Hello, ladies and gentlemen, and thank you for standing by for the NIO Incorporated First Quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Eve Tang from Capital Markets. Please go ahead. Good morning and good evening, everyone. Welcome to NIO's Second Quarter 2023 earnings conference call. The company's financial and operating results were published in the press release earlier today, and are posted at the company's IR website. On today's call, we have Mr. William Li, Founder, Chairman of the Board, and Chief Executive Officer; Mr. Steven Feng, Chief Financial Officer; Mr. Stanley Qu, Senior VP of Finance; and Ms. Jade Wei, VP of Capital Markets. Before we continue, please be kindly reminded that today's discussion will contain forward-looking statements that are 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 company's actual results may be materially different from the views expressed here today. Further information regarding risks and uncertainties is included in certain filings of the company with the U.S. Securities and Exchange Commission, the Stock Exchange of Hong Kong Limited, and the Singapore Exchange Securities Trading Limited. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that NIO's earnings press release and this conference call include discussions of unaudited GAAP financial information, as well as unaudited non-GAAP financial measures. Please refer to NIO's press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. With that, I will now turn the call over to our CEO, Mr. William Li. William, please go ahead. [Foreign Language] Hello, everyone. Thank you for joining NIO's 2023 Q2 earnings call. Hello, everyone. Thank you for joining NIO's 2023 Q2 earnings call. [Foreign Language] In the second quarter of 2023, NIO delivered a total of 23,520 smart electric vehicles. [Foreign Language] In July 2023, as we started mass production and the ramp-up of more new models, NIO's monthly delivery volume grew rapidly to 20,462 units, representing a year-over-year growth of 104%, and a new monthly high. According to the retail statistics of CATARC, in July, NIO was the best-selling brand in the premium electric vehicle segment, with a transaction price of over CNY 300,000, claiming a 59% market share. As NIO completes its product lineup, further expands the sales and service network and the power network, enhances its all-around sales capability, and rolls out sales and the marketing plans, the competitiveness of the NT2 products has been further unleashed. The delivery volume in the third quarter of 2023 is expected to be between 50,000. 55,000 and 57,000 units. And now, I would like to share with you the recent highlights of our products, R&D, and operations. Following the delivery of the flagship coupe SUV, EC7, the flagship sedan 2023 NIO ET7, and the all-round SUV, all-new ES6, earlier this year, we started to deliver the smart electric tour, ET5 Touring, or ET5T for short, and the flagship SUV, all-new ES8 in June. In the second quarter, NIO achieved high-quality delivery of five new models, with user satisfaction exceeding our expectations. This also proves NIO's capabilities of conducting fast product iteration and managing product complexity. 未来计划于9月发布和交付全新升级的中型轿跑SUV EC6，完成基于NT2平台的全部产品切换。未来的8款产品将全面进入高端纯电市场，更好满足高端市场用户的多元化需求，推动整体交付量的稳步增长。 In September, we plan to launch and deliver the new mid-size coupe SUV EC6, which marks the completion of our product transition to the NT2 platform. With that, NIO's entire NT2 product lineup, featuring eight different models, will have entered the premium BEV market, to better cater to the diverse needs of the users in the premium segment and drive the steady growth of deliveries. 未来的产品安全性受到国际权威机构的高度认可。2023年7月12日，蔚来智能电动中型轿跑ET5，智能电动中大型SUV EL7，在中国市场叫ES7，双双获得欧盟新车安全评鉴协会Euro NCAP五星安全评级。Euro NCAP 2023年新规启用至今，蔚来是第一个达成五星安全评级的汽车品牌。 NIO's product safety has been highly recognized by authoritative institutions worldwide. On July 12, 2023, NIO's smart electric mid-size sedan ET5, and the mid-large SUV EL7, which is called ES7 in China, both obtained the five-star safety rating from Euro NCAP, making NIO the first car brand receiving the five-star rating since Euro NCAP adopted the new testing protocols for 2023. 智能驾驶方面，基于全栈自研的端到端能力和数据闭环，蔚来已经取得了重要进展。一方面，智能驾驶的用户规模和活跃度继续攀升，NOP+的开通用户数超过10万，累计行驶里程超过8,000万公里。用户使用NOP+驾驶的里程渗透率在覆盖的路段达到了53%。另一方面，包含城区的全域的增强领航辅助，已经在上海和北京展开了多人先锋用户的尝鲜体验。 Enabled by the full stack technologies developed in-house and the closed-loop data management, NIO has made significant progress in the assisted and intelligent driving. User base and engagement continue to grow. At present, over 100,000 new users have activated Navigate on Pilot Plus or NOP+, and have driven on it for over 80 million kilometers. The mileage penetration rate of NOP+ has reached 53%. In the meantime, we have carried out multiple rounds of early bird program in Beijing and Shanghai for NOP+ in all operational domains, including in urban environments. 销售和服务网络方面，截至目前，包括快闪店在内，我们开设了420家蔚来中心和蔚来空间，覆盖143个城市，拥有304家服务中心和58家交付中心，覆盖201个城市。从7月份开始，我们更积极地拓展用户触点和销售渠道，并进一步扩充全国的销售团队，这些举措将提升我们的销售能力，推动销量的增长。 In terms of the sales and service network, so far we have 420 NIO House, NIO Space, and pop-up stores in 143 cities, and 304 service centers, as well as 58 delivery centers in 201 cities worldwide. Since July, we have started to take a more active manner in expanding the user touchpoints and sales channels, and enlarging the sales team in China. These actions will further increase our sales capabilities and propelling sales growth. 充电网络方面，截至目前，我们全球已经累计布局1,470. 1,747座换电站，累计为用户提供超过2,700万次换电服务，其中476座高速换电站，贯通46纵4横68大城市群的高速换电网络。我们也已经累计部署超过7,900根超充桩和9,700根目的地充电桩。蔚来已经成为国内布局充电桩数量最多的汽车品牌，同时也是高速公路布局充电桩最多的汽车品牌。与此同时，我们的充电地图在全球接入第三方的充电桩超过136万根。 As for the charging and swapping network, to date, we have installed 1,747 power swap stations worldwide and provided more than 27 million battery swaps. Our expressway battery net, battery swap network in China consists of 476 swap stations along the 10 major expressways, connecting 68 major cities. We've also deployed over 7,900 power chargers and 9,700 destination chargers. NIO has become the automotive brand with the most public chargers and the most chargers along expressways in China. In the meantime, NIO's charging map has connected with over 1.36 million third-party chargers worldwide. 7月20日，蔚来开启了电池灵活升级日租服务，给用户提供更灵活的电池升级服务，满足更个性化的使用场景。 On July 20, NIO announced the flexible battery upgrade service by day, providing users with more options and fulfilling more use cases. 七月，NIO Day 2023申办正式拉开序幕，最终西安由蔚来用户票选成为NIO Day 2023的举办城市。 In July, we organized the host city election for NIO Day 2023, and the city of Xi'an was voted by NIO users as the host city this year. 八月二十日，我们携手WWF、祁连山国家公园，落成全球首个由光伏电站V2G双向充电桩和纯电动汽车组成的V2G光伏自循环补能体系。此外，我还发起了Clean Parks公民科学家项目，赋能用户和公众共同参与生物多样保护行动，支持国家公园志愿者体系的建设，共同践行Blue Sky Coming的愿景。 On August the 20th, we partnered with World Wide Fund for Nature and Qilian Mountain National Park in installing the world's first photovoltaic self-consumption system with V2G capability. It features solar power stations, V2G chargers, and battery electric vehicles. Moreover, we initiated the Clean Parks Citizen Scientists program to engage more users and the public in conserving biodiversity and supporting the establishment of a volunteer system for national parks, in hope of striving for a shared vision of blue skies. 资本市场方面，阿联酋阿布扎比政府旗下的投资机构CYVN于7月份通过定向增发和老股转让的方式，完成了总计约$1.1 billion的战略投资，并将在未来国际业务上进行战略合作。 In July, NIO received a strategic equity investment from CYVN Holdings, an investment vehicle majorly owned by the Abu Dhabi government. The investment package totaled $1.1 billion. In addition, we will also cooperate with the new strategic investor to jointly pursue opportunities in our international business. 虽然当前的市场环境充满挑战，智能电动汽车市场竞争日益激烈，我们在核心技术、产品布局、销售能力、制造和供应链等方面，充分做好了迎接挑战的准备。我们相信公司有能力聚焦市场销售策略的执行，推动交付量稳步提升，同时进一步优化成本结构，全面提升运营效率。我们对下半年的市场表现充满期待。 Although the smart EV market is full of challenges and the competition is increasingly fierce, with our continuous efforts in core technologies, product portfolio, sales capabilities, manufacturing, and logistics, we are fully ready to rise to the challenge. We believe that with focused marketing and sales strategy as well as execution, NIO can drive the steady growth of sales and the deliveries, while further optimizing the cost structure and enhancing operating efficiency on all fronts. We look forward to NIO's strong market performance in the second half. 感谢大家的支持！现在Steven将为大家介绍第二季度的财务业绩。有请Steven。 As always, thank you for your support. With that, I will now turn the call over to Steven, who will provide the financial details for the second quarter. Over to you, Steven. Thank you, William. I will now go over our key financial results for the second quarter of 2023. To be mindful of the length of this call, I will reference to RMB only in my discussion today. I encourage listeners to refer to our earnings press release, which is posted online for additional details. Our total revenues in the second quarter were CNY 8.8 billion, representing a decrease of 14.8% year-over-year, and a decrease of 17.8% quarter-over-quarter. Our total revenues are made up two parts: vehicle sales and other sales. Vehicle sales in the second quarter were CNY 7.2 billion, representing a decrease of 24.9% year-over-year, and 22.1% quarter-over-quarter. The decrease in vehicle sales year-over-year was mainly due to lower average selling price as a result of higher proportion of the ET5 and 75 kWh standard range battery pack deliveries and decrease in delivered volume. The decrease in vehicle sales quarter-over-quarter was mainly due to a decrease in delivered volume. Other sales in the second quarter were CNY 1.6 billion, representing an increase of 119.9% year-over-year, and 9.3% quarter-over-quarter. The increase in other sales year-over-year was mainly due to the increase in sales of used cars, accessories, and provisional power solutions as a result of continued growth of our users. The increase in other sales quarter-over-quarter was mainly due to the increase in sales of used cars and provisional power solutions as a result of continued growth of our users, partially offset by a decrease in revenue from provision of auto financing services. Gross margin in second quarter of 2023 was 1.0%, compared with 7.0% in the second quarter of 2022, and 1.5% in the first quarter of 2023. Vehicle margins in the second quarter was 6.2%, compared with 16.7% in the second quarter of 2022, and 5.1% in the first quarter of 2023. The decrease in vehicle margin year-over-year was mainly attributed to changes in product mix, partially offset by decreased battery cost per unit. The increase in vehicle margin quarter-over-quarter