reflects only the company's management's opinion as of this call, and the company undertakes no obligation to update or revise any statements made in this call in light of new information, future events, or otherwise. The following events discussed in this conference call may not occur due to various uncertainties and assumptions.
The above disclaimer applies to all forward-looking statements referred to in this call. In addition, shareholders and potential investors are also reminded that nothing contained in this earnings call constitutes any investment advice, nor does it constitute the basis for any contract commitment or investment
Shareholders and potential investors are urged to exercise discretion and caution when trading the company's shares. Thank you, Mr. Shen. May I invite Mr. Wu Qiang to update us on the 2024 interim results. Good evening. Welcome to this 2024.
The interim results, first of all, Leap Motor in the first half of the year, based on our style operation, we have made very good results. In the six months, we delivered
86,696 vehicles compared with the 45,000, we have increased by 95% in March. We also launched the brand new remodel and also based on the developed LEAP 3.0 architecture and with C11C01,
And we have been launching the global Lead Motor C10 based on the Lead Motor 3.0. In June, we also launched the brand new six-seater SUV C16, and it was being very welcomed. The launch of C16 has not impacted the grid momentum of C10, C11.
And with the new model, we have bring in more traffic into the showroom, promoting the sales for other vehicles. So this has to do with the demonstration of our solid style in operation and sales. Now, Leap Motors C10, particularly C16, since the launch in March, C10 sales have been growing steadily. As of end of June, we deliver
24,100. C16, first month after launch, we have order over 10,000. Now based on the improvement of the product execution, our delivery continue to improve. In June, we deliver more than 20,000 units for the first time, becoming tier one in all the EV startups.
In July, our net order exceeded 28,000 for the same month. In July, the delivery has reached 22,993. In the first half of July, we have delivered over 400,000 vehicles. A milestone given the external momentum and internal driver. We are accelerating the sales this year further. We expect Q3 sales will hit a new high.
So therefore, in 2024, we will further, aiming for the quarter million total sales, we're going to make further actions. Financially speaking, in the first half of the year, we have excellent results. Thanks to growing sales, our sales in the first half of the year has been 8.85 billion yuan, which is 52% year-on-year growth. In the first half of the year, GP was
101 million, which is improving more than 7% compared with same period last year.
The improvement of GP comes from the economy of scale based on higher sales, the optimization the product makes, and also we have been sticking to the full house, in-house R&D vertical integration, which give us advantage of cost and cost management. In the first half of the year, our Q2 margin has improved to 2.8% for the quarter. We expect in the second half of the year, GP margin will perform even better.
were aiming at 5% GP margin for the full year. In the first half, the company recorded a loss of the 2.2 billion renminbi, which is similar to the same level last year. I'd like to make a note here in terms of
While we're seeing improvement in the GP margin, but the loss was not narrow significantly. It's based on the fact that we have stepped up efforts in investing more on R&D. Now, in the first half of the year compared with the last year, our GP has improved by $440 million.
But for this half year, in 2024, we invest 1.22 billion in R&D, which is 48% higher than last year. So higher R&D input come from in about 400 million. That 400 million basically have already offset some of the GP gain compared with last year.
That's really because the EV market has been growing fast this year, and the first half penetration has reached around 50%. So Leap Motor, as a result, is accelerating some of the projects. We are running seven models in the pipeline. In the coming two years, we're going to be launching multiple new models.
So we're accelerating R&D. We're also investing end-to-end large model technology. So based on this R&D investment, but despite higher R&D, LeapMotor is keeping as the highest efficient company in R&D efficiency. Now, when it comes to R&D, the R&D continue to make new progress and breakthroughs. In 2024,
We are accelerating. Now, we achieved the LEAP 3.0 iteration. And after that, our C2C battery, 8295 smart core peak, and smart driving in urban and express way, and also in the six top blocks of intense driving, we are taking shape already.
And in 2024, in C11, C01, C10, and C16, in June, we have the latest 800-volt platform with characterization of high performance, high efficiency, high intelligence, and life's durability, providing convenient and efficient charging experience. And subsequently, we are also going to iterate and upgrade the current products so that we can enjoy latest R&D outcome. In SmartCopic,
In 2024, we launched the first Qualcomm 8295 cockpit chip with excellent human-machine interaction and intelligence performance is the key to connect to the passenger and the vehicle feature, which is welcomed by consumers. The latest cockpit is based on SOV software architecture
We have over 300 developers, and also we have the unique customization and user experience. And also the 21-speaker algorithm, we support the Dolby Audio with the first-class interior audio experience.
