Xpeng Inc (XPEV) 2024 Q3 法說會逐字稿

Hello everyone.

I'm a Xiaopeng.

Mr, I'm a woman the.

In the third quarter of 2024 we surpass our key performance targets.

We deliver 46,533 units in the third quarter, reflecting a 54% increase quarter over quarter and a 16 increase, 16% increase year over year beating the high end of our prior quarterly guidance.

SEMS deliveries exceeded 20,000 units marking a record high.

Furthermore, thanks to the technology driven cost reduction and growth in scale.

Our gross profit margin increased to 15.3% in the third quarter, achieving our c level and demonstrating continuous improvement for five consecutive quarters.

As a champion Xop cheers.

Over the past two years, Exan has undergone significant transformation amidst challenges.

However, I remain calm at the center of the storm because crises often present opportunities having overcome these adversities.

Exan has emerged stronger than ever.

We're now poised to accelerate our growth and move forward steadily.

I would like to express my gratitude to all of our shareholders and everyone who has consistently supported us.

We have implemented comprehensive changes in our strategies, products, management and organizational structure.

We've also addressed previous areas of improvement in marketing sales channels and design.

Moreover, our firm investment in A I technology has begun to yield advantages in both product experience and cost efficiency, helping to bolster our competitive edge by prioritizing customer needs, maintaining a business oriented approach and keep the full picture in mind.

We have established a robust capability across our entire operations from product definition and research and development to presell activities, product launches and delivery.

As a result, we have created a series of send out products that truly surprise and delight our users.

The I.

Exan second decade has started and I believe the next 10 years will be the era of A I or artificial intelligence.

I'll strive to lead Exan to become a global A I defined car company and spearhead the large scale application of A I in the mobility industry.

Looking at the industry landscape, I anticipate that between 2025 and 2027 which is upcoming three years, we will see a knockout phase in the Chinese automobile industry.

The penetration rate of China's new energy vehicles will likely rise to over 85% while the integration of A I will lead to the next stage of consolidation of market share.

Unlike the traditional car companies that have relied on cooperative integrated supply chain models for research and development.

In the past winners in the A I defined car sector will be those with indepth fullstack self development capabilities.

We plan to harness the power of A I and use it as a data engine integrated both software and hardware in our research and development of the whole vehicle ad cabin and engines, et cetera.

This will allow us to iterate and upgrade at an unprecedented speed, creating a substantial advantage over companies that continue to use traditional R&D models regarding user experience and optimization speed.

Starting next year, I expect significant advancement in autonomous driving and vehicle intelligence.

Introducing A I large models will provide a transformative experience from all aspects, enabling users to embrace safer, more comfortable, more comprehensive and smarter A IA I driving and A I driven vehicles.

The outside.

On November the seventh, the world's first A I defined car, the P seven plus was officially launched that night.

The number of firm orders exceeded 30,000 and continued to rise.

The P seven plus has become a phenomenal success in the mid to large BEV sedan market and marks a milestone in the widespread adoption of A I defined cars.

I'm pleased to see that the core reasons users choose the P seven plus is its standard, high standard intelligent driving features across the entire model range.

In the past luxury was defined by configuration, but now it is defined by technology and this trend is where we are striving to be.

We're collaborating with suppliers to expand the production capacity of the P seven plus and I expect the delivery volume of the P seven plus to exceed 10,000 units in December.

Currently, both the M 03 and the P seven plus have begun double shift production as production capacity ramps up.

We anticipate monthly deliveries will set a record in the fourth quarter and will strive to exceed 30,000 units in November.

Additionally, steady and long term progress is one of our main themes for 2025 we'll enter 2025 with tens of thousands of orders which will increase our delivery volume in the first quarter of next year and lay a solid foundation for a significant increase in sales next year.

No number two, nen.

Starting from the P seven plus model, our new and facelifted max models will all feature the A I Hawkeye Visual Adas solution.