was mainly due to decreased promotion discount for the previous generation of ES8, ES6, and EC6. R&D expenses in the second quarter were CNY 3.3 billion, representing an increase of 55.6% year-over-year, an increase of 8.7% quarter-over-quarter. The increase in research and development expenses year-over-year and quarter-over-quarter was mainly attributed to, first, the increased personnel costs in R&D functions and increased share-based compensation expenses recognized in the second quarter of 2023. And second, the incremental design and development costs for new products and technologies. SG&A expenses in the second quarter were CNY 2.9 billion, representing an increase of 25.2% year-over-year, an increase of 16.8% quarter-over-quarter. The increase in SG&A expenses year-over-year and quarter-over-quarter was primarily due to, first, the increase in personnel costs related to sales functions. Second, the increase in sales and marketing activities increased the launch of new products. And third, increased rental and related expenses related to company's sales and service network expansion. Loss from operations in the second quarter was CNY 6.1 billion, which is an increase of 107.5% year-over-year, an increase of 18.8% quarter-over-quarter. Net loss in the second quarter was CNY 6.1 billion, with an increase of 119.6% year-over-year, an increase of 27.8% quarter-over-quarter. Our balance of cash and cash equivalents, restricted cash, short-term investment, and long-term time deposits was CNY 31.5 as of June 30, 2023. Now, this concludes our prepared remarks. I will now turn the call over to the operator to facilitate our Q&A session. Thank you. If you wish to ask a question, please press star then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. We ask that you please limit yourself to two questions. If you are on a speakerphone, please pick up the handset to ask your question. The first question will come from Bin Wang of Credit Suisse. Please go ahead. Thank you. My question is about your sales network structure. Recently, I heard you hire a few experienced salespeople from other luxury brands such as the BMW, Mercedes, and Audi. So, what's the reason you hire the non-NIO salespeople recently? And how is the impact so far for your sales volume increase? We also found that in your third quarter guidance, you actually imply in the August and September, September will be lower compared to July. So kind of what's the reason behind that? Is because any supply chain issue? Thank you so much. 谢谢王斌。我们在今年的大概六月份吧，我们其实还是意识到了一个问题，就是我们的销售人员的数量和我们的销售能力还是落后于整个市场的这个我们的竞争对手的。举个例子来讲，比如说从宝马、奔驰这样的主流的豪华品牌的视角。 从高端品牌的视角来讲，那么他们的销售人员在那个时间点大致上是我们的6-7倍左右，就是整个的销售人员。那么销售人员和销售的这种touch point的不够的话呢，其实对我们的用户的这个满意度、试驾转化率各方面的影响当然是很大的，也根本无法去满足我们同时销售7-8款车这样的一个，这个，这个销售的这个需求吧，就这个，这个很多方面做不细。所以我们其实是从大致上从7月份开始吧，我们其实是开始全面地提升我们的这个销售能力。我们内部的目标是希望呢，按照这个，每个月能够卖到30,000台左右，去看我们的这个销售人员和我们的一些，呃，包括销售的网点呢，这样的一些扩展。那么这个工作我们计划是到9月底能够完成这个扩展的工作，当然这个指的是销售的能力啊，但我们还有这些人要招聘到位，要培训他们，还有一些location，我们要去找到这样的一些place，去，达成这样的一个销售能力，我们，我们希望在9月底能初步建立这个能力。10月份的话呢，能够，这个，能够真正开始能够形成这样的一些效能。所以，这个其实是我们目前在发现我们的一些问题，我们在进行一些改进。所以如果去看的话呢，我们在这方面的呢，我们从7月份、8月份开始是比较积极地做这样的一些布局和扩展。当然这个中间的话呢，在人员方面的话呢，特别是到一些下层市场，比如说，地级市啊，一些三四线城市，我们当然是希望有一些更多的这样的一些有经验的一些销售人员能够加入，啊，他们有他们的一些用户的基数，能够更好地开展这个，这个... 虽然我们有的地方没有店铺，但是我们有这样一些有经验的人员，能够更好地帮助我们去执行这个销售的这个任务啊。所以这是第一个问题，这我们正在做的一些事情。 Well, thank you, Bin Wang. For your first question, actually, around June, we have realized that inside of the company, in terms of the number of our salespersons as well as the capabilities of selling products, we are lagged behind by the competitors in the market. For example, for those luxury brands like BMW or Mercedes, the size of their sales team is six to seven times of ours. Without sufficient personnel or touch point, we cannot realize a very good user satisfaction, realize very good test drives or high conversion rate from leads to orders. So starting from June and, July and August, we have taken a more active manners in improving our sales capabilities. And, with that, we hope that the company will be able to support the new orders of 30,000 units per month. That will be contributed by our sales network as well as the personnel increase, so that by the end of September, we will be able to realize that target. Of course, it takes time for us to really train the personnel and also to find the locations. So we will have that initial capability ready by the end of September, and then the real effect will kick in from October. That is our existing plan for the improvement. This is also why, starting July and August, we've been taking some active measures and actions in expanding our sales network and the touch points, especially in lower tier cities where we don't have a full-fledged facilities or stores. We hope to really secure and hire experienced and seasoned salespersons who have their networks and user bases already to help us with the sales task. Yeah. [Foreign Language] P remium battery electric vehicle segment priced over CNY 300,000, we have already realized the 59% market share. This has proven a very solid foothold of NIO in this segment, and we will continue to make efforts in transforming and converting ICE users into buying EVs in the premium segment. In this case, we will also make more efforts in expanding our channels at touchpoint. Thank you, Bin Wang. Thank you. The next question comes