released the Banyan 1.1.0, based on NT2 in August, with over 60 new features and optimizations. In terms of the digital cockpit and the driving experience, this aspect has introduced more modes under the parking scenario, diversified the audio and video experience in the cabin and further optimized the suspension comfort and the vehicle handling.

In aspects of the advanced driver assistance system, we have further upgraded the environment simulation display and automatic emergency braking, which has the enhanced the interaction experience and the driving safety for the users.

As for production, we rolled the first batch of the ET5 preproduction vehicles off the production lines at NIO's Factory 2 and NIO Parts, and we plan to start the mass production this month.

With regards to sales and service network, we now have 395 new houses and new spaces in 149 cities across the globe and 263 new service centers and delivery centers, covering 151 cities in the world.

In terms of the charging and swapping networks, we have built an expressway power swapping network, covering five vertical and three horizontal expressways and four metropolitan areas in China. We have installed 1094 power swap stations, including 285 situated by the expressways, and completed over 12 million battery swaps for the users.

At the same time, we have deployed 1873 power charger stations, including 5341 power chargers and 5466 destination chargers, and connected with more than 560,000 third party chargers, offering over 860,000 times of [inaudible] power services.

NIO is dedicated to putting in place a power system with chargeable, swapable and upgradable experiences, making the recharging experience better than refueling. To this end, we have been making continuous investments with a vertical and horizontal network across the country and a hub and a spoke layout in the metropolitan areas. We aim to bring a more convenient and joyful travel experience for the users.

Our charge stations are not only efficient recharging facilities, but also serve as virtual power plants. During this summer, we responded to power break peak [shavings] in different cities, well over 100 stations. In the meantime, up to 60% of the stations are regularly involved in the off-peak charging by increasing the electricity consumption in off peak hours.

To support energy saving and emissions reduction, new power swap stations will continue to support power grid demand response and off-peak charging in more regions.

As for the global markets, with the NIO ET7 being shipped to Europe in August, the order placement and user delivery of our new products will take place in Germany, the Netherlands, Denmark and Norway this year.

On August 28 Hefei was chosen by our user community as the host city for NIO Day 2022 and the preparations for the event have been officially kicked off. We look forward to sharing with you our latest progress regarding our products and the core technologies at that time.

As a player in the smart electric vehicle industry, NIO has been devoted to practicing corporate social responsibility and supporting global sustainable development. Since the very beginning of our establishment, NIO has been endorsing the Formula Student Electric China and starting from last year, we began to endorse the Formula Student Autonomous China, FSAC.

In August this year, NIO officially became a partner of the Formula Student Germany. We would like to contribute to the development of young talent in the global automotive industry by supporting these events.

On August 15, NIO officially entered into a partnership with the United Nations Development Program, UNDP, as a partner of the Clean Parks platform. The UNDP will conduct in-depth collaborations with NIO in areas such as the environmental protection of protected areas and the natural reserves and supporting social entrepreneurship to encourage young innovators to explore business solutions to advance biodiversity conservation and ecological protection.

The second half of 2022 will be a critical period for the delivery and production ramp-up of multiple new products of NIO which will present huge pressure on the supply chain production, delivery and services. The teams will work closely with our partners to improve system efficiency, accelerate the mass production and the delivery of our vehicles and ensure high quality product and service experience.

As always, thank you for your support. With that, I will now turn the call over to Steven to provide the financial details for the second quarter. Over to you, Steven.

Thank you, William. I will now go over our key financial results for second quarter of 2022, and to be mindful of length of this call, I will reference to only domestic cash today. I encourage listeners to refer to our [audience] press release, which is posted online, for additional details.

Our total revenues in second quarter was RMB10.3 billion, representing an increase of 21.8% year over year and 3.9% quarter over quarter. Our total revenues are made of two parts, vehicle sales and other sales.

Vehicle sales in the second quarter was RMB9.6 billion, representing an increase of 21% year over year and 3.5% quarter over quarter. The increase in vehicle sales year over year was mainly attributed to higher deliveries. Increase in vehicle sales quarter over quarter was mainly driven by higher average selling price.

Other sales in the second quarter was RMB0.7 billion, representing an increase of 34.6% year over year and 8.2% quarter over quarter. The increase in other sales year over year was mainly attributed to the increased revenue derived from auto financing services, sales of service and energy packages, and sales of used cars. The increase in other sales over the first quarter of 2022 was mainly attributed to the increased revenue derived from sales of used car and auto financing services.

