Li Auto Inc . (NASDAQ: NASDAQ:LI), a prominent electric vehicle (EV) manufacturer, has announced a significant year-over-year (YoY) growth in its first quarter of 2024. The company reported delivering over 80,400 vehicles, marking a 52.9% increase from the previous year. Total revenue for the quarter reached RMB25.6 billion, up 36.4% YoY.
Despite these gains, the company experienced a net income decrease of 36.7% YoY and a loss from operation of RMB584.9 million. Li Auto's cash position remained strong at RMB98.9 billion. Looking ahead, Li Auto plans to expand its charging network and anticipates delivering between 105,000 and 110,000 vehicles in Q2 2024, with projected revenues between RMB29.9 billion and RMB31.4 billion.
Key Takeaways
- Li Auto delivered over 80,400 vehicles in Q1, a 52.9% YoY increase.
- Q1 total revenue reached RMB25.6 billion, a 36.4% YoY increase.
- The company reported a net income decrease of 36.7% YoY.
- Li Auto plans to deliver between 105,000 and 110,000 vehicles in Q2.
- The company expects Q2 revenues to be between RMB29.9 billion and RMB31.4 billion.
- Li Auto's cash position was strong at RMB98.9 billion as of March 31, 2024.
Company Outlook
- Li Auto anticipates a YoY increase of 21.3% to 27.1% in vehicle deliveries for Q2.
- The company aims to expand its charging network to over 10,000 stations by year-end.
- A new SUV product is set to launch in the first half of the next year.
- Li Auto will continue its direct sales model and may explore innovative pilot programs.
- The focus will remain on EVs priced over RMB200,000 for family users.
Bearish Highlights
- The company reported a loss from operation of RMB584.9 million in Q1.
- Net income decreased by 36.7% YoY due to increased expenses, including employee compensation and expansion of sales and servicing networks.
Bullish Highlights
- Gross margin for Q1 was 20.6%.
- The company launched new models, Li MEGA and Li L6, and improved its autonomous driving platform.
- Li Auto plans to release a fully independent HD map solution for city NOA in Q3 2024.
- The establishment of aftersales servicing networks in overseas markets is being accelerated.
Misses
- The company does not plan any further price cuts, focusing instead on sales recovery.
- No plans for a share buyback are currently in place.
Q&A Highlights
- Li Auto aims to have a level of charging stations comparable to Tesla (NASDAQ:TSLA) in China before launching its best SUV.
- The company has established a new department called quality operations to enhance decision-making and efficiency.
- Autonomous driving functionalities are seen as a key factor in user car purchase decisions, with the upcoming Tesla FSD v12 in China expected to raise industry standards.
InvestingPro Insights
Li Auto Inc. (ticker: LI) has shown impressive growth in its vehicle delivery numbers and revenue for the first quarter of 2024, yet it's important for investors to consider a broader financial context provided by InvestingPro. Here are some key metrics and tips that can provide additional insight into the company's performance and stock behavior:
InvestingPro Data:
- Market Cap (Adjusted): 26.41B USD
- P/E Ratio (Adjusted) last twelve months as of Q4 2023: 16.32
- Revenue Growth last twelve months as of Q4 2023: 173.48%
InvestingPro Tips:
- LI holds more cash than debt on its balance sheet, which is a positive sign of the company's financial health and its ability to sustain operations and expansions without heavy reliance on debt financing.
- The stock has taken a significant hit over the last week, with a 1-week price total return as of mid-April 2024 at -19.59%. This could potentially offer a buying opportunity for long-term investors who believe in the company's fundamentals and growth prospects.
Additionally, for those seeking more comprehensive analysis, InvestingPro offers several more tips for Li Auto, which can be explored further at: https://www.investing.com/pro/LI. To gain access to these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Li Auto Inc (LI) Q1 2024:
Operator: Hello, ladies and gentlemen. Thank you for standing by for Li Auto's First Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. Today's conference call is being recorded. I'll now turn the call over to your host, Ms. Janet Chang, Investor Relations Director of Li Auto. Please go ahead, Janet.