and also all these features like the voice control for all scenarios, voice wake up. We also have the OTA upgrade based on the current topic. On C1.0, we are providing AI model on the vehicle, so we are using the AI LM to provide text to graphic and other
LLM applications. And also with the application of smart driving, we are seeing more certainty of urban driving. We are investing more, and based on the high-speed urban architecture, LeadMotor is now activating end-to-end LLM test driving system. So this year and the coming days, we are going to step up our investment of human power
computing power and equipment. In 2024, we also have a Smart Intelligence Technology Institute. So we expanded the team to about 500 to develop algorithm and application. At end of July, we are performing OTA upgrade on the L2 plus autonomous driving to the welcome by consumer. In the second half of the year, we're also going to launch further optimization
like point-to-point commuting on open road, the memory of parking and parking loss. In 2024, sorry, 2025, we're going to launch point-to-point smart driving large model, CNAP, so that we can continue to provide comfortable and safe experience. In October, in Paris car show, we're gonna make debut
or the first class B model, which is coded B10. This is targeting the largest segment using the latest architecture LEAP 3.5, which is going to be a next blockbuster supporting our sales target next year. In terms of marketing, we continue to dive deep based on the users and services and experience of purchase continue to improve
our marketing network. We continue to drive 1 plus N channel model with one 4S feature region supporting multiple
urban showrooms. So, around the end users, we're providing customized, personalized, and convenient services. As of end of June, we have 470 outlets, including 320 outlets providing services, covering 187 cities in the country. In the second half of the year, we're going to accelerate the channel layout
will increase the coverage, penetrate deeper into the uncovered cities and the county level penetration. We're going to improve the lead model center to provide optimal service experience. In terms of sales, still we are using the vertical management model led by retail manager so that they are helping to improve the refined management of stores.
In terms of management, we're going to use the Full Chain Digital Marketing Service Center. It's serving the end users, making alignment of all touch points, offline and online, covering all scenarios, and it has worked very well.
In terms of globalization, we're actively exploring the global business and to increase the revenue streams, providing implementation of overseas business. In May, Atlantis Group and LeapMotor JV has established the build-up of the core team, and we plan to start to sell and deliver C10,
T03 in Europe from September. Both models have been certified by EU. Right now, we have our 2,000 C10 T03 being shipped to Europe by marine shipping. In the coming months, we're going to ship out more vehicles to Europe. We plan that by the end of the
year, we're going to expand about 200 sales outlets in Europe, and by 2026, we're going to expand to 500. In Q4, other than Europe, we're going to go into Asia Pacific, Middle East, African and South America to promote the sales of Europe. We plan
a four-day Leap Motor International media event at the end of September, inviting first-class media to test-drive C10 and TO3. Working with Delantis, we come from channel, network, after-sales, service, auto finance, product, spare parts, and empowerment. It's a comprehensive collaboration.
Recently, we worked with Maserati under Stellantis in terms of the chassis R&D and also the adjustment. We are working together to improve the global competitiveness of Leap Motor. We're making significant outcomes and results in ESG. In the first half, we received EECOM Ready's global certification. We received a bronze medal of certification. We are
among the top 35 in 130,000 companies worldwide, which is strong support of our supply to the 3.0 parts and also funding the third-party supply chain. Our globalization is the globalization of whole vehicle plus auto parts, providing Chinese market and global market and making breakthrough in Tier 1.
OK, thank you. That was wonderful. We're now going to open up for questions. Operator, how do we do with questions? For those of you on the Chinese line, you can press star 1.
On the Chinese line, you can also enter your question by entering your question in a text chat box. We're now taking questions from the Chinese line.
the audience from the Chinese line can either ask question by raising a hand or writing it down. Yeah, let me start with a few questions with the management team. First question has to do with the GP margin. My question is in Q2, what are the major impact on GP margin in Q2? And what is the outlook for GP margin Q3? You talk about, you know, the, you know,
better margin models in 2024 and what's the contribution of C1-6?
Yeah, let me take you back to the Q1. Q1 was the Chinese New Year, which is a low season. And also in Model 2023, switching to Model 2024. So we're making some of the prize giveaways. So the GP margin was a bit low. But starting from March, as we are launching the new Model 2024, the overall GP margin has improved a lot.
and we are clearing our 2024 stock already. So in March, April, May, we are seeing year by month by month improvement. So Q2, we've got to a 2.8% GP margin. In June, we're close to 5% already. So this is on the uptrend.
So that's on Q1 plus Q2 on average, 1% Q2 to 1.8% and Q3, we know in July, GP margin in July is over 5%. So basically we are very upbeat about the full year GP margin. We are trying to get to our target for the full year. We aim to get to 5%.
and above 5% as our GP margin target. Thank you, Mr. Chu. My second question has to do with the C16. C16 and C10 was made from the same line. So how would you expect to adjust the split of the models? And what about the delivery and ramp-up? And based on the current order at hand or the backlog,
What is the stable sales number for C16? Are you revising your sales projection? Well, C10, C16 were made from the same line, same factory. That factory has a tech, will have a 30G pH, so we have two shifts.