This is the only a solution in China that does not rely on HD maps or L A and we'll take it to the rest of the world soon.

In the global automotive industry, we're the first to standardize high-level intelligent driving software and hardware across our entire lineup, providing an actual leading experience for the users.

We delivered the experience of the level three A driving at the cost of level two.

Achieving what we refer to as intelligence for all tech powered driving with the same cost as fuel excitingly in the first half of next year.

After the Lunar New Year.

Mona M 03 max will start mass producing the platform based A I Hawkeye Visual Aid solution.

This will allow us to become the world's first car company to offer advanced intelligent driving vehicles for just 150,000 RMB or about $20,000.

Lowering the threshold.

With our leading A I technology and strong cost control, we have the competitive mode that will serve as our ultimate weapons for navigating from a serious competitive red Ocean to the opportunities of a blue ocean market.

No A so.

I believe that over the next 1 to 5 years, the penetration rate of smart features will significantly increase nonlinearly.

Our A I defined vehicles which incorporate powerful A I capabilities and autonomous driving features will accelerate the replacement of cars that lack these technologies or cars that only claim to have these technologies.

In 2025 we plan to launch at least four new models including super electric vehicles and we will also update several existing models.

Each of these new and faceless models will be very distinctive in their respective market segments.

And I look forward to launching more top selling models that users will love next year.

The Xop.

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At our recent A I tech day, we unveiled the Quinn Super electric system.

Our next generation extended range products along with our next generation pure electric products will be our second largest growth engine together with our A I capabilities.

It will drive strong momentum for accelerated development, powertrain technology and industry leading energy efficiency are key components of expanse brand.

We have received widespread user acclaim for our exceptional energy consumption management.

With our electric vehicles regularly exceeding advertised range estimates in our brand new extended range products.

We employ high voltage electric technology one generation ahead of the market to address common user pain points facing current extended range products in the market and provide a user experience far superior to many existing extended range products.

The kong Super electric drive system is built on our third generation industry leading 800 volts platform supporting various features including a pure electric range of 430 kilometers.

A combined range of 1,400 kilometers and the five C ultra charging battery while also controlling cost, all of which will lead the way for the next generation extended range technology in the coming future, Exan will adopt a dual energy approach offering a batch of new vehicle models with pure electric and super electric powertrain options to cater to the diverse needs of global customers.

I believe that this will significantly expand our total addressable market, bringing multiple opportunities for sales growth and accelerating the mass adoption of A I defined vehicles worldwide.

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In terms of operations, the P seven plus will also mark a brand new starting point for the overall improvement in vehicle growth margins.

For exan next generation models, new platform based technologies we have implemented in the P seven plus will also be applied to new models and major facelifts over the next two years of 2025 and 2026 we anticipate that the gross margin of our next generation models will reach double digits, significantly increasing our sales volume to a new level during our strong product cycles and helping us move steadily toward achieving scale profitability.

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Exan turing A I smart driving system derate our robust full sex self development capabilities.

It indicates cloud based and inve software and hardware including chips.

It set a new goal standard for next generation, full set development and highlights our exceptionally efficient R&D iteration process.

Many of our peers are still using our previous generation of architecture and technological routes.

I believe that enhancing the capabilities of smart driving relies heavily on cloud technologies.

Our cloud based large model has 80 times more parameters than in vehicle model making it the most advanced technology currently available in China's Adas market in the coming years, the synergy between our in vehicle data, cloud based commuting computing power and both cloud and inve large models.

And our globalization and car manufacturing will grow exponentially marking and making significant leaps forward in our large models performance per the scaling law.

The the Tianqi, the N GP.

No, we I.

We plan to realize door to door full scenario.

A as on Tnaix OS 5.5.

By the end of this year, this uninterrupted and ultrasmooth driving experience will elevate us from being on par with the 1st year to truly leading the pack.