from Tim Hsiao of Morgan Stanley. Please go ahead. Hi, thanks for taking my question. So my first question, basically just want to follow up regarding the sales volumes into second half. Because as William just mentioned, we successfully upgraded our sales team and sales network. So looking into fourth quarter, I recall that we expect our monthly sales can stay above 20,000. So if that's the case, look into fourth quarter, should we expect NIO to grow the sales further to above 20,000 or even like 25,000? And what could be the contribution from the four volume driving models, covering like ET5, ET, ES6? So could you just provide some update regarding volume? My second question is about the gross profit margin, because according to the management's previous guidance, I think the vehicle gross profit margin could be back to double digit in the second half. So after the 30,000 RMB cost in late June, do you still stick to your previous view on sequential margin expansion into second half? What would be the pace in third quarter and fourth quarter, respectively? That's my second question. Thank you. Thank you, Tim. "...... B ut along with our sales and volume ramp up of our all our NT2 products, our target to achieve the double-digit gross profit margin in Q3 and 15% in Q4, if we can control the battery cost and other costs, well. So, yeah, Tim. [Foreign Language] Yeah. We have already digested the impact of the price reduction. Got it. Thank you very much, William and Stanley. Thank you. Thank you, team. Thank you, team. The next question comes from Yuqian Ding of HSBC. Please go ahead. Thanks, team. Yuqian here. I got two. First question is, we practically have all the models are now refreshed and then newly launched based on 2.0 platform. Eight models is a pretty comprehensive coverage. We will be expecting strong ramp up in the coming six months in a visible way. But how do we expect the key growth drivers if we're looking at 12-18 months, especially in terms of new product? How do we fill in the already comprehensive product portfolio, or the software gonna be the next leg of growth? The second question is on the OpEx side. So this year, we have new model launches, and we have the sales channel upgrade. But next year, when we're rolling to next year, could we see the absolute OpEx value dialed down a little bit? Thank you. Okay. Uh, [Foreign Language] Thank you for your question. Regarding your first question, as you may know that starting from September, we will launch our EC6 into the market, and with that, all eight models on the NT2 platforms will be launched to the market. Over the past several months, we have launched five brand new models plus a facelift. In such a short time frame, we are able to realize the high quality deliveries of these models. This has also demonstrated our R&D efficiency as well as the strong execution. In the meantime, we also need to realize that it's a challenge brought by the smart electric vehicles to the entire industry, as in a very short time frame, we need to catch up to the changes of all the smart technologies. But in the meantime, for all the NT2 products, we are looking at more software features to be updated and released. For example, our new assisted and intelligent driving. For the coming month, we will be rolling out some new features and also services. This will help us to improve the competitiveness of the product. And also, as we've mentioned, we are developing the sales capabilities inside of the company so that we can reach out to broader channels with more salespersons, and support the new orders of 30,000 units per month. This will also be a very concrete foundation for the continuous growth of the sales and the deliveries in the coming months. If you look at our eight models on the NT2 platform, they are already covering 80% of the needs in the premium market. And also, we have also adjusted our organizational structure, starting from the third quarter, so that from the headquarters to the original companies, we will be having dedicated teams managing and responsible for each of the model, across the life cycle. This is also the efforts we've made, from the sales and marketing perspective. Hi, Yuqian. Regarding the OpEx of next year, you know, the next year, the budget for us has not been ready. So at this moment, I be able to give you the precise number, but I can give you some feeling. Regarding the R&D expense, as introduced in last quarter's on average, each quarter this year, the non-GAAP R&D investment will be CNY 3 billion-CNY 3.5 billion. For this year, I think for next year, the we will keep similar like investment, investment R&D activities. Regarding the SG&A expense, as explained by William, we have a relatively more aggressive sales target for the second half of this year. I think should be for next year. So, the absolute value for SG&A will grow accordingly since we need more market activities and events. But the percentage of total sales revenue, I think will decline compared with the first half of this year and also the whole year of 2023, because of the improvements in both delivery volume and also operating efficiency. Thank you, Yuqian. The next question comes from Jeff Chung of Citi. Please go ahead. Hey, ni hao, Li Zong. Hello, I have two questions. First question is our refinancing plan going forward, and the second question