Over 20 hours, so 10 hours per ship, we can get to 600 vehicles. At full capacity, we can get to 16,000 to 18,000 of a total volume. C10 starting from launch in March,
April, May, June, July. Well, because of the first launch, we have about 5,000 units of cells. That was April. In May,
It was slightly down, but still is close to 5,000. But in June, July, we're getting 6,000, even 7,000. So for C10, the cells was a continuation of all the product of lead motor. So we are seeing steady growth.
So now we are seeing the C1.0, it is still on the growth trajectory. In the future, we think it will get to 7, 8,000 or even higher sales. That's for C1.0. What about C1.6? From 28th of May after the launch, the overall, well, that was the June 28th, sorry, June 28th. And then in June,
from 28th of June to 28th of July, the company have got 10,000 order. This is really the best order number in the history of Lippmolta. So in the first month of launch, C16, we're getting 10,000 order, compared with the C10, we're clearly
have 30 to 40% growth compared with what happened in C1.0. So that was a single month order for C1.6. So I think C1.6 has huge potential in August, except for the first week, because for the end of the month, the policy
Well, we have been taking back the favorable policy for the first month, but starting from the second week of August, we are seeing the order picking up speed again. So we think, based on the current capacity planning and based on the order, for both C10, C16, we can get to 18,000 units combined as a sales.
And our capacity has sufficient capacity to plan for that. Thank you. Those are my two questions. Okay. Phone number 0464. You have the floor. Mr. Zhu, Mr. Wu, Mr. Shen.
I am Dan Ling from CICC Auto. Congratulations to the results. I have two questions. First of all, on the R&D expenses, Mr. Wu mentioned R&D expenses has grown a lot this year. What about a four-year outlook? What the R&D expense would be? And also smart driving, you mentioned that
based on the end-to-end investment, you're going to invest more on end-to-end. So what exactly are you planning to invest in those regards? Now my second question has to do with the new trade-in policy. Have you seen the trade-in policy having results? You have some promotion campaign, a policy to go with that. So I was wondering how the management evaluate
the benefit from the trade-in policy to sales. Yeah, thank you. First of all, R&D spend in the first half, it grew by about 50%, mainly because we are increasing the investment of smart driving, including people, computing power, operating expenses. And on the other hand, as we have more models, as we say, we have seven models in the pipeline,
which will be launched in the coming year or two. So we need more R&D headcounts. So that means more investment. For the full year outlook, for this year the R&D spend for the full year will be growing by about 50%. Because the second half last year compared with the first half last year,
we have seen a big growth of headcounts. So therefore, for the full year, we will say 50% growth of R&D compared with last year. So that will be R&D. Secondly, for smart driving, Leap Motor Smart Driving was established four years ago, where we have a dedicated team on smart driving algorithm. Previously, in terms of people,
Elgo or the competing power, we have limited investment. But starting from last year, we have been gaining traction, growing the headcount to 200 to 300 people. We have 400 people. So by the end of the year, we're going to get a team of 500 in smart driving. So more headcount. At the same time, we publish the smart driving algorithm coming
from the electronic architecture is now spin off as a special institute for smart driving. So that team has spun off to be a dedicated team to invest in that area. And also we have the BEV model using BEV architecture so that our autonomous driving algorithm, we have OTA or C10 is using BEV model.
In the second half of the year, we are going to do the point-to-point commuting model so that we can provide OTA for users, maybe in Q3 or Q4. Now, subsequently, we're also going to implement the urban NOA and large language model, which is end-to-end.
Well, when it comes to progress, people are all going that direction. There's not much of a gap. So we hope to take one or two years, maybe by the end of next year, the lead motor autonomous driving could become tier one player, which is our goal. Right now, this is the biggest part of investment of R&D by lead motor. The third part
When it comes to trade-in policy or for new policy, it has brought a lot of sales like TO3. TO3 really sees some growth from trading in because it has a lower selling price. So compared with the subsidy or without a subsidy,
Well, this is quite a significant portion when it comes to the trade-in subsidy, which allows the customer to find it more affordable. So therefore, with the over new trade-in policy and the C1-6 launch, all these factors have resulted in a nice sales breakthrough in July, from 20,000 to 28,000, close to 30,000.
we expect in August, we should be selling more than 30,000 units. That's the way it looks like in terms of orders. It's only 15th of August, halfway through the month, but we have over 15,000 orders, which is a new record for Leap Motor. So going forward, we are very optimistic of ourselves.
Thank you, Mr. Zhu. That was very clear. Next question is from 0585. You have the floor. Please ask your question. Thank you, Mr. Zhu. I'm CLSA analyst, Xiao Kangkai. I have two questions. First of all, as I mentioned, early August, you have adjustment of the sales policy. You are favorably optimistic.