We actually were able to deliver similar experience three years ago already, but it was a combination of multiple solutions.

Whereas this 5.5 OS is onestop solution.

Next, we plan to achieve A L three like intelligent driving experience by the fourth quarter of 2025 targeting less than one takeover per 100 kilometers.

The more advanced ultra version of the vehicle we are developing now will significantly enhance the computing power on board and incorporate a fully redundant design for core components.

This will enable us to mass produce robotaxi at a low cost while ensuring sufficient safety.

I firmly believe that the substantial improvement in autonomous driving capabilities will make A I A core differentiator among leading auto companies and a key factor in capturing user mindshare users will discover that A I is not only applied to autonomous driving but will also expand and integrate into various aspects including in car A I system, A I cabin, a hub, smart chess, smart audio systems, and A I battery doctors.

In the medium to long term.

The GAAP between A I leaders and laggards on product technology, brand image and profit models will continue to widen.

Some time to change your call.

We don't understand how you do your heart, Xia, why or the.

Now let's talk about globalization.

We're accelerating our global presence leading the way for chinese smart EV brands in their overseas ventures.

Our organizational management, product planning, autonomous driving technology, smart COFI design, supply chain management, and manufacturing and production are all strategically aligned for global deployment.

By collaborating with high quality overseas dealers.

We have extended our reach to more than 30 countries with over 110 C stores as of the third quarter and we have experienced strong initial sales in multiple regions.

Currently, Exan ranks first in export sales of chinese premium BEVS and LG nine ranks first in the mid to large sized battery electric SUV in Northern Europe.

In the third quarter, our overall overseas sales increased by 70%.

Sequentially accounting for 15% of our total sales volume.

Looking ahead to 2025 we plan to further expand our international sales network to more than 300 stores, expanding to over 90% of the NV market outside of North America.

Our goal is to maintain robust growth in overseas sales over the next two years.

Aiming to secure the leading position in mid to high end NV export sales among Chinese automakers.

The rapid expansion of our international business will further boost our profitability.

So don.

After two years of head winds, we're about to enter a brand new positive cycle in the fourth quarter of 2025.

We expect to experience tailwinds driven by A I transformation and the super electric system which will accelerate our growth and lead us to profitability.

We anticipate our total delivery volume for the fourth quarter of 2024 will range from 87,000 to 91,000 units.

This represents a quarter over quarter increase of 87% to 95.6% and a year over year increase of 44.6% to 51.3%.

Additionally, we project our total revenue for the fourth quarter to fall between RMB15.3 billion and RMB16.2 billion.

Reflecting a quarter over quarter rise of 51.5% to 60.4% and a year over year increase of 17.2% to 24.1%.

Moreover, we expect our cash flow in the fourth quarter to improve significantly resulting in positive free cash flow for the second half of the year.

By year end, we anticipate our cash on hand will exceed RMB40 billion with healthy gross profit and cash flow will have the capacity to invest deeply in research and development and for the future allowing us to consistently and confidently provide our customers in China and abroad with market leading A I defined vehicles.

So.

The.

Thank you everyone with that, I'll turn the call over to our VP Finance James to discuss our financial performance for the third quarter of 2024.

Thank you Xiaopeng.

Now let me provide a brief overview of our financial results for the third quarter of 2024.

I'll reference RMB only in my discussion today unless otherwise stated, our total revenues were 10.1 billion for the third quarter of 2024.

An increase of 18.4% year over year and an increase of 24.5% quarter Over quarter revenues from vehicle sales were 8.8 billion for the third quarter of 2024 representing an increase of 12.1% year over year and an increase of 29% quarter.

Over quarter the year over year and quarter over quarter increases were mainly attributable to higher deliveries.

Revenues from services and others were 1.31 billion for the third quarter of 2024 representing an increase of 90.7% year over year and an increase of 1.1% quarter by quarter the year over year increase was mainly attributable to the increased revenue from the technical R&D services related to the platform and software, strategic technical collaboration, as well as electrical electric architecture, also known as EE a technical collaboration with the Volkswagen group.