Janet Chang: Thank you, Kim. Good evening, and good morning, everyone. Welcome to Li Auto’s first 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 Tie Li. To begin with prepared remarks, our President, Mr. Donghui Ma; and the Senior Vice President, Mr. James Liangjun Zou will join for the Q&A discussion. Before we continue, please be reminded that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements informed inherent risk 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 this conference call include discussions of unaudited 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 unaudited non-GAAP measures to comparable GAAP 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.
Xiang Li: [Foreign Language] I’ll now translating for Mr. Lee. First all, we'll begin with a review of Li Auto's first quarter performance. In the first quarter, we delivered over 80,400 vehicles, up 52.9% year-over-year. According to China Automotive Technology and Research Center, the NEV market priced over RMB200,000 grew by 24.8% year-over-year during the first quarter. While our great growth rate far exceeds that of the market, making us the leader among all premium NEV brands. Driven by the vehicle delivery growth, our total revenue for the first quarter reached RMB25.6 billion a year-on-year increase of 36.4%. Our gross margin for the first quarter remained healthy at 20.6% despite the launch of Li MEGA, the changeover of the L series and the following price adjustments. In the long run, our robust balance sheet with cash reserves of over of nearly RMB100 billion will continue to support us to focus on user value creation and firmly invest in R&D as we continue to offer products and services for families that exceed their expectations. Nevertheless, we have admittedly encountered multiple challenges since the start of the year from both internal operations and changes in the external environment. Our performance this quarter fell short of our expectations made at the beginning of this year. In response, we immediately took action and swiftly implemented adjustments across our business, including an organizational restructure and workflow optimization. We're confident that these initiatives will enhance our internal operating efficiency and improved the quality of our decision making going forward, allowing us to focus more on creating and delivering user value. Turning it over to products. We released Li MEGA on March 1st, our first HPC BEV model and high tech flagship MPV for large families, built on our latest 800 volt battery electric platform, and equipped with Qilin 5C battery. Li MEGA is one of the fastest charging mass produced vehicle passenger vehicles in production today. During China's Labor Day holiday, the average charging time for Li MEGA users at our supercharging stations was only 12.8 minutes, significantly alleviating energy anxiety. On April 18th, we launched Li L6 a 5C premium family SUV that offers young families who are seeking family vehicles priced below RMB300,000. Li L6 offers a spacious interior and superior configurations and can support a CLTC range of 1,390 kilometers. In terms of safety, Li L6 vehicle body is designed to meet the most stringent safety testing standards in the industry combined with its ever-improving full scenario, AEB systems that comes with a stand comes standard on the vehicle. The Li L6 offers robust 60 for families on the road. With the official launch of Li Mega and Li L6, as well as the 2024 model year, the Li L7, L8, and L9, we now offer a product portfolio that caters to a wide range of family users at price points ranging from RMB200,000 to RMB600,000. Facing challenges in the competitive market landscape in late April, we swiftly responded to evolving user needs with the introduction of a new pricing scheme that received very positive feedback, resulted in a substantial increase in store visits. During the Labor Day holiday, weekly order growth hits and hit a no all-time high, and particular Li L6 received over 41,000 orders within its initial launch sales period from April 18th to May 5th. We're sparing no efforts to ensure a robust supply and production ramp up for Li L6 to drive a rapid increase in deliveries. Along with the release of our new models, would continue to make improvements in our autonomous driving platform. In mid-May, we began releasing the AD Pro 3.0 to all of our users with an upgrade to a large model-based BEV architect -- architecture with improved functionalities including highway NOA with driver takeover mileage of over 1,000 kilometers CD LCC capable of identifying traffic lights in real time autonomously stop and go at intersections, and automated parking that can manage complex parking spaces. We launched public beta testing for Li AD Max 3.0 in May, where approximately 1,000 users tested our latest and city NOA feature, which does not require high-definition maps and covers all roads nationwide. We planted deploy the city NOA and all ad Max vehicles through OTA in third quarter this year after we complete the initial nationwide testing. Looking at our charging network, we currently have 404 super charging stations in operation with 1,770 charging stalls. During the May Day holiday, we provided over 54,000 complimentary charging sections and waived charging fees for users across our models. At the same time, we provided over 96,000 charging sessions to NEV users across the country across different brands. We will continue to expand and accelerate investments in our supercharging network and aim to have over 10,000 charging stations, charging stalls in operation on highways and cities in China by the end of this year, continually improving the ultra-fast charging experience for all of our BEV users. With respect to our sales network, we have established a presence across all first year, new first year and second tier cities, as well as 89% of third tier cities nationwide. This year, we'll steadily expand our reach into additional cities to boost the penetration rate of any needs in China. Moreover, our service network is also expanding very rapidly, ensuring high salt quality services to our users. As of April 30, 2024, we have 481 retail stores covering 144 cities as well as 361 service centers and Li Auto authorized body shops operating in 210 cities across the country. Looking ahead to the second quarter, we expect vehicle deliveries to be between 105,000 and 110,000, driven by robust market demand and all our new products and recovery and orders. By fine tuning the pace of our operations and upgrading our matrix organization, I'm confident that we will further enhance operating efficiency, increase user value, and pursue healthy growth. Next, I will turn it over to our CFO, Johnny.