And indeed, if we go on like this, what's the sales target this year? Are you going to be focused a bit more on the profit side? Or even if you are achieving higher sales, are you going to ensure higher volume, striking the right balance? Because right now we can see you are having more capability in autonomous driving. So this means more consumers are buying the high-config versions.
contributing to SP, contributing to GP margin. So my second question has to do with overseas. You talk about the TO3 have achieved the launch of the pilots of TO3 in the short term. So what is the ramp up in Europe? Are we going to see the launch really quickly in Europe in terms of the production? Okay, the first question you are asking about the sales target. Well, we are still aiming at 250,000.
a quarter million unit, as it stands now, we are pretty comfortable and confident that it will happen. Now, in terms of balance of sales and profit, definitely we want to strike a balance. We want to achieve 5% to 10% GDP margin as the target, and also 250,000 sales target. We hope that
we want to reach the minimum of each and every of the target. That is the balance in its own right. So that's between GP and sales. Now, as lead motors, autonomous driving, having improvement of performance, and also C10, the APA, autonomous parking, I think the autonomous parking
is at the top level in the industry already. In terms of Thomas driving, the expressway NAP, we have got to the level which is the leading or at the top level, equivalent to the industry. And also we are doing point-to-point commuting model. The point-to-point commuting is aimed to be launched within the year. It's a great benefit.
So there's no need to take over. And for the usual route from your home to company, a fixed commuting route can be done with zero handover. It's kind of autonomous driving model. So this is really thanks to the autonomous driving investment, and we are enjoying the benefits. People are most popular about the end-to-end. We are not really different from others. We are at the same level.
So LeadMotor, based on our autonomous driving technology, we are confident that in terms of timing, we should be able to launch this point-to-point autonomous driving at similar time points. Now, to your second question, in Europe, the production in Europe. Now, previously, as mentioned,
Lead Motors 2 model, TO3, C1O, have both been certified by EU. TO3, the right steering model, and right steering model C1O have also been certified, which means we are able to sell in many countries. Many countries
Many countries will ride steering wheel, many small countries. So basically you need to have the permit, right? You need to have the permit and license. We are able to sell. So that has been done. And now the 200 stores, the 200 outlets will also be deployed in Europe. Starting from Europe in September, we're going to have the sales
In September, we're also going to have the media test drive campaign in Europe, which is the official launch of the Libmotor overseas sales. Now, because EU policy uncertainties, so we are taking two models at Libmotor. The first model is we're using KD, the knockdown approach, to be assembled in Poland.
So that model, of course there are many details to be R&L, including to what extent are we going to break it down for final assembly in Poland and to meet the European policy. Are they calling for 40% or whatever thread hole? It's really based on the requirement on the policy for localization.
So, but still, we have to be doing this way in Europe for local manufacturing. It's a matter of time. It's just a matter of timing. We're doing it already. We're evaluating the best way to work with this Atlantis, to work with them to produce the models in their European factories. So this is the end game. We are going to get to the end game in Europe.
So are we going to get there earlier or later? Well, it depends on ourselves. It depends on ourselves in Europe. It depends on the final tariff from EU toward Chinese EVs. And we have to strike a balance of these factors and the cost structure to balance our progress of localization. Thank you, thank you so much.
Now, 4530, please ask your question. Hello, everyone. I'm from BFFA Securities. I have two questions. First of all, based on ASP, the Q2 SP is about $100,000 compared with Q1.
which is $104,000 slightly lower. So, I was wondering, is it because in Q2, you have some promotion or clearance of stock, clearance of 2023 models? And also, what do you think of the ASP in the second half? What's the trend of the average selling price, C10, C16? You're going to see some momentum.
and also the exports. Well, export is not much of an impact because you are selling to LeadMotor International. That price is still kind of low, just kind of a cost plus, so it's not going to contribute too much on the sales. But my first question is the trend on ASP. My second question is about next year, LeadMotor International Outlook, because previously when we talked to management,
you mentioned that lean motor working with Stellantis in terms of the sales next year, the year after next, you actually have very high target for GV margin, operating margin, but considering recently in Europe, in macro, and the weakness of the sales of vehicle, including IC vehicles, and so Stellantis margin is actually lower than expectation. So I wonder,
Is it going to have any impact on the margin target next year, coming from these macro factors? Are you going to revise the target for margin? Thank you. Thank you. First question on the SP. Now, in Q3, Q4, it could be slightly better than Q2, because C1-6, for a high price model, we have more high price model, and also some offsets.