is our cash flows projection into the third quarter and fourth quarter. So, why I am asking this is because we saw the first quarter the net cash outflow was CNY 10.6 billion, but improved to a cash outflow of CNY 5.9 billion in the second quarter. And within the second quarter, we also saw the inventory QoQ delta of around CNY 5 billion while the accounts payable accounts receivable remains stable. So that said, if the third quarter inventory came down, plus the operating leverage with a volume hike, whether we should see the cash outflow should be significantly narrowing further? This is my first question. My second question is about the third quarter and fourth quarter GP margin guidance. When can we return to a 10% or double-digit level, as well as the third quarter, fourth quarter SG&A as a percentage of the revenue guidance? That's all from me. Thank you. Okay. Thank you, Jeff. Stanley, please answer the first question. Yeah. Yeah, regarding the cash flow, I think first. Sorry. Yeah, regarding the cash flow and also the refinancing plan, I think several points about this. One is regarding operating cash flow. I think as the delivery volume ramp up from Q3 this year, our operating cash flow will be significantly improved compared with Q1 and Q2 of this year. And we also carried out a series of measures to control the CapEx investment and also manage our investment cadence prudently, like delay or cancel of certain CapEx investments. This will also help us to manage the healthy cash flow. Additionally, as explained in William's comments, we received a $740 million strategic investment from CYVN. And we also completed the offering of our first off-balance sheet ABS in Q3. I think both our U.S. dollar and also RMB financing channels remain upward directed. And all those will enable us to keep a healthy cash position and support the ongoing business development of the company. And regarding the financing refinancing plan, we will disclose our plan accordingly if there is any capital market related updates. But at this moment, I think we don't have the precise information to communicate with you. Yeah, that's the first question regarding the cash flow and also refinancing plan. The second is for this year's margin? Yeah. For this year's margin, I think we have explained in the previous questions. And for Q3 our target is to achieve the double digits gross profit margin, and Q4 is 15%. And for SG&A guidance, I think the absolute value will grow along with our delivery volume and sales growth. But its percentage, t he total revenue will decrease. But, you know, according to the market situation, the adjustment and change of our marketing strategy will be quite dynamic. So at this moment, I cannot give you a precise guidance about the percentage of SG&A over sales revenue. Thank you, Jeff. Thank you. Just a correction here. I mentioned inventory QoQ delta was CNY 5 billion, which was wrong. I just checked it. The QoQ delta was only CNY 2 billion. That's it from my side. Thank you. Thank you very much. Yeah, welcome. Thank you. The next question comes from Ming-Hsun Lee of Bank of America. Please go ahead. So I have two questions. The first question is, currently, you have eight products to cover the majority of the luxury car segment. So, could you give more guidance on any of the new product plans next year under the NIO brand as well as the Alps brand? And the second question is, what is your latest business progress for the mobile business? Thank you. Thank you for your question. For NIO brand, actually, we don't plan to launch any new products in the year of 2024. Of course, we will still roll out some routine facelifts or product upgrades, but we haven't planned any new products for next year, because we think that it's more important for us to stay focused on our existing 8 products on the NT2 platform, to continuously improve its qualities and also market performance. Just like in 2021, we didn't launch any new models, but still we have realized a very good growth margin, sales volume, as well as quality performance. So that's the plan for the brand of NIO. In terms of our mass market brand, Alps, we plan to launch the very first model from Alps in the second half of next year. Right now, the R&D activities are proceeding according to the plan. Actually, we have just rolled out the verification build of the first model from Alps, and this model will be highly competitive in its price in its product segment. [Foreign Language] Thank you for your question. For NIO brand, actually, we don't plan to launch any new products in the year of 2024. Of course, question. For NIO brand, actually, we don't plan to launch any new products in the year of 2024. Of course, question. For NIO brand, actually, we don't plan to launch any new products in the year of 2024. Of course, we will still roll out some routine facelifts or product upgrades, but we haven't planned any new products for next year, because we think that it's more important for us to stay focused on our existing eight products on the NT2 platform to continuously improve its qualities and also market performance. Just like in 2021, we didn't launch any new models, but still we have realized a very good growth margin, sales volume, as well as quality performance. upgrades, but we haven't planned any new products for next year, because we think