The quarter over quarter increase was mainly attributable to the revenue from technical R&D services related to the ee a technical collaboration with the Volkswagen Group, partially offset by the reduction in parts and accessory sales gross margin was 15.3% for the third quarter of 2024.

Compared with negative 2.7% for the same period of 2023 and 14% for the second quarter of 2024.

Vehicle margin was 8.6% for the third quarter of 2024.

Compared with negative 6.1% for the same period of 2023 and 6.4%.

For the second quarter of 2024.

The year over year increase was primarily attributable to the cost reduction and the improvement in product mix.

The quarter over quarter increase was mainly attributable to the cost reduction.

R&D.

Expenses were 1.63 billion for the third quarter of 2024 representing an increase of 25.1% year over year and an increase of 11.3% quarter over quarter, the year over year and quarter over quarter increases were mainly due to higher expenses related to the development of new vehicle models as the company expanded its product portfolio to support future growth.

SG&A expenses were 1.363 billion for the third quarter of 2024 representing a decrease of 3.5% year over year and an increase of 3.8% quarter over quarter.

The year over year decrease was primarily due to lower employee compensation in the third quarter of 2024.

While the quarter over quarter increase was mainly due to higher commissions paid to the franchise stores.

As a result of the foregoing loss from operations was 1.85 billion for the third quarter of 2024.

Compared with 3.16 billion for the same period of 2023 and 1.61 billion.

For the second quarter of 2024 net loss was 1.81 billion for the third quarter of 2024.

Compared with 3.89 billion for the same period of 2023 and 1.28 billion for the second quarter of 2024.

As of September 30th 2024 our company had cash and cash equivalents, restricted cash short term investments and time deposits in total of 35.75 billion to be mindful of the length of our earnings call.

I would encourage listeners to refer to our earnings press release for more details on our third quarter, 2024 financial results.

This concludes our prepared remarks.

We'll now open the call to questions operator.

Please go ahead.

Thank you.

If you wish to ask a question, please press star one on your telephone and wait for your name to be announced.

If you wish to cancel your request, please press star two.

If you're on a speaker phone, please pick up the handset to ask your question for the benefit of all participants on today's call.

If you wish to ask your question to management in Chinese, please immediately repeat your question in English for the sake of clarity and order.

Please ask one question at a time management will respond and then feel free to follow up with your next question.

Your first question comes from Tim Shaw with Morgan Stanley.

Please go ahead.

The local.

So my first question is value because in the next 3 to 5 years, are you expecting the technology GAAP or smart driving be widened and narrow?

Several leading local ed brands in China are considering making smart driving a standard configuration for all mass market models with the to become a need to function in the future and how could ensure consumers can feel and appreciate the difference and Chief Excellence Cars because of that.

That's my first question.

Thank you.

So we do the so and you know, that's the one.

Thank you.

This is a very good question.

Actually, we've been talking about this for the past two years while we are developing our N two and large model solution.

Now, what we need to hear for this next generation of capability is not only first of all the capital for RD, but also the computing power and big data as well.

And in the coming 3 to 5 years, I think any companies who try to compete in this land in this landscape will not only have the full sex self developed R&D capability that combines software and hardware, but also on the cloud side, whole vehicle chip development and also ee a development across different car manufacturing capabilities are all essential for having that capability.

So in some, I believe that the GAAP between different E makers will actually be widened in the several years.

Another point that I would like to mention is that a capability is just like part of your brain.

You have to have to not only have your mindset, you know what you think you can do, but you actually need to be able to deliver your claims and that also will set the bar or the threshold for entering this competition.

Another point that I would like to mention is the whole vehicle capability.

How do we make sure that the whole car gets smarter in order to carry all this a des generate a desk capability?