Johnny Tie Li: Hello everyone. I will now walk you through some of our 2024 first quarter financials. Due to time constraints, I will now will address financial highlights here and encourage you to refer to our earnings press release for further details. Total revenues in the first quarter were RMB25.6 billion or $3.6 billion, up 36.4% year-over-year and down 38.6% quarter-over-quarter. This includes RMB24.3 billion or $3.4 billion from vehicle sales, up 32.3% year-over-year and down 39.9% quarter-over-quarter. The year-over-year increase was mainly attributable to higher vehicle delivery, partially offsite by the lower average selling price due to the different product mix and the pricing strategy change between the two quarters. The sequential decrease was mainly due to decreased vehicle deliveries, which were affected by seasonal factors related to Chinese New Year holidays and lower the expected order intake in March. Cost of sales in the first quarter was RMB20.3 billion or $2.8 billion, up 36.1% year-over-year and down 36.3% quarter-over-quarter. Gross profit in the first quarter was RMB5.3 billion of $731.9 meaning, up 38% year-over-year and down 46% quarter-over-quarter. Vehicle marketing in the first quarter was 19.3% versus 19.8% in the same period last year and the 22.7% in the prior quarter. The vehicle margin remained relatively stable year-over-year. The sequential decrease was mainly due to lower average selling price as a result of pricing strategy changes in the first quarter and throughout adjustments of warranty reserve in the prior quarter, based on updated estimates of cost of future claims. Gross margin in the first quarter was 20.6 versus 20.4% in the same period last year, and 23.5% in the prior quarter. Operating expenses in the first quarter were RMB5.9 billion, or US$812.9 million up 71.4% year-over-year and down 13.1% quarter-over-quarter. R&D prices in the first quarter was RMB3 billion of US$422.3 million up 64.6% year-over-year and down 12.7% quarter-over-quarter. So year-over-year increase was primarily due to increased employee compensation as a result of growth in number of staff as well as increased expense to support the expanding product portfolios and technologies. The sequential decrease was mainly in line with timing and progress of new vehicle programs. SG&A expenses in the first quarter were RMB3 billion or US$412.4 million up 81% year-over-year and down 8.9% quarter-over-quarter. The year-over-year increase was primarily due to increased employee compensation as a result of the growth in number of staffs, as well as increased rental and other expenses associated with the expansion of sales and servicing network. The sequential decrease was mainly due to lower vehicle deliveries. Loss from operation in the first quarter was RMB584.9 million or US$81 million versus the income from operations of RMB405.2 million in the same period last year, and RMB3 billion in the prior quarter. Operating margin in the first quarter was negative 2.3% versus positive 2.2% in the same period last year, and the positive 7.3% in the prior quarter. Net income in the first quarter was RMB591.1 million or US$81.9 million down 36.7% year-over-year, and 89.7% quarter-over-quarter. Diluted net earnings per ADS, attributable to ordinary share was RMB0.56 or US$0.08 in the first quarter versus RMB0.89 in the same period last year and RMB5.32 in the prior quarter. And turning to our balance sheet and cash flow, our cash position remains dropped and through that RMB98.9 billion or $13.7 billion as of March 31, 2024. Net cash used in operating activities in the first quarter was RMB3.3 billion or $462.9 million versus net cash provided by operating activities of RMB7.8 billion in the same period last year, and RMB17.3 billion in the prior quarter. Free cash flow was negative RMB5.1 billion or negative $700.1 million in the first quarter worth it positive RMB6.7 billion in the same period last year, and the positive RMB14.6 billion in the prior quarter. And now for our business outlook. For second quarter of 2024, the company expects the delivery could be between 105,000 and110,000 vehicles presenting a year over year increase of 21.3% to 27.1%. The company also expects second quarter total revenues to be between RMB29.9 billion and RMB31.4 billion or $4.1 billion and $4.3 billion representing a year over year increase of 4.2% to 9.4%. This business outlook reflects the company's current under preliminary review on its basic situation and the 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.
Operator: [Operator Instructions] Your first question comes from Bin Wang with Deutsche Bank (ETR:DBKGn).
Bin Wang: [Foreign Language] First question about a volume basically your guide of quarter will be 105,000 units to 110,000 units, which means the second half you need to sell 360,000 units, which means monthly volume will be close to 60,000 units, because mega volume is quite small and the [Indiscernible] line will be late. So just the [EI EV], the monthly volume, we go to 60,000 units stable, which change. So if you have some pressure to achieve this number, further revise on the pricing to volume or actually you just want to compromise and give up the volume target. [Foreign Language] My second question is about gross margin. Previously you got a three year gross margin would be 20%. If you want to maintain a 20% gross margin after your pricing cut, what's the key driver for the margin? Is it because the volume increase, when the monthly volume go to 60,000 units or other driver for maintain 20% gross margin?
James Liangjun Zou: This is James. I will take the first question. First of all, the L6 series has been widely recognized by users for its product strength and price point. And during the initial sales period from 18th April to 5th May, the accumulated orders of L6 reached over 41,000 units, which was excellent sales performance. The order intake of L6 series has maintained strong growth momentum posted the initial sales period. Additionally, after we implemented the new pricing strategy for Li L7, L8, and L9, their order flow has also showed ongoing improvements. In summary, our sales momentum has gradually improved and we are optimistic about the continued the ramp up of the monthly sales going forward. And I will hand over to our CFO for the second question.
Johnny Tie Li: Hello, this is John. I think, to us the most important part after Q1, a challenge as Xiang Li mentioned, especially after March 1st. I think the most important part at the current stage is sales recovery. I think it is also everyone's primary concern and I on the company and we all know, the auto industry has a sign significant economy of scale. So as stock sales can come back, I believe, the gross margin pressure will be somehow released. So, and also with the L6, additionally, outside the sales growth product mix of optimization will be another factor which can impact our gross margin. And [indiscernible] might be implemented a lot several actions to control the organization efficiency and which will help the marketing to come back. But to remind you, I think, we faced those challenge since March. So the second quarter will be the most difficult for the company in this year.
Operator: Your next question comes from Tim Hsiao with Morgan Stanley (NYSE:MS).
Tim Hsiao: [Foreign Language] Just want to follow-up regarding the sales problem because as management just mentioned, the competition in China market has been getting worse here today. Although, the other just launched 2024 Phase -- and L6 and also had the reasonable price adjustment. What would be the company's strategy to further boost the volume frontier? If say sales stay suppressed would the company ever consider to upgrade the spec or further the cut prices to provide the sales volume into second half, not just to L6, but also to the L7, 8, 9 and the battery EV, pure EV into second half? So that's my first question.
Xiang Li: [Foreign Language] First in terms of the pricing strategy, in fact, after the price adjustment in April, we've received consist feedback that the current pricing is very competitive in the market and it is also been very well received by our customers, as shown in continued order intake growth since April. So we don't have any further plans for price cuts. In terms of growth margin, we always believe that as a -- for a healthy company sales and growth margin are the two most important operating metrics. And as a company, as a 9-year-old car company, the auto has contingently held ourselves against these two important metrics.
Tim Hsiao: [Foreign Language] So my second question is about expenses. So based on Li Auto, the updated sales target for 2024 and '25, what would be the reasonable sizes of employees, sales networks, sales and marketing expenses as well as R&D spending. And when will the benefit of cost savings be minimally reflected in the auto financial? That's my second question.