that it's more important for us to stay focused on our existing eight products on the NT2 platform to continuously improve its qualities and also market performance. Just like in 2021, we didn't launch any new models, but still we have realized a very good growth margin, sales volume, as well as quality performance. So that's the plan for the brand of NIO. In terms of our mass market brand, Alps, we plan to launch the very first model from Alps in the second half of next year. Right from Alps in the second half of next year. Right now, the R&D activities are proceeding according to the plan. Actually, we have just rolled out the verification build of the first model from Alps, and this model will be highly competitive in its price, in its product segment. Also for the brand of Alps, its R&D philosophy is different from that of NIO. Alps is targeting at the mass market, and we will not have many products in the lineup for Alps. But for NIO, it's different. It is targeting at the premium segment, where we care more about the personalization and also the differentiations of the product. Just like Mercedes and BMW in China, they are selling 40, 50 models. That is a unique character of the premium segment. But for Alps, for the mass market, it will be more family-oriented, and we will also care more on the sales volume of each model launched by Alps. In terms of our phone business, our mobile phone will be developed mainly for our new users, especially the users of our NT2 products. And the phone itself is developed centering on the vehicles, but with better mobility and a connectivity experience. We are actually believing that with the phone business, it can help us to improve the competitiveness of our vehicle products, because our phone business is not to compete with those phone makers. Instead, we would like to use the phone as a carrier to provide the best experience for our vehicle users. Moreover, the underlying software and the underlying logic between the phone and the cars share quite a lot of similarities. In terms of the launch plan for the phone, we plan to introduce our first phone product in the second half or in late September. Thank you, Ming. The next question comes from Paul Gong of UBS. Please go ahead. Thanks for taking my question. So, two questions here. The first question is regarding the sales channel. You mentioned that you are going to expand it, you feel it's behind of the BMW model, and in terms of the channel as well as the salesperson. But how does it compare to other EV startups? Are we ahead or are we behind? And how much do you think about the expansion of the store network and the sales personnel versus the sales efficiency improvement? And you also mentioned, you are going to reach 30,000 monthly sales capability. How does that compare to today? Is that fair to assume currently we have the capability to sell 20,000 monthly sales, given we already achieved that in July, and the expanding would be about 50% compared to today, to 30,000? How does this mathematics work? This is my first question. The second question is regarding the battery swap versus fast charging, given the batteries, the semiconductors, as well as even the charging piles, DC charging stations, all this seems to be rolling out with industrial efforts. I understand it's good to have both the battery swap as well as the fast charging, but would you consider the rolling out of the fast charging kind of weaken the battery swap convenience and the competitive edge of NIO's cars? Thank you. Okay. Thank you. you. Thank you, Paul. 对，我们和一些目前销量比较高的这样一些新的创业公司相比的话，如果我们看到六月底的纯粹销售人员的数字，我们大体上只有别人的大约一半。这个是我们 的一个问题，我们确实在服务网络方面，我们投入的，比如说换电站的人，比如说我们的道路服务的人，比如说我们 NIO House 里边的这样的一些服务的同事，这个我们确实是要比... 这是我们的，我们的一些特点，我们的service和community方面的一些特点，是比别的同行是要多的，啊。但是我们直接卖车的这个fellow，啊，我们的门店里面的这些用，呃，用户顾问，我们其实是比我们的同行要少的，和这个有些，其实不管是销量比我们多的，还是比我们少的，都是要少的。那这个我们其实是意识到这样一个问题，因为四月份、五月份的时候呢，我们的交付数比较少，所以我们当时在这方面的action呢，其实执行得不是特别的快。到六月份，我们的车就开始多了以后，我们认识到了我们对试驾的满意率，我们试驾的质量，都因为人手的问题受到了，包括成交的效率都有很大的影响。所以我们从七月份开始，我们开始增加人手，啊，包括增加这样的一个，这个门店的数量，啊。那这其实是七月份我们在做的一个动作。所以总的来说的话呢，我们认为我们要达到大概，呃，这个五千人左右，才可能和现在头部的这样的一个比我们销量高的这样的一个一些同行的，差不多这样的一个效能啊。那当然还需要一些时间，把每个人的平均的这个销售数量还要提升上来。但七月份的时候呢，如果我们看到两万的这样的一个数字的话呢，是说明我们的交付的能力已经到了，因为交付的话呢，相对来说是还好一些。但是如果真的是从一个常规的一个销售的角度来讲的话，我们现在的能还是落后于我们的计划。所以这是目前总的一个状态。 Thank you for your questions. If you look at the size of the sales teams in comparison to other EV startups in China, actually by the end of June, the size of our sales team is only half of other companies. Of course, in terms of the service network, we have specialists and the teams working for the power swap stations, roadside services, as well as at the new houses. So for the service and the community part, we have a bigger team than other EV startups. But when it comes to the actual salesperson, in our company, we call them fellows. In terms of the number of fellows, we are actually have a much smaller team than all the other companies in the industry. In April and May this year, our delivery volume was not very high. By then, we didn't really realize the importance of the sales capabilities or taking any actions. But starting from June, as we ramp up our delivery volumes, we gradually realized that the insufficient sales teams has affected the satisfaction and also the executions of many things, including test drive and also order conversions. That's why starting from July, we have started to develop our sales channels as well as the sales teams. For comparison, to ramp up to the comparable size, we believe that we need around 5,000 people working on the sales team. But of course, it takes time for us to have that many people on the team and also to train them with the corresponding capabilities. In terms of the delivery volume, in July, we have delivered more than 20,000 cars, but that demonstrated our capability in terms of the deliveries, which is relatively easier than realizing sales capabilities. 另外一点，我想强调一下渠道，我们目前呢，从NIO来讲的话呢，我们江苏、浙江和上海三个省市占了我们销量一半以上。那么我们在一些像安徽这样的一些中西部的省份，我们省会城市大概占了我们销量的90% 左右，80%-90%。所以如果拿安徽来举例子的话呢，就是，宝马、奔驰他们一半以上的销量来自于这个，合肥以外的城市，他们基本上在每个地级市都有他们的这个4S店。而我们其实刚刚才在芜湖，在安徽第二大城市，才刚刚有我们的NIO House，所以我们在渠道方面的这种下沉，确实是我们很紧迫的一个任务啊。那么我们的换电站当然也在做这方面的一些准备，我们从六月份开始，换电站开始提速，那么，现在每个月开始能够有超过100座的换电站，这个月我们能够部署超过100座的换电站。那么，这些动作的话呢，它有一定的滞后效应，但是我们认为这样的投资是能够显著地帮助我们去提高后边的，用户触点，和提高我们的这种销售，销售的可能性。 And another thing is about the channels. If you look at our sales distribution, Jiangsu, Zhejiang and Shanghai, these three places basically contribute half of our sales volume. But for other provinces, like in Anhui, the capital city itself is contributing around 80%-90% of the sales volume. If we take Anhui as an example, for other brands like BMW or Mercedes, half of their sales volume in Anhui province is contributed by cities outside of Anhui, sorry, outside of Hefei, and they basically have dealership stores in all the cities in Anhui province. And for us, we've just opened our NIO House in the second largest city in Anhui province, that is in Wuhu. In this case, we really need to take efforts in increasing our penetrations into the lower tier cities. In addition to the sales channels, we are also developing and expanding our power swap networks into more cities. For the past several months, we've been developing our power swap stations in a much faster manner, and in August, we expect that we will deploy and install more than 100 power swap stations. Of course, it will take time for all these measures to kick in, but this investment will be very important for our long-term capability. 第二个问题是，换电和充电的关系。事实上来讲，我们一直都是坚持可充、可换、可升级的一个整体的理念，我们是根据用户的场景和用户的体验，去给他打造最好的这样的一个充换电的这样体验。那我们，也是中国部署这个充电桩最多的汽车品牌，前面我也讲过了。那我们认为，快充的技术对于换电站来讲是一个正面的事情，因为总的来说能够提高我们的换电站服务的这个用户的数量。从另外一方面来讲的话，我们其实主要部署的是充换一体站，就是可充、可换、可升级的充换一体站。那么，我们现在部署的大部分的都是这样的，这样的话能满足用户更好的一个需求。那关于换电和超充的关系啊，就是我们有很多的讨论，我们从目前来讲的话，我们当然换电的体验肯定比充电都还是好很多的，我们认为这当然长期来说还是我们非常重要的竞争优势。 Regarding your second question about power swapping versus faster charging. As we've always mentioned, that chargeable, swappable, and upgradable have been the philosophy of our power solutions, and we've been choosing the optimal solutions and also the best experience for our users based on the actual scenarios and the use cases. And as we are developing our power swapping network, we are also the automotive brand with the most public chargers in China, as I've mentioned in my opening remark. Of course, we believe that with the development of the faster charging technology, it will also help us with the power swap operations as it can improve the service capacity of the swap stations. Not to mention that many of the stations we've installed as of today are integrated stations featuring both chargers as well as power swap. So, in terms of the power swapping and the faster charging, we've also had many discussions between these two technologies, but we believe that so far, power swapping is still having a much better experience than faster charging, and it will continue to be a very unique advantage and the competitiveness of NIO. Thank you very much. That's very helpful. Yeah, thank you. Thank you, William. Thank you, Paul. The next question comes from Jing Chang of CICC. Please go ahead. Okay, thank you for your sharing. I have two following-up questions. The first is about our other sales revenue and profit margin. As we can see that, after our policy adjustment, what is our expectation for the future revenue and also profit margin for other sales after our battery swap started to gain money, gain profit. And in particular, do we have any internal calculation of the profitability of the battery swapping business? So, what is the upward trend of our gross profit margin for other sales in the following few quarters? And when will it turn positive? This is my first question. And my second is about the technology improvement. We have always been focused more on R&D investment and also technology accumulation. So looking forward, regarding to our next generation platform, NT3, so what improvement can we expect? Or what are the major areas of our effort to put in? So can you just share a few insights or information about that? This is my two questions. Thank you. Hi, Jing. This is Stanley. Regarding your first question about the other sales revenue and margin. As you mentioned, we canceled the free battery swap policies in Q3. So therefore, there will be more users to pay for battery swap services. And as the sales keep growing, we think more battery swap service revenue can be realized. But you know, since it's only one month from the policy adjustment, so we still need some time to observe and assess the impact of this policy change. Second is, with the power swap station, the third generation put into operation starting from this April, we will accelerate the deployment of the power swap station in the following quarters. And, for this year, our plan is to build 1,000 stations. But, at current stage, the capacity won't be fully utilized, so, the losses from the accelerated construction of power swap station, will increase. So, I think, that's basically the guidance for the other sales revenue. Yeah. Yeah. Actually, the inherent efficiency of the power swap business is pretty high. Before we have negative margin on this part, it's mainly because when we were offering free power swaps, the electricity costs were also included in that offering. But now we are charging that separately. In addition, we are also charging our users 30 CNY per swap as the service fee. Actually, we are seeing growing demand for such charged power swap services, especially many used car users. They are actually using the service, so the percentage for the users to use the paid swap service is also growing. It's mainly a business for the existing users and existing population. For the third generation power swap stations, we've also done a rough calculation. When it complete 60 swaps per day, it basically can be breaking even, and its service revenues will be covering its operating costs. Right now, around 20% of our third generation stations are able to realize such performance and capability. So for the long run, we believe that power swap is also a sustainable business, as in addition to offering power swap services, we also have other diversified business models, like we can leverage the energy storage. Regarding the second question about our next generation technology, of course, we will be leveraging our full stack capabilities developed in-house. With that, we will continue to improve the experience and also the performance of our products, and we believe that this will give us a strong product competitiveness worldwide. And also the continuous investment into the research and the development of the core technologies will also help us to optimize and improve the vehicle margin, as well as improving the efficiencies of our operations and R&D. Thank you, Jing. Okay, thank you. That's all for my question. Thank you. The next question comes from Edison Yu of Deutsche Bank. Please go ahead. Hi, thank you. I have one question. I'm wondering, what is the management team's openness to embarking on some more strategic action? We've obviously seen a lot of activity from the European OEMs in China trying to revive or restructure their efforts. And I also think in the context of, you know, I think NIO has made some mistakes. You know, we talked a lot about sales, the sales force today. We had a lot of supply issues last year, many of which are related actually to more traditional auto side. Could we perhaps benefit actually from having some more closer strategic relationships with some of the OEMs out there? Thank you. 谢谢，谢谢 Edison。当然我们对各种合作当然是开放的，这毫无疑问，我们当然目前没有任何信息，需要跟大家来沟通。从一个方向的角度来讲，当然我们现在的智能化技术，我们的充换电网络，当然这个我们相信对整个行业都是，都是能够帮助整个行业去加快这个转型的。那我们从近期，我们其实在我们的 Power Day 上已经说到了，我们的下一代的电池包和我们整个的换电网络，我们是愿意向这个，整个行业去开放的。也有些汽车公司在跟我们进行这方面的 一些很初期的讨论。因为如果他们要换到我们的... 他们要用到我们的换电站络和我们的一些技术的话呢，他们需要对他们的车去进行一些，进行一些，重新这样的一些研发和它的有一些改造，这个也是一个比较大的决定，对他们来说也需要一些时间。所以总的来说，我们对于，推动整个行业往电动化，往智能电动方面转型，我们是非常open的。 Thank you, Edison, for your question. Overall speaking, we are very open to all kinds of collaborations with the peers in the industry. But so far, we don't have much information to update or share with you. But if you look at our smart technologies as well as our charging and swapping networks, actually, we aim to use these technologies to catalyze the transformation of the entire industry. As we've also announced at the Power Day 2023, we are willing to open up our next generation battery technologies, as well as our charging and swapping networks to the entire industry. Right now, we are in some initial communications with certain OEMs. They are also thinking about using our battery technologies for swapping networks. But to use that technology, they need to adapt their products to our standards, which can take some time for them to make the final decisions. But overall speaking, we are very open to all kinds of collaborations. 那我想补充一下，事实上来讲，我们的充电网络，80%以上的这种，电量都是由蔚来以外的这些汽车品牌用户去使用的。前一段时期，还有一个在新疆的赛里木湖的一个在网络媒体上还被提到的一件事情，就是我们的目的地充电桩，这个旅游路线太热了，我们只好把一些时间限定在给我们用户服务，那这个还让很多别的品牌的用户有一些抱怨，但我们也是迫不得已。但从另一方面来讲，也能看出我们的整个换电的基础设施帮助了非常多的这个电动汽车的用户，在这方面我们一直都是非常开放。 In terms of our existing charging network, so far, 80% of our electricities are actually charged for the non-NIO users. Maybe you've also read this on news recently, in Xinjiang Sayram Lake. Because it's such a popular tourist spot, we have to limit access to our public chargers for the non-NIO users at certain time frames, and that caused some complaints by the non-NIO users. But overall speaking, it's also a very good example showing our existing charging and swapping facilities are helping many EV users, not just the users on the NIO. Great. Thank you. Thank you, Edison. As there are no further questions now, I'd like to turn the call back over to the company for any closing remarks. Thank you once again for joining us today. If you have further questions, please feel free to contact NIO's Investor Relations team through the contact information provided on our website. This concludes the conference call. You may now disconnect your line. Thank you!