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Hello, ladies and gentlemen. Thank you for standing by for Li Auto's third quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Janet Zeng, Investor Relations Director of Li Auto. Please go ahead, Janet. Thank you, operator. Good evening and good morning, everyone. Welcome to Li Auto's third quarter 2024 earnings conference call.
The company's financial and operating results were published in a press release earlier today and were posted on the company's IR website. On today's call, we will have our Chairman and CEO, Mr. Xiang Li, and our CFO, Mr. Johnny T. Li, begin with prepared remarks. Our President, Mr. Donghui Ma, and Senior Vice President, Mr. James Jiang Jingzhou, will join for the Q&A discussion.
Before I continue, please be reminded that today's discussion will contain forward-looking statements made under the safe harbor provision 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 certain company filings with the U.S. Securities
and Exchange Commission and the Stock Exchange of Hong Kong Limited. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that Li Auto's earnings press release and district conference call include discussions of unaudited U.S. GAAP financial information as well as unaudited non-GAAP financial matters. Please refer to Li Auto's disclosure documents on the IR section of our website.
which contain a reconciliation of the un-audited, non-GAP measures to comparable U.S. GAP measures. Our CEO will start his remarks in Chinese. There will be English translation after he finishes all his remarks. With that, I will now turn the call over to our CEO, Mr. Xiang Li. Please go ahead. Hello, everyone. I am Li Xiang. Welcome to today's phone conference.
In the third quarter, China's New Southern Motor Company has reached a 50.3% growth rate. New Southern Motor Company's quarterly sales volume exceeded that of fuel trucks for the first time. At the same time, the head-to-head effect of brand sales is becoming more and more obvious, especially in the New Southern Motor Company's car market with a price range of more than 200,000 yuan. In the third quarter, the market share of the top three major brands has exceeded 50%. Among them, Ideal Motor Company's quarterly sales volume has reached 150,000 yuan, which is an increase of 45.4%.
The market share has increased from 14.4% in the second quarter of this year to 17.3% in the third quarter of this year. The high market share and market share in the third quarter of this year further stiffened the position of Ideal Automobiles as the best-selling brand in China with more than 200,000 units sold. In addition, in the entire city car market with more than 200,000 units sold, Ideal Automobiles has sold more than many traditional European brands for the first time. The market share is in the top three.
and become the top brand in China. Faced with the increasing number of car companies entering the market, the ideal R series sales are still strong. We continue to innovate. Through the high-quality OTA update of one version per month, the functions of intelligent driving, intelligent cabin and whole car experience are constantly evolving. In three quarters, the average monthly sales of the R series reached 50,000 units. It is worth mentioning that
Thanks to the firm investment of R&D, Ideal Car's intelligent driving ability has been rapidly improved and continues to break through. The sales ratio of the AD Max model continues to improve. This not only represents the user's recognition of Ideal Car's technical achievements, but also further optimizes our product structure. In the third quarter of 2024, the total revenue of Ideal Car reached RMB429 billion, a growth of 23.6% and a new high in history.
We continue to optimize product structure, expand scale efficiency, and improve operating efficiency. The 3G毛利率 further increased to 21.5%. By adjusting operating profit, it exceeded RMB 4.4 billion and reached the highest level in history, and achieved the operating cash flow of RMB 1.1 billion. In October, Ideal Automobile's cumulative delivery exceeded 1 million, took 58 months,
to become the first brand in China to reach one million transactions. One million transactions is a milestone, and a new beginning. In the future, we will continue to develop our technology, maintain our innovative advantages, and strive to create excellent products and services. At the same time, we will stick to efficient production and transaction rhythm, and strengthen our industry's leading position. In the fourth quarter of this year, we expect to reach 160,000 to 170,000 transactions.
led to about 520,000 to 512,000 transactions per year in 2024. In terms of smart driving, since July, our new generation of smart driving solutions with full-fledged resource end-to-end and vMware have been updated quickly with two to three official versions per week. In three months, the model training data scale has increased from 1 million to 4 million.
The average traffic journey, MPM, has doubled to about 2.5 times. Based on the powerful data model and the full-scenery coverage, we have a deep understanding of the traffic environment. This new dual-system pricing solution can greatly improve the user's pricing experience. On October 23rd, we launched OTA 6.4 push for the MEGA and Ideal R series vehicles. Over 320,000 AD Max users
to fully promote the new chassis design. Since July, the nationwide WUTUO NVA has been promoted, and in just 13 months, the AB MAX technical center has been realized again. In addition, the OTA6.4 has brought a more vibrant ideal class to all owners. The task master 2.0 of large language model chassis, charging experience upgrade, and other smart space and smart electronic function upgrades and experience optimization.
