XPeng [XPEV] Conference call transcript for 2022 q3
2022-11-30 12:41:14
Fiscal: 2022 q3
Operator: Hello, ladies and gentlemen. Thank you for standing by for the Third Quarter 2022 Earnings Conference Call for XPeng, Inc. Todayâs conference call is being recorded. I will now turn the call over to your host, Mr. Alex Xie, Head of Investor Relations of the company. Please go ahead, Alex.
Alex Xie: Thank you. Hello, everyone and welcome to XPengâs third quarter 2022 earnings conference call. Our financial and operating results were issued by our Newswire services earlier today and available online. You can also view the earnings press release by visiting the IR section of our website at ir.xpeng.com. Participants on todayâs call from our management will include: Co-Founder, Chairman and CEO, Mr. He Xiaopeng; Vice Chairman and President, Dr. Brian Gu; Vice President of Finance, Mr. Dennis Lu; Vice President of Corporate Finance and Investments, Mr. Charles Zhang; and myself. Management will begin with prepared remarks and the call will conclude with a Q&A session. A webcast replay of this conference call will be available on the IR section of our website. Before we continue, please note that todayâs discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the companyâs results maybe materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the relevant public filings of the company as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under the applicable law. Please also note that XPengâs earnings press release and this conference call including the disclosure of the unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. XPengâs earnings press release contains a reconciliation of the unaudited non-GAAP financial measures to the unaudited GAAP measures. I will now turn the call over to our Co-Founder, Chairman and CEO, Mr. He Xiaopeng. Please go ahead.
He Xiaopeng: Hi, everyone. I am He Xiaopeng. In the third quarter of 2022, XPeng delivered 29,570 electric vehicles, a year-over-year increase of 15%. Cumulative deliveries in the first three quarters of 2022 totaled 98,553 electric vehicles, representing a growth of 75% year-over-year. Frankly, we are going through a very challenging period in pursuing our long-term goals. In response, we recently conducted an in-depth strategic review and implemented organizational restructure. The competition for smart EVs is similar to a marathon. I believe that only strong players with core technologies, well-rounded capabilities and the ability to monetize from both hardware and software will eventually win in the long run. To enhance our product competitiveness and boost cells, we will simplify configurations while improving our hardware and software products attractiveness to incorporate customersâ voices and needs. As market competition intensifies, we will sharpen our marketing to highlight the great value in our industry-leading smart and electrification technologies and further enhance our branding, sales and service capabilities. I would also like to take this opportunity to sincerely thank our customers and shareholders for their valuable suggestions regarding these areas for improvement. Within the new organizational structure, I will focus on XPengâs strategy, product planning and R&D. My goal will be to drive organizational change and upgrades, ensure customer values is reflected in our entire product development process, including design, R&D, sales and service holistically making our business operation more concentrated and efficient. In a recent strategic review, I am more convinced that the adoption of smart EVs will accelerate in the second half of 2023. We will unwaveringly invest in the R&D of autonomous driving and smart cockpit technologies to strive to reduce the cost of these technologies to our customers while ensuring that customersâ needs and preferences are at the center of our innovation to enhance our smart productsâ competitiveness and profitability as well as our customer satisfaction. At the same time, the platform-based approach for our vehicles and powertrain will improve the efficiency of our research and development and will help consistently reduce our R&D expenses and BOM costs through technologies. Besides, our ecosystem affiliates, XPeng Aero HT and XPeng Robotics have both raised funds recently and are now well equipped to operate independently. As a result, I will be spending much less of my time on our ecosystem affiliates operations. Our Co-Founder, Mr. will resign as an Executive Director of the Board of Directors to focus more on products. In addition, we are restructuring our brand and marketing team through a strengthened team and more targeted content, I believe will succeed in addressing the key factors that affect consumersâ purchase decisions in the most sought-after channels and across a broad range of customer demographics, paving the way for more powerful brand awareness of XPeng in our products. Leveraging our dedicated EV platforms with a focus on architecture and powertrain, we expect to increase our R&D efficiency, enhance our cost control measures and improve supply chain management. In line with our mission, we have invested in three powerful EV platforms over the past few years, including our fully established E platform and our third-generation F platform and H platform, both of which are expected to be mass produced next year. Together, these advanced platforms form a solid technology foundation to support our product upgrades and iterations. Our core technologies, including our powertrain system, advanced driver assistance systems, chassis and electrical and electronic architecture will be shared across multiple vehicles we are developing as much as possible. As a result, the required R&D cycle time and expenditure for each new product will be reduced, while the vehicle software and hardware quality will be more stable. We have also adjusted the organizational structure for our EV product management team accordingly. Each EV platform will be led by a senior product manager in charge of product development across the complete