So I think going forward users will actually have a better idea or awareness of how capable a company is and how good the product is and they will have an in depth experience or first hand experience of what truly means to have a smart a desk capability in the product.

Thank you.

So I also would like to add that traditionally, the model for OEM to develop cars is to work with tier one suppliers.

However, in the future, when we require cars to adapt the a capability from not only the brain but your upper toss in your legs and the whole body.

It will actually require a completely different model of development, which will also in the coming 3 to 4 years, set us apart from the rest of the competition.

Thank you.

And my second question is about the profitability because over the past few quarters, we've seen expert posting consecutive margin improvement at both week and at the group level looking into next year, how could the company further narrow the loss in the systematically turn the profit?

That's my second question.

Thank you.

It's Brian, let me address this question.

First of all, I think in this quarter's financials, I think we're very encouraged to see that our nongaap operating margin, actually, the loss has narrowed to 15.5% compared to in the second quarter.

I think it's about 19%.

So you start to see operating leverage and narrowing of operating losses.

And I think that trend will, as we mentioned, we're going to launch P seven plus, which we think is actually a better margin profile product.

And also overall, we actually can see the scale effect coming into play as well as additionally, we can see continued improvement on the vehicle margin front and also on the expense side, I think we also start to see a very significant reduction opportunities for, for example, for the fourth quarter, I think we are going to hold a very consistent R&D spend of below 2 billion R&B in total.

And that will make our entire year R&D to be probably less than 6.5 billion R&B than our original estimate.

So going into next year, we start to see these factors going to compound with additional launch of more in a robust product.

As we mentioned, we have new models as well as refresh models to be launched.

We also have models that are tackling new segments including for example, extended range energy module.

So with all that, I think we're very optimistic about our robust growth as well as continued margin improvement.

We still, I think hold the same view as I think, communicated to all of you starting two years ago, that will be breaking even at some point next year, probably towards the end of next year.

And that is still a view.

I hold, I think we hope to deliver on that and also the improvement also will bring a healthy cash flow for the company as well next year.

So for example, by the end of this year, we asked them that we're going to have over 4 billion R&B on hand.

And next year, 40 billion R&B on hand.

Sorry.

And next year, I think we will actually still continue to see healthy cash flow which allows us to have very comfortable capital base to bring us to break even.

Great.

Thanks for sharing the details and congrats again on the strong results.

Thank you.

Thank you.

Your next question comes from Ming Shan Li with Bank of America.

Please go ahead.

Ha ha ha ha the woman the sentence to now find out.

So my first question is related to export outlook.

So in 2024 how do you expect the export sales contribution to your total revenue?

And because some overseas market, the charging infrastructure is not as good as in China.

Therefore, do you see any potential bottleneck for the ev penetration in certain countries?

And in the longer term, where you see your ev product to be the major product for the overseas market?

I mean, Brian again, yeah, let me address your question on overseas market.

First of all, I think we do see overseas market as a very robust growth market for us, it's still very early in the electrification process compared to the Chinese market.

And also I think given our current you know, coverage of, you know, covering, you know, most of these markets by the end of next year, I think we are hoping to be able to tap into that growth as you mentioned, you know, last year, I mean, I would say this year, our overseas market percentage is has increased to around 15% of our sales.

I think the next year we expect the contribution will be similar even though our domestic market growth is very very significant.

But I would still think overseas growth will, you know, you know, I think has a very similar growth profile as well.

And then also in terms of the electric BV versus extended range format, I think you're right.

I think in some markets, we do recognize the lack of infrastructure could be a potential bottleneck for be penetration.

However, I think these markets, I think currently the B penetration is still very low, so there is still growth opportunity for be models themselves.

So we are also very hopeful, the growth of BEV exports as well as market penetration will increase as we expand into more markets.

But at the same time, once we actually have extended range of products, we think in some markets, particularly for markets like let's say Latin America or Central Asia or Middle East where charging facility infrastructure is lacking for efficient and fast charging be products, some of the extended range product will actually be also attractive.