In the industry-leading accumulated training journey, we have continuously innovated for smart driving technology and established core advantages. As of October 30, the ideal car smart driving training journey has reached 2.6 billion kilometers, and the ideal car user MMI general journey has reached 13.9 billion kilometers, and the accumulated use of smart sports car functions has exceeded 60 million times. Ideal cars take the initiative to accumulate safety for users,
There have been 3.45 million small accidents, including 516 extreme accidents. In the third quarter, we will continue to upgrade sales and service networks. By the end of September, Ideal Motors will operate 479 retail centers in 145 cities across the country, and 436 post-sales maintenance centers and auction sales centers in 221 cities.
The number of central power stations located in the head of the car city and high-quality property has reached 165. The number of single power stations is 9 to 11. The total power stations are more than 3,000. While supporting the increase in the current vehicle sales, we are also preparing for our new pure-electric SUV. In terms of charging network construction, as of now, Ideal Motors has opened 1,000 Ideal Super Charging Stations in operation.
with 4,888 superchargers covering 175 cities in 31 provinces nationwide. Among them, the ideal high-speed supercharger station has reached 582 stations and ranks first in the industry in the construction of high-speed supercharger networks. In addition, we will continue to strengthen our cooperation with high-quality industry partners. On October 12, we officially reached strategic cooperation with China's Shihua. The two sides will build a charging station
and the Internet of Things. We have built a top-of-the-line supercharging platform with more than 1,200 high-power, high-stability third-party top-of-the-line charging stations. In the field of charging, we will maintain a stable pace. The efficiency and reliability of charging vehicles have always been one of the core concerns of consumers. We will continue to accelerate the charging network layout,
and actively explore new technologies. Our goal is to build a charging network ahead of the industry, including highways and cities, next year, and to prepare for our new charging SUV model. We will also continue to provide more user-friendly and reliable unlimited experience. Finally, I would like to share with you the results we have achieved in ESG. In September this year, with the company's management and product quality security,
Hello, everyone. This is Li Xiao, and thank you for joining today's earnings conference call.
In the third quarter, China's NUV penetration rate has reached 50.3%, marking the first time NUV overtook ICE vehicles in terms of new vehicle registration. The market share of leading brands continue to expand, especially in the RMB 200,000 and over NUV market, where the top three brands combined account for over 50% market share in Q3. Li Auto delivered over 152,000 vehicles in Q3.
of 45.4% year-over-year and driving our segment market share to 17.3% in Q3 compared to 14.4% in Q2. Our historically high quarterly deliveries and market shares solidified our market leadership in the segment. In addition, our sales in China's overall RMB200,000 and above PV market surpassed multiple established European premium brands for the very first time,
the top three brands among all brands and number one across all Chinese brands in this segment. With a multitude of players entering the EREV market, Li-L series sustained its strong sales performance, partly attributable to our ongoing innovation and high-quality monthly OTA updates, encompassing improvements in autonomous driving, smart cockpit, and electric drive. In Q3,
The average monthly sales of LEED L-Series exceeded 50,000 units. It is worth noting that ADMAC's take rate continues to grow, owing to our investments in R&D that have led to rapid iterations and breakthroughs in our vehicle's autonomous driving capabilities. The deployment not only reflects user recognition of our technologies, but also improves our overall product mix. In the third quarter,
to continue to upgrade our sales and servicing networks. As of the end of September, we had 479 retail stores located in 145 cities, as well as 436 service centers and the auto authorized body and paint shops operating in 221 cities in China. Among these, 165 sales centers are located in major auto parts and premium commercial properties.
with 9 to 11 display spots per store, driving our total display spots to over 3,000. This supports the sales growth of our existing models while also prepares us for the launch of BVSUEs. On the supercharging network as of now, we have 1,000 supercharging stations with 4,888 charging cells operating in 175 cities across 31 provinces nationwide.
Notably, our network includes 582 Li Auto supercharging stations along highways, the largest network of its kind in China. In addition, we continue to strengthen our collaboration with premium partners in the industry. On October 12th, we officially formed strategic cooperation with Sinopec on charging station construction and platform interconnectivity. As of now, our Li selection supercharging network
includes 1,200 high-power, highly stable third-party charging stations. We remain on track in terms of our BEV strategy. Charging efficiency and reliability remain top concerns for BEV customers. We will continue to accelerate the deployment of our charging network while actively exploring new technologies, aiming to establish an industry-leading charging network covering both highways and urban areas by next year.
The initiative will prepare us for the launch of our BEV electric SUVs and ensure that we continue to provide convenient and reliable charging experience for a growing number of users. Moving on to autonomous driving. Since its release in July, our proprietary full stack end-to-end and vision language model autonomous driving solution has been iterating at a rate of two to three versions per week. In just three months,
The amount of training data per model went from 1 million video clips to 4 million, while the average mileage per intervention increased nearly 2.5 times. Our new System 1, System 2 Autonomous Driving Solution significantly enhanced user experience with its robust model and deep comprehension of the traffic environment. On October 23rd, we began rolling out OTA 6.4 for Leemega and BL series.