product cycle from design and development to sell, forming a market-led closed-loop system to improve user experience in sales. Mass deliveries of the G9, our flagship SUV equipped with our most advanced technologies, commenced at the end of October. All of the G9s are equipped with an 800-volt high-voltage platform that enables excellent driving range. Itâs charging speed also outperforms all the other EV models in the market. The increasing market recognition of G9âs outstanding capabilities has marked XPengâs leadership in not only smart technology, but also electrification. Such a reputation is not only popularized in China but also overseas. Despite near-term challenges brought by COVID-related restrictions and production ramp up, we are confident that the G9 will soon rank among the top three in terms of monthly sales volume in a battery electric SUV segment priced above RMB300,000 and draw closer to number one next year as we continue to enhance our brand recognition. We believe G9âs sales ramp up will drive future sales volume and pull it out of the trial we experienced in October. Moreover, beginning in the first quarter of next year, we will successfully launch three new vehicle models, which will further strengthen our product competitiveness. We also expect consistent improvement in our marketing capabilities to make our subsequent product launches successful. As we continue to rollout new products and technologies, coupled with technology differentiation of our next-generation full-scenario ADAS products, we are confident that we will achieve a significant increase in sales volume and average selling price, gaining a revenue growth in 2023 that exceeds the industry average and increasing our market share. Since the third quarter of this year, we have made significant progress in the mass production of autonomous driving technology. We continue cultivating consumersâ trust in and willingness to purchase our product with best-in-class ADAS software. On September 17, we debut our City NGP pilot program in Guangzhou. In urban traffic scenarios, which are significantly more complex than highway scenarios, XPengâs P5 took the lead in delivering the best-in-class driver safety and driving experience at a much lower hardware cost. We are accelerating the development of our next-generation full-scenario advanced driver assistance product, XNGP and plan to release its major functions to several dozen cities in the third quarter of 2023. In my view, the upcoming release of XNGP will represent an inflection point where smart driver assistance software, becomes a must-have product with high-frequency usage. We are also pleased to see that a high proportion of current G9 orders are for the max version that features XNGP ahead of the XNGPâs OTA rollout. We look forward to enabling our cost competitive XNGP next year in more models. Furthermore, we believe XNGPâs hardware costs will have the opportunity to be reduced as our technology advances and become significantly lower than that of our peers. Driven by strong brand awareness of our product and cost competitiveness, we are confident that XNGP will rapidly gain widespread adoption nationwide. On October 31, the XPeng G9 obtaining the Guangzhou Intelligent Connected Vehicle Road Test permit making XPeng G9 the first unmodified mass-produced vehicle to qualify for autonomous driving tests on Chinaâs public roads. With the parallel development of our advanced driver assistance system, XNGP and robotaxi capabilities alongside a closed-loop data and a complementary approach in software iterations, we plan to be the first to realize autonomous driving with cost effective mass-produced vehicles. As we strive to bring our smart technologies and electrification technologies into commercialization, we firmly believe in the value proposition that our in-house developed, industry leading technologies bring to our customers as well as our commercial value for our enterprise. We are open to opportunities for strategic cooperation and technology collaborations globally. Regarding cash liquidity, our current cash amounts to over RMB40 billion. We have become increasingly aware of the importance for automakers to maintain steady growth in adversity and not just in prosperity. Therefore, we will implement prudent cost control initiatives over the next few quarters and next few years to improve operational efficiency and streamline our investment projects. Building on our more focused R&D strategy and vehicle and technology platforms that can be applied across different vehicle models, we plan to rollout future products at a lower R&D cost. A stronger product portfolio and internal organizational restructuring will also help significantly improve our sales efficiency. Furthermore, thanks to our early investment in our production capabilities, our CapEx needs will significantly decrease over the next couple of years compared with 2022. Therefore, we are confident that our cash position of RMB40 billion will support our business growth in the coming years. Also, our cash flow will substantially improve as our product sales grow. Looking ahead to the fourth quarter, we will focus on mitigating the impact of COVID-related restrictions in China and making internal adjustments for our medium and long-term development. Our November deliveries are estimated to reach at least 5,800 units mainly due to the impact of the G9 production ramp up. We are trying our best to expedite deliveries of our order backlog. In December, our deliveries will rebound significantly month-over-month. We expect to deliver a total of 20,000 to 21,000 vehicles in the fourth quarter of 2022 and generate revenue between RMB4.8 billion to RMB5.1 billion. We will accelerate internal organizational adjustments and management upgrades in the coming quarters. Weâre confident that we will rank among the top players in the smart vehicle industry in the medium to long-term. Thank you everyone. With that, Iâll now turn the call over to our VP of Finance, Mr. Dennis Lu, to discuss our financial performance for the third quarter of 2022.
Dennis Lu: Thank you, Mr. He, and hello, everyone. Now I would like to provide a brief overview of our financial results for the third quarter of 2022. I will reference RMB only in my discussion today, unless otherwise stated. Our total revenues were RMB6.8 billion for the third quarter of 2022, an increase of 19.3% year-over-year and a decrease of 8.2% quarter-over-quarter. Revenues from vehicle sales were RMB6.2 billion for the third quarter of 2022, an increase of 14.3% year-over-year and a decrease of 10.1% from the last quarter. The year-over-year increase was mainly attributable to higher vehicle deliveries, while the quarter-over-quarter decrease was mainly due to lower vehicle deliveries for the P5 and G3i. Gross margin was 13.5% for the third quarter of 2022 compared with 14.4% for the same period of 2021 and 10.9% for the last quarter. Vehicle margin reached 11.6% for the third quarter of 2022 compared with 13.6% for the same period of 2021 and 9.1% for the last quarter. The quarter-over-quarter increase was mainly attributable to product mix changes. R&D expenses were RMB1.5 billion for the third quarter of 2022, an increase of 18.5% year-over-year and an increase of 18.5% quarter-over-quarter. The year-over-year increase was mainly due to the increase in employee compensation as a result of expanded research and development staff. And the quarter-over-quarter increase was primarily associated with higher new vehicle development to support our future goals. SG&A expenses were RMB1.6 billion for the third quarter of 2022, an increase of 5.7% year-over-year and a decrease of 2.3% quarter-over-quarter. The year-over-year increase was mainly due to expansion of our sales network and associated personnel costs. The quarter-over-quarter decrease was mainly attributable to lower operating expenses. As result of foregoing loss from operations was RMB2.2 billion for the third quarter of 2022 compared with RMB1.8 billion for the same period of 2021 and RMB2.1 billion for the last quarter. Net loss was RMB2.4 billion for the third quarter compared with RMB1.6 billion for the same period a year ago and RMB2.7 billion for the last quarter. Comprehensive loss was RMB0.7 billion for the third quarter compared with RMB1.6 billion for the same period a year ago and RMB0.8 billion for the last quarter. The primary difference between the comprehensive loss and net loss was foreign currency translation gain resulting from the rapid appreciation of U.S. dollar-denominated assets. As of September 30, 2022, we had cash and cash equivalents, restricted cash, short-term investments and term deposits in total of RMB40.1 billion. To be mindful of the length of our earnings call, I will encourage listeners to refer to our press release for more details on our third quarter financial results. This concludes our prepared remarks. We will now open the call to questions. Operator, please go ahead.
Operator: Thank you. We have a first question from the line of Tim Hsiao with Morgan Stanley. Please go ahead.
Tim Hsiao: So my first question is about deliveries because the vehicle deliveries have been slow in rest of the month, likely due to the modern translation and COVID curbs. XPeng has done a series of organizational restructuring, but how fast could this adjustment translate into more meaningful volume recovery in the upcoming months, assuming the impact from the COVID restriction could ease over time? And separately, have we adjusted our 10,000 target for G9 per month or the new P7 next year due to the current supply-demand challenges, as this is also hardly correlated to the companyâs profitability into 2023? So this is my first question. Thank you.
He Xiaopeng: Alright. First of all, thank you for your question. Regarding â well, I just reviewed a lot of historic cases of how manufacturers do changes over time. And currently, the organization adjustment that XPeng is conducting is for the mid to long-term goals, not for the short-term. So we ask for your patience. At the same time, we are very confident that we can see more significant changes to be translated into our sales performance in the coming several quarters. And in 2023, our market share will be further expanded. Now in the short-term, if the pandemic can be well under control, we are confident that in December, we can still maintain our original goal of reaching 10,000 of monthly sales for G9, and we can we are very confident that we can be ranked among the top three players in the battery electric SUVâs segment, price above RMB300,000. Now in 2023, with the roll-out of our further developed XNGP function, we believe that G9âs sales volume can be further enhanced to further exceed actually P7âs performance compared to the same developmental stage are in the history. At the same time, P7âs competitiveness will be further enhanced alongside with our technological improvements with the â and also their sales performance will be improved in the coming year as well. Now in mid-2023, we expect to launch a new product or a new model that are price between RMB200,000 to RMB300,000, which will be a B-class midsized SUV and that will definitely help us to further boost our product sales. And we believe that the sales volume of this particular model will actually exceed our current product portfolio. Thank you.
Brian Gu: Just want to make a clarification. We mentioned that the December delivery overall will reach 10,000, not just G9, the overall delivery for December. Just want to make that clarification.
Tim Hsiao: So my second question is about the cash flow. In light of the challenging macro backdrop, investors are increasingly concerned about expense cash flow. The company still has a pretty strong cash position and balance sheet based on the latest financial statement. But will there be any potential changes to our supplier payment turn or surge in new modern investment next year that may deteriorate our operating cash flow? What kind of cash burn should we expect next year? And separately, based on the latest financial statement, expense short-term borrowing also increased more substantially in the quarter. Is there any specific reason to that? Thatâs my second question. Thank you.
Brian Gu: Hey, Tim, itâs Brian. Let me address your question. First of all, the payment terms for our suppliers, we donât see any material change. Weâre actually maintaining a pretty favorable payment terms with our suppliers and partners. And then if you look at the cash â operating cash outflow, the first three quarters is actually less than RMB6 billion. And then we actually also foresee the entire CapEx for this year 2022 to be less than RMB4.5 billion and lower than what we anticipated earlier in the year. And then looking to 2023, we actually see a significant change and reduction in CapEx due to a number of factors. First of all, as Xiaopeng mentioned earlier that we actually pretty much completed our capacity build out, so we donât need to incur significant CapEx for that. We also have also completed the construction of these new product platforms for the new car launches. So a lot of these CapEx has been already incurred already. So next year, we think the CapEx for us will be significantly lower, actually below RMB3 billion in our estimate for next year. And also in line with the current streaming line and focus that we are doing in our R&D projects, we think the R&D expenses next year compared to 2022 will also see that growth actually in line or reduction. And we also see that SG& A expenses going down due to some of the structural organizational changes we mentioned. So overall, weâre actually very confident that we can see free cash flow outflow significantly improve next year compared to this year. And also with our current cash on hand, we have very adequate resources to meet our business plan and we also anticipate that carries us to our projected cash flow positive sometime in 2024.
Dennis Lu: Hey, Tim, this is Dennis. I just want to supplement one point regarding your question on the short-term borrowing. Yes, you are right we have increased our short-term borrowing in the third quarter. The reason is basically for the kind of the money management because we have established considerable credit lines with a variety of banks. And then we tactically draw down some part of the credit lines to strengthen the relationship with banks. So thatâs why you see a slight increase in the short-term borrowing at the end of September.
Tim Hsiao: Great. Thank you very much for sharing Dennis and Brian.
Alex Xie: Hi, this is Alex. I just like to clarify, when Brian mentioned the decrease of SG&A expenses, it means like as a percentage of revenues in 2023 compared with as a percentage of revenues in 2022. Thank you.
