Zhejiang Leapmotor Technol-h Aktie

Hello, everyone. Welcome to Leapmotor 2026 Interim Results Conference Call. We have CFO, Mr. Li Tengfei of Leapmotor; as well as Co-President, Mr. Wu Qiang; as well as the Board Secretary, Mr. Shen Ke.

First of all, may I invite Mr. Shen Ke to announce the disclaimer. Thank you.

Ladies and gentlemen, good evening. I'm Board Secretary, Shen Ke. Before we proceed, please note the following important legal and regulatory disclosures. The conference call and accompanying materials may contain forward-looking statements, including, but not limited to projections regarding revenue, profitability, growth and strategic plans as well as future market conditions. These statements are based on the company's current expectations, estimates and assumptions and involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from these expressed or implied in such statements.

Therefore, we would like to remind you not to rely too much on these forward-looking messages because these messages reflects our opinion as of now. The company undertakes no obligation to update, revise or otherwise modify any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Investors are cautioned not to place undue reliance on these forward-looking statements.

Other than that, the information and materials presented in this call are not suggestions of investment. Therefore, shareholders and potential investors needs to make investment decisions prudently. Thank you.

Now I'm going to invite Mr. Li Tengfei to report the interim results. Thank you.

Distinguished guests, I am Li Tengfei from Leapmotor. I am going to brief you the interim results of the first half of the year. In 2026, H1, our net profit is CNY 210 million. In the first half of the year, our total delivery is 356,000 units, an increase of 60.8% year-on-year, ranking first in China's EV startup. In July, our sales volume created -- exceeded 100,000. And this is the first time we exceed over 100,000 units in 1 month. We are the first EV startup company to achieve these results. And Leapmotor is a leader.

In the first half of '26, our export is 96,294 units, up by 72%, exceeding the year total export of 2024. And in July, our export exceeds 17,000 unit and overseas market has become our important growth curve. D19 was launched in April. The sales volume has been increasing, monthly average exceeds 7,000. And in July 2026, the sales volume exceeds 10,000, ranking first for large SUV with the price range below CNY 400,000. And then in terms of financial revenue, we achieved CNY 38.11 billion, up by 57.2% year-on-year and GP margin is 11.7%, down by [ 2.4% ] versus 14.1% of the same period in 2025. And in Q2, our GP margin is 12.6%, up by [ 3.2% ] year-on-year.

And by June 30, 2026, well, net profit owned by our shareholders also increased. Adjusted net profit is CNY 270 million. By the end of June, our cash flow is CNY 270 million. The same period of 2025 is CNY 2.86 billion. Our free cash flow is CNY 140 million, while the same period last year, it's CNY 860 million. By the end of June, our cash and cash equivalents are CNY 38.59 billion. In terms of sales volume, our sales volume has increased by 60.8%. And Leapmotor ranked #4 among all global EV brands. And in July 2026, our sales volume exceeded by -- increased by 102%, becoming the only EV startup with monthly delivery exceeding 100,000 units. And our total export has grown by [ 37.3%, ] exceeding the yearly export total in 2025. In July 2026, our export exceeds 17,000 units. And from January to July 2026, the total shipment has exceeded [ 1.13 million ] units.

In terms of product, by the end of the first half of 2026, we have fulfilled A, B, C, D series launch and covering all the mainstream price range. And for all our models, they are leaders in their different sectors. We have created a very complete product lineup and has created synergy among different model lines. In March, we launched our A10 series. For the first time, we actually make this model with LiDAR as well as high-end autonomous driving systems available within CNY 100,000. And then together with the latest technology of CLTC -- long CLTC as well as smart technologies, providing a new mobility choice for -- after launch of A10, it is a great success.

By August 7, we managed to produce the 100,000 units. This creates a new record of creating 100,000 units from May to July 2026. For 3 consecutive months, it has become the sales champion for SUVs in China, becoming a new popular product. And it also ranked very top in various kinds of tests. In April 16, 2026, the first D model, D19 was also launched in the market. After years of technology accumulation together with the product advantage, D19 is a great success. Order number has been a great success as well as it's, say, [ bus ] created among the consumers. For 2 months in a row, it has become the champion for large SUV sales rank.

And also in the health ranking of EV models, D19 was ranking -- was ranked top as the most recommended models. And then for the range extended models, it has this new 80.3 kilowatt batteries. And then for the pure electric model, it used a battery of 111-kilowatt hours with CATL battery cells, together with the Qualcomm's 8797 chips with the TOPS reaching 1,280. So this is true flagship models in this sector, providing a very comprehensive comfort for both driving and passenger experience.

On April 24, we also launched this new model of Lafa, providing a new sedan choice for the customers. In terms of the sports packages, quality as well as materials, there are major breakthroughs, addressing various needs of the younger generation, not only providing the top technology but also the emotional value with a very affordable price range of [ CNY 100,000 to CNY 150,000. ] So after this Lafa series launched at the end of 2025, the total sales volume has exceeded 40,000 units. In the future, this new model will continue to tap into this blue sea market.

In June 16, our C10, C11 and C16 were also launched in the market. This is an upgrade of this C-series, focusing on the customer needs, new, say, upgrade of the style, range, smart technology, covering CNY 120,000 to CNY 180,000 price range. For these 3 facelift models, the popular -- the result of the market was very optimistic. And in June, the sales volume exceeded 30,000 units. C10 is a really benchmark of this segment. For C11, after launch in 2021, the total sales volume has exceeded 350,000 units. And C16 is also a sales leader in this segment. For C-series, we have accumulated over 850,000 customers. The word of mouth has been proven over the years.

In June 26, D99 was launched the market. It is a flagship MPV model. It is the flagship of the D-series, providing great technology, range, safety and also the smart technology as well. So D99 fills the void of Leapmotor, and it is a model in the MPV market. The average selling price exceeds CNY 300,000 after its launched market. The market performance has been a great success improving our premiumization strategy.

In July 16, 2026, we also launched 2 B platform upgrade models with a very long range. B10 and B01. These are 2 models proving our strategy of democratizing technology. So for B01 and B10. We use the 800-volt technology as well as zero gravity seats as well as large central control. All this address the pain points of the market with affordable price range within CNY 100,000, providing the technologies and experience of CNY 200,000 price range.

And then in August 2026, A05 was launched in the market with 5 different versions, and the price starts with CNY 63,900. With our years of technology expertise, we provide the best-in-class quality. A very good choice within the price range of CNY 100,000.

In terms of R&D, LEAP 4.0 was first used in D19 based on 8797 chips, smart technology is further improved. This architecture support single or double 8797 chip platforms. Based on different use cases, the chip's performance can be adjusted accordingly. GPU/CPU, together with NPU, can fully utilize the hardware resources. At the same time, the data can be better shared between the passenger cabin as well as the driving system. And the smart technology condition can also be synchronized at the central dashboard. At the same time, the response is within milliseconds, providing a very good handling experience. At the same time, city autopilot has also been available in all A series, B, C, D series. In September 2026, we're going to launch a brand new autonomous driving solutions, providing further upgrade of the driving experience, covering all our product range from A-Series to D-series.

In terms of channel, by June 30, our sales network has covered 298 cities, covering 87.4% of the city. We have 1,064 stores as well as 562 services stores. Compared with 2025, we have increased 258 sales outlet as well as 101 service stores. We also launched our brand-new multifunction stores, which can provide demo, test drive, delivery as well as aftersales services. Currently, our flagship store in Shanghai and Shenzhen is in operation. This is going to further enhance the customer experience and channel operation.

Retail wise, H1 2026, we continue to focus on the customers' lifestyle management, refine our operation. By the end of 2026, in terms of NEV market, our market share has increased to 5.71%, which is an increase versus 4.22% at the end of Q1. The conversion rate in the first half of the year has achieved 4.3%. In terms of channel and store management, we continue to upgrade our service so that we can create synergy among different stores, creating new benchmark. In terms of service in 2026, the company focused on serving our customers as our top priority, addressing customers' needs as much as we can so that we can really create a better word of mouth.

Our service NPS reached 57.8%, up by 39.6%. In the first half of 2026, we practice our full service commitment and also upgraded our service standard. At the same time, we also have owner events to further optimize the experience of Leapmotor's owners.

For globalization, from January to July, our total export has exceeded [ 1.13 million ] units. Throughout the year, we can exceed 150,000 units. In the first half of 2026, our export was 96,294 units and especially in Italian market, our market share has exceeded 25% in the EV pure electric sector. In June 2026, we are also becoming the #1 EV brand, Chinese EV brand in German market. In U.K., we are #3 in China's EV brand. So all this means our globalization strategy has taken effect.

By end of June 2026 in Europe, South America, Africa as well as 45 countries, we have established over 1,000 stores. In Europe, over 900. Asia Pacific, 50. Safety South America, over 30. And North America -- South America over 30. And in Q2, we entered Mexico market we have established our channel network there. Leapmotor right now is also localizing our production. In Southeast Asia, our assembly plant in Malaysia has achieved great success. And also, our SOP for C10 models in Malaysia has also been fulfilled. For B10 in Q3, we're going to start mass production and market launch. In Europe, say, in Spain, we have fulfilled our factory together with Stellantis.

In 2027, we plan to officially produce B05. In South America, together with Stellantis, we have selected Stellantis' Brazilian factory as a localized assembly plant. This is going to take the lead in locally assembled B10, and the production is projected to start in the second half of 2027.

In terms of environment, social and governance, in the first half of 2026, we have launched our fourth independent annual report, demonstrating our sustainability practice. Our sustainability practice has gained recognition. We got 2 accreditations. For 3 years in a row, we were MSCI accredited. And in a new round of [ EcoVadis ] accreditation, we have become silver from copper, and our ranking also became the top 15% from the previous top 35%.

As for digitalization in the first half of 2006, we have launched our AI product, which is developed in-house and also upgraded to version 2.0. This is going to ensure that AI technology can be fully integrated into our R&D, marketing and internal use. We continue to utilize AI in various processes, centering around very complex business cases. We are improving our innovation, risk detection, customer service as well as operational efficiency in R&D, focusing on styling AIGC and voice recognition, knowledge management. We're also trying to improve our design innovation, diagnosis of problems as well as the problem response.

In supply chain, we are also better analyzing the risks and decision-making. In marketing, focusing on customer, say, defects, description, smart scoring, we can also improve customer insights. By doing so, we can improve our customer service. As well in the administrative area, we are also using AI for smart translation and document treatment. By integrating AI capability in our key business processes, we are also scaling up the use of AI technologies, paving the way for high-quality development in the future.

Thank you very much. Now we will open the floor for questions.

[Operator Instructions] Next question. Please identify yourself.

I am [indiscernible] from CICC. Congratulations on the very good interim results. I have two questions. The first question goes to Mr. Li Tengfei. Can you break us down your revenue contribution of carbon credit as well as R&D services in Q2?

The second question. Looking into the second half of the year, do you see any changes, cost-wise? And are you going to update the profitability guidance? Any change of the guidance of the GP margin?

Well, for H1, our carbon credit revenue is CNY 800 million to CNY 900 million. In Q2, it's around CNY 500 million. When we're looking at our carbon credit revenue, Leapmotor has achieved a lot in European market. However the price of carbon credit, as we mentioned in Q1, the selling price dropped versus the previous year. So that is why the overall carbon revenue is not growing as fast as the absolute ratio.

As for R&D services, in the first half of the year, you probably have a notice that with G -- FAW and Stellantis in R&D service, we have continued, and I'm sure that you will hear the announcement very soon. So please stay tuned for the good news.

As for the second question, the profitability guidance. You mean throughout the year 2026, right?

Yes.

Throughout the year -- at the beginning of the year, we set this CNY 5 billion net profit guidance. Now judging from the current condition, CNY 5 billion is very challenging. This is mostly due to reasons that is known to all because of the price uplift of raw materials, which actually affected our GP margin.

According to the current condition, we expect the GP margins -- NP margins throughout the year is around CNY 3 billion. As for GP margin, which is around 13% to 14%.

Follow-up question. In H1, in R&D service, there is no revenue contribution?

Well, there is some, but it's not significant. When we have our business officially launched, we're going to announce that.

And GP margin, 13% to 14%, what is the GP margin for vehicle sales then?

Vehicle sales, the margin is around 10% to 11%.

Next question.

I'm Wu Pingyue from Citic auto team. I also have two questions. The first question is about Leapmotor and Stellantis cooperation. We know that Stellantis announced its technology partnership for the electric models. So can you share with us how can you say -- how do you expect to benefit from this partnership? And any possibility for range extender on the second model? And also, we noticed that for localized procurement, European Union has some new requirements. And Leapmotor International, can you use the Stellantis supply chain? So that's my first question.

The second question is for overseas sales. Can you update next year's target for overseas sales and the breakdown in different regions?

First question, our partnership with Stellantis. In fact, in the previous question, we have mentioned that we expect that recently, we're going to announce some new -- good news to launch the new partnership. Well, this is based on our very, very sophisticated supply of parts and components. We hope that we can benefit our partners by using this strength from Leapmotor. This is a direction for the partnership. And the benefit for us from this partnership, well, for this part, I want to share more information with you when our partnership has been announced.

As for your second question, local procurement, and we use Stellantis' supply chain. Stellantis Group has existing supply chain, which is a very important resource for us. When we are selecting supply chains, Stellantis will provide support for Leapmotor, Leapmotor International. However, we will not rely completely on Stellantis' local supply chain because our pursuit is better quality, better cost, and this is going to be the criteria when we select supply chain together with Stellantis.

But of course, with Leapmotor International's local supply chain as a foundation, I think our work can be more efficient. The cost control will be more efficient. As for overseas target next year, this year, our overseas sales target is 100,000 to 150,000 units. It seems that this year, we can fulfill this target of 150,000 units. We expect the overseas sales can reach 200,000 units.

As for next year's target, we are very confident about next year's overseas sales. Our overall target is 350,000 to 400,000 units for next year. This next year, together with Stellantis, we hope that we can fulfill 400,000 units. As for sales distribution in different regions, which is not going to vary too much from this year's distribution. The main market is Europe. South American market will be a very important part of our overseas sales together with Asia Pacific as well as Australian market.

Next question. Again, please identify yourself and your institution.

Two questions. First, your production capacity in overseas market has been growing very fast. Looking to next year, in Europe, Spain and Latin America, what is your planned capacity? The first question.

And the second question, we know that for Stellantis, they were saying that for the first 3 years, the profitability is not the main target. So I want to know for the actual sales revenue per vehicle, what is the profit margin?

First, capacity question. Right now in Europe and South America, we are using our partner's production capability. Together with Stellantis Group, we have discussed very thoroughly and they have been very supportive in Europe, North -- South America. Our partners are doing everything they can to provide Leapmotor's capacity needs. You all know that in Europe, South America, Stellantis has sufficient production capability. Therefore, production capacity is our strength. We have such a strong partner. There is no concern production capacity-wise. And we also have a very good plan working together with Stellantis. We believe that the production capacity can fulfill our needs in those regions.

As for the second question, profitability. From Leapmotor's perspective, Leapmotor International is a JV company. We own 49% of the share. They own 51%. Therefore, GP margin for us is before we sell to Leapmotor International. For the first 3 years, we have mentioned that our overall GP margin will remain very low because that is not our top priority, 3 years passed very quickly. For both sides of this partnership, we will sit down and continue the discussion.

For the first 3 years, our corporation has achieved a lot. You can see the sales volume and Leapmotor International last year managed to be profitable. And this year, Leapmotor International's operation is also very good. We have been growing very fast. So now it's time for us to sit down and continue the discussion of the operation of Leapmotor International.

From our perspective, right now, our top priority is still the sales volume in overseas market because we're in a faster-growing period. That is why we still need to grab more market share in those regions. We, of course, value the importance of profitability, but sales volume is our top priority right now.

Next question. Please introduce yourself. Sorry, there's some audio issue.

Sorry, I was on mute. Congratulations on the very good results. I have two questions. I'm [ Liao Ling ]. My question has to do with autonomous driving. We know that for A10 and D-series, autonomous technology has very good quality. Now Leapmotor has late movers advantage. With limited investment, you can achieve very good results. What is the secret? And that's the first question.

And the second question is for L2+ and L3 autonomous driving, we've seen some trends. For instance, the differences among Tier 1 players are not so obvious. Therefore, the competition is more on cost. And the second trend is L2+ and L3. Players are getting closer to L4. So my question is for Leapmotor's smart driving technology road map, are you focused on cost control for L2+ and L3? Or do you want to approach L4 technology?

First question. Smart Driving technology. As you said, for A-series and D-series, in the middle of the year, we also launched B-series products. So all these solutions has been very well recognized by the market. For A and D-series smart technology, very good positive feedback from consumers. As I mentioned earlier this year, in September, we will launch new smart driving products. So a little sneak preview is for this new solution compared with the current solution, we believe there is a major leap forward. We hope that you can all stay tuned. You're all welcome to come to Hangzhou to experience our new smart driving technology.

Well, as for why we can invest small but achieve a lot. I would say in terms of smart technology, the investment didn't start recently. At the beginning of the company's foundation, smart technology has become a very important technology direction for us. But at early stage, we focus more on paving the way of building a foundation. We are not in a hurry to make major investment for output. We see that technology road map has evolved a lot from high resolution map to map-less technology. We've seen a lot of changes.

We didn't make a decision in a hurry until we see that physical models, large model technology, we believe that these technologies will be the direction of our future. That is why in the second half of last year, we have stepped up our investment in smart driving technology, not only budget-wise, but also talent wise. Last year, we have launched models with our own solutions and has generated a lot of data. And that is why, say, this, we can launch our new smart driving solutions in September. We believe that we are in the right direction. And that is why we can control our investment more effectively. Once we see the correct direction, we can step up the investment and achieve good results within a comparatively shorter time frame.

As for future technology road map, be L2+, L3 or L4, we have made plans in both areas. We are not only trying to achieve L2+, L3, L4, including software and hardware. Hardware includes smart driving hardwares but also chassis. For all these technology aspects, we have a complete plan.

Next question. Please introduce yourself first.

I am [ Zhang Jieying from Guotai Haitong. ] I have three questions. The first question has to do with export. Next year, the guidance is 350,000 to 400,000 units. Do we have a breakdown of local produced vehicles? And also, is the Spanish factory still be commissioned in October? Any changes on that? And also, the net profit each vehicle after the operation, any guidance on that?

And the second question is, in September, you're going to launch our new smart driving technology. Other than that, any other information we can expect?

And third question, I noticed that in your subsidiary companies, robot business is also included. We're also seeing that this year, competitors has announced the news of, say, robotic-related businesses. So any prospects for Leapmotor?

Well, first question, locally produced vehicle. Our factory in Spain, our plan is in October, Mr. Zhu will go to the Spain factory together with Stellantis' top management to attend the opening ceremony of the Spanish factory. The plan has been going on smoothly. As for next year, our locally produced vehicles will be B10, that is B10's share in -- among this total 350,000 to 400,000 units will be very small because B10 is the only model that will be produced locally. We expect that next year, B10's volume will be around 50,000 units. But of course with the company's continuous development. Well, locally produced models will also increase. As I said, production capacity is not our concern. We are working very closely with our partner to increase our sales volume.

As you also asked about the net profit of locally produced models, well, I would say, definitely, localization has some tariff advantage. However, compared with parts procurement, locally procured parts and components will be more expensive. So if you factor in all this, the GP margin of localized vehicles will improve compared with the current CBU, but not as much not that much as you may expect. Well, with the tariff policy continues to change, we believe that localization will benefit more. Therefore, we believe that net profit improvement for localization strategy will not be very immediate, but it will eventually happen. We believe that localization in Europe, in South America, in other markets, localization strategy will be very important for Leapmotor. It will be a very important strategic direction.

You also asked about technology release in September. Well, it's set on September 16. Other than smart driving technology, there will be other new technologies announced. We will have industry experts. They will join us. But right now, I am not in a position to disclose too much, but I would like to extend my invitation to all of you to come to Huzhou City in Zhejiang province to attend our press release so that you can see the brand-new technology of Leapmotor. I can tell you that be it smart driving technology, battery, motors, we will have a new technology announcement.

And lastly, the business scope includes robotics. Yes, we do see the news lately. Well, in our subsidiary company, we added new business scope. This is a very common practice. I know that you are looking very closely at any robotic-related moves. Well, what I can say is we believe that new energy, NEV companies, especially NEV companies with in-house R&D capabilities will have unique strength in embodied robotic or humanized robot business. I can tell you that we do have a plan in this regard. And in the near future, or I can say very soon, you will hear our official announcement of robots-related business announcement.

Next question. Please introduce yourself and the institution you're in.

I am [ Jiang Su ] from Huatai Securities. I have two questions. The first question is our yearly gross margin. Just now you mentioned that gross margin in the second half of the year will increase versus the first half. Why?

And the second question is for the sales structure of our models because in the past 2 months, you have upgraded the C-series and A05 launched. So what is your monthly sales target for A, B, C and D-series?

For GP margin improvement, there are several reasons. Number one, our sales increase has been fast in the past months. This will bring about a scale effect, say, better raw material cost and better manufacturing cost. And secondly, is raw material price uplift. You have seen that in the first half of the year, the price increase or the price of materials of commodities have stabilized. So lithium carbonate price will be more stable. And together with our scale effect as well as optimized production cost, we believe that our gross margin will improve. However, I would say the GP margin will recover to the level same period of last year. We cannot say that this is a very good GP margin. However, this target would require a lot of efforts from us.

As for the sales structure for our B and C-series, the sales volume, as you may see, compared with last year, the B and C-series sales volume has increased slightly compared with last year. As for D-series from D19 and D99's launch, the sales volume has been very strong. Together with A-series, A10 and A05, the product launch has already been completed. These 2 model combined will have a total sales volume of over 30,000 units. That is roughly the sales structure.

We will take the final two questions. Next question, please.

I am [ Maiyi Chu ] from [indiscernible]. The first question is A10, D19, D99, A05, all these models are very successful. So I want to know, what are the new product launch plans for '27?

And the second question is the Spanish factory, which will be in operation very soon. The production capacity will be tens of thousands of units. And then in 1 or 2 years, the second factory will be in operation. So I want to know that pure electric vehicle and maybe plug-in hybrid will have some new policies. So what are the risk exposures for your export to European market?

The first question is new product launch next year. I can tell you for this year's new product release after A05, we have finished all these major launches. There may be some small face lift. For '27, our brand new model launch will be more than 2026. For D-series, we will have new product launch. C-series, we will have a new launch together with upgrade of current C-series. So both C-series and B-series will have that. That is why next year, it's still going to be a very major year for new launches.

Right now, internally, product preparation is not a big challenge. We are still considering the pace of new product launches next year because we have a lot of new products, and we also have plans of existing products face lift so how to have a better rhythm, better pace of new launches, that is our focus right now.

Second question, Spanish factory and production capacity, I have responded to part of the question, I would like to reassure all of you that there is no concern for production capacity because we have our partner, local partner, and we are both very cautious capacity-wise. In Europe, in South America, we have sufficient production capacity to ensure the implementation of a localization strategy.

Our partner in [indiscernible] market has a sufficient capacity. We are selecting factories that will be best for our future development, which includes capacity, capacity they can give to us as well as the location of the factory, the supply chain, so we are considering all these factors to find the most suitable factories. Again, this is a very important or a very big advantage to have a local partner like Stellantis. So we can implement localization strategy at a lower cost. We also have more choices, which is benefiting our strategy.

Congratulations on improving market share and sales volume.

Well, next question.

I'm from [ Dong Security. ] I'm [indiscernible]. Two questions. The first question is return on investment. In the first half of the year, there is a loss. Why?

And second question is about export. Well, in Q1, you're saying that the order volume actually exceeds the shipping capacity. I'm not sure if you still have a bottleneck for your shipping capacity. And what about overseas channels? As you said, there's over 1,000 stores. Any plan to expand overseas network?

First question, return on investment. Yes, in the first half of the year, there was loss. The key reason is foreign exchange, which caused a problem for our joint venture company's profitability. We expect that this would be offset in the second half of the year so that Leapmotor International's yearly profitability will not be affected.

And second, the shipping capacity. If you read news, you may know that because of the new energy vehicles exports from China, the roll on and roll out shipping demand has increased tremendously. There is a tight supply in the first half of the year. We have been working with major shipping companies as well as Stellantis' global strategic partners to discuss cooperation. Right now, compared with March and April, the shipping speed has improved. We believe this can ensure our overseas sales volume of 200,000 units this year.

As for channel network, we have exceeded 1,000 stores. The majority is in Europe. We will continue to develop our network in Europe, say, Eastern Europe and North Europe. Those are the areas we're going to further expand the network.

Another important area is South America. Last month, we have officially entered Argentina market. We will start our sales there. Brazil, Argentina, Uruguay. So this South American market will be expanded very fast. Together with the Asia Pacific market, the channel will continue to expand. We work with Stellantis in Europe, Asia Pacific, in South America, they have very, very well-established channel network. For example, in South America, Stellantis' market share ranks first and is far ahead of #2. That is why by using this strength of Stellantis, our channel network will be developing very healthily, paving the way for sales increase.

Thank you. Thank you for the company management, and thank you for all investors. If you have any other questions, please reach out to the IR team of Leapmotor. Thank you for joining us. See you next time.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Hello, everyone. Welcome to Q1 2026 Earnings Conference Call from Leapmotor. We have here with us CFO of Leap Motor, Mr. Li Tengfei; Joint President of Leap Motor, Mr. Wu Qiang Chiang; as well as Mr. Shen Ke, Board Secretary.

First, Board Secretary, Mr. Shen will read the disclaimer statement.

Hello, everyone. I am Shen Ke, Board Secretary of Leapmotor. The earnings conference call may contain forward-looking statements. including, but not limited to, statements regarding the company's future financial condition, strategies, objectives and metrics and the future market development conditions in which the company participates or may participate. These statements are based on the company's existing and future business development strategies and assumptions regarding the company's future business environment. They inevitably involve known or unknown risks and uncertainties. These factors, the companies cannot foresee or control may cause the company's actual performance and the performance of this industry to differ from the future performance expressed or implied in the forward-looking statements.

Therefore, we caution you not to place undue reliance on the forward-looking statements discussed in this conference call. These statements reflect only the opinions held by the company's management as of the date of this conference call and the company has no obligation to update or revise any statements made in this conference call in light of new information, future events or other circumstances. The forward-looking events discussed in this conference may also fail to occur due to various uncertainties.

The above disclaimer applies to all forward-looking statements mentioned in this conference call.

Shareholders and potential investors are hereby reminded that none of the content contained in this earnings conference call constitutes any investment advice, nor does it form the basis or foundation for any contract commitment or investment decision. Shareholders and potential investors are requested to act with caution when buying or selling the company's shares.

Thank you, Mr. Shen Ke. Now I'm going to hand over to Mr. Li Tengfei, CFO of the company, to brief us on the earnings of Q1 '26.

Dear investors, good evening. I'm Li Tengfei. I will give you an update of our Q1 results briefly. First, from a financial perspective. In 2026 in Q1, the company's revenue is CNY 10.8 billion, up by 8%. The revenue growth is more about car delivery and parts delivery increase but because of the product mix change, the ASP dropped and part of that gain is offset. GP margin is 24% in '24, in '25 is 25.9%. In '26, it dropped to 16%. The major reason is because the product mix change, and we continued our management control.

And then in terms of strategy, equity holders, the loss attributable to equity holders also changed in Q1, and this increase of loss is due to GP margin growth and expense increase. In 2026, the Q1's operation cash flow is negative CNY 6.6 billion. Free cash flow is negative CNY 7.4 billion. Our capital on hand is sufficient. Cash and cash equivalent, the fair value and the bank balance is CNY 30.63 billion. In terms of sales revenue in Q1, our sales is 110,000 units. And our overseas sales has created a historic high. It's exceeded 40,000 units, and this is a major increase.

With all our product mix product offensive started. And then we also created a new monthly sales exceeding 70,000 units, ranking #1 among all EV start-ups. And then in April, overseas sales is -- exceeds 14,000 units. And then we have created some new blockbusters models and our new models has exceeded 10,000 orders within the first 48 hours. And then the test drive number also created a new high for the company. And our D19 within 15 days of launch and the order has exceeded 15,000 units. And all our models have generated very good sales revenue. C Series exceeded 8,000 units. And for B, the annual delivery has exceeded 230,000 units.

In terms of product, A10 was launched. And for the first time, we used LIDAR and OTA within the price range of CNY 100,000, and it has become a new buzzword for A10. The positioning is a global product. The focus is technology democratization. It has a very long drive range together with the Qualcomm's 8295 and 8650 chips. Oil cooled drive and other new technologies, this is a new choice for the product -- for the customers who seek high-quality products.

In April, the 16th, our flagship E-Series, D19 was also launched with a 10-year technology strength and the price range is very competitive. It's around CNY 220,000. So a lot of new orders and customer attracted to the brand, becoming a new flagship models. And D19 EREV model also using largest EREV batteries. The pure electric range exceeded 500 kilometers. And using CATL cell and it also supports the 1,000-volt high-pressure architectures. The total computing power is 1,280 tops. This is also equipped with ADAS system. So for this D19 with a great design, driving range, price and safety, this is a new choice at the price range of CNY 300,000 SUV.

And also MPV D99 also launched its 10 years celebration model. At this year's Beijing Auto Show, it attracted new public attention. We started to presell in June, and the delivery will start in July. And D99 is a new important model also a lot of competitive features, providing top design, top range and top driving control and a lot of luxury experience. This is a highly competitive product within the CNY 300,000 MPV market. With the D 99's update and face lift, it will create new success.

Well, we're going to equip more new technology to these flagship models. And LAVA5 Ultra was also debuted in Beijing Auto Show this April. This -- the price range is RMB 150,000 providing to the younger consumers, more sporty choice. With the great driving control and ADAS systems, we have a complete update. The 5 second acceleration from 0 to 100 kilometers and also high-quality interior materials with city NOA. Based on our understanding of young customers' needs, we featured on not only technology and function but also providing emotional values. So this is filling the void of the pure electric vehicle market at the price range of around RMB 150,000, so the sales ever since its launch has exceeded 20,000 units ranking top in this segment.

RAVA5 series has now more members in its family, and this is, we believe, a new Blue C. In terms of R&D, we have our central domain control system, which is used in D19. Using dual chip and super large storage, we are making this cockpit more smart and more intelligent. It's like a brain controlling the whole vehicle. The computing power can be distributed dynamically based on different driving scenarios. GPU CPO is focused for the entertainment function. And the hardware resources can be fully utilized. So the cockpit and the driving system can have an exchange of data.

So this is providing better driving and cockpit experience. At the same time, we also support millisecond data exchange with minimum latency, so that our experience is reliant. C Series and B Series in 2026 will use LEAP 3.0 and 3.5 architecture so that we can demonstrate our in-house technology development capabilities so that high level ADAS will be more popular, not just on premium models.

In terms of channel, by the end of March, our sales and service network has covered 295 cities, 18 new cities. We have 993 stores and over 500 service stores. On a country level, we are expanding our network. We have registered 613 outlets. We're going to increase our channel coverage.

In terms of retail, in Q1 2026, we continue to focus on the management of the life cycle of our customers, focusing on tiered management of our outlets, creating new records by the end of Q1. For NEV is market, our market share has increased to 4.22, ranking first among EV start-ups. With our prospect management and sales procedure standardization, our test drive has increased by over 10%. At the same time, for the key stores, we are also trying to increase the conversion rate by implementing more strict management process.

We have 6 star rating of our stores so that our stores will be classified into different types. We can have addressed -- the strategies addressing their existing problems to drive up the overall service quality. And in Q1, in terms of service, we focused on the improved mobility experience for our customers and more easy maintenance and repair. The customers can see very clearly their work order. Especially on holidays, we provide free road aid. Over 200,000 customers booked the maintenance in our store with over 1.2 million customers entered our stores for repair or maintenance for 122 stores serving a total of over 4,000 groups of customers, and the customer satisfaction exceeds 90%.

We are also providing dedicated, say, service advisers to our customers, so they can provide more professional services. Our NPS service is 59.8% and in 2026, we will continue to focus on customer needs, providing better customer experience, so that service can also be our great reputation. In 2026 Q1, our export has exceeded 40,000 units. And this is over 42% growth versus the same period last year. And this is also leading the export of EV brands in China, especially among 16 European countries, the registered number of LEAP motor has grown by 726%.

In the 12 countries in EU, our BEV sales exceeds 170,000 units. In March, the total registered plate exceeds 5,000. And in April, it exceeds 4,000, still number one, for the BEV markets. By the end of March 2026, in Europe, Middle East, Africa, Asia Pacific, over 40 markets, we established around 1,000 outlets. In Europe exceeds 850, in Asia Pacific of 50 and South America exceeding 30 outlets.

On January 11, A10 was debuted at Brussels Auto Show. And in Q3 this year, it's going to be launched to the market because of its design and its functionality is going to meet the needs of European customers.

And then in terms of ESG, in Q1, the company for the third consecutive year, we were MSCI AA grade. At the same time, among the sustainable grade worldwide, our rating has improved from Copper to 0. Comprehensive evaluation has increased from 35% to the top 15%. In the future, we will continue to step up our efforts in ESG. Now we're going to open the floor for questions.

[Operator Instructions]

I'm Lin ba Lin. I have 2 questions. Number 1 for Q1, do we have a GP margin in Q1? And any reasons for the GP margin change? How much is due to cost of change and how much is because product mix change? That's my first question.

Would you like also to ask your second question?

Okay. My second question is for Q2, not sure if you have updated your guidance in terms of sales and GP margin. The sales guidance is 240,000 to 250,000. Any changes on that?

Question number one, for the vehicle GP margin in Q1, our company GP margin is 9.4%, around 10%. And the vehicle margin as compared with last year's GP margin, '25 is similar to last year. Last year's whole year is over 7%. I'm not going to disclose the detail, but it's over 7%. So for vehicle GP margin versus Q4 '25 and the same period in '25, it's going down. There are several reasons for that. Number one, in Q1, the scale is different. If you look at the volume, it's smaller in Q1, which is in line with the industry situation, industry trend.

So with a smaller volume, our capacity and capacity reserve and parts reserve increased so that our utilization rate also dropped. That's one reason. And secondly, because of the product mix change in Q1 versus same period last year, last year is mostly C Series, this year, B series has a higher share, and B Series has slightly lower margin than C Series and also material price.

If you look at Q1 this year, the material price has a limited impact on our GP margin. Because our major raw materials has already been reserved last year. So that stockpile can cover our Q1 manufacturing needs. That is to address your first question. And the second question is for the guidance in Q2. Earlier, as you said, our total sales right now, it's around 240,000 to 250,000 units in Q2. We believe this is achievable because in April, we have monthly sales exceeding 70,000 units.

So in -- on June 1, we are going to announce our sales volume in May. By then, you can see that we are confident for that. And for the GP margin in Q2, we believe that -- the GP margin versus Q1, we believe the margin will grow, will increase. But as for how much, I don't think we can go back to the level of Q4 2025, but it's not going to be too far. It's around 12%, 13% GP margin for Q2.

And then back to the first question because it's for our vehicle business and our vehicle margins, so my input.

Thank you, Mr. Li. We will now take the next question.

Hello, I am Wu, Pingyue from CITIC Automotive team. Congratulations for Q1 performance, especially deliveries in overseas market, creating a new high, exceeding 40,000 units. So I want to know any updates of your target for '26? And also in your key markets, what is your capacity plan working together with Stellantis because Stellantis announced that you're going to strengthen your cooperation in Europe? So maybe talk a little bit more on Europe, Southeast Asia and Latin America.

Thank you for the question. Let's start with overseas sales. In our 2026 guidance, overseas sales is 100,000 to 150,000 overseas sales. In Q1, our overseas sales was very good, very strong growth momentum. I can tell you that in Q1 or April, our overseas sales can be better than our figure. But there are several reasons, the disruptions in shipping and other reasons, there are some small impact. We could have done better.

And at this moment, we still believe that we don't want to adjust or revise our earlier guidance. But now based on Q1 performance, we think that our annual overseas target of 150,000 is very, very possible and the possibility has increased tremendously. That's for export. And then in key markets at the beginning of the month, Stellantis made an announcement. I am sure that many of you are following this very closely. Our production in Europe, our factory in Spain, we have also mentioned that in the previous conference, the progress is smooth.

In Q3, we expect that the Spanish factory will start production for Europe. In Stellantis announcement, they also mentioned Stellantis factory. Well, it's very likely that the factory will be sold to Leapmotor International. The shareholders on both sides together with Leapmotor International were evaluating this project very, very carefully. From Leapmotor and Leapmotor International's perspective, on one hand, our localization strategy in Europe is largely with Stellantis capacity. We, at the same time, will also acquire some production facilities so that we can have our own production base.

We can also have our own production capacity in Europe so that we can introduce our products into European markets faster in the future. Well, for South America, if you look at this year's sales performance, the growth in South America was very fast. You may know that in South American market, Stellantis has very strong presence. South America, well, you can see that Stellantis has around 30% of the market share in South America. So that is why it's growing very fast because Stellantis also value the importance of Leapmotor's Motors business.

And then since we start our sales in South America, the sales volume has been trending up very fast. At the same time, we are also going to localize the production in Brazil. We want to have localized production facilities in South America as well.

As for Southeast Asia, Indonesia or Malaysia, Thailand, we have been planning our footprint very carefully. Southeast market -- Southeast Asia market is very competitive. We are changing our competition strategy. So that we can win the competition. Overall, right now for Southeast Asian market, the overall performance has improved largely versus the same period last year.

We now are taking the next question.

I am Ming from Merrill Lynch. I have 2 questions. First, follow-up question of the previous one, just now we talk about export volume. This year, you can achieve your 150,000 targets. So I want to know, in Q1 and in 2026 whole year, in European market, EU market, how much is the revenue going to be like? And what is the price trend? And that's the first question.

Second question is, in the future, will Leapmotor establish a second premium brand?

EU revenue, we look at the license registration -- registered vehicle and then plus x ASP. For a single vehicle, the revenue change, well, I can assure you that for our single vehicle revenue versus last year, it's going down. It's easy to understand. It's just like the trend in China with increased penetration of a new energy vehicle with increased supply in the market and this revenue generated from carbon credit will go down.

By the end of last year, we're also talking and reach agreement with Stellantis for this credit business, and this business is moving very smoothly.

Second question -- the second brand premiumization. Mr. Drew and Mr. Tao recently have disclosed the second brand information because our second brand, right now, it's still confidential. That is why I can only tell you that we do have the plan to have a second brand. It is expected that the product from that new brand will be premiered at the end of this year or no later than the middle of next year. And we expect the product launch to be no later than mid of next year or the second half of next year.

The positioning of the second brand will be different from the first brand. We hope that this new brand, new products can help the company continue to grow in the future.

We now take the next question.

I'm from CITIC International. Number one, cost wise, earlier, we talked about some stock up of raw materials. We now see that memory chips and lithium price has gone up in Q1. So I want to know how long can your stockpile last? At what point, I would say, you will be affected because of the high material price? Or when can we see the major impact on your GP margin?

And second question is still overseas market. This year, because of energy price surge and geopolitical reasons, new energy vehicle export has been very, very good, very strong. And with your increased sales volume, do you have any plan to really ensure that your overseas sales volume can contribute more to our overall profitability?

Yes, first question. In Q4 last year, we foresee the price surge of raw materials. That is why we have stocked up some raw materials. That is why in Q1, the impact on our margin is not very, very obvious. But then as you said, those stockpiles will be used up. And the price hike is not ending yet, especially for key materials. This is the background we are now against in Q2. The raw material price hike and its impact on our profitability will show in Q2, but then not that severe impact as we have talked about Q2 margins.

But in Q3 and Q4, say if this price hike of lithium carbonate or memory chip or precious metal, if the price hike continues, then we'll have to say it's going to have a bigger impact on our GP margin. But then the precondition is our retail price remain unchanged. As you may see that some of our competitors are changing their price, adjusting, revising the price. So for us, on one hand, for the second half of the year, with the change of geopolitical environment, we will follow the trend very closely to see whether the price will continue to be so high, but no one knows.

There are so many uncertainties, the war in Middle East and geopolitical reasons. So we'll follow very closely. And secondly, if this trend continues, how should the whole industry cope with the situation? Maybe this whole industry will adjust the price as a whole. I believe if the material price continue to surge, the whole industry will have to adjust retail price. Therefore, looking into H2, there are still a lot of uncertainties. We are now following the development very closely. But right now, it's very, very difficult for us to give you a precise answer. That is to address your first question.

Second question, export. When we established Leapmotor International with Stellantis, we have agreed with integrity as a very important part of our business philosophy. We will fulfill our commitment, especially with our partners. We're not going to change any agreement because of changed scenarios. That is one thing. And a lot of investors are looking very closely at our profitability in overseas market. Our vehicle margin is not high right now in overseas market. However, I want you to see two possibilities.

Number one, in 2025, Leapmotor International was profitable on the first full year of establishment is profitable. In Q1 '26, Leapmotor International sustained a small profit. There is an impact of foreign exchange rate change. We're also Leapmotor International's shareholders. So we want the company to be profitable. And secondly, our volume is growing very fast. We have overseas sales outlets of over 1,000. Therefore, from Leapmotor's perspective, we are not investing so tremendously in overseas market to reach the profitability we have right now.

Meaning the capital investment from both sides are not investing so hugely at early stage of Leapmotor International. The result is largely due to sound operation and the brand impact in those markets are also increasing. Therefore, from a CFO's perspective, our investment in overseas market was quite small, if you compare the number with our competitors' investment. Therefore, we reached our target at a smaller cost.

This, in my opinion, is another kind of profitability. We have agreed partnership models with Stellantis. With our investment, we now have achieved such big presence, brand impact and if not this kind of partnership, we may have to invest 10x higher than we have and may not reach the same results. So if you see this perspective, you can see that the contribution of overseas market to Leapmotor is huge. You all know that for a brand to expand to overseas market, you will have to invest tremendously to develop, educate the market, to build those stores and also to establish a supply chain, financing services.

So to establish such a system will take not only time but also a huge amount of capital investment. Therefore, our model with Stellantis allows us to reach the result with a minimum investment within the shortest possible period of time. So the investment saved in this regard can be regarded as profit.

We're ready to take the next question.

Earlier, Stellantis' announcement has been mentioned. So I want to ask Stellantis is going to also increase their production in the European factories. So in the future, are you going to make a joint procurement in that factory? And what are the parts that will be procured locally? That's the first question.

And the second question is, there are several models in overseas market, but now carbon credit ownership is on us. What about the European factory? The carbon credit will belong to Stellantis maybe. What are the models in European market?

First question, our European factory. As Stellantis also announced their production plans in the factory, and we will share production line there. Well, for Stellantis brand, which will be manufactured in the factory, Leapmotor will utilize our strength. We will provide electric drive for their model cockpit and some control parts of controllers that were developed in-house from Leapmotor. We will be suppliers for Stellantis brands. And then for our cars and Stellantis cars, when we share a production line, we will establish joint teams, so that we will combine our sales target. Then together, we will look for the suppliers so that we can achieve the maximum scale effects.

We can also get a better price. We also sell some parts to Opel. This model will be launched by the end of '27 and even 28. So by 2027, we will start to provide a small amount of parts to the brand. And when the mass production starts, we will provide in larger quantity and it's going to have more impact on our overall operation results.

And secondly, the carbon credit ownership. According to EU regulation, the ownership is -- belongs to the manufacturer. Those who own the license will own the carbon credit. Right now, for our CBU sales model, our carbon credit belongs to Leapmotor because we are the manufacturers. We own the certificate but then in European factory or a Madrid factory acquired by Leapmotor International and then the models produced in those factories will be -- those cars will be manufactured by Leapmotor International and then the certificate will be Leapmotor Internationals. They are the manufacturers.

So the carbon credit belong to carbon -- belongs to Leapmotor International, and the revenue will also go to Leapmotor International. And then Leapmotor International will trade the credit with there possibly Stellantis. And the revenue -- part of the revenue will be used for model promotion or brand promotion, and then we will also benefit.

We now are taking the next question.

I have two questions from a financial statement perspective. Number one, the expense and in the coming, say, future, say, carbon credit and non-vehicle business like carbon credit business, how much does that contribute to your overall revenue?

Now first, the financial statement, this RMB [ 7 ] million gap is the result of government subsidy. In our annual announcement last year and also last year's announcement for the same period, there is this gap of RMB 700 million. And from the company's perspective, we received government subsidy, but not that much. And this subsidy and its recognition will take some time. If you compare Q1 last year, the situation was very similar.

As for the contribution of carbon credit, well, I have explained our company GP margin and CBU margin has a difference of around 2%. In Q1, excluding the projects -- strategic projects with our partner, in last year, we do have revenue in this regard. And this year, with Conti, we have the revenue showing in Q1 and this cooperation project is going very smoothly. In Q4, the volume production will start. And with Stellantis, we also supply parts to them. With FAW Group, we are also talking with each other. It's very likely that in Q2 or Q3, we will have some major announcement.

For the time being, we will take the final two questions. Next one, please.

I'm [indiscernible]. I have two questions. Number one, for D19, the sales performance was very good since its launch. It actually exceeds our internal targets. So I want to know for D19, the average monthly sales expectation is like how much do you increase that? And do you think that the GP margin of D19 also exceeds our expectation?

And the second question is, for the annual yearly guidance, any changes on that because earlier, the annual sales volume is 1 million. So I want to know after Q1, do you have any changes on your yearly guidance?

First, on D19. Since its launch, the sales performance has exceeded our expectation, 15,000 units in order within a very short timeframe. Now the delivery is on the way. After the delivery, the customers' feedbacks are also very good. Customers have spoken highly of this model. And then the company also has a new requirement on our D19 team. We want to stabilize the annual sales at around 10,000 units. So that this can sustain our D series sales performance, paving the way for D99 model.

As for GP margin, if you look at single car or GP margin, there is not so much change. Similar to our plan and the previous expectation, but for the sales increase and the total increased number in our mix, it is going to have a very positive impact on the overall profitability. We're expecting that, but we're also very confident to see stabilized sales volume of around 10,000 units. And D99 has also attracted a lot of attention, and we have reason to be optimistic about D99.

And second question is our yearly guidance. In terms of sales volume, in Q2, the sales volume is around 250,000 to -- 250,000. So in H1, we can finish our 360,000 H1 target. This is in line with our yearly targets. But now if you look at policy, regulation, the seasonality of this industry from new energy vehicle perspective, well, normally, H1 sales volume is weaker, but H2 will be stronger. In H1, 36%, in H2, 64%. That's the best target. And we believe that we are very confident to realize this 1 million sales target.

As for profit target, earlier, we talked about the impact of raw materials on our profitability. Well, in second half of the year, we don't know the eventual trend of the raw materials. And we are still not sure the price trend in the whole market. There are too many uncertainties at this moment. Therefore, from the company's perspective, we think that this RMB 5 billion profit target is possible to be achieved, but we'll also admit that there are some potential risks. We will have to follow the trend very closely. There are so many variables here. It can be raw material, can be geopolitical environment. It can also be impacted from the auto market.

Therefore, right now, it is not easy for us to have a very clear prediction. We do not have any plan to revise our RMB 5 billion profit target but we think that there is a risk.

We take the question from the next [indiscernible].

I'm with Huatai Security. I'm [indiscernible]. Two questions. First is the facelift of C Series. What are the timelines? What will be the changes? And second question is overseas sales guidance in Q2. Maybe you can walk us through that.

For C series facelift, you asked about the major changes and what are the differences? What I can tell you now is 416 and well, that's a mid facelift. And for 411 -- C11 versus C16, the changes may not be that dramatic, but C16 and C10 will have more dramatic changes because it's a mid-phase facelift. The product competitiveness will improve. I'm not in a position to disclose any more on any specific changes. So this is what I can tell. C10 and C16, mid-phase major facelift, but C11 is more moderate.

In June, we're going to finish the facelift and launch the product. It's already made. So very, very soon in around a month you will know the results, so please stay tuned. Our marketing management, Mr. Su will give you a very, very detailed introduction.

The second question for overseas sales target in Q2. In April, it exceeds 14,000, so if you look at the whole Q2, the sales is around 40,000 to 50,000. If we do well enough, it's going to exceed 50,000. Leapmotor International placed the bigger orders than these numbers. But I think it all depends on the international shipping. We are trying to work out more ways to get this shipping more smoothly. Only when we can break this bottleneck, can we realize this sales volume.

Thank you all the management, and thank you for all the investors. If you have any other questions, please reach out to the IR team of Leapmotor. This is the end of this conference call. Thank you for joining us. See you next time.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Hello, everyone. Welcome to Leapmotor Full Year 2025 Earnings Conference Call. Together with us, we have CFO of Leapmotor, Mr. Li TengFei; Joint President of the company, Mr. Wu Qiang; as well as Mr. Shen Ke, Board Secretary.

First, may I invite Mr. Shen Ke, Board Secretary to read the disclaimer statement.

Thank you, moderator. Good evening, everyone. I'm Shen Ke, Board Secretary of Leapmotor. The earnings conference call may contain forward-looking statements, including, but not limited to, statements regarding the company's future financial condition, strategies, objectives, metrics and future development conditions in which the company participates or may participate.

These statements are based on the company's existing and future business development strategies and assumptions regarding the company's future business environment. They inevitably involve known or unknown risks and uncertainties. These factors, the company cannot foresee or control may cause the company's actual performance and the performance of the industry to differ from the future performance expressed or implied in the forward-looking statements.

Therefore, we caution you not to place undue reliance on the forward-looking statements discussed in this conference call. These statements reflect only the opinions held by the company's management as of the date of this conference call, and the company has no obligation to update or revise any statements made in this conference call in light of new conditions, future events or other circumstances.

The forward-looking events discussed in this conference may also fail to occur due to various uncertainties. The above disclaimer applies to all forward-looking statements mentioned in this conference call. Other than that, shareholders and potential investors are hereby reminded that none of the contents obtained -- contained in this earnings conference call constitutes any investment advice nor does it form the basis or foundation for any contract commitment or investment condition. Shareholders and potential investors are requested to act with caution when buying or selling the company's shares. Thank you.

Now may I invite Mr. Li TengFei to share with us the earnings results in 2025.

Dear investors, I'm Li TengFei from Leapmotor. Now may I share with you some of the information from our 2025 earnings. First, for our business highlights. In 2025, our vehicle sales ranks top among all EV startup in China. Our total delivery is 596,905, up by 103%. So for 2 consecutive years, our delivery has doubled, and we're the only startup EV companies that has monthly sales exceeding 70,000. And then in terms of export, we also top all the BEV start-ups. Our total exports has exceeded 100,000 units.

In 2025, we managed to break even and be profitable and the net profit is RMB 540 million. In 2025, our GP margin is 14.5%, 6.1% higher than the 2024, 8.4%. In Q4 2025, our GP margin is 15%, creating a new quarterly record. In 2025, our total cash is RMB 37.8 billion, up by RMB 13.2 billion, up by 50.9%. In 2025, our revenue is exceeding RMB 64 billion and up by 101% -- 101.3%. The yearly GP margin is 14.5%, up by 6.1% versus the 8.4% GP margin, creating a new high.

In 2025 Q4, the GP margin is 15% of the company, creating a new quarterly high. In 2025, we also managed a very good financial performance. Our RMB, we managed to break even and become profitable. So in 2025, our GP margin based on the equity assets has also increased, up by RMB 3.4 billion. And the cash flow from operations exceeds the RMB 12 billion, up by RMB 4.15 billion versus 2024. Our own cash flow is RMB 7.8 billion, up by RMB 1.5 billion versus the RMB 6.3 billion.

Our cash and cash equivalents in '25 has a balance of RMB 37.88 billion. In terms of sales, our yearly sales is 596,955 units and versus '24, it's up by 103%. And for 2 consecutive years, our sales volume managed to double. And we're the only EV start-up in China that managed to do so.

By the end of December 31, our total delivery has exceeded RMB 1.2 million. And for our C10, for 18 months, the total sales has exceeded 200,000 units. And then for this mid and large SUV, our net recommendation rate ranks top. And by the end of February, for our B-series, the total sales volume approached 200,000 units. Lafa5 after 3 months launched to the market, the total sales volume exceeded 20,000. And then B10, 11 months after hitting the market, the total sales volume exceeded 100,000 units. In terms of products, we have launched 3 new B-series models while for C platform, we also had major facelift for A10 and D19 and D99 has also been launched, and they are going to provide more options for our customers. And this is also providing the foundations for us to reach the 2026 targets. And our LEAP 3.5 technology architecture created the B-series. They have a very strong technology strength and also followed the international design standard, quality standard and production quality so that these smart technologies are becoming more popular. B10 was launched in April 10, 2025 based on the LEAP 3.5 architecture with the latest Qualcomm ADAS chips and also smart cockpit chips, end-to-end large models, together with OS 4.0 operation system. These are highly luxury configurations, creating a new benchmark.

This has helped to generate more young customers. And after 1 month launch to the market, it has won 18 awards becoming the new star in the market. It is also the first model that has been awarded by its excellent design and green design, together with numerous other awards also in France and in London. LEAP B10 launched in July 24, 2025, it is regarded as the high-end smart vehicles for younger generations. For 4 consecutive months, it has managed to exceed the 10,000 sales unit. And for B10, also awarded numerous times, including the China Association Automotive Association Awards. Leapmotor Lafa5 launched on November 27, 2025, initiating a new chapter for Leapmotor. It focused on lifestyle demonstrating the very, very strong personal statement. And it also fits the trend of design, providing new options for metropolitan youth. Lafa5 positioning is high-end sports coupe and also excels in its smart technology. In 2026, Q2 is going to enter global market.

LEAP D platform, we have the flagship D19. The Global Premier was held in October 16 in Shanghai, creating a new flagship for us. As the first car with our D models, it has concentrated all the technology breakthroughs we have made in the past years. For D19, it's aesthetic designs and safety features, and it becomes a new benchmark for the RMB 300,000 price range. The first MPV, D99 launched in December 28, together with the 10 years anniversary of Leapmotor, D99 is another luxury model demonstrating the strength of our D platform, providing comfort, smart technology, battery technology and all the luxury experience. It has very good competitiveness, becoming a new choice in the market. This is going to provide new options, not only for individual users, but also family users. We will continue to enable our models on this platform, making sure that these flag models is more accessible.

For A Series, the first A10 was launched in November 21, 2025 in Quanto Auto Show. It will hit the market in March 26 in 2026. As a long range SUV, A10 is going to further democratize the new technologies. The range is 500 kilometers together with our 8295 smart chips as well as the advanced technology solutions, providing new choices for family users covering all use cases.

In terms of R&D, in 2025, March 10, we published LEAP 3.5 technology architecture. We use a Qualcomm chip combining the new technology so that they can be controlled by one domain controller. This is highly centralized domain control technology so that we can connect all the key technologies like chassis, batteries and thermal management, providing the better user experience.

In 2025, LEAP's brand new products as well as our facelift models are all using LEAP 3.5 technologies. So in 2025, in October, we have launched our D platform -- new technology platform. The EREV models using large batteries, the pure electric range is 500 kilometers and another highlight is we launched 115 kV cell, 3 battery system together with the new thermal management modules.

And third highlight is the double 8797 chips, providing the tops of 1,280 together with smart cockpit and then using LMC 2.0 chassis system, providing better stability and better drive -- turn radius. In terms of safety, we have 2G Par rigidity, providing not only the comfort, but also safety. Lafa genuine leather and also zero gravity seats, this is the first time that we use this technology in production cars, providing new comfort experience for the customers.

Our end-to-end ADAS system is also being implemented. Our city NOA was launched in 2025, covering our B-series and C-series. In February 2026, our city NOA is also used in B, C-series providing better experience. In Q2, we're going to launch our NOA function that covers all the cities in China.

By the end of 2026, we expected to finish our smart driving foundation models. And on top of that, we can use large models becoming an industry leader in this regard as well. In 2025, our electric drive has also made major breakthroughs -- compressors and has managed to be mass produced, become a leader and new benchmarks. Our drive technology has made 3 breakthroughs. Number one is we have torque vectoring technologