Hello, ladies and gentlemen. Thank you for standing by for NIO Incorporate Second Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Rui Chen, Head of Investor Relations and Corporate Finance of the company. Please go ahead, Rui. Good morning and good evening, everyone. Welcome to NIO's Second Quarter 2025 Earnings Conference Call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website. On today's call, we have Mr. William Li, Founder, Chairman of the Board, and CEO, and Mr. Stanley Qu, CFO. Before we continue, please be kindly 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 involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain filings of the company with the U.S. Securities and Exchange Commission, the Stock Exchange of Hong Kong Limited, and the Singapore Exchange Security 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. 大家好, 非常感谢各位参加未来2025年第二季度业绩沟通会议。 Hello, everyone. Thank you for joining NIO's 2025 Q2 Earnings Call. 2025年第二季度公司共计交付了72,056辆智能电动汽车, 同比增长25.6%。 In Q2, the company delivered 72,056 smart electric vehicles, up 25.6% year- over- year. 在今年二季度，NIO品牌四款车型已经完成2025款焕新升级，产品竞争力得到进一步提升。ONVO品牌通过组织效能以及品牌口碑势能提升，逐步释放在主流家庭市场的增长潜力。Firefly品牌凭借对高端小车市场的精准用户需求洞察，产品定位获得目标用户的高度认可。 The NIO brand refreshed four products to model year 2025, further enhancing its product competitiveness. With improved organizational efficiency and growing brand awareness, the ONVO brand is gaining momentum in the mainstream family market. Thanks to the clear product positioning and deep market insight into the high-end small car market, the Firefly has been well received by the target audience. which will set a new historical high. The company delivered 21,017 vehicles in July and 31,305 in August. The launch of the ONVO L90 in late July and the pre-launch of the all-new ES8 in late August drove strong market demand, boosted user confidence, and lifted overall sales. We expect total deliveries in Q3 to range from 87,000- 91,000, representing a new high of 40.7% to 47.1% growth year over year. by more than 30% quarter-over-quarter. On the financial side, vehicle gross margin remained stable, while other sales saw significant margin improvements. Moreover, the implementation of the sell business unit mechanism has begun to yield tangible cost reductions and efficiency gains. In Q2, the non-GAAP operating loss narrowed more than 30% quarter over quarter. delivery has been achieved on a self-developed flagship autonomous driving chip. Since the start of deliveries in Q2, NIO ET9 has performed strongly in the executive flagship sedan market. Building on continuous R&D investment, NIO was the first to bring the in-house developed smart driving chip and full-domain vehicle operating system on production models, such as ET9, as well as the 2025 ET5, ET5 Touring, ES6, and EC6. In late June, we rolled out the NIO World Model across all NIO vehicles equipped with our proprietary smart driving chip. Within just the five months, this in-house developed chip enabled the mass release of functions and the seamless migration of core models and applications across five vehicle models, representing China's and also the industry's first full-function delivery on a self-developed flagship smart driving chip. the official launch at NIO Day in late September, deliveries will commence. On August 21st, NIO hosted the product and technology launch of its core strategic model, the all-new ES8. As an all-around tech flagship SUV designed for the success of business, family, and individuals, the third-generation ES8 is an epitome of NIO's tech innovation. The all-new ES8 features original and distinctive design language, class-leading cabin and storage space, premium features, and comfort experience. Flagship safety, as well as smart driving and cabin experience, are ahead of its time. It is the most competitive model in the premium large three-row SUV segment, receiving significant attention and recognition from both media and users. Pre-orders have started, with test drives starting in mid-September, followed by the official launch at NIO Day in late September and deliveries afterward. large family users very well. On July 31st, the ONVO L90, a game-changing product among large three-row family SUVs, was launched. With ingenious space and comfort design, all-around smart safety, competitive pricing, and comprehensive charging and swapping services, the L90 redefines the large three-row SUV experience, making it a good fit for large families. 加之ONVO L90的订单情况超过预期，在交付首月即达到创纪录的10,575辆。我们正与供应链合作伙伴一起继续提升产能，以尽快满足强劲的市场需求。 The ONVO L90's sales performance exceeds our expectations. In its first full delivery month, its deliveries reached a history high of 10,575. We are working closely with our supply chain partners to further ramp up production capacity and keep pace with the strong market demand. 乐道L90的热销提升了乐道品牌的势能, 也促进了L60的需求增长。8月份L60的订单创造了今年新高。 L90's strong market performance has also boosted ONVO brand awareness and the demand for the L60. In August, the L60's order intake also hit a new high this year. increases, market demand for Firefly is steadily growing. As for Firefly, since deliveries began, over 10,000 Firefly have been delivered within just three months. It's already the best-selling model in the high-end small EV market. Its novel design, flagship-level safety, and agile driving dynamics have been well received. Notably, in recent CIASI tests, Firefly, together with the onboard L60, achieved the highest safety rating ever. We are pleased to see the growing brand awareness is driving growing demand for Firefly. 产品质量方面, 今年6月, 蔚来ET5、ET5 Touring获得JD Power中国新能源汽车新车质量研究细分市场第一, EC6和ES6分别获得中国新能源汽车产品魅力指数研究豪华纯电动第一和第二名。蔚来凭借出色的产品和质量, 2019年以来已经连续7年获得JD Power质量调研细分市场第一名。 In terms of product quality, in June, NIO ET5 and ET5 Touring ranked segment first in JD Power's NEV IQS study, while the EC6 and ES6 ranked top two in the premium batch segment in JD Power's NEV Appeal study. With outstanding product quality, NIO has been the segment leader in JD Power's quality study for seven consecutive years since 2019. continues to receive widespread user acclaim. As of now, the company operates 176 NIO Houses and 416 NIO Spaces, as well as 414 onboard stores. On the service side, the company has 388 service centers and 68 delivery centers. Our sales and service network now operates efficiently and cohesively across all three brands, earning recognition from our users. making it the company with the most self-built charging piles in China. Regarding charging and swapping, the company has 3,542 power swap stations worldwide, including over 1,000 stations on highways in China, and has provided over 84 million swaps to users. By July this year, the battery swap network had thoroughly covered the highways between major cities in China, connecting 550 cities with three-minute swaps and eliminating users' range anxieties on long trips. In August, we completed the power swap route along China's iconic G318 Sichuan-Shizang Highway. NIO and onboard users now can drive their cars and swap all the way to the base camp of Mount Komolama. Besides, the company has built over 27,000 superchargers and destination chargers. NIO is the car company with the most chargers in China. 从二季度开始, 蔚来开始进入新的周期。我们过去几年持续的研发投入、基建投入和多品牌布局开始展现出市场竞争力。 In Q2, NIO has entered a new cycle where its continuous investment in technology innovation, infrastructure, and the multi-brand strategy in the past decade began to translate into market competitiveness. of other models. The strong sales momentum of the NIO all-new ES8 and ONVO L90 proves that our decade-long commitment to the battery roadmap, with chargeable, swappable, and upgradable technologies, can create user value beyond expectations, increasingly recognized and embraced by a growing base of users. We believe the all-new ES8 and L90 will drive the transition of the large three-row SUV market toward full electrification and boost sales growth across other models. NIO's power swap network. At the same time, with NIO's continued efforts in the charging and swapping infrastructure, its power swap network now covers major highways and expands into more counties in China. As the network effect of power swap is becoming more evident, over time, more users will experience and understand the unique benefits of NIO's power swap. sustainable and better future. Built on the company's tough full-stack technological capabilities and the nationwide charging and swapping network, the three brands are reaching a broader user base. Starting in Q3, the multi-brand strategy will drive our sales growth and capture greater market shares across various segments, helping to advance our mission of shaping a sustainable and brighter future. 今年以来, 我们聚焦运营效率与执行力提升的组织能力建设, 研发与销售服务的体系化效率显著优化。随着销量、毛利率和费效的提升, 将大大改善公司的财务表现, 推动公司进入新一轮发展周期。 Since the beginning of this year, the company has focused on systematically enhancing operational efficiency and execution, leading to significant improvement in both R&D as well as sales and service. With rising sales, improving gross margin, and more efficient cost control, we expect to see a substantial improvement in the company's financial performance, paving the way for the next phase of rapid growth. 感谢大家的支持，现在Stanley Qu将为大家介绍2025年第二季度财务业绩，有请Stanley。 Thank you for your support. With that, I will now turn the call over to Stanley for Q2's financial details. Over to you, Stanley. Thank you, William. Let's now review our key financial results for the second quarter of 2025. Our total revenues reached RMB 19 billion, increased 9% year over year, and 57.9% quarter- over- quarter. Vehicle sales were RMB 16.1 billion, up 2.9% year- over- year and 62.3% quarter- over- quarter. The year-over-year growth was mainly due to higher deliveries, partially offset by the lower average selling price from product mix changes. The quarter-over-quarter increase was mainly from higher deliveries. Other sales were RMB 2.9 billion, grew by 62.6% year- over- year and 37.1% quarter over quarter. The annual growth was driven by increased sales of used cars, technical R&D services, sales of parts, and after-sales vehicle services at Power Solutions, while the quarter-over-quarter increase was mainly due to the increase in revenues from used cars, technical R&D services, parts, accessories, and after-sales vehicle services. Looking at margins, vehicle margin was 10.3% compared with 12.2% in Q2 last year and 10.2% last quarter. The year-over-year decline was mainly due to changes in product mix, partially offset by lower material cost per unit, while quarter-over-quarter vehicle margin remained stable. Overall gross margin was 10%, 39.7% in Q2 last year and 7.6% last quarter. The year-over-year gross margin stayed stable, and the quarter-over-quarter increase was mainly attributable to positive mix effects driven by the increase in revenue from used cars and technical R&D services. Turning to OPEX, R&D expenses were RMB 3 billion, decreased 6.6% year- over- year and 5.5% quarter- over- quarter. The decreases year over year and quarter over quarter were mainly driven by lower design and development costs from different development stages, with the year-over-year also reflecting reduced depreciation and amortization expenses. SG&A expenses were RMB 4 billion, up 5.5% year over year and down 9.9% quarter over quarter. The year-over-year increase was mainly driven by higher personnel costs, rental, and related expenses associated with the expansion of sales and service network, partially offset by decreased sales and marketing activities. The quarter-over-quarter decrease was mainly due to the decrease in personnel costs and marketing and promotional expenses, primarily driven by the company's comprehensive organizational optimization efforts in marketing and other supporting functions. Loss from operations was RMB 4.9 billion, down 5.8% year- over- year and 23.5% quarter- over- quarter. Excluding share-based compensation expenses and organizational optimization charges, adjusted loss from operations was RMB 4 billion, representing a decrease of 14% year over year and 32.1% quarter over quarter. Net loss was RMB 5 billion, showing a decrease of 1% year- over- year and a decrease of 22% quarter- over- quarter. Excluding share-based compensation expenses and organizational optimization charges, adjusted net loss was RMB 4.1 billion, representing a decrease of 9% year- over- year and 34.3% quarter- over- quarter. That wraps up our prepared remarks. For more information and the details of our unaudited second quarter 2025 financial results, please refer to our earnings press release. Now, I will turn the call over to the operator to start our Q&A session. Thank you. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speaker phone, please pick up the handset to ask your question. For the benefit of all participants on today's call, please limit yourself to two questions. If you have additional questions, you can re-enter the queue. Your first question comes from Jeff Chung from CITI. Please go ahead. Hi, this is Jeff from Citi. Thank you, William Li and Stanley Qu, and congratulate with a good result. My first question is about ES8 and the L90's capacity ramp updates and the delivery target for the rest of the year. Due to the strong order backlog, can we expect the December single-month run rate for the group to hit the 55,000 units or above? This is my first question. 的目标是希望 10 月份能够做到全供应链 15,000 台的产能。在 ES8 的话，有一个产能爬升的过程，我们希望在 12 月份能够做到 15,000 台的单月全供应链产能。结合今年的这些需求和供应的情况吧，我们目前的目标是今年的四季度，平均每个月能做到 50,000 台的交付量，也就是说四季度能够超过 150,000 台的整个三个品牌加起来，总计超过 150,000 台的交付量。这个目前是我们整个公司的一个目标。谢谢 Jeff。 Thank you for the question. It's true that with the launch of the ONVO L90 and also the all-new ES8, we actually see a stronger market demand, higher than what we've expected before the launch. In that case, we've been working closely with our supply chain partners to improve and enhance the production capacity throughout the value chain and also the supply chain. Our target is that in October, the full supply chain capacity for the ONVO L90 can achieve and reach 15,000 units a month. For the ES8, as the ramp-up of production takes slightly longer, we hope that the full supply chain capacity can achieve 15,000 units in December. With that, by looking at both the demand and the supply availabilities and capacity, our Q4 target is to achieve an average of 50,000 units deliveries per month for all three brands, which means that in Q4, our quarterly delivery target, combining all three brands, is 150,000 units. Thank you. Thank you, Li Bingzhong. My second question is about the gross profit margin and whether the fourth quarter can break even at the bottom line level. If we look at the second quarter, our revenue is up 58%, but our gross profit is up more than 100% Q1Q. Could you give us more color on the second half vehicle GP margin trend and the non-vehicle GP margin trend? To be specific, how do you see the L90 and the ES8 GP margin independently? Thank you very much. Hi Jeff, 我把整个公司从二季度的这个毛利的趋势跟大家讲一下。二季度整个整车的这个毛利呢是在10.3%，主要的原因呢是二季度我们在产品的切换期。那我们2025款的5566呢是在5月中下旬逐步完成切换的。从整个销量占比上来讲呢，整个72,000多台的这个二季度销量里面，5566的占比大概只占了交付的20%。所以呢，在二季度的这个整车毛利里面呢，相应的比一季度的提升没有那么多。如何? Thank you for the question. I would like to walk you through our Q2 product margin. In terms of the vehicle margin in the second quarter of this year, it was 10.3%. As in the second quarter, we have conducted the model year upgrades on the ET5, ET5 Touring, EC6, and ES6. As the product upgrades happened in mid and late May, in that case, among the 72,000 units we've delivered in Q2, only around 20% was contributed by the model year 2025 products. In that case, the actual margin improvement contributed by these four models is not that significant in comparison to Q1. 到三季度呢, 随着我们的蔚来品牌的5566完成切换, 以及在三季度L90开始交付呢, 我们的整车的毛利率呢将会逐步的提升。到四季度, 刚刚William也提到我们ES8从9月下旬开始交付。四季度L90和ES8都是一个全季度的交付。我们的毛利目标还是会在进一步提升。整个的整车毛利率, 就刚刚你也问到, 到四季度盈亏平衡的时候, 我们的整车的整体毛利率的目标是在16%到17%之间, 来达成我们整个盈亏平衡的目标。 In the third quarter, as we have the full quarter deliveries for the model year 2025 products, as well as the third of deliveries of the L90, this will further improve the vehicle gross margin. In Q4, as William mentioned, starting late September, we are going to start the deliveries of the ES8. We expect the vehicle margin to further grow. Q4 also represents the first full quarter for the deliveries of both L90 and the ES8. With that, we expect the Q4 vehicle gross margin to be around 16%- 17% for the entire group to be able to achieve break even. 过去十年的这个纯电技术积累，关键零部件的自研，以及我们持续的这个采购和成本控制的措施，使得我们在像L90和ES8这样的新车型上，不仅能够做到有竞争力的产品，还实现了这个系统性的全面降本。到四季度，我们在L90和ES8的这个毛利目标呢，我们是希望能够做到20%。 As based on the decade-long battery Bath tech innovation, the in-house development of core parts and components, as well as the continuous efforts in the cost control and the savings on the supply side, as well as the product cost structure, we achieved not only competitive product performance for the L90 and the all-new ES8, but also a very competitive cost structure and the pricing point. With that, in Q4, our gross margin target for the L90 and ES8 is 20%. quarters, the second quarter saw a significant improvement. In terms of the gross margin of other sales, it's 8.2% in Q2, and it's mainly contributed by two factors. The first is regarding the revenues contributed by our existing users, including via our aftermarket services, our auto financing business, as well as the narrowed loss on the power services. The second factor is regarding the margin contributed by our technological service provided to our partners. With these two combined, we've achieved a good and positive gross margin on other sales in Q2. 当然考虑到刚刚提到的对外技术服务, 它有一些跟着车型的周期走的趋势, 所以不是每个季度都是相对稳定的。在整个季度的预期里面, 我们对于其他业务的毛利, 希望是能够实现盈亏平衡或者保持一个微亏的状态。 In terms of the revenues or margin contributed by the technological services we provide to the partners, as it is highly dependent on the product and the project stage, the actual revenues contributed may not be consistent from quarter to quarter. In that case, excluding that part, our expectation for the gross margin on other sales is to be break even or with a slight loss quarter over quarter. Thank you, Jeff. Thank you for the new guidance. Looking forward to the fourth quarter. Thank you. Thank you. Thank you. Your next question comes from Bin Wang from Deutsche Bank. Please go ahead. Thank you. I just want to ask for more details about the number four quarter break even. Number one is that what's your R&D expense for the number three and number four quarter? I think you actually got close to RMB 2 billion R&D in the number four quarter. Do you still maintain the same R&D guidance for the number four quarter? Secondly, is the same for SG&A? Lastly, what's the break even means? Do you break even in the operating loss level or net profit level? Is GAAP or non-GAAP? Thank you very much for my question. we still hope to achieve a quarterly non-GAAP target of ¥2 billion in both the third and fourth quarters. Thank you for the question. Regarding the break even target, our quarterly break even target is based on the non-GAAP basis. Regarding the R&D and SG&A guidance, starting Q2 this year, we have conducted a series of measures combining our CBU mechanism to control our R&D expenses. Our principle is that without compromising on the major and core R&D activities and also product planning, we will keep improving the R&D efficiency, which means that without compromising or affecting our major product planning and R&D, we will push for higher efficiencies in the R&D activities. With that, our target for the Q3 and the Q4 R&D expenses on the non-GAAP basis will be ¥2 billion per quarter. help us achieve the non-GAAP break-even target for the fourth quarter. In terms of the SG&A expenses, also based on our CBU mechanism, we've conducted measures to improve the overall SG&A efficiency. In the second quarter, our sales volume is at the magnitude of around 70,000 units. The SG&A ratio to the sales revenue still accounts for a relatively high percentage. As in Q3 and Q4, we grow our sales volume and also sales revenue, we expect the percentage of SG&A in the sales revenue to actually come down to a more reasonable range. As in Q3, we're planning several new product launches. There will also be corresponding marketing and go-to-market expenses. In that case, in Q3, we are still not able to achieve a break even on the SG&A expenses. In Q4, the non-GAAP target for the SG&A expenses will be within 10% of the sales revenue. Thank you, Armin. Thank you. Your next question comes from Tim Hsiao from Morgan Stanley. Please go ahead. Hi, this is Tim from Morgan Stanley. Thanks for taking my question. I have a two-questioner. The first one is about the new model pipeline. Given the robust demand of L90 and ES8 that might occupy our capacity, will the company adjust the launch schedule for the upcoming models? We noticed that the new days have notably moved forward to late September. Could matching team also share more insight into the updated model pipeline in the following quarters? That's my first question. Thank you. L60 也已经成为我们需要按照 OTD 去等的这样的一款产品。现在整个公司有四款车是订单在等生产和交付的，L90、全新 ES8、L60，包括 FY05，其实这四款车都有订单等着生产。乐道这边的情况在 10 月份会得到比较大的缓解，主要是电池的产能从 10 月份开始应该是能够增加到一个比较合理的水平。在过去几个月我们和电池的合作伙伴一起在增加供应。 Thank you for the question. It's true that at the moment we actually prioritize the production of the L90 and also the all-new ES8 from the production capacity perspective. For the ONVO brand, we even have to really give way to the L90 production and compromising on the production of L60. You will find that our L60 users are also waiting up to pick up their cars. Right now we actually have four models with order backlogs accumulated, and users will need to wait for the new car pickup, including L90, all-new ES8, L60, and also Firefly. Regarding the production capacity for the ONVO product, starting October, we expect the capacity to come back to a normal range, mainly supported and fueled by the production capacity of the batteries. In the past several months, we've been working closely with our battery partners to ramp up the production capacity. 总的来说，四季度我们是希望把乐道的全供应链产能提升到每个月25,000辆。在未来品牌方面，现在主要的挑战也是全新ES8的102度电池，因为全新ES8的需求确实比我们原计划的要好。在最初我们的电池供应方面确实也预估得保守了一些，但是我们和电池的合作伙伴也在全力以赴地提产。从四季度来讲，整个的产能方面，在未来品牌的产能方面，我们目前也是按照每个月25,000辆去做努力的目标。 With that, in Q4, for the ONVO brand, we expect the full supply chain production capacity to be around 25,000 units a month. Regarding the new brand for the launch of the all-new ES8, we also have challenges regarding the supply of the brand new 102 kWh battery. As the demand of the ES8 is actually stronger than we expected, we, at the beginning, underestimated the demand for the ES8 and also the volume assumption for the battery packs. We've been working closely with the battery suppliers and partners to secure the supply of this new battery pack. With that, in Q4, we expect the full supply chain capacity for the new brand can also achieve a 25,000 units monthly capacity. FY方面的话呢, 它的产能是相对来说比较目前也是一个稳步提升吧。我们在四季度希望它能够在高峰的产能能够做到每个月6,000台左右。这样的话, 三个品牌加起来的产能的peak差不多在56,000辆, 支持我们每个月50,000的这样一个交付量, 这是目前整个的产能和交付方面的一个计划。 Regarding Firefly, we are also steadily increasing its production and supply capacity. In Q4, we expect the production capacity to ramp up to 6,000 units a month at its peak. This means that in Q4, the combined production capacity of all three brands will be as high as 56,000 units a month to be able to support our demand. ES7. Next year, we will have three large SUV models to deliver. As we have already dedicated our full capacity to the production of the existing models in the market, for this year, we will not have any new models launched or delivered to the market. Previously, we've mentioned that we plan to also launch the L90 of the ONVO brand, but as now we have run out of all the capacities available, we actually have decided to delay the deliveries of this new model. In terms of the launch or the go-to-market cadence for the L90, that's to be decided. In addition to the ONVO L90, next year in the coming quarters, we also have another two new models coming under the new brand, also two large SUVs. One is the ES8, as many of the users and the public already know about it, and also ES7, a large five-seater SUV model. is the launch of the ES8. As for the NIO Day this year, as it is happening in September, the protagonist of this event will be definitely the all-new ES8. 好, 谢谢Tim。 Thank you, William. My second question is about the pricing strategy and also just a quick follow-up on the margin side. We noticed that both the L90 and the new ES8 have launched with aggressive pricing strategies. I just want to know that, will this pricing strategy be extended to all the upcoming models under both brands? If that's the case, how should we think about NIO's gross profit margin trajectory into next year? What would be a more sustainable and ideal vehicle margin level once all the new models are upgraded next year? That's my second question. Thank you. in-house R&D, and our cost control measures to achieve this cost reduction goal. Okay, Tim. Thank you for the question. For the entire company, as we've also previously mentioned, for the long term, our group level product margin is actually 20%. That's our target. More specifically on the gross margin by brand, for the new brand, our target is to achieve a 20% vehicle gross margin and even target a higher margin of 25%. For ONVO, no lower than 15% for the long term, and for Firefly, around 10%. For the ES8 and the L90 newly launched this year, as well as the new models coming up next year, we also have this, we'll also contribute to this target. At the product definition and design stage, we have already prepared for an aggressive pricing strategy, and our cost structure can also support such strategy to be able to achieve more competitive pricings of our products without compromising on the product competitiveness itself. This is actually driven and enabled by our decade-long tech innovation, technology accumulation, in-house developed parts and systems, and also stringent cost control. Thank you, Tim. Thank you, Rui. Thanks a lot. Thank you. Your next question comes from Jing Chang from CICC. Please go ahead. Thank you for taking my questions. My first question is still about our L90 and also ES8. We have already seen that these two new models have already demonstrated our enhanced product capability and also very competitive pricing, still with a very solid gross profit margin. Besides previously, Stanley has already told us of the technology and also the platform upgrades. Could you share more about the underlying successful experience about these two new models, such as our changes on maybe supply chain, maybe the dealers' networks? This is my first question. 谢谢, 这个确实我们新的一代的产品的这样的一些竞争力啊是非常强的, 非常综合的一个竞争力。那么我觉得从一个产品能力和定成本的一个竞争力的角度吧, 还是首先还是来自于我们的技术的创新。如果大家去看的话, 我们900V高压平台啊, 能够把我们不管是从电驱还是从整个高压的部件吧, 能够做得非常的集成, 能够从轻量化、从它的性能各方面来讲, 这都是减了很多的重量。其实在很多方面来讲的话呢, 这些轻量化的技术它也是能带来成本的优势。所以在这方面, 这些集成的设计和技术创新, 它是能够带来非常好的一个竞争力的成本的竞争力, 能带来体验的一个竞争力。大家也看到了, 我们不管是L90还是全新ES8, 不管是前备舱还是后备箱, 整个的储物空间是非常大的, 这个也是来自于我们这样的一些集成的研发的能力。在智能化方面的话, 我们其实整个全新的数字架构吧, 其实是做得非常的集成, 这个中央计算单元加上区域控制器这样的一个架构, 其实也是既支撑了丰富的智能功能, 也能够在成本还在重量方面有很多的优势。举个例子来讲, 像我们这个智能保险丝, 其实它的集成度非常的高, 原来车上的这些保险可能要用到, 这些保险丝可能要用到接近10公斤, 要8升多的体积, 我们先把它集成到主板上去, 而且能够对整个车上全车的电力去进行功耗, 进行一个非常细致的管理, 这个其实既提升体验也降低了成本。 Thank you for the question. Regarding the overall product competitiveness on the third generation, it is actually getting stronger and better, and this also allows for more competitive product competitiveness as well as the cost structure. As we've mentioned, this is enabled by our continuous tech innovation. Let's say the 900V high-voltage platform, this platform actually allows for more integrated and lightweight design of not only the powertrain system as well as the high-voltage architecture throughout the vehicle to be able to achieve high performance and the lightweight design. Such lightweight design also allows for improved cost structure and also experience competitiveness. For example, on the ES8 and also L90, we've achieved a huge frunk and also trunk space. Such huge storage space is also enabled by the high integration level of our architecture and systems. Another example is regarding the smart technologies, the digital architecture. On the third generation, we adopted the innovative digital architecture with the central computing cluster plus the zonal controllers. This can help achieve a better cost as well as the mass performance and management. Let me take e-fuses as an example. Previously, on other older models, there are physical fuse boxes, which are as heavy as 10 kilos per car, and it can take up 8 liters of space. With e-fuses, we are able to integrate them into the master board that can actually manage the power supplies throughout the vehicle at a very detailed and precise level, but still contributing to the mass reduction and cost improvement. 从这些简单的例子能够看到与技术创新既能带来用户体验的提升, 也能带来成本的竞争优势, 当然还有包括我们的芯片, 但这个芯片的投资非常大, 但我们的旗舰芯片NX9031一颗能够比四颗行业其他自驾旗舰芯片, 毫无疑问成本也降低了不少。我们研发费用虽然投入了很多, 但是反映到BOM上, 它的成本也降低了很多。 This improvement in both cost structure as well as user experiences is enabled by the tech innovation. Another example is regarding our proprietary smart driving chip. Of course, we've made major upfront investment in the chip development, but the performance of our in-house developed smart driving chip, NX9031, can achieve the performance that is on par with four flagship chips in the industry. R&D-wise, we made investment upfront, yet BOM cost-wise, this smart driving chip can also achieve savings. advantages of our chargeable, swappable, and upgradable technical architecture in terms of weight and cost. Another thing is regarding the technology roadmap, mainly the chargeable, swappable, and upgradable technologies for our products. With this, we are able to select the most suitable and optimal battery pack, including its capacity and size for our users. For example, for some of our peers and competitors, they actually need to strike a balance between the battery cost and also the battery range. They choose the LFP as the chemical system, and they make a battery pack of around 90 or 100 kWh capacity. With that, the battery pack is actually very big and heavy. If you look at our battery packs, for the ONVO L90, we put an 85 kWh battery inside, and for the ES8, 102 kWh battery inside. They can achieve the driving range and performance on par with those peers. In terms of the mass, the 85 one is only around 400 kilos, and the 102 kWh battery pack is only around 500 kilos. It is actually around 200 kilos lighter than many of our peer solutions. This is also another mass and cost optimization enabled by our chargeable, swappable, and upgradable tech solution. of Chinese users, we have achieved the recent market performance and popularity of the L90 and ES8. In terms of a competitive product, in both cost as well as the user experience, I think three things will define the competitiveness of a product. The first is regarding the technology roadmap, the second is regarding the product planning, and the third is regarding the product definition itself. Our past practice and experiences prove that our technology roadmap, including our multi-brand strategy, our chargeable, swappable, upgradable solutions, our tough full stack tech capabilities developed in-house, as well as our product planning, are in general in the right direction. Yet when it comes to the product definition, we did have some lessons learned from the previous generations and platforms. With that, on the third generation with our all-new ES8 and L90, we not only draw the best practices from the industry and peers, but also make corrections from within to be able to achieve a better product performance and success with the ES8 and L90, as it is actually drawing the effort of our competitive technology roadmap, reasonable product planning, as well as more precise product definition and the market insights that can fit for the users' needs in the Chinese market. 当然在供应链方面，毫无疑问，这个和供应链有一个共赢的这样一个长期合作关系，这个也是对于增加成本的竞争力也是非常重要的。我们在过去的一两年，我们也在供应链策略方面，我们也进行了比较多的调整。我们会更加专注于去和那些相信未来的技术路线和我们的长期发展的可能性的一些合作伙伴去建立更紧密的关系，这个在这方面的话，我们也在推进一个就是基于合作伙伴这样一个理念的供应链的定点策略。在我们接下来一些全新平台的定点方面，我们会更加坚决地去推行这样一个理念，和我们的合作伙伴一起去设立成本目标和我们各方面的共同。 terms of the supply chain, this is also playing a very important role in achieving the long-term competitiveness of our product cost structure by establishing a win-win cooperation with our partners. In the past one or two years, we've also made adjustments to our supply chain and the partner strategy. In general, we look for the partners who believe in the roadmap, technology decisions of the company, as well as believe in the long-term potentials of the company. We work closely with these partners to jointly define the cost targets and all types of targets. For the existing products and also the coming platforms, we will also adopt this principle in our nomination and the sourcing strategy to be able to work with our partners closely. Thank you. Thank you. Thank you. Your next question comes from Nixon Lee from Bank of America. Please go ahead. Thank you, William, and congrats for the good result. I also have two questions. My first question is, could you confirm your new model pipeline for 2026? Can I confirm there will be at least five new cars, which include ES6, ES7, ES9, L80, and also the second model under the Firefly brand? 谢谢。那个26年的产品其实前面也讲过了, 这个, 我们主要还有三款大车, 会推向这个市场。其他的产品, 在 ET5, ET5 Touring, ES6, EC6这四款今年刚刚换新的, 这四款产品, 明年并没有新的新款的计划。因为这四款产品今年其实它的整个的智能化的系统我们已经提升到了, 已经升级到了C到S, 就是比如说芯片, 还有我们的操作系统, 这已经全面切换成了雪松的平台。我们前几天也刚刚宣布了100度电的标配, 所以也能够进一步提高他们在续航方面的竞争力。我们认为他们的竞争力在可见的将来仍然是非常强的。我们在内饰, 在外观方面也进行了很多的升级, 所以, 明年我们在这四款产品方面并没有升级的计划。当然有一些阅历, 我们现在交的一些小的这样的一些版型, 这个会定期的会有, 就像我们前两天刚刚推的冠军纪念版一样。这种层面的产品的更新, 还是会有的。 Regarding our product strategy for 2026, as we've mentioned, we will focus on three large SUV models, for the ONVO and also the new brand. Regarding the ET5, ET5 T, ES6, and EC6, as this year we have just upgraded these four models to the model year 2025, for next year we don't have major plans to upgrade or facelift these four models. As on the model year 2025, we've already upgraded interior, exterior, the smart system is also upgraded to the latest C to S platform with both, upgrades in the smart driving chip as well as the operating system. We have also announced to make the 100 kWh battery as a standard configuration on these four models. We believe that with all these changes, the competitiveness of these four models will continue to be strong in the coming quarters. Of course, it doesn't mean that we will make zero changes to these models. We will still roll out some product calendars, as earlier this year we have released the Champion Edition for the five and the six series. In the coming year, we will also have such special versions and editions for these models. Yeah, that's clear. 我们没有第二款车，也三天。 For the Firefly Brand, we don't have a plan for the second model next year. Thank you, William. My second question is regarding the operating expense control. In 2026, what level do you expect for your R&D expense per quarter? Do you think you can maintain around R&D $2 billion non-GAAP R&D expense per quarter? Also, could you guide your latest CapEx plan for 2025 and 2026? Thank you. 总的来说, 我们研发这个从今年来讲, 我们做了非常多的提效的工作, 我们基于这个CBO的机制, 我们现在研发的这种效率还是提高了很多, 产出这个整个的RY提高了很多。所以从明年来讲, 从从明年来讲, 我们基本上会保持每个月, 每个季度吧, $2 billion到$2.5 billion这样的一个研发的支出, 这个我们认为是能够保证我们长期的竞争力的。当然, 主要的这个变动还是这个车型, 新车型的开发的这么一个变动。我们基础的研发, 我们认为这个已经在一个合理的这样一个投入的水平。 Regarding the R&D expenses, starting this year, we've made major efforts based on the CPU mechanism, improving our R&D efficiencies and the overall ROI of our R&D activities and investment. For the next year, our quarterly R&D expense non-GAAP will be around RMB 2 billion- RMB 2.5 billion per quarter. That is a reasonable range for us to also maintain our long-term competitiveness from the technology perspective. The major viabilities come from the new model development, as we believe that the investment for the foundational level R&D activities and technologies are mostly finished. 关于明年的 CapEx，因为现在明年的经济好像没有做，所以这个具体的一个规模现在还没有一个太多的展望。我觉得有两点可以提供的，就是一个呢，我们明年的换电站建设还是希望能够依赖社会的资源来帮我们去建设更多的换电站。还有第二个呢，当然整个的 CapEx 还是取决于，尤其是我们新车型的上市和开发的节奏。那整个的 gas feeling 来说呢，可能明年我们希望维持在跟今年差不太多的这样的一个水平，当然我们说看看有没有机会能够控制得比今年还要更低一些。当然这也取决于，尤其是我们新车型的开发的节奏和产能的一些节奏。 Regarding the CAPEX, as we haven't started the operational target discussion and the setting for next year, I may not have a very clear or precise outlook regarding the CAPEX for 2026, but I can share with you two principles we have. The first is regarding the power swap network. In general, we still hope to leverage as much as possible the customer's resources for the power swap network construction. Regarding the R&D CAPEX, it's mainly dependent on the overall R&D cadence and also go-to-market strategies of the new models. Overall speaking, for next year, we hope the CAPEX can be similar to the level of this year, or if possible, achieve an even better result next year. As I've emphasized, it's highly dependent on the overall launch cadence and also R&D cadence of the new models. you. you. Thank you. Thank you. Thank you. Thank you. Thank you. Your Thank you. Your next question comes from Paul Gong from UBS. Please go ahead. Thanks, William, for taking my question. My first question is regarding the impact of the 100 kWh of the battery that we are going to adopt across new brands. Can you share with us the financial impacts of this strategy? Definitely, we can see that the competitiveness of the vehicles are getting enhanced because of this 100 kWh of the battery. What would be the incremental costs on your front? Thank you. This is my first question. the gross margin for the 5566. This is the impact of making the 100 kWh long-range battery pack standard on the 5566. Thank you for the question. When we announced the policy changes on the 100 kWh battery pack, we've already introduced the potential impact or implications on the financials of the product. As when we launched the model year five and model year 2025 product, we offered a series of special offers and discounts to our users together with the products. This time, when we make the 100 kilowatt-hour battery a standard configuration of the five and the six series, we actually withdraw many of these offers we provided at the launch of the product. In exchange, we offered the 100 kWh battery as a standard configuration. From the transactional perspective, there is no major change. From the user's perspective, as well as from the vehicle margin perspective, there is also no major impact. 补充一点就是从一个100度电标配以后的这个影响上来看呢，对我们的销售的开口还是有蛮大的这个帮助。当然，这个长期的影响呢，因为也是刚刚改政策没几天嘛，所以我们还需要观察，目前看还是一个积极的改变。 Another impact is more on the sales and the upper funnel of our sales leads for the five and the six series. After announcing the change on the 100 kWh battery, we actually observed increases in the upper funnel incoming leads. Of course, this is a newly launched policy. In terms of the long-term implication, we will still need some time to observe. Overall impact is more positive than negative. Okay. My second question is regarding the impact of switching to your self-developed chips. I think William mentioned that it is saving cost, and it is also depending on the volume because of the fixed cost versus the volume. Can you give us some color that, for example, if you are delivering 20,000 per month with a new self-developed chip, what would be the cost saving on the per car basis? If this volume is coming to 50,000 per month, what would be the positive impacts from the cost-saving angle due to the switching of the self-developed chips? I just want to have a better estimate and sensitivity on that. Thank you. deliver ourselves and this is not that significant. Thank you for the question. Regarding the chip R&D expenses and investment, as we actually recognize that in our immediate financials and the P&Ls, its actual cost of savings per unit is not really closely tied in the actual volume we sell or actual number of pieces we sell. In terms of the production of these chips, we purchase the wafers directly from our chip manufacturing partners. In that case, the cost of saving per unit through the in-house developed chip is not tied into the delivery volumes we achieve. 当然如果和这个同样的算力和我们这个二代的这个比的话，那当然降了非常多。当然如果是和现在外彩的这个旗舰差不多性能的全球旗舰的性能的这样的一些自家芯片比也是降了非常的多，但是具体的这个就这个成本我就不说那么细了，反正肯定是降了很多的。 In comparison to the chip solution we use on the second-generation products, achieving the same level of computing performance, the cost is actually more advantageous and competitive with our own solution. Even on the Third Generation, in comparison to the industry flagship smart driving chips, we still have a cost advantage and competitiveness with our in-house solution. Here I will not elaborate on the specific savings achieved per piece. I can understand that. It's very helpful. Thank you. Thank you. Your next question comes from Yuqian Ding from HSBC. Please go ahead. Thank you, team. The first question would be more exploration on the pricing side. ES8, L90, attractive pricing, good volume traction. How does management evaluate the potential internal capitalization to the existing portfolio, such as the ES6 or L60, and the potential splash impact into next year's new model pipeline? 首先我觉得这个从定价的角度来讲，当然是要基于市场和成本，以及这个量价关系去综合考虑。如果我们去看L90推出之后，我其实也讲到了我们其实对L60它其实销量是有正面的影响的。我们在8月份的话，L60的订单也创造了今年的新高，这个和7月份比，这个订单其实是好了不少。现在L60我们也是用户也需要等这个OTD，就是这个订单，所以它，所以从这个来看的话呢，是正面的影响的。全新ES8的推出呢，加上我们最近对100度在5566，我们对100度进行了标配，我们觉得这样的一个组合我们把整个的价格体系也梳理得比较清晰。我们觉得未来品牌的势能的提升也会对现有的5566的销量也会是正面的一个影响。其实我们也在几天吧，我们也看到了一些积极的市场的信号。可能在一开始的几天呢，会因为一线follow的经历的原因也许会有点影响，但是总的来说长期的肯定是非常正面的一个影响。 As we've mentioned, the pricing strategy for a product is highly dependent on the market competition, the cost structure of the product, as well as the volume and the pricing sensitivity of the product in the segment. For the L90, as we've mentioned, with its launch, it has helped boost the sales volume of L60. Right now, even for the L60 users, they will have to wait for the new cars' deliveries and the pickup. Actually, in August, we even achieved a new high for the order intake of L60 for this year. The overall impact from L90 on L60 is positive. Regarding the all-new ES8, as we've also mentioned, we have now made the 100 kWh battery a standard configuration on the five and the six series. The attractive pricing of ES8 is helping boost the brand awareness of the new brand, which can also introduce more attention to the five and the six series. With this logical and clear pricing system set up for the brand, we believe that the overall impact will also be positive on the new brand. Maybe at the beginning, our fellow will struggle with how to allocate their focuses and time across different products. For the long term, we believe that the impact of these two models and the new models will be positive across the brands and the products. is arriving. This is a change in the market, and it will have a very positive impact on the sales of our existing products, whether it is the ES6 or the L60. This change in user perception is very positive. As we see strong demand for the all-new ES8 and the L90, we have also observed the successful product, great large three-row battery electric SUV models launched not only by NIO, but also by our competitors who used to have only REV products in the market. With all these large three-row SUVs coming into the market, we also observed a market trend. In the first half of this year, the growth rate of the BEV segment increased by 39% year- over- year. For REV, that's only 14%. If we consider the sales volume in July and August for the BEV and REV respectively, I believe that the growth rate of the BEV will be even faster than that of REV. In that case, we are observing growing competitiveness of the products in the mid and the mid-large battery electric SUV segment, as this is more well received and also evident to the public. This is why we say that the golden era of the large three-row battery electric SUV is arriving, as with more mature user mindset and also stronger competitiveness of the product, the market is shifting towards that direction. This will also help the long-term competitiveness and the popularity of our existing SUV models, including ES6 and L90. 感谢, 雨天。 Yeah, got it. Thank you. The second question is a little bit more exploration on the OpEx side. You touched upon the innovation, redesign, and R&D commitment. Could you give us a little bit more quantification and breakdown in terms of the OpEx cuts targets, if there is any, or just break down the cost optimization initiatives in a little bit more detail? Thank you. 当然, 关于这个OPEC的刚刚我们也提到, 就是我们对于今年四季度 non-GAAP盈亏平衡的这样的一个背景下面, 我们对R&D的这个目标是在不影响主线产出, 就是我们长以及我们长远的竞争力的情况下, 我们希望能够把这个研发费用控制在¥2.0 billion左右。然后 SG&A呢, 是希望能够占到控制在整个销售收入的10%以内, 这个是我们作为四季度non-GAAP盈利的这个目标。对, 那长期来说呢, 其实刚刚这个William也提到2026年了, 我们是希望说在研发费用¥2.0到¥2.5 billion每个季度之间, 取决于我们的新产品的这样的一个推出的这个节奏。那SG&A呢, 当然我们还是希望说能够持续的去往说更高的这个效率目标去努力了。对, 大概是这样。 Thank you for the question. As we've introduced towards the Q4 non-GAAP break-even target, our overall principle is that for the R&D expenses, without compromising on the major R&D activities and also long-term competitiveness, we would like to control the quarterly R&D expenses to be within RMB 2 billion for this year. For SG&A ratio to the sales revenue, around 10% this year. That's our target for this year towards the quarterly break-even. For the long term, as we've also mentioned, for the year of 2026, our R&D expenses will be around RMB 2 billion- RMB 2.5 billion per quarter, depending on the product's go-to-market and also development cadence. For the SG&A expenses, we would like to continue to achieve higher efficiency and utilization of expenses. That's the overall principle. Thank you, Rui Chen. Thank you. Thank you. Your next question comes from Tina Hou from Goldman Sachs. Please go ahead. Thanks, management, for taking my question. Just a very quick one. In the longer term, how should we think about the stabilized sales volume of L90 as well as ES8 on an average monthly basis? Thank you. 谢谢, Tina。中国现在整个市场竞争确实是非常激烈的, 而且我们也看到智能电动汽车它现在整个的销售的趋势确确实实都是一上来新车发布的效应比较强, 然后会进入到一个稳销期。其实在市场上去看, 我们确实也很难看到一款车能够长期的在一个比较大的量上去畅销, 其实这个还是挺挑战的。我们很难去给一个长期稳态到底是多少, 但我们肯定要去朝这个更高的一个比较高的目标去努力吧。从今年开始, 我们其实一直在建设NIO的team和ONVO的team的这个我们叫做新的一个营销的范式。这个新的营销范式是能够尽可能的去把这种新车的效益能够延长, 能够保证能够在一个比较高的这么一个稳销的水平。实事求是的来讲, 这个挑战仍然是非常大的, 所以我们还需要一段时间才能看清楚我们的这个营销范式到底能不能帮助像L90和ES6的这样非常有竞争力的产品, 它的稳销的水平能够在一个让市场和让投资人满意、让用户满意的一个水平, 还需要一些时间才能看清楚。 Thank you for the question. For the automotive industry, thank you for the question. As the automotive industry here in China is highly competitive, if you look at the sales trend of the smart electric vehicles, you seldom see any new model that can capture a very stable market share and a very major trend or popularity in the market for a very long time. In that case, it is also difficult for us to really share with you a clear outlook regarding what the stabilized sales volume of the ES8 and L90 will be for the long term. We definitely set ourselves a higher target, and we will also try the best. Starting this year for the new and ONVO brand, we also started to build up the team capabilities by implementing a completely new sales and marketing paradigm. We hope that through this new sales and marketing paradigm, it can actually help us to maintain and capture the market share of our new models as long as possible to prolong their impact and influence in the market and also to stabilize their reasonable and satisfying sales volume in the market against the fierce competition as long as possible. As we have just implemented this paradigm, it will also take time for us to understand if it is truly helping us with the stabilization of these two great models, ES8 and L90. Overall, we hope that this can achieve a good result that is satisfying to the market, investors, and also our users. Thank you, Tina. Thank you, William. Thank you. As there are no further questions now, I'd like to turn the call back over to the company for closing remarks. Thank you again for joining us today. If you have any further questions, please feel free to contact NIO's Investor Relations Team through the contact information on the website. This concludes the conference call. You may now disconnect your line. Thank you.