So we're actually very very optimistic that both be as well as extended range products will be finding attractive growth opportunities in various global markets.

Yeah, thank you, Brian.

Now with the China woman, now you can go.

Yes, the Xinjiang component you now we find with the one.

So my second question is related to capacity.

Could you advise your latest capacity and also your effective capacity in 2025?

Do you have any plan to expand the new plant or you can just expand your current plant to meet the demand?

And recently, do you also see any component shortage across your supply chain?

Thank you.

I mean, Charles.

First of all, I think as we mentioned in the earning call that both our Guangzhou and Zo Qing plant already turned on the second shift.

I think each of the plants can support approximately 200,000 to 300,000 per annum based on the two shifts.

And also I think as we communicate before, there are also ample reserved land and also existing the plant next to our Guangzhou and Ching manufacturing base.

So we believe that we can expand our production capacity at fast speed and also with low capital intensity.

And also we already had our long term production capacity planning until 2026.

And so we believe that all these required manufacturing capacity has been a well planned ahead and also given we have long term planning for the our own manufacturing capacity, we are also working with our suppliers also to expand the supplier capacity.

Because as you know that we are pushing really hard on the platform, a unified platform and also the component sharing across multi platforms and vehicles.

So it is actually more efficient for our suppliers to expand their capacity with us.

Thank you, Charles.

Thank you.

Your next question comes from Bin Wang with Deutsche Bank.

Please go ahead.

So my first question is about the gross margin of the vehicles and actually in the third quarter, you got 2.2% points.

Much expansion.

Can you quantify each of the factors?

How much came from the, how much came from, how much came from the high base?

Because they have the cost?

And secondly, you actually for the number four quarter due to the vehicle cost can go to double digit or not.

Thank you.

Hey, Ben, this is James.

So to your question on the Q3 versus Q2 margin improvement, I'd say it's primarily driven by two aspects.

One is we continued engineering cost reduction with regard to efforts on bave.

In combination of the battery cost reduction, as we see the battery cost is coming down for the entire industry.

You did mention the eop impact.

We did have some impact in the second quarter which is less in the third quarter, which is also driving an improvement of the margin.

So that's that's for the quarter over quarter improvement.

As we look into Q4, we mentioned earlier, the P seven plus delivery will start in Q4.

This is a product that will embed our latest platform with the cost reduction targets achieved and representing a double digit gross margin.

As we communicated earlier, this is going to help us further improve our vehicle margin from Q3 into Q4.

So as a trend, we do see margin continue to improve combined with larger scale.

As Xiaopeng mentioned earlier, we expect our Q4 delivery to be exceeding prior quarters in the history.

Therefore helping us to thin our manufacturing cost as well and improve overall margin.

So we have a double cost margin in the number four quota possible.

The overall margin will improve.

As you can see, we have overall margin in Q3 as reported and you can expect that to improve in the fourth quarter.

Okay.

Thank you.

The question is that recently media report that the Taiwan Foundry Company may not be able to do the OEM for China suppliers actually for the seven nanometer with any potential impact for our upcoming chips.

Thank you.

I think this Charles, I think that the the mass production of our touring soc still progress.

Well, and we haven't seen any impact on our development of the turing soc.

Thank you.

Thank you.

Your next question comes from Tina Hou with Goldman Sachs.

Please go ahead.

And JJ.

And thanks for taking my question.

So my first question is regarding long term cost reduction of of EV.

So if we look at it from an angle of the powertrain, the A bomb including both smart cabin as well as autonomous driving as well as maybe potentially the car body and the interior exterior.

So how much potential further cost reduction do you think there is in the longer term?

Thank you.

No to the people.

Number one by JD is the for the three TNZ Guiu.

So.

Thank you.

Thank you for this question.

Actually, we've been, we've never stopped thinking about that.