Tim Hsiao: Okay, thank you.
Operator: Thank you. We have next question from the line of Ming-Hsun Lee with Bank of America. Please go ahead.
Ming-Hsun Lee: My question is that the ASP trend in 4Q based on the difference between your volume guidance and also the revenue guidance. So could you give us a more color on this? And besides that, looking into 2023, whatâs your plan to control the component costs as well as the battery costs in order to maintain your gross margin? Thank you.
Dennis Lu: Ming, this is Dennis. Regarding your question on the ASP, yes, youâre right, in the third quarter, our ASP increased primarily â compared with quarter two, primarily due to the better mixed P7 mentioned also improved the margin. For the quarter four, the P7 â in terms of P7 mix will be lower. However, because of the mass delivery of the G9, so we will be able to maintain together the P7 and the G9 mix at about maybe 55% to 60%. So we should â we actually will have slight increase in terms of ASP compared with the quarter three, offsetting some variable marketing spending on the P5 and G3. So thatâs the answer to your first question. In terms of material cost increase. So far, we havenât seen the big changes in terms of the battery cost for the next year, mainly for the first quarter. But we believe due to more supply, we are seeing opportunities in terms of the battery supply. And that would, in return, translate into a cost reduction maybe in the second half. So with that, the cost improvement will help to maintain or to improve our margin, offsetting the NEV subsidy discontinuation.
Brian Gu: Yes. So Ming, just to also add to this, the fourth quarter, due to the volume contraction and also launching of our new product, G9, I think the gross profit will face some pressure versus the third quarter and then the first quarter, given the subsidy elimination, which impacts some of our lower-priced models, so that will also present a challenge for the gross profit. However, our view is that with the volume rebounding starting in the second quarter and in the rest of the year with scale, and also, we anticipate battery prices moderate and also show some opportunities for decline later in the year, I think the gross profit trend will improve significantly in the later half of next year.
Ming-Hsun Lee: Okay. Thank you, Brian and Dennis. I have no questions.
Operator: Thank you. We have next question from the line of Nick Lai with JPMorgan. Please go ahead.
Nick Lai: Now let me translate my question firstly. Now Chairman just mentioned that you are going to change a lot of strategy regarding the management, including branding and marketing team and can you elaborate more what are going to change in terms of branding strategy and marketing campaign? And what â when can we expect those changes having an impact on underlying demand or volume?
He Xiaopeng: Alright. Thank you, Nick, for your question. Weâre actually conducting or in the midst of doing this organizational adjustment with focus on our branding and marketing. Looking back, I mean in the past, our branding and sales and marketing mainly focused on sales with more focus on boosting the sales of our products, but going into the future, we are going to balance different aspects of our branding, marketing and sales with innovative measures, and we plan to actually reduce our spending to boost in the sales, while increasing our spending in marketing. Now, the second thing that is regarding the organization adjustment is that we plan to â we expect to integrate our organization to make it more efficient and effective. And we plan to recruit very high-quality talent from different industries in order to boost our sales and marketing efficiency and we aim to launch a series of measures in order to tackle different challenges as well as boost our effectiveness in order to align our product portfolio as well as to achieve higher customer satisfaction rate, while adjusting the customer demand. Now, we are talking about our near-term strategy for these organizational changes in the coming 15 months, but we believe that in the long run, we will continue such adjustment in order to achieve our mid to long-term goal. Thank you. And just allow me to add several key points. The first one is that we will have a clearer positioning of our brands and products. And the second thing is that we are aiming for the long game. We are not doing this for the short-term. And the third point is that we are going to be more aggressive and more proactive in our sales and marketing campaigns rather than being rather passive just like in the past. And the fourth and the last point is that we will remain a very customer-oriented and focused. Thank you.
Nick Lai: My second question is really about autonomous driving XNGP solution. And can you give a little bit more how are we different from the other solutions in terms of LI and Audi and so on? And also management mentioned that we are looking for potential opportunity to work with other potential partners at NGP product, and can we explain a bit more on that as well? Thank you.