As mentioned, the trade-in policy, which brought about the sales of TO3, we might have more TO3 sales. But in the end, we still hope to strike a balance. The several models, C11, C10, C16, and TO3. C01 is a bit smaller in volume. So basically, they are a bit average,
even, about 25%. They are all about 25%. By that target, the ASP will be further improved, coming from 100,000 to 110,000. Another source of high ASP, we are different from XPeng and NEO. Our distributor model, you know, for distributor,
we are eliminating the 10,000 distribution fee. So based on the direct sales model, our price is 120,000, 130,000 because the distributor fees is actually net of the sales dollar amount. So for overseas, we are pretty optimistic
because in this Atlantis, they have their strength, they have channels, they have resources, they have the service, they have the spare part distribution, finance, insurance, they have a very healthy system. And because of that, that's the reason why we're going to have 200 outlets in Europe in September to sell lead motor brands. So those are in our favor.
Of course, we have to be looking at the EU policy. If the tariff increase, lead motor will be the fastest to make in Europe to avoid some of the tariff
So this effective way to circumvent tariff. These are unique advantage to LeadMotor. In terms of sales, we are maintaining 6,000 to 7,000, or even higher, our sales target to overseas. Next year, we're going to aim for tens of thousands. Of course, there are some uncertainties because of geopolitics. The overseas, like in Europe and US,
the trend for new energy vehicle will be slowing down. That is a big hurdle. As mentioned tariff, they might slow down our progress of internationalization. But compared with our peers, compared with the market at large, I think lead motors,
overseas operation in our localization, local manufacturing, local sales, we are at a better advantage compared with peers. Thank you, Mr. Wu and Mr. Chu. Thank you. Now, phone number ending with 7946, you have the floor.
Hello, Mr. Chu. I'm Yongxin Auto. My name is Yu Xiaofei. Congratulations to excellent Q2 results. I have two questions for you. First of all, some other analysts have mentioned about the volume and price. So for this year, we can see BYD
They are pricing quite aggressively. John Venture, they are now taking back discounts, rebates. They are taking back rebates. So I wonder what Mr. Zhu has seen in the market. What is the market demand since August? What do you think of the competition landscape?
in the days to come, and what about demand? And also my second question is, like you have done a lot of optimization reform in channel, you're driving the N plus one model, which is quite a success. So my question is the new channel models, how does it contribute to the customer satisfaction and brand reputation? Okay, starting from the market,
in July, NEV penetration is over 50%. Our estimate is, well, if it's above 50%, it will mean it's all going to be downhill from here. It's going to be accelerated from here. If someone is buying ICE now, people are going to question you. What are you thinking? Because you are buying something that's a back work as a technology. That's the point of view from China.
I think the market demand for NEV or for electrification will be further accelerated. So that's what we think. For every OEM, we have to capture the important period of the next three years. After three years, we're barely going to see ICE vehicles. It's going to be ER-EV, hybrid, plug-in hybrid, or even BEV.
We are not going to see pure ICE vehicles. That's our view. So in three years, in three years for Lipp Motor, this is critical. Are you able to become a top player in three, five years?
are you going to be the top five in the market? That has to do with your survival. If you can survive, if you couldn't survive, there's no chance. Right now we are grabbing share from ICE, it's still easy, but in the future, no more share to be grabbed from ICE. You're going to compete with each other, it's going to be more difficult. And if you don't have the size, if you don't have the size, you're not able to compete.
Because if you don't have the volume, you're not having the size, you don't have the cost advantage, it will be difficult to compete. So therefore, from the point of view of lead motor, we are feeling volume is more important than GP margin and GP. Of course, we are not going to sell at a loss. We definitely need to have some GP margin. But our strategy is to improving the GP margin year by year. We do it with a plan. We do it with a plan like last year,
We still have a loss, but this year, our average margin, we are seeking to get to 5% or even higher. Next year, we are aiming at 10% margin. Ultimately, I think Lead Motors' GP margin should be 15%, which is a mid-term target. So that's our strategy for GP margin. Now for the volume, our position in the market, we do have a good plan.
First of all, on the C series, C16 was the last C series. C11, C01, C10, C16. We have deployment of models across the board for 150,000. So in that segment of 150,000, we are now selling 30,000 units.
30,000 units means a certain market share. So we are gradually expanding the market share of every product model. So the four model will always be there. In 20 years, the lead model will still be C11, C10, C16, and C01. We're going to capture this segment still in 20 years.
Mr. Wu was talking about in the October Paris car show. We're going to launch the first B-series, B10, which is a five-seater SUV. A B-series is a traditional, just like a traditional class B vehicle in the ICE world. However, it's going to be a very competitive, even though it's a class B vehicle, but it's prized as a class A vehicle.
and we are aiming to price it as a class A. So next year, B1.0, we are very happy about it, and we'll be using the LEAP 3.5 architecture, and also using... It's actually $100,000 to $150,000, which is going to the top volume segment, $100,000 to $150,000. So in next June, we're going to have the second model from the B series,
We're looking at the model. I really like the styling of the model. I'm very confident that the B01, which is the sedan on the same B platform, and also B05, which is the crossover style class B vehicle. So the three model, we're aiming at 40,000 units of sales. So if you've got 40,000 per month for B series,
Then in 2026, we're going to have a Series A and Series D corresponding to 60,000 to 80,000 and 250,000 RMB. So Class A, Series A and Series D. So we have A, B, C, D as four platforms. So we have three, four, four, three as a lineup. So the monthly sales will be able to cover the full scenario, the full market demand.