And our understanding and our possible solution to it has been changing over the years.

I remember about a year and a half ago during the earnings call, I actually made a promise of achieving significant cost reduction at that time.

I actually summoned my courage to make that promise and I'm very happy and proud that we are able to actually deliver what we promise at that time.

And in the coming 3 to 4 years, obviously, there are a lot of room for improvement when it comes to cost reduction.

A lot of things are very obvious, for example, supply chain optimization, scale economy of scale and also technology driven kind of cost reduction.

But specifically, we can do a lot more things as well.

For example, on the one hand, we can do something that we call super integration, meaning that we can actually combine different capabilities of different parts together and make something that is significantly different from what we traditionally have.

Or we can also learn and adopt the Apple model, which is to empower the tier one suppliers or help them together develop the capabilities of tier two, tier three suppliers advantages, leveraging their already existing existing logistic capability and a lot of other details that can help us to improve efficiency and cut costs.

In addition to that, we also can look at, for example, saving and cost control and in the electronic electric materials, et cetera.

I mean, these are just some examples tip of iceberg here really.

And as a company that's constantly driven by technology innovation, we also can look at the upgrade of our manufacturing process, our craftsmanship in the coming 3 to 4 years, we're not going to stop until we achieve, you know, the optimal level of cost cutting.

Now in the future A I tech day and also in the future earnings call, you can expect to hear our reporting of every year's cost control outcome.

And I don't think it's not just going, I don't think that it will come from only the scale or supply chain control optimization, but more likely being driven by technological innovation.

Thank you.

Now, the xxxxxy and Z and the second question is regarding our 2025 new pipeline and also volume outlook.

Could we get more details in terms of the four new models?

Which quarter will they come out?

And then what kind of price range, what kind of body type and also our overall volume outlook for 2025?

Thank you.

Brian.

I think first of all, we are not providing any guidance as we've done in the past.

So I think right now, all I can say is that next year, we we actually are very confident that we can continue the momentum.

We're seeing the second half of this year and also looking at the the the growth profile, I think it will be more moderate growth compared to this year.

But still, I think it will be second half and slightly heavier than the first half.

In terms of the model, I think we gave you the total number.

We're not at the moment, I think ready to share specific models and exactly when they will be launched.

But we mentioned that there will be four new models, one of those will be extended model.

And also in addition to those four models, we will have a few refresh of current models.

So and that will be spread over the next four quarters.

So you will expect to see a new model and refreshment potentially every quarter.

Follow up is the model YB mona PJ Biba.

So for the four new models, our expectation should not, should not be lower mona as well as P seven plus.

Well, I think we are very, very confident that the models we launch will be leading their respective categories, obviously, different segments and different categories will have different volume expectations.

But we do feel like our models will be very competitive in their respective segments.

Thank you very much.

Thank you.

Your next question comes from Nick Le with JP Morgan.

Please go ahead.

Let me translate my question very quickly at the moment, so called as per overseas market accounted for about 50% of our sales volume.

But we understand from other competitors that for those who have overseas exposure, the possibility of profit margin is generally about 1.5 to 2 times arrogant.

I think in China it is fair to say the same pattern will apply to us.

And likewise, how do we educate customers?

That level two, level three functionality is something very nice and that they need to have in the future.

Hey, Nick, it's Brian.

I think, let me address your first question in terms of overseas markets, profitability contribution to us.

I think there are a couple of areas to think about.

One is that yes, in general, I think the price of selling our models overseas are higher than domestic prices.

There's additional cost obviously and potential tariffs and duties that we have to pay.

But the margin in general is slightly higher than the domestic gross margin.

But also to to be mindful is that the margins that we achieve in a lot of these overseas markets actually are margins that wholesale margins because we are working with importers or distributors in those countries where we are not responsible for retailing and distribution of those products.

So a lot of those margins actually, it's essential direct contribution to us rather than just the gross margin so that there's a distinction.