Gross margin in the second quarter of 2022 was 13.0% compared with 18.6% in the second quarter of 2021 and 14.6% in the first quarter of 2022. The decrease of gross margin year over year was attributed to the decrease of vehicle margin and the reduction in other sales margin resulting from expanded investment in power and service network. The decrease of gross margin quarter over quarter was mainly attributed to the decrease of vehicle margin.

More specifically, vehicle margin in the second quarter was 16.7% compared with 20.3% in the second quarter of 2021 and 18.1% in the first quarter of 2022. The decrease of vehicle margin year over year and quarter over quarter was mainly attributed to the increased battery cost per unit, which was partially offset by favorable changes in sales mix of the ET7.

R&D expenses in second quarter was RMB2.1 billion, representing an increase of 143.2% year over year and 22% quarter over quarter. Increase in R&D expenses year over year and quarter over quarter was mainly attributed to the increased personnel costs in research and development functions, as well as the incremental design and development costs for new products and technologies.

SG&A expenses in second quarter was RMB2.3 billion, representing an increase of 50.4% (sic -- see press release, "52.4%") year over year and 13.3% quarter over quarter. The increase in SG&A expenses year over year was primarily due to the increase in personnel costs and costs related to sales and service network expansion.

The increase in SG&A expenses quarter over quarter was mainly attributed to the increase in personnel costs and increase in marketing and promotional expenses, including expenses related to launch of ES7.

Loss from operations in second quarter was RMB2.8 billion, representing an increase of 272.8% year over year and 30% quarter over quarter. Net loss in the second quarter was RMB2.8 billion, representing an increase of 369.6% year over year and 54.7% quarter over quarter. Net loss attributable to NIO's ordinary shareholders in the second quarter was RMB2.7 billion, representing an increase of 316.4% year over year and 50.4% quarter over quarter.

Our balance cash and cash equivalents, restricted cash and short-term investment was RMB54.4 billion as of June 30, 2022.

Now, this concludes our prepared remarks. I will now turn the call over to Operator to facilitate our Q&A session.

Thank you. (Operator instructions). The first question comes from Tim Hsiao from Morgan Stanley. Please go ahead.

(Spoken in Chinese). So, I've got two questions. The first one is about the component supply crunch because the supply bottleneck continuously capped the sales outside of the models like ET7. Should we be concerned about any potential hiccups to the production of models like ES7 and ET5 in upcoming months?

In light of fresh round of COVID outbreak in China, what has NIO team done so far to hedge the risk of potential disruption to the Company's upcoming models and even for next years that we are going to have the MT 2.0 upgrade for [EFAE], ES6 and EC6? So, what have we done to avoid this [collateral] risk to our production?

The second question is about the chip set. Just want to learn that what's your take on the restriction to the export of high-end GPU from companies like NVIDIA and AMD to China? While near term the impact to auto industries should be pretty limited but would that accelerate NIO's plan of semiconductors, the localization in the upcoming models or even speed up the inhouse development of our own chips for functions like autonomous driving in the future? Thank you.

(Interpreted) Thanks, Tim, for your questions. Regarding the first question, in the third quarter especially in terms of July and August we have seen come through some supply chain hiccups, and we believe the COVID-19 resurgence in some regions in China in September will also affect our supply chain to some extent. But based on our experience accumulated throughout the March and April shutdown experience in Shanghai, we believe the COVID-19 impact is under control compared with that of the second quarter.

Regarding the mega casting components, the yield rate is below our expectation and this has affected the vehicle deliveries to our users but we have already taken multiple measures to improve the yield rate of the mega casting components.

For example, we have already sent over dozens of engineers to our suppliers to help them to improve their yield rate and we have already witnessed some improvement. At the same time, we have also introduced some new partners for the mega casting components. We believe we have already resolved this issue to some extent at a preliminary stage and we understand probably in October we should be able to resolve this issue [at once].

Of course, we are very confident about our delivery in the fourth quarter and we are confident to achieve our delivery targets for the whole year. Of course, there will be many challenges ahead of us but we will try the best to achieve the target and improve our delivery performance in the fourth quarter.

Regarding the US chip ban related with the AI training chipsets, we believe this will not have an impact on our business operations. Based on our estimations, our computing power is sufficient for our autonomous driving technology development in the aspect of the AI training for now and we have been working very closely with our partner NVIDIA.

At the same time, we have been keep monitoring the situation very closely. We understand there are also many AI training chipset companies in China who are working on the mass production of their chipsets so we are evaluating a different kind of technical solution for this AI training chipset and we would like to work with different companies on this respect. Basically, we believe this is not going to affect our long-term strategy.

(Spoken in Chinese).

(Interpreted) Of course, we are building out our core technology and the capabilities, including the chipsets, and we believe our target is to do the full stack inhouse capabilities in all those key core technologies. We are building our capabilities and we believe that this is going to help us to mitigate the political risks and the regulatory risks. At the same time, it can also help us to improve our technology powers and also our gross margin as well.

(Spoken in Chinese).

The next question comes from Ming Hsun Lee from Bank of America. Please go ahead.

(Spoken in Chinese) What is your latest guidance in SG&A and R&D ratio considering more industry competition and also overall slower sales for the industry? Do you have any new targets for your points of sale?

Second question, your ET5 and ET7 had very good feedback during the Chengdu Auto Show, but currently there is more competition and product iteration in the industry. Will you speed up the new product launch? Also, could you give some guidance regarding your 2023 new model plan? Can you also share do you have any plans for a third brand? Thank you.

(Interpreted) Thanks, Ming, for the question. Yes, in the industry we have seen many companies that are launching good products in the market, but in terms of the investment we would like to follow our own strategy and cadence.

In terms of R&D, of course this is our long-term strategy. We would like to make decisive investment in R&D. This year we have ramped up our R&D investment to improve our long-term competitiveness. Also, for the SG&A as a percentage of the revenue, we believe the long-term trend is going down. We don't expect to change our pace or our strategy just because of the competition in the external environment. We would like to make sure we can focus and determine our own strategy and pace.

For the ET5, we have already showcased the ET5 in different aspects in the Chengdu Auto Show and other exhibitions and auto shows as well. We have also received a wide range of media coverage for the ET5. ET5 has attracted a lot of attention from the users, the public and the media, and we have received very good reviews and feedback from the user itself.

Next year we plan to further launch more products based on the NT2.0 technology platform, and we plan to upgrade our current ES8, ES6 and EC6 to the new technology platform 2.0. We believe with all the products rolled over to the new technology platform 2.0 we will be very confident regarding our market performance at that time, because if we look at the ET7, the ES7 and the ET5, we can see the comprehensive competitiveness of the NT2.0 technology platform.

We have launched many innovations that have been very much welcomed by our users.

Of course, at this moment I cannot share much detail regarding the new product launch, and we would like to say that we are going to accelerate the ramp-up of our new products based on the new technology platform.

Regarding the third question, of course we would like to have more and more users to use our products and enjoy our technology, but at the same time we are going to pay attention to the users' needs and the demands at different price ranges, and users of different brands may have different needs regarding the products and the technologies. For us, we would like to have more smart EV users to experience our products and enjoy the benefits of those core technologies, and we will make decisive planning regarding this.

(Spoken in Chinese)

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

(Spoken in Chinese) My first question is about the full-year volume guidance. As per your earlier previous guide second half of year, the volume guidance will be 100,000 units. If you're considering third quarter guidance, that means that in that last quarter, number 4 quarter, your volume will be [rather] around 68,000 units. Is that true or roughly in October 20,000, in November 22,000 and December 24,000 to 25,000? Is that the right way to think about your volume progress? That's number 1 question.

Number 2 is about the order backlog. We actually (inaudible) to call on dealers. They told me that they've got three to four month waiting list for all the new products, ES7, ET7 and ET5. [So can I ask] 15,000 are orders for ES7, 15,000 for ET7 and roughly 55,000 for ET5, so [again] got an 80,000 auto backlog. Is that the right way to think about the auto backlog? That's the second question.

The last one is about margin outlook in number 3 quarter. Based on second quarter guidance, previously you guide with 4% q-on-q although I know that margins could be better than your guidance. What is your outlook for the number 3 quarter? You actually have raised the price two times for the old products. Should the third quarter gross margin return to a level in the first quarter this year? Thank you.

(Interpreted) Thanks, Bin, for the question. Previously, I've also mentioned that we will try our best to meet the delivery target for this year. Of course, this means that the fourth quarter is going to witness a lot of pressure and challenges on our delivery and supply.

We have already started to make the preparations for the delivery starting from the third quarter. We believe starting from the fourth quarter we're going to have two factories running to make sure we can support the delivery demands. Actually, starting from the third quarter, we have already kicked off the tooling and the preparations for the mass production of ET5 large scale in Factory 2 in the NeoPark.

At the beginning, we believe the production capacity of Factory 2 is relatively lower compared with Factory 1, because the Factory 2 will only need to manufacture one product, that is the ET5. So, we believe in the fourth quarter we're going to break records every month, and we are confident to achieve the record-breaking target for the fourth quarter, and we have been making active preparations to meet this target as well.

Regarding the specific order information, we believe we haven't disclosed this information for a long time, because different companies have different definitions and understandings regarding the orders. But what I can say now is we have a sufficient order backlog regarding the ES7 and the ET7. For the ES7, we believe the order performance is much better than our expectation. For the ET5, the waiting time is much longer.

Recently, we believe the bottleneck or the constraint is not about the demand. It's mainly about the production capacity of the supply chain. Of course, for our own production capacity we believe we have already made sufficient preparations, but the main constraint was in the supply chain.

For the third question about the gross profit margin in Q3, second half-year, the Company has taken multiple measures to improve our gross margin profits and we raised the selling prices of certain vehicle models like ES8, ES6, EC6 and ET7, and most of the positive impact will be reflected in Q3.

Most of ES7 are starting to be delivered in Q3, our first edition with higher price and margins. So, we expect a slight increase of vehicle margin in Q3. But in the short term, we're still facing great uncertainty and challenges regarding the battery cost, which will have a negative impact on our gross margin. Thank you, Bin.

(Spoken in Chinese)

The next question comes from Jeff Chung from Citi. Please go ahead.

(Spoken in Chinese) My first question is about the ET5 production capacity. How many ET5s can we produce in December? What is the pace on ET5's ramp-up from October to December? This is the first question.

The second question is about the overall production ramp-up from September to December. Our third quarter guidance implied the September run rate should accelerate by 15% month on month. In order to meet our full-year's target, the October to December month-on-month run rate has to be at least 30% month-on-month every month. So, should we expect a straight-line ramp-up or accelerating pace, that December/November's portion could be more critical compared to October? Thank you.

***

(Interpreted) Thank you, Jeff, for your questions. Jeff, actually, I think for the production capacity ramp-up, everyone understands this will need some time, and there is a process, especially when it comes to new products production ramp-up. At the beginning, it will start as a relatively low volume, and then it can accelerate to a stable level. We have already made sufficient preparations for the mass production of the ET5, and we believe the ET5 will have the opportunity to surpass 10,000 units in one month.

If we look at December, of course our internal target for ET5 should be higher than this. For the November and December, we believe we are going to break the delivery record month over month. Especially, we are going to see the peak at December. Previously, I've also mentioned, in October, the supply chain bottleneck will be resolved for the ES7 and the ET7, and around that time, we will also ramp up the production of the ET5.

So it means that we're going to see the delivery volume to gradually ramp up. But at this moment, we cannot predict with certainty, because there are many factors outside of our control. But in the past few years, we have experienced many challenges and extreme situations. In the past, we have accumulated a lot of experience, so our team knows how to handle those challenges and ramp-up of production to meet those challenges.

We believe in the fourth quarter, of course, we're going to experience many pressures in terms of the supply chain and production, but we're confident to make sure that we can meet the target with that for ourselves.

(Spoken in Chinese). So my question is, if the production capacity reaches 10,000 units a month - okay, initial (spoken in Chinese).

(Interpreted) Of course, for the reservation orders, there are some fluctuations and uncertainties, but for the production order confirmation, this is the starting point for us to make the arrangements of the actual production of ET5. If you would like to get your ET5 earlier, then of course you should place your orders as soon as possible.

(Spoken in Chinese).

(Spoken in Chinese).

The next question comes from Edison Yu from Deutsche Bank. Please go ahead.

Hey, thanks for taking the questions. First one, we noticed that William visited the US last month, and we're wondering what kind of decisions or perhaps considerations were taken while he was there, perhaps earlier entry into the US?

Then the second question is, the original plan was to introduce a solid hybrid battery pack, I believe in the fourth quarter. Is there any updates to this? Is it still on track? (Spoken in Chinese).

(Interpreted) Thanks, Edison, for your questions. NIO is a global startup from day one. Actually, we set up the San Jose R&D center back in 2016. Because of the COVID-19 situation, I haven't been able to visit our colleagues in the US for several years. We actually have hundreds of colleagues here, based in the US, and we also have colleagues based in Europe, so at this time, I would like to visit our colleagues here in the US, but then I will also go to Europe to visit our colleagues over there.

For the US market entry, we have been making preparations for a long time. We have been thinking about the US market entry strategy back in 2017, and this has been in planning for almost five years already. We have been thinking about what kind of a product should be the best products for the US market, what kind of user experience we should provide and what should be the right business model for the US market.

We believe right now we have a much clearer plan regarding the US market entry and we have been making comprehensive preparations based on our plan and strategy for the US markets. The US market is quite different from the China market and also the European markets. The US market is very competitive and the regulatory environment is also quite different from China and Europe.

We have been making long-term thinking and preparations about the US market entry, and we believe that the right strategy for us is to make comprehensive preparations and be patient. Of course, there isn't much details that we can disclose at this moment, but we believe we have a clear strategy for the US market entry, and we just need to be patient for the execution.

For the 150-killowatt hour semi-solid-state battery pack, this battery pack offers the very high power density, and we are making comprehensive evaluations of this semi-solid battery pack. We are making preparations for the production of this battery pack together with our partners, but according to our current evaluations, we believe that probably we are not going to provide this service to our users in the fourth quarter. According to the current evaluation, this battery pack will be delayed for several months.

Of course, we have been working with our partners to evaluate the progress, and this is the current situation and we will try to work with our partners to improve the situation.

Thank you.

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

(Spoken in Chinese). So two questions from me. The first one is, have you realized that there might be some orders that have been placed by certain people who is not really intending to get the vehicle but just to jump the queue and try to sell the order to someone else for profit, which might inflate the orders and give some misleading information for your production plan? How do you prepare for that?

My second question is regarding your secondary and tertiary brand preparation, ALPS and Firefly. We noticed that there are some orders have been entered with some suppliers, especially from the batteries and other components. Is there more color management can share compared to, let's say, two quarters ago?

(Interpreted). Thanks for your question. Regarding the first question, of course, if we cannot meet the user demands in a timely manner, then probably some users may transfer their orders to others. But we have very strict policies regarding the order transfers, so we believe there will be very few cases for the order transfer, and the percentage of order transfer will be quite low. This is probably also because of our follow-up mechanism. If you place a reservation order for now, then our [seller] will follow up with you regarding the specific orders, and then this can be converted to the actual production orders.

In our current order backlog, we believe that the percentage of users who are only placing the orders to make sure they can transfer the orders to others in the future, this percentage should be quite low, because of all those different mechanisms we have in place.

For the mass-market brands, previously, we have already discussed about our plans for the mass-market brand. Currently, the R&D progress is on track. Our plan for the mass-market products is to follow the schedule and the cadence of our latest technology platform that is the NIO Technology Platform 3.0. We're going to launch the mass market products based on the NIO Technology Platform 3.0.

Yes, probably from the media and the supply chain, there have been some discussions about the third brand of NIO. Actually, in the past, we have recognized that if we want to accelerate the conversion from the ICE to EV, we will need to provide more products to cater to different users in different segments. We believe in the past year, we have witnessed tremendous growth in terms of the EV demand at the entry level market segment, which has also been driving the EV penetration here in the China market.

We have realized some interesting opportunities for the business model innovations, and I believe that NIO is very good at combining the innovation technologies with the user experience and providing very innovative experiences to our users. We have identified some opportunities for us to make innovative technologies and blended together with our business models to provide services to the users and provide different kinds of products to a wider range of user groups and the communities.

So at this moment, we cannot disclose much information about this, but what I can say is we do believe that there are some opportunities for us to explore.

(Spoken in Chinese) Thank you so much.

This concludes our question-and-answer session. I will now hand the call back to Ms Eve Tang for closing remarks.

Thank you once again for joining us today. If you have further questions, please feel free to contact NIO's investor relations team through the contact information provided on our website. This concludes the conference call. You may now disconnect your lines. Thank you.

Thank you.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.