The update includes our new autonomous driving solution, which is now fully deployed on over 320,000 AD Max vehicles, only three months after we rolled out our nationwide map list in LA in July. The LTA 6.4 update also features a more lively Li Xiang Peng Xue, Taskmaster 2.0, powered by large language models, and improved charging experience, among many other improvements. Our industry-leading amount of real-world training data
is a key competitive advantage and powers rapid innovations in autonomous driving. As of October 30th, our total real-world training mileage has reached 2.6 billion kilometers, with NOA mileage hitting 1.39 billion kilometers, and automated parking has been activated 60 million times. Additionally, our active safety features have prevented 3.45 million potential accidents
including 516 severe accidents. In Q3 2024, our total revenues reached a record high of RMB 42.9 billion, up 23.6% year-over-year. Our growth margin expanded to 21.5% and non-GAAP income from operations hit an all-time high of RMB 4.4 billion. And operating cash flow reached RMB 11 billion.
The solid financial performance is driven by our improving product mix, economies of scale, and operating efficiency. In October, we reached an important milestone of 1 million cumulative vehicle deliveries in just 58 months, the first among emerging new energy vehicle automotive brands in China. The milestone marked a new beginning. Looking forward, we will continue to innovate through R&D and develop outstanding products and services.
while maintaining our production and delivery efficiency as an industry leader. In Q4 of this year, we expect vehicle deliveries to be between 160,000 to 170,000 units, with full year deliveries falling between 502,000 and 512,000 units. Last but not least, I would like to share the highlights in our ESG performance. In September,
We received MSCI's highest AAA BSG rating for the second consecutive year, a testament to our outstanding performance in corporate governance, product quality and safety, and clean energy technology. We will continue to explore cutting-edge low-carbon technologies and implement green operational management practices, proactively fulfilling our social responsibilities. I will now turn it over to our CFO, Johnny, to walk you through our financial performance.
Thank you, Xiang. Hello, everyone. I will now walk you through some of our 2024 third quarter financials. Due to time constraints, I will address financial highlights here and encourage you to refer to our earnings price release for further details. Total revenues in the third quarter were RMB 42.9 billion.
or 6.1 billion U.S. dollars, up 23.6% year-over-year, and 35.3% quarter-over-quarter. This included RMB 41.3 billion or 5.9 billion U.S. dollars from vehicle sales, up 22.9% year-over-year, and 36.3% quarter-over-quarter.
The year-over-year and sequential increase was primarily attributable to the increase in vehicle delivery, partially offset by the lower average selling price, mainly due to the different product mix. Cost of sales in the third quarter was RMB 33.6 billion, or 4.8 billion US dollars.
24.5% year-over-year, and 32% quarter-over-quarter. Gross profit in the third quarter was RMB 9.2 billion, or 1.3 billion U.S. dollars, up 20.7% year-over-year, and 49.3% quarter-over-quarter. Vehicle margin in the third quarter was
0.9%, relatively stable compared with 21.2% in the same period last year, and improved from 18.7% in the last quarter. The sequential increase was mainly due to the cost reduction, partially offset by the lower average selling price, mainly due to the different product mix.
Gross margin in the third quarter was 21.5% versus 22% in the same period last year and 19.5% in the prior quarter. Operating expenses in the third quarter were RMB 5.8 billion or 825.4 million US dollars at 0.2% year over year.
and 1.5% quarter over quarter. RMB expenses in the third quarter were RMB 2.6 billion or 368.6 million U.S. dollars, down 8.2% year over year, and 14.6% quarter over quarter. The year over year and the sequential decrease
was primarily due to the decreased design and development cost for new products and technologies and decreased employee compensation. FD&A expenses in third quarter were RMB 3.4 billion or $478.7 million, up 32.1% year-over-year.
19.3% quarter over quarter. The year-over-year and the sequential increase was primarily due to the increased employee compensation associated with the recognition of share-based compensation expenses regarding the CEO's performance-based awards in the third quarter of this year.
as the achievement of the related performance condition was deemed probable. Income from operations in the third quarter was RMB 3.4 billion, or 489.2 million US dollars, up 46.7% year-over-year, and 633.4% quarter-over-quarter.
Operating margin in the third quarter was 8%, improved from 6.7% in the same period last year, and 1.2% in the prior quarter. Net income in the third quarter was RMB 2.8 billion, or $401.9 million, up 0.3% year-over-year, and 156%
0.2% cultural culture. Diluted net earnings per ADS attributable to ordinary shareholders was RMB 2.66 or 0.38 US dollars in the third quarter versus RMB 2.67 in the same period last year and RMB 1.05 in the prior quarter.