But I think going into next year, I think you clearly, you know, we are in a need to dealing with, you know, changes in tariff change, potential new markets have different regimes.

So we need to obviously have a more flexible approach to that structure.

But this year, I think the contribution has been pretty positive and I think Xiaopeng just your second question.

So and Tao, so the LCC.

Thank you.

Yes, indeed.

Different countries are different, they have different users, different preferences, different regulations.

By comparison.

For example, Europe versus China, typically China, you know, as a market has a younger group of consumers that are, you know, really attracted by nuvs, whereas in Europe, the majority of the users are middle age and above.

But also we see a lot of similarities between China and other parts of the world outside of EU as well.

But here for this discussion, I'm going to focus on the differences between Europe and China now.

Right now what you know, when it comes to the capabilities being delivered to our Europes customers, I think they really love smart cabin, fast and ultrafast, efficient charging our high quality services after sales services and also the the parking, auto parking LCC AC C.

These are the you know, sort of most daily commonly accepted and prefer Adas features that are being loved by European customers.

And when it comes to other parts of Adas features because of the limitation or because of the regulatory environment in Europe, typically, you know, the implementation of those features in Europe is about 12 months behind what we can see in China right now.

But as a company that is being driven by technology with heavy investment and very strong capabilities in software and hardware.

We are very, very confident in, you know, adopting the same set of solutions but using different combinations for different market in order to build our global presence as a premium brand going forward.

And right now, you know, as has been proven by market feedback that we are actually able to do that.

So in the future, when it comes to landing or implementing our solutions in different countries, we're going to focus more on not only product and service quality but also the operations across different regions to customize for local consumers.

Thank you.

My second question is really about the trading policy from a top down standpoint.

What's our view on the continuity of the policy in 225?

And likewise, our product volume has been very strong, especially for free and PC plus if we place orders today and we only get a cut sometime in first quarter next year.

What's our market strategy for the customer who get a car only in first quarter?

Hi, Nick, this is.

Charles.

I think we believe that our newly launched product like MO three and also the P seven plus are very competitive in terms of the product capabilities.

And I think that the customer chose the product because I think there is no alternative product or, or less or very limited options available to them.

In the price range.

So we believe that we will continue to see the strong momentum for the order orders for the MO three and also P seven plus.

I think that more importantly, I think that we have very significant, huge, significant order backlog for both MO three and the P seven plus.

I think this is also, I think this is also very different from a lot of our peers.

We will be carrying probably tens of thousands order backlog for both mo three and P seven plus into the Q1.

So we believe that that will be the foundation of our growth in the 2025.

And this is my question is my question is for the customer who buy P C++ or if they only get a car in first quarter, 2025 will consider reimbursed, then provide additional incentive.

Thanks.

Hi, this is Alex.

So first of all, we do not have any specific insight about the government subsidies.

We expect the auto sector will still be supported by any of the potential stimulus policy as a priority of any of the economic policy.

And regarding the customer expectations, I think they have quite reasonable expectations for the delivery time.

As you can see the delivery time for the P seven plus is 8 to 11 weeks.

So I don't think our customers they are expecting to see sort of delivery before the December of this year for most of the customers who put their orders right now, they have reasonable expectations.

We don't think they will change the decision because of the subsidies, they chose Expo cars because of the unique value proposition.

We bring to these customers in these segments.

P seven plus more than three, they exhibit competitiveness of all our peers models.

So we don't really expect to see a material impact from any potential continuation or discontinuation of subsidies.

We just focus on our product competitiveness as well as strengthening our channels.

That very, very clear.

Thank you.

Thank you.

As there are no further questions.

Now, I'd like to turn the call back over to the company for closing remarks.

Thank you once again for joining us today.

If you have further questions, please feel free to contact investor relations through the contact information provided on our website or the PS and financial communications.

This concludes today's conference call.

You may now disconnect your line.

Thank you.