Johnny Tie Li: This is Johnny. I think given the new year new sales growth target, the company has adjusted very quickly in the last less than 2 months to adjust resource allocation across various attacks, to better align with this year's operating objectives just as we have just mentioned, we focus a lot on operating equity. I think you can read that in the last 4 years of operation of the company. We expect this adjustment will have some initial impact or results starting from Q2. Most of them will impact the operating efficacy after the second quarter.
Operator: So our next question comes from Tina Hou with Goldman Sachs (NYSE:GS).
Tina Hou: [Foreign Language] So my first question is in terms of the new store sales network expansion plan. So previously, we had a target of 400 new stores this year. So just wondering, now with our new strategy, what is the target number there? And also, among the stores, what's your split between the city center stores as well as like city, maybe suburban stores. And in terms of different city tiers, what is your consideration there?
James Liangjun Zou: Tina, this is James. I will take your question. So regarding our store expansion plan, and we will -- first of all, we will plan our sales and service networking advance according to sales demand. While expanding our sales network in tens of quantity, we will also continuously optimize the quality of each retail store by offering more showroom vehicles and improving the store space, considering we now have more and more different models. So this year, we have already opened 43 new retail stores with more than half of the having the capacity to display over 9 showroom vehicles. In the meantime, we have closed some smaller ones. As of 19th May, the number of total retail stores reached 488. So this is the latest number. And by CT tiers, as you just asked, we have achieved 100% coverage of all first-tier cities, new first few cities and the second-tier cities, and 89% coverage of third-tier cities. We also had 215 showrooms across the country to order our coverage of more cities, which help us to penetrate to the Tier 3 and Tier 4 cities, aligned with our new sales target, we are gradually changing our pace of market penetration in order to better suit the current business needs. As to the store types of types for our new stores, we have gradually increased the proportion of stores in automotive parts, over the past year. In the non-run, we will continue to increase the percentage of stores in automotive as we expand our model portfolio and improve our brand awareness and influence.
Operator: Your next question comes from Yingbo Xu with CITIC.
Yingbo Xu: [Foreign Language] So I have 2 questions. The first one is about autonomous algorithm and the difference of this algorithm and how we see the future of this autonomous thing? The second question is about product. How we plan for the pure EV product later this year and next year?
Xiang Li: [Foreign Language] First of all, on the question regarding city NOA. There are 3 major paths in this area. Completely dependent on HD Map, partially independent and serve independent of ATMs. And obviously, a completely independent solution is the most difficult path because it doesn't rely on the coverage and update frequency of hot HD maps as well as there's navigation coverage, city NOA can work. So our plan is to release a completely independent HD map independent solution to all users in Q3 this year for city NOA. And fundamentally, fully independent solutions is real artificial intelligence in terms of autonomous driving, uses data-driven model to -- use data to trade model to mimic human behavior and in place for completely rule-based solutions. And Tesla concept of end-to-end big model is similar concept driven by data-driven model solution. It's very easy to reach consensus on this conceptual solution, but to implement it requires a lot of data and computing power. And this is not something that all car companies are capable of or have the resources of achieving. Therefore, we believe that different companies will like 1 of those 3 solutions based on their current situations and capability and resources. And these different choices will result in different products and user value creation. [Foreign Language] The second question on our later bet products. First of all, we will not be releasing our best SUV later this year. The latest plan is we released in the first half of next year. And for 2 reasons, the first reason is, we believe in order to sell premium at SUVs, a necessary requirement of enough branded charging stations. We believe a correct level is to get similar levels of Tesla in China. That would be the perfect timing for releasing our next ad product. And secondly, another constraint is the number of parking spots in stores -- into our parking so display port. And this is very critical for us to be able to sell multiple cars and from multiple price points and to supply consistent sales of over 10,000 units per model. And in order to achieve that, we need an additional 500 to 600 display spots across the country. Otherwise, we'll be only increasing the number of products rather than the number of sales volume. And that was the exact issue that L8 ran into in the past few months because we decreased the display spot of 8 by 40%. But that is being recovered by now, and we are adding more display box for the L8. So to summarize, enough charging stations and enough incremental display spots are 2 critical and necessary conditions for selling our SUV product. And we believe we'll reach this point in the first half of next year.
Operator: Your next question comes from Paul Gong with UBS.
Paul Gong: [Foreign Language] So two questions for me. The first 1 is sooner or later, we are going to have the full product line within the BEV do you consider building the dedicated brands or channel for the BEV products? The second question is, given the huge cash reserve and the [indiscernible] performance recently. Will you consider share buyback at some time point?
James Liangjun Zou: This is James. I will take your first question. And regarding the BV and our RV models. So we will stick to our direct sales model in the domestic market. And we will strive to showcase all of our products in our retail stores and showrooms. In the meantime, we have initiated internal discussion on differentiated retail strategy, and we may launch some innovative pilot programs in the future. And we will share additional relevant details in due course. And I hand over to our CFO, Johnny, for your second question.
Johnny Tie Li: For the share buyback, currently, we don't have a [indiscernible] and we will [indiscernible] make some assessments based on company's acquisition, capital market and other priority more for [indiscernible].
Operator: Your next question comes from Yuqian Ding with HSBC (LON:HSBA).
Yuqian Ding: [Foreign Language] I got 2 questions. The first is to ask about the growth conviction, especially our total addressable market is mainly hinged on the family users that's largely middle class relevant, but it seems to be melting down. So is the growth coming from the increase in TAM or the relative competition versus the other peers offering, but we are seeing above RMB200,000 above increasing model supply. And second question is whether the company will consider harvesting some low-hanging fruit in the overseas market with relevance to the development -- the domestic market the pricing and competition is more favorable and the global OEMs are moving marginally towards hybrid, the range extender seems to be a good solution?
Xiang Li: [Foreign Language] So on the first question, our focus will remain on the market of NV vehicles priced over RMB200,000 for family users. And this will continue to be our focus in the mid to long run, because we firmly believe that there's still much to be done in the market in terms of product, and there are many areas where we can improve to better serve our users and create value for them in the long term.
James Liangjun Zou: Okay. I will take your second question. And regarding the overseas market strategy. So as the auto vehicle models became increasingly popular overseas, we will accelerate the establishment of our aftersales servicing networks, in order to provide the best service experience for our overseas users. We view the after-sales service network in international markets, where we already have established the user base. We plan to start our own aftersales network -- after sale service network in Central Asia and in the Middle East, this year, which is ongoing right now. We will select appropriate dealers for market expansion in overseas countries, and regions outside Western Europe and North America. Given the adjustment of this year's sales target, we will focus our efforts in the domestic market this year, we will share more details in due course.
Operator: Your next question comes from Ming Hsun Lee with Bank of America (NYSE:BAC). [Foreign Language] So recently, media reported company has certain reorganization, and in the future, what is your strategy for your reorganization and what department or what area you will input more resource to develop?
Xiang Li: [Foreign Language] So in this most recent organizational restructuring one most important change is we've established a new department called quality operations. And the thinking behind this change is to allow our business units to really focus on high-quality decision-making and operating efficiency, instead of focusing on processes and operating these processes. And typically, for an organization change, it takes about 12 to 24 months to see real results. So we think a good time to evaluate would be sometimes in 2025 and 2026.
Ming Hsun Lee: [Foreign Language] So this year, we can see Li Auto's development in NLA is speeding up. So right now, for your client base, how important do you think on way for your customer base? And after if [indiscernible] 12, in China, we at least change consumers' behaviour. And in the future, if some auto companies, they don't have NOA functions on the car, are they able to sell [indiscernible]?
Xiang Li: [Foreign Language] First of all, we firmly believe that NOA makes it easier and more and safer for our users to track. As we've seen in the latest release of our mapless NOA beta version in May, the feedback from the first group of users, over -- they drive over 65% of their total mileage using city NOA. And this penetration rate is a good testament to their -- to widely accepted related version of NOA mono users. And in terms of Tesla FSD v12, we believe that the next stage of competition across -- for smart electric vehicles, Atmos driving will be a primary reason for our users as they consider buying cars. FSD v12 after it becomes available in China will only make users focus even more on autonomous driving functionalities as well as experience, which will further enhance the importance of the creation of industry standards and the development of the technology in the industry. And again, in return, drive different car companies to invest even further in improving the performance of NOA features.
Operator: 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 Chang, please go ahead.
Janet Chang: Thank you once again for joining us today. If you have any further questions, please feel free to contact Li Auto's Investor Relations team. That's all for today, you may now disconnect your lines. Thank you.
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