And now turning to our balance sheets and cash flow. Our cash position remains strong and stood at RMB106.5 billion or 15.2 billion US dollars as of September 30, 2024. Next cash provided by operating activities in the third quarter was RMB11 billion
or 1.6 billion U.S. dollars versus net cash provided by operating activities of RMB 14.5 billion in the same period last year and net cash used in operating activities of RMB 429.4 million in the prior quarter. Free cash flow was RMB 9.1 billion or 1.3 billion U.S. dollars in the third quarter
worth RMB 13.2 billion in the same period last year, and negative RMB 1.9 billion in the prior quarter. And now for our business outlook. For the fourth quarter of 2024, the company expects the deliveries to be between 160,000 and 170,000 vehicles, representing a year-over-year increase
21.4% to 29%. The company also expects fourth quarter total revenues to be between RMB 43.2 billion and RMB 45.9 billion or 6.2 billion U.S. dollars and 6.5 billion U.S. dollars, representing a year-over-year increase of
3.5% to 10%. This business outlook reflects the company's current and preliminary view on its business situation and market conditions, which is subject to change. That concludes our prepared remarks. I will now turn the call over to the operator to start our Q&A session. Thank you.
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, please limit yourself to two questions. And if you have additional questions, you can reenter the queue. If you are a Mandarin speaker, please ask your questions in Chinese first, then follow with English translation.
Your first question comes from Tim Tsao with Morgan Stanley. Hi, I'm Tim. Thank you for accepting my question. Congratulations on the strong growth of the company. I have two questions. The first question is about the future growth of the Li-Xiang-L series. Our goal of 50.2 to 51.2 million in the whole year
Thanks for taking my question. So my first question is about the potential growth potential of ER-EV.
The four-year target of 502 to 512,000 units implies the average monthly sales of the L series could exceed 53,000 in the fourth quarter. So looking to next year, how much upside do you think the L series would still have? If there is ample upside, where would the opportunities be emerging from? Is it going to be new models like L5, Faceless, X4?
or further penetration into the lower-tier cities in China. So that's my first question. Okay. Tim, this is James. I will take your first question. Overall, we hope our sales growth next year will be twice the growth rate of renminbi 200,000 and higher anyway market. Thank you. Okay.
My second question is about autonomous driving.
So in September, LiAuto launched a better version of point-to-point, all-scenario smart driving with just one click. So when will such function be officially deployed in full scale? And in addition, is there any chance that LiAuto will launch its CDNLA function on the new pro version with hardware spec upgrade next year? Thank you. I'm Ma Donghui. I'll answer this question. In the past 10 months,
And we have completed several large-scale versions of the stack. From the initial light soil, to the earth, and then to the dunes. You can see that everyone's recognition and expectation of the Linxiang car stand is getting higher and higher. Then about the one-piece stand from car to car, our plan is that by the end of this year, before December, we will fully promote it to all ADMAX users.
At the same time, we will also push the national ETC and non-exit ability. We will use the VOM model to identify ETCs. Whether it is from urban to high-speed NOA or from high-speed to urban NOA, it will not exit through the ETC payment station and bring a smoother user experience to the user. In addition,
In the past 10 months, we have went through several major iterations in our autonomous driving features.
We went from reducing reliance on maps to mapless and to end-to-end, which we've seen today. And in the meantime, people's recognition and expectations for our NOA have kept increasing. And in terms of parking space to parking space at one click, our plan is to launch it to all of you AD Max users by the end of December of this year. And along with this launch, we will also be releasing the feature to pass
all of ETC pole stations automatically, which relies on our BLM model to recognize ETC pole stations so that our users can drive from highway to urban roads or to urban roads to highway through ETC pole stations without exiting NOA, which provides a more fluid user experience. And in terms of whether our city NOA will be released on pro models,
And because CityNOA relies on stronger perception and a larger amount of computing power, the current CityNOA features, unfortunately, won't be provided on our pro models. As for specifics of future models and information, please stay tuned to our product launch events in the future. Thank you. Your next question comes from Dinh Nguyen with Deutsche Bank.
My first question is about the new upcoming TOEV products. What's the timing for the first product and what's the pricing range like it to be?
and what's your expectation for the monthly source volume? Because some of the local media reports actually will have i6 in the middle of 2025. Can you confirm that? Thank you. I'm Li Jiang. As for the detailed product design, we will share it with you through the official product launch at the right time. Because for such a new product, the work of confidentiality is still very important. Overall, we are still very confident about the follow-up product design.