He Xiaopeng: First of all, allow me to address the first part of your question. From our own user experience, there are four key components to the adoption of ADAS technology nowadays. The first one is scenario coverage or scenario support. Now, from our data, we noticed that highway and parking only took up about 10% of peopleâs daily use in terms of the scenario, and 90% of peopleâs use of ADAS technology is actually on city roads. And the second component to the adoption of ADAS is the cost, how much people are willing to pay for the advanced technology. And we actually are confident that in the future, the cost of affording our XNGP or related ADAS software will be able to be reduced to 20% to 30% of their current cost. And the third component is safety, and the fourth component is the true value that you are able to contribute to your customers. Now for XNGP, where we are able to roll out our city-based scenario or function, we are actually expanding the scenario coverage by over 9x because 90% of the usage happens on city roads compared to only 10% happen on highways and parking scenarios. Now, in the past, without our XNGP, people mainly rely on, for example, high definition maps or laser-related â laser-based technology, etcetera, those pose a lot of challenges, especially in areas where you donât have high definition mapping available and that caused a sharp difference â that actually produce a sharp difference in terms of user experience and in terms of the safety as well. And we donât think that, that is our final target. Thatâs why we launched XNGP, that allows very consistent performance even in areas where we donât have high-definition mapping or high-definition maps available. And that actually is the reason why we are so excited that with the rollout of our city road based or city scenario-based XNGP, we will be able to support a true â a full scenario functionality in a true sense, and we will be able to provide a very consistent experience when people are switching the use of such functionality from areas with high definition maps and without high-definition maps. And that will allow our customers to have a very easy and safe and efficient driving experience just like when you are a passenger in a car driven by an experienced driver and that kind of seamless integration is our goal here, and that is why we are very confident with the rollout of our XNGP to achieve higher customer satisfaction. Thank you.
Brian Gu: Yes. And Nick, to answer your second question regarding the openness in terms of collaboration and cooperation, I think itâs all generated from the recognition that we have spent a lot of effort and resources to develop market-leading technologies. And we think actually, in addition to increase our sales, I think there is tremendous value embedded in these technologies that can be monetized in other ways potentially. We also saw tremendous interest in such technologies. We have leading technology in smart driving autonomy, in smart cockpit, in electrification and then in high-voltage platform, and etcetera. So, I think these technologies, I think could become valuable if we actually have ability to make it more scalable and also using â leveraging potential partnersâ resources to quickly penetrate scenarios or markets that we currently doesnât focus on. So, with that, I think our openness, I think that we are evaluating a number of potential opportunities to hopefully help us to make these technology reach more scale, at the same time without compromising our focus on producing sort of attractive and competitive products ourselves. So, this is an attitude. Obviously, if there is more specific progresses I am happy to update when itâs available.
Operator: Thank you. We have next question from the line of Bin Wang with Credit Suisse. Please go ahead.
Bin Wang: Hi. My first question is about auto backlog, basically two parts. Number one, whatâs the new order flow for China in November? Second, whatâs the accumulate order backlog for G9, because COVID has impact and your delivery should be more than 10,000 order backlog already secured? Thank you.
Brian Gu: Hey Bin, itâs Brian. First of all, as you have tried a number of times that we donât disclose backlog on any model or particular company backlogs. But there are a few things that I want to point out to you. One is that as you can see that our delivery timetable has now been extended to later in the first quarter, that shows the strong â our orders at hand, and we will be also delivering a significant number in December of G9, so thatâs one indication. Secondly is that we also are confident that with our sales momentum, we see G9 become one of the top three, if not the top two battery electric SUV models over RMB300,000 price, and thatâs also an indication of the level of demand that we see.
Bin Wang: Actually, I just want to check because on your official website, when we try to book G9 online actually, they show up I am expecting deliver time. I want to know whether this might change according to your order backlog, because some the test actually, if you go to the China website, actually can show the model waiting time. Sometimes it was one week to four weeks, sometimes itâs 12 weeks actually indicating us demand waiting time is changing according to the auto backlog. So, I just want to know whether G9 waiting time in your website is changing according to your order backlog on real-time base? Thank you.
Brian Gu: Yes. Bin, I think you are right. The wait time is correlated to the real-time demand and also our production ramp-up capabilities. So, what you see in the retail store reflects the various models real-time delivery timetable.
Bin Wang: Okay. Thank you.
Operator: Thank you. We have next question from the line of with CITIC Securities. Please go ahead.
Unidentified Analyst: I will translate my question. And my question is about how to be demand-oriented? And specifically, the first one is what is the real customersâ demand? And secondly, how do we find them? And what will we do in terms of our structure? Yes, thatâs my question. Thank you.
He Xiaopeng: Alright. Thank you for your question. Now, there are two basic logics behind the industry of auto-making, especially for our OEMs. The first one is to adopt the theory of bucket, which means that you have to identify your weakest links and also identify your strengths as well. Now, in the past several years, I think not just ourselves, but a lot of our peers have been doing their best to actually identify and also improve their weak links in terms of, for example, safety, product quality, service quality and also cost control as well. We are also doing our best. We are striving to further perfect our service quality as well as our â the design of our products, interior design as well as smart cockpit and other space design as well. So, in the long-term, one of the key competitive strengths is to really identify your goal, I am talking about short-term as well as the long-term goal as well. You have to make sure that you understand the current focus, whether you aim for the short-term or the long run. And the second logic behind our auto-making industry is to define your customer portfolio or your targeted customer goal as well as your original target as well. Now, for the past 2 years to 3 years, XPeng has identified ourselves as a global company in the long run, and we really want to build scale as well. And that is why in the coming 3 years, well, based on which we have made our 3-year plan in the future. And I apologize that today, I wonât be able to disclose further information regarding our future lineup or the market demand in regards to specific car models. However, what I would like to mention is that in the future, autonomous driving or ADAS technology will be the standard configuration in our future products lineup with very consistent performance and very high-quality capabilities across our product. And also thatâs our long-term goal to â based on which we will further enhance our technological capability and also do better in cost control so that we can deliver truly cost-competitive, high-quality products to our customers and that will be something that we embody in our next generations of products. Thank you. Regarding the second part of your question, now our current organizational changes is mainly conducted to fulfill two goals or mainly focus on two areas. The first one is to do changes in terms of our product planning, product development and also to have a higher efficiency and effectiveness in implementing our technology in our future products and also to control â well, first of all, to be able to identify true demand and to control our investment in the month that has less value. And that is why we have been invested so heavily in perfecting our, for example, electrical and electronic architecture, our whole vehicle architecture as well as our powertrain and other systems. With those systems and those integrations, we will be able to truly offer end-to-end solutions that are able to deliver high-quality products to our customers. Thank you.
Unidentified Analyst: My second question is about P7. In 2023, we will have launched a new P7 with better configurations. And I think it would cause a rise in the BOM cost. And will we maintain relatively stable GP margin and drives our MSRP, or we want to boost our sales and maybe maintain our price or even lower our price? Thank you.
Brian Gu: Yes, itâs Brian again. On P7 next year, yes, we aim to launch the upgraded model to reflect the technology advancements, particularly the ones that you saw already on G9. So, the P7 will have equally advanced autonomous driving architecture, will also have the faster charging capabilities and higher voltage capabilities as well as a number of other upgrades and fixes that will address the â some of the shortcomings people have â we received the feedback on. Benefiting from the platform development actually, since a lot of these advancements are just sharing the modular and platform development, we actually are able to control the cost of the new P7, so to maintain the similar margins of the current version. And also the current â some models of the current version P7 will continue to be selling along with the updated P7. So, itâs actually I would say, the high end or upgraded version of the P7. So, with that, I think we believe we can introduced a much more competitive P7 reflecting the top-of-the-line capabilities that we have in technology, while maintaining the segment price and profitability on the series â the P7 series.
Operator: Thank you. As there are no further questions, now I would like to turn the call back over to the company for closing remarks.
Alex Xie: Thank you once again for joining us today. If you have further questions, please feel free to contact XPengâs Investor Relations through the contact information provided on our website or the TPG Investor Relations. Thank you.
Operator: Thank you. This concludes todayâs conference call. You may disconnect your lines now. Thank you for your participation.