That's how we plan to deploy our lineup from 60,000 to 250,000 price range. Now, Leap Motor, we're looking at the NEV ranking. We're ranking number seven, ranking number eight or nine. So by the end of the year, we want to become top eight. We're not saying like if GD, they have many brands, we don't put them together.
Chang'an, they have many brands. We don't put them together. We're actually looking at as a group, including overseas OEM, domestic OEM. We are aiming to become top eight. And next year, we're going to top six. The year after next, top five. So that's how we are looking at the ranking of sales. We want to climb up the ladder. LeapMotor, we call ourselves turtles.
in the race, the turtles making step out, one step after step, improving market share, improving our GDP margin. After three years, three years from now, you won't be talking about the new startup or the old ones or incumbent, there will be no ICE, there will be no incumbent. Everything will be electric. By then you have to be top five in China. If you're top five in China, it will mean that in NEV,
you're going to be the leader in global NEVs. It's virtually the same thing. So that's our view on the market landscape and our own strategy. Number three, channels. You asked about channels.
Our market strategy, like in China, we want to dive deep into the Chinese market. For overseas, we rely on partners. We rely on Stellantis with their global sales network, global sales system, as the resources to support us, to plug in our competitive product by Leap Motor. For domestic market, we, as we say,
This year and next year, we are optimizing the channel mostly. We're optimizing channels to refine our management. By optimization, I mean we want to reduce the investment entities within the same city. We want to break it down by different regions. So I don't want the region to be overlapped.
so that people can actually capture one region and dominate that region. So normally in a Tier 1 city, even for Tier 1 city, we want no more than four distributors. We hope three distributors can cover one Tier 1 city. So we can cut back on unnecessary competition among investors so they can optimize the outlets.
The OnePlus N model is to have more touch points with low cost touch points. Of course, we'd also need a 4S store as a showroom, delivery, service, and sales, so that we can put the mind of user at peace, but it's also making it easier to buy. So this is the standard we want to build up the system. In the end, it comes down to the service capability, the user satisfaction, and the cost benefits.
So how do we refine the management? That is what we are thinking in terms of optimizing the channel so that we can rationalize the outlets. Like urban showroom is only about sales. The forest store, there are sales, delivery, repair, service integrated in the forest store. So that is the model so that we can achieve the lowest cost, but we can have the widest coverage.
At the same time, LeadMotor has been sticking to the refined management approach, which means for all distributors, we don't ask them to stock up. We just care about the out, we don't care about the stock in. So I don't care how much you stock in, we just care about how much stock out you have.
how many orders you have a day. How do you satisfy users? We don't force them to stock in. We just care about the stocking out. So for end-to-end, we want to optimize the entire process so that we can improve the whole flow from lead to deal. This is what we are different from others. We have a retail manager. A retail manager
come from a VP of a distributor group. So the retail manager is managing about 10 stores to optimize the store management, the 5S management, from customer invitation, to arrival, to test drive, kind of a full life stage, life cycle user management, and providing coaching, provide supervision and training so that, you know,
We're using the original distributor model where they are motivated to operate on the distribution and now we're combining that with the direct sales model so that we can achieve this kind of benefit without massive investment.
Because if everything is full-time, it's going to be costly. If everything is professional manager, it's going to be costly. We don't want that kind of cost. But at the same time, we want some sort of professionalism to refine the management, improving satisfaction, improving the conversion rate. So I think by one year effort this year,
our sales capability will be significantly improved. In the next two to three years, by continuous improvement, I think the distributor model that is categorized by LeadMotor will surely become a role model for others in this sector. It's definitely going to work very well. Thank you. Thank you, Mr. Chu. I have no further questions. Thank you.
Next question from phone number 9596. You have the floor. Thanks to Mr. Zhu and management. Thanks to the host. I'm from Haitong Security. I'm Liu Yiming, an auto analyst. Congratulations to the domestic and international business progress. I have one question. How do you play your product advantage in Europe?
In the last period of time, in Europe, passenger vehicles are not seeing growth in penetration of NEV. So how do you leverage your strength for product? So that those people who are not choosing the local European NEV, how do you compel them to buy from you? Okay, in Europe,
The demand from customers are very different from China. You can see in Europe, there are two types. The first are the Italian-Spanish countries, like in Israel, they are the AOO.
or the AO, kind of small vehicle, not many class B. In Germany, it's better. Nordic country, a bit better. They also have some C class, larger vehicle. So there are different preferences in terms of the size of the model. So those are differentiated. Starting from last year, Leap Motor has plan big. So based on the European demand, we want to focus on
the B10, code name B10, which is kind of a B series and A series. We're gonna prioritize smaller models. Secondly, indeed, electrification is slow going in Europe. They don't have enough infrastructure. So therefore, in Europe, other than pushing for BEV, we are also going
many users are saying about ER-EV because in Europe ER-EV will be popular. So B1-O, we don't launch ER-EV version in China, but we will have a ER-EV and more ER-EV version of B1-O. Like they can commute by using battery during the weekend on a trip. They can travel across Europe. They need a long distance
commuting, and then ER-EV is a great option for refueling. So we think in the future in Europe, ER-EV is going to be a good option, kind of a transition before electrification take place completely. And it's an excellent option. And in the end, we still hope that for a OEM,
particularly for this mid to low-end product. We're not like luxury vehicles. They don't care about the freight. But actually, we care about the freight. It costs 1,400, 1,500 euros to ship a vehicle from China to Europe. If you add a tariff, you basically have no profit to speak of. So therefore, you have to go for local manufacturing. So,
From that end, we are actively planning local manufacturing in Europe using the current facilities and resources for the NEV retrofit. So we can achieve local manufacturing by a low cost of retrofitting so that we can reduce the cost, expenses, improving margin,
and more competitiveness. So in Europe, definitely we have to go for local manufacturing. It has to be done fast. And also, it has to be based on what they need in Europe. They want more AO, Class A. But it doesn't mean low-end, right? They still need maneuverability, even for the smaller vehicle.
It's not like they want bigger vehicles. It's the different preferences. So we have to understand the demand and needs sufficiently so that we can plan our product accordingly to adapt to the global market. Thank you, Mr. Zhu. I have no further question. Thank you. Next question is from phone number 6861.
Hello, I'm from Chang'an Model. I have two questions for you. I'm sorry, your connection is broken up. We're not able to hear you. Yeah, my question is about, is it better now? Yes, yes, it's better.
Please go ahead. Yeah, you are loud and clear now. Okay, great. So I have two questions for you, Mr. Zhu. Smart driving, your goal that the end of last year, we're going to be tier one in smart driving. So are you become more aggressive or more positive and active in smart driving?
And what do you think of the investment of R&D of autonomous driving this year? Secondly, on overseas, because in September, you're going to have sales starting up in your seats. How is marketing channel ready by September? How many channels will be available to sell your vehicle?
On the marketing side, you talk about in end of September, you can have a test drive campaign. Are you planning for other things, like release, launch, ceremony, or other campaigns? Yeah, first of all, Thomas Driving, for myself, for the DeepMotor team, intelligence has been something we do long ago. We started with deep learning in 2011, 2012.
we have facial recognition, license plate recognition, we have deep insight. But for onboard application, you can see people keep saying, like 2014 and 15, when we started to make vehicles, Elon Musk had been saying that Tesla will have autonomous driving right away. But now, all the way to now. But now with the LMBV, with this new technology,
smart driving, or assisted driving, or the high performance assisted driving become more and more, you know, kind of something that's more visible. We can see this is more and more reliable. This will help to relieve the fatigue of driver, so making driving easier.
That is actually a bit more certain now, a much more certain now. So which is why we're investing more starting from the first half last year, including investing on BEV, investing on end-to-end, we're investing more on the people, computing power, and a data management platform. By using last year and the first half this year's investment, now for BEV has been launched at the same time,
the point-to-point commuting model will be launched by the end of the year by way of OTA. And next year, we are very confident that when it comes to end-to-end, we're going to launch the end-to-end capability. So how much money to spend? I think the current investment makes the most sense now because in many areas, people have been talking a lot
they have already made a lot of pitfalls, they have made all the mistakes already, like the map or without map. We don't want to follow those pitfalls. If they have already done all this, we will go back to the end-to-end large model. So in some cases, there is only some foundation, some basis. We don't really want to reinvent the wheels if they already have the foundation. This will be time-saving.
So in terms of the investment, LeadMotor has always been seeking the minimum R&D investment, but we're aiming the best outcome. That's always been the philosophy of LeadMotor. We're looking at the best timing for making that investment. It's not like the earlier the better, the more the better. We're seeking the best timing. Sometimes you start early, but you arrive late.
Sometimes you are just going after the hype, and Leap Motors never go after the hype. We invest when we should, when it makes sense, because this is the best thing that makes sense to us. And computing power is used in the most economical way. Right now we have surplus of computing power. Many governments, many organizations are buying NVIDIA servers.
We just want to rent them out. We don't want to buy. A lot of people are selling them. A lot of people are renting them. It makes the most sense. I can rent computing power. This is a saving of R&D. That's on the computing power. And also, the data management platform, we develop the platform in-house. We don't go for the outsourcing.
So this is all about improving efficiency and improving optimizations to have the minimum investment but maximum output. So that's on the autonomous driving. We only invest 100 million on the competing power server. The rest, we rent them out for 100 or 200 million. For OpenSea Channel, as we say, in September, we're going to have 200 outlets ready to be selling LEAP motor.
On the marketing side, in September, we're going to have the test driving campaign. In October, we'll be part of the Paris Auto Show in France. That auto show is going to be the largest in Europe, which is also a great opportunity for us to make our name heard.
Thank you, those are my two questions, thank you. Next question from phone number 1909. Next question from phone number 7820.
Thank you. I am the freeze analyst, Lei Xiaoyi. My question is, in the first half of the year, what about Tier 1 sales of components? What is the revenue generated from Tier 1 sales? And what is the full year outlook and profit outlook for the full year from component sales? And also, you have mentioned that
you've been working with the brand under Stellantis on working together on the chassis. So I wonder, in terms of supply chain, are you having progress working with Stellantis? Is it possible that you're going to sell some product to them later? Yeah, component sales in the first half, we have good results. The electric drive,
We have added two SOPs. So SOP will not generate sales until 2025, 2026. So automobile industry analysts, you know that very well. From SOP to sales is a lengthy process. Now, in terms of batteries, and this year in the first half, we have a few tens of millions of sales, including ESS,
and some of the electric utility vehicles. And they have generated quite a bit of sales. Close to how much? 60, 70. Sales. For working with the Atlantis based on
Light fixture, LEM is a business. There are some sales to Stellantis and electric drive. And also subsequently, we are going to make announcements accordingly or publish some other news. I got it. So you're saying working with Stellantis, we have some SOP to Stellantis already? Yes, that's right. Understood.
A further question on your chassis collaboration with Stellantis. Is it for any model on the slip motor? Well, C10 and the subsequent models in the lineup, the chassis remodeling will be supported by the chassis team from Stellantis. They will work with us for the chassis remodeling.
or tuning, chassis tuning. Yeah, another question, because the end of the year, we're gonna have another model, SUV, five-seater SUV. What about SP, what about the sales, any launch time point, any guidance? Well, that product will be launched, making debut in Paris Car Show in October. The first time we use the LEAP motor 3.5,
price within $100,000 to $150,000. So for that product, we are having high hopes. This is going to be another blockbuster product. I see, so I'm saying, well, this is going to be making debut in Paris car show, but in China, it's going to be debuted in Guangzhou car show.
Aiming at next Q2, we are going to start the delivery next Q2. Okay, no further questions. Thank you. Thank you, Mr. Chu. Well, can we have the last question? Yes, the question is from phone number 6132. Thank you.
I have two questions about overseas. First of all, I'm from City Security Wu Pin Yue. My question is on Lee Motor.
How many people are working on international business, including Leap Motor, Leap Motor International, JV? In terms of roles, sales, marketing, production, R&D, is there any split of the headcount? Secondly, some others have been talking about overseas demand. Overseas demand is very different from China demand. Europeans, they like to travel a lot. They like to put a hook, a tow hook at the back of the vehicle.
So other than these models, is it possible that you're going to localize design so that meet the demand overseas? Those are my questions, thank you. All right, Limbota International Business, Overseas Business, as mentioned, is an SLI model. SLI meaning they can use their
advantage without repetition overlap. So we have very few management team of Leigh Motor International. We aim to keep it below 50 people. They're just working on the product, demand, market management. As to every country, every city, we want to use the original teams on the ground, the sales and marketing team on the ground. So in every country, they are running many brands.
So LeapMotor could be just one part of the brand portfolio. Like they used to run 14 brands, now they run 15 brands.
we just sum up the management fee allocated to them. So we can quickly deploy in multiple countries. At the same time, this will make saving of the operating costs. So that's our structure. So this year, we want to have a team that are small in headcount, but those are elites. In terms of role assignment, like the model that we have, the Stellantis, we're using mostly team from Stellantis.
Lead motor is in supporting role, supporting Stellantis, so that we can cut back on operating cost. Now, overseas models, indeed, there are many differences. For example, charging, the three-phase, 1,000 watts, this is the demand. But in China, 6,000 watt use two-phase, not three-phase. And as we talk about tow hook, this is also going to be
The hook is going to be fitted on C1O, a large vehicle. This is a necessary component, right? In Australian market or European market, those are necessary features, something that can be personalized. And because the market, we are predominantly relying on the market team on the ground,
So we actually will have better understanding of the demand compared with the peers. We could get a better insight, faster insight. We can act faster to be part of the market compared with the peers. OK, thank you. Thank you. That's very clear. OK, thank you so much. In the end, I'd like to thank all of you for joining this learning call. I hope to meet you next time. If you have further questions, feel free to reach out to the LeapMotor IR team.
With that, we conclude the call today. Thank you and goodbye.