First of all, as for exact information about our launch plan, I will be releasing this information at the appropriate time in a formal product launch event, because for automotive products, confidentially, LED is quite important.
And overall, we're still very confident about our best products overall. And if you've seen with our L-series, our EV models, they have performed very strongly in the high-end new energy vehicle market. And it is also our goal to make our best SUVs our Tier 1 players in the high-end BEV market.
Thank you. My second question is about the CEO rewards for this quarter. As I mentioned before, we have exceeded 500,000 yuan, which can be confirmed. We haven't reached 500,000 yuan yet. How much is confirmed in this quarter? And how much will be the main cost in the next quarter? And what is the principle of the cost distribution and time distribution? Thank you.
My question is about the share based conversation for the CEO. We know that the previous day announcements that more than half a million units in the past 12 months, you can get one CEO, some options. Can I know how much expense you're looking in the third quarter and how much you are going to be in the number four quarter this year? Thank you. Hi, this is John.
Regarding the CEO share base compensation, as of September 30th, the company expects the Q4, the fourth quarter delivery plus the delivery in the first three quarters will probably meet the CEO's performance required for the first batch of share base compensation awards.
which means the total delivery in the trading 12 months first reached over 500,000. So as a result, we recognize the share base compensation expenses in the third quarter of RMB 593 million. And there will be
additional RMB 42 million in the fourth quarter. And every batch of the reward, which means the next 500,000 milestone, the expense will be the same as each batch. Thank you.
Your next question comes from Tina Hao with Goldman Sachs.
At the same time, I see that this year, compared to the 3rd quarter, the sales of the 4th quarter increased by about 10,000 to 20,000 cars, but the growth of the 4th quarter and 3rd quarter last year was actually 26,000 to 27,000 cars. Considering that we actually have one more car this year, but the overall sales are relatively conservative, I would like to ask how this is considered. Is it possible that this year's sales policy will not be as much as last year?
So my first question is regarding our sales policy strategy into the fourth quarter of the year. And then also in relation to that, our fourth quarter volume guidance seems to be quite conservative, incremental volume in 4Q versus 3Q compared to last year. So wondering how we're thinking about the volume and the sales policy.
Okay. Hi, Dina, this is James. I will take your first question. First of all, against the competition, sales of the L-series remain strong, mainly due to the strengthening momentum of our brand recognition with over 1 million deliveries and the rapid breakthrough of our autonomous driving capabilities. We are very confident about our sales in the first quarter.
The competition has been intense since the beginning of this year. Against such tough competition, our market share has been continuously increasing. In the third quarter, our market share in the renminbi 200,000 and above, any way market reached 17.3%, a record high year to date. Meanwhile, since L6 launch, its monthly delivery
have exceeded 25,000 units with community deliveries exceeding 139,000. LE-L6 is the best-selling model among the new vehicles released this year. As to sales, we initiated a new round of change in the second half this year to give more operating autonomy
to each region. The person in charge in each province will be responsible for overall operations, not just the sales as in the past. With operating autonomy, each province can run region-specific sales and marketing activities according to the local market condition, further increasing brand awareness and market share.
If we look at this region by region, the competition landscape varies for different provinces. We will formulate region-specific sales policies according to the local conditions. Thank you. Okay, thank you. My second question is also related to our sales network.
My second question is regarding our sales network expansion plan. So what will be our target store number by end 2024 and also by end 2025? Thank you.
Okay, so we expect our retail stores to reach about 500 at the end of this year. Our key channel adjustments we have been implementing this year is to gradually replace lower performing shopping mall stores in our network with sales center in Leading and auto parks. As a result,
the proportion of sales centers in auto parks will increase to over 40% at the end of this year from 24% at the end of 2023. Our total displaced sports in China is expected to reach over 3,600 at the end of 2024 from over 2,600 at the end of 2023.
Meanwhile, we are expanding our coverage in the third tier cities and some key fourth and fifth tier cities in terms of sales and service networks. As to the store target next year, we will share that after the first quarter earnings release. Thank you. Our next question comes from Jing Cheng with CICC.
So my first question
As Mr. Li Xiang has just mentioned, we have more and more new players to compete with us in the REV sector. So, if looking into our L series, it has already been released for nearly two years.
So if there are some factors that we can upgrade our products, or what aspects do we think can be greatly improved? Hello, I'm Li Xiang. I think the competition of cars includes the competition of comprehensive driving capabilities such as technology, product, supply chain, sales, service, etc. In fact, driving is just one of the more important aspects of technology.
but not all of them. In the next one or two years, the RO series will be at the stage of its peak. And after consumers buy IdealX, we will continue to update the functions and upgrade the experience, and continue to upgrade the value of the product. Software, hardware, and the ability to integrate the product experience should be the best performance in the industry. In the next three to five years, I think the biggest change will come from artificial intelligence, including intelligent driving based on real artificial intelligence,
and smart assistants based on artificial intelligence. It will bring consumers a completely different experience from today. It is also the beginning of true change. Finally, I would like to remind everyone of a small point. So far in 2024, the most popular new car recognized by consumers in the global market is the Lugia R6. This is the result of 10-to-10 sales. Six months since its launch, Lugia R6 has accumulated more than 13.9 million orders.
The competition in the automotive industry encompasses technology, product, supply chain, sales, and service. It's a holistic competition. And REV technology is only a pretty important one among all technologies, but it's definitely not the whole picture.
For the LEEL series in the next few years, it's still considered, if you were to make an analogy to a human being, it's still in its youth stage. And after consumers buy our LEEL auto vehicles, we will continue to improve our features and experience through OTAs, which improves the value of products that they receive. So software, hardware, and user experience and product, this integrated experience,
the auto is still the leader in the industry. And if we were looking at the next three to five years, I think the biggest variable is going to be autonomous, artificial intelligence, which includes AI-powered autonomous driving and AI-powered smart assistant. It will create a completely different experience for our users. And that I consider is the beginning of real step change. And one thing I want to remind everyone of is since the beginning of 2024,
The most popular and well-received automotive product in the entire world is LEE-L6, and that's hard results that we've seen in our stores. From launch to today, in a matter of only six months, LEE-L6 has delivered over 139,000 units, and demand is still over supply, which requires us to expand our production facilities during Spring Festival in 2025.
So my second question is about overseas markets.
Do we have a more aggressive strategy to going overseas? And if yes, what considerations we shall base on? Can you give us a brief plan, including which markets we should focus on and how to develop the product dealership? And if we look into 2025, whether the overseas market will be a key driver for our sales growth.
Okay, this is James, and I will answer your question. Absolutely, the overseas market is very important to us. Our overseas strategy is different from other automakers. As of now, we have established the servicing networks in several countries and regions, such as Kazakhstan in the Middle Asia,
These servicing stores also helped us expand our market share in the overseas market. Regarding the choice of the overseas region, the Middle East and Central Asia will be our first target regions. Building on this, we will continuously explore and evaluate other markets with high growth potential to expand our global footprint.
However, we are not considering entering Western Europe and North America for the time being. Thank you. Your next question comes from Ning Sunli with BFA. Hello, everyone. Thank you for giving me the opportunity to ask questions. I have two questions. First, my first question is, a few days ago, Ideal Automotive officially announced
In October 2024, Lyoto officially
OTA, the end-to-end latest AD Max functions, and how does the user experience improve and the feedback so far? And year-to-date, do you see a significant sales mix change for your AD Max version? Thank you. Hello, I'm Donghui Ma. I'm here to answer this question.
First of all, after Duanduoduan and VYM were launched, we believe that the concept of the whole bracket will change from a function to a capability. It will change from a function like a city NV or a high-speed NV to a real one with the ability to monitor the bracket. This is also a change from a rule calculation to a real AI model.
And for the users, it brings a lot of value. Let me give you two examples. First, the management journey, we call it MPI, will be longer. And with the model parameters and the increase in training data, the number of MPI journeys will be greatly increased. This is also very consistent with the CPNLaw rule. This means that companies with high-quality training data
and will have an absolute advantage in the future competition. The second point is safety. The safety journey of the whole scenario, which we call MPA, will also be greatly improved. Compared to that, we predict that this version will further improve the number of safety journeys and will reach three to five times the human safety journey. In addition, with the improvement of large model capabilities,
In terms of automatic emergency braking and automatic emergency turning, the safety of the vehicle has significantly improved. The number of major accidents will also be significantly reduced.
Since we launched what we call end-to-end BLM autonomous driving functionality,
We view autonomous driving no longer as a feature, city NOA and highway NOA, but more as a capability, the ability to offer supervised autonomous driving. And that marks the change from rule-based algorithms to real AI model-driven algorithms. And for users, the values are pretty significant. I'll give a few examples. First of all, in MPI, or what we call miles per intervention,
have increased very steadily as we increased the amount of model parameters and training data. And the increase actually fits very perfectly into scaling law, which means companies with high quality training data will have a significant competitive advantage in this industry in the future.
Second example I want to give is MPA, which is miles per accident, have also been increasing steadily. My estimate is that with this current end-to-end version, the MPA is going to be three to five times compared to human drivers. And lastly, as we increase the big model capability, our active safety features like AEB and AES
have also been improving very significantly. The number of severe accidents have dropped dramatically. And in terms of sales take rate, ADMAX take rate has steadily increased, not only for cars priced over $300,000, but also for BL-6, we have seen a very dramatic increase in ADMAX take rate. Okay. Thank you, Mr. Ma. My second question is about
our charging station. As Mr. Lee just mentioned, we already have 1,000 charging stations. I would like to ask how many charging stations we can reach by the end of next year. In addition, how many are self-built and how many are third-party? I would also like to know the capital outlay related to next year. Finally, I would like to ask more about the usage rate of our charging station.
So what's our plan for the charging station by the end of next year?
And what is your current breakdown for your own building, charging station, and also the charging station run by the third party? And right now, what is the utilization? Especially, since you have so many charging stations, but your BEV mega total population is still not high, does this mean that many other brands use your charging brands? So your charging station did not impact
your gross margin. Okay, this is James. I will take your question. So, overall, we plan to establish the industry's largest OEM charging network and have an absolute lead. Before our new BEV models come to market, we expect to have more charging stations than Tesla in key cities for sales.
By the time our new BEV model launches, we target to have more than 2,000 charging stations in operation, which will scale up to 4,000 by the end of 2025 next year. Our supercharging station network now covers nine national highways, a total of over 54,000 kilometers,
with a coverage ratio of 63% of national highway trunk lines. By the end of 2025, we will build more than 1,200 supercharging stations along highways, covering 90% of national highways.
In addition to highway and urban coverage, we will also selectively cover a medium and non-distance self-driving route to meet the needs of our users for family travel. For instance, our Mount Everest Supercharging Station commenced operation in October this year, and we expect to achieve end-to-end coverage to national highway
and the National Highway 318 in April next year. And also, regarding the cooperative supercharging station in the city, so far we have already built more than 500, and we are expecting by end of next year, we will also have this cooperative supercharging station in the city, more than 3,000. Thank you.
Your next question comes from Yuchen Ding with HSBC. The first question is about the consolidation for the pricing category above 200K.
We discussed that at the beginning of the year, is the energy consolidation shaping the way as management expected? How do we take the competition coming from the mass market brands, high-end models, and tech brands all to line up? I'm Li Xiang. I think even though we haven't launched the full-fledged SUVs yet, we are increasing the market share of NEVs by more than 200,000 units every quarter.
3G has already reached 17% I think that for a long time, no matter what brand enters the market I think everyone will face the same fundamental challenge Can every product we provide provide a leading product value for the user in the price range? This is the core of everything
Today, even before we launched our pure electric SUVs, we have been increasing our market share very steadily every quarter.
and it has reached 17.3% in Q3. And for the longest time, no matter who enters the market, the fundamental challenge is the same for everyone. Can we offer products that provide the most value for our target users in their respective price range? That's the key to everything. And our long-term goal is still to, through our BEV and REV products,
together captures over 25% of market share in the NME market, over 200,000 RMB. Thank you. Thank you, Mr. Xiang. The second question is, in this medium to large-scale family-use large SUV MPV, we see the supply of new vehicles is gradually increasing. Do you think that the boundaries of family users may be partially touched? Are there any opportunities to divide the blue sea?
The second question is on the segment and boundary. We noticed there's more model supply among the mid to larger size, the family utility SUV and MPV. Will the company management see the boundary limits for the current segment? Or will family use the market separated to a certain extent? Which of the other segments that the company would identify promising?
I think we have just started to explore the whole family market, especially the artificial intelligence. After the automatic driving and storage experience have changed, the imagination and creativity of the family space will become stronger. I don't think it's too early to expand the market. We should make the market better. On the other hand, from the perspective of pure electricity, many people say that if there is more than 300,000 pure electricity,
It's hard to sell products, but the truth is, if you want to find a product with a product power like R7, R8, R9, you have to think about the fact that there is no such product in the market. So, we often say that from the perspective of artificial intelligence or from the perspective of pure electricity outside the city, I think this kind of medium-sized SUV, there are more markets to explore.
My view is that we've only started scratching the first surface in terms of family users market. Especially if you take into account the power of AI, the changes that will be powered by AI in terms of autonomous driving and smart cockpit experience, there's going to be so much room for imagination for family users
So in this regard, we're not in a rush to explore new markets. And the other opportunity is in pure electric or BEP markets. If you look at the market of BEP products over 300,000 RMB, there is no product that offers the equivalent or comparable product value to L7, L8, and L9. So there's simply no good supply, and we believe that's another big opportunity for us. So whether it's AI or
fab market, we think there's a big opportunity in terms of large SUVs for family users. So this is something we will continue to explore before we look at other potential markets or niche markets. And an analogy would be, we actually have a golden bull in our hands, and we shouldn't be bagging with the golden bull.
Your next question comes from Gao Feizheng with SciTech.
If we slow down, will it lead to a decrease in the technical difference of each company? Let me translate it. My first question is about self-driving. So could you give us some introduction about progress and plans in the field of self-driving? And a warning is that will the speed of self-driving iterations slow down in the long term? And will it then potentially lead to a narrowing difference
between companies' technology. Thank you. Hello, I'm Ma Duhui. I'm here to answer this question. Now, we are monitoring the direction of smart driving, and then we develop technology, research and development, as well as product iteration, to build a product experience that is true to the car, and then the whole scene is not broken. At the same time, we think that in terms of smart driving, human-machine interaction also requires product and technology innovation.
At the moment, we have already started to integrate with users. After that, we will continue to push it to all users. In the long term, we have also launched the L4-level automated driving prediction. Then, on the current technology route basis, we will study more powerful end-of-car VIA models and cloud-end-of-the-world models to combine to strengthen the learning system.
In addition, we will continue to increase investment in smart driving and infrastructure, and maintain a lead in training and computing, as well as a lead in intelligent training and maturity. As for the ability of each company, we don't think the gap will be narrowed, because in the long run, smart driving, computing power of the car, cloud computing power, and training data resources
Our current direction is to iterate on supervised autonomous driving and provide parking-to-parking autonomous driving experience and completely seamless user experience.
In the meantime, we are innovating in terms of human-vehicle interaction when it comes to supervised autonomous driving. And we are currently running through some internal tests, and we will be releasing these to all of our users in the near term. And looking at the long term, we've already launched primary research on L4 autonomous driving, and it builds on top of our current end-to-end BLM model.
and we are looking into reinforced learning systems that combines VLA models on the car side and a world model on the cloud side. And in the meantime, we will continue to invest in infrastructure and to sustain our leadership in computing power as well as autonomous driving mileage. And finally, in terms of autonomous driving capability and the gap between different players, I don't think it will narrow, but in fact, I think it will widen over time.
And the reasons for that is because, first of all, the requirement for car-side and cloud-side computing power, requirements for training data and resource investment continue to be very large and has trended to increase. And there's also a higher requirement on the algorithm capabilities for autonomous driving. So overall, I think the gap will widen.
My second question is about the future cost reduction. As we know that with our increasing sales,
So how do we look future cost reduction, including procurement, technology, depreciation, and other aspects? Thanks. Let me answer this question. Regarding the reduction of capital and efficiency, we will look for such opportunities from all aspects, including the technology innovation I just mentioned, as well as the purchase volume.
reduce some quality waste, and improve the productivity rate of our partners, and even include more efficient logistics and delivery methods. In fact, they all require a very sophisticated operation. Let's expand a little bit. First of all, we think that technological innovation is very, very important for reducing costs. For example, the integration of the entire system, including the power drive, and the integration of the central control unit. Then not only can we improve the productivity,
we can also improve the competitiveness of our cost. At the engineering end, we have already built a joint platform for innovation, which allows our partners to enter more quickly and find better design and supply solutions together, and look for opportunities to reduce costs. In terms of cooperation between partners, we always advocate the concept of all-in-one, which is conducive to the long-term development of the industry.
On the other hand, we are planning to platformize our products, and we are also focusing on the cost-benefit ratio, which will bring us an opportunity to optimize the cost.
At the same time, we are also using digitalization and smartization. We can provide them with our own factories and partners, reduce the cost of manufacturing, and improve the opening rate of manufacturing equipment to optimize costs. Thank you.
and reducing quality-related waste. And also includes working with our partners to increase their capacity utilization, more efficient logistics. All these require very detailed and very skillful operations. And to give an example in terms of technology innovation, it is key to driving lower costs over the long term. For example, with our REV system and our electric drive system, if we could integrate them and integrate the central control unit
It will not only make our products more competitive, but also make our costs more competitive. On the supplier end, we are building a joint innovation platform with the supplier so that our suppliers can get involved much earlier. We can work together to find better solutions in terms of designs and processes to find opportunities for lowering cost. Also in working with suppliers, our value has always been a win-win
philosophy because only this is beneficial to the long-term development of the industry. On the other hand, we will design our parts so that they share the same platform and we enlarge the volume of each product, which we call HIP product. And in terms of supplier strategy, our strategy has been to concentrate the volume on a smaller number of suppliers, increase their capacity utilization,
and drive costs down over the long term. And lastly, we will continue to leverage digitization, smart technologies on our factories, as well as to empower our partners to reduce waste in the manufacturing process, increase running rate or online rate of the equipment to drive down costs over the long term. Thank you.
As we are reaching the end of our conference call now, I'd like to turn the call back over to the company for closing remarks. Ms. Janet Zhang, please go ahead. Thank you once again for joining us today. If you have further questions, please feel free to contact Leotto's investor relations team through the contact information provided at our website. This concludes this conference call. You may now disconnect your line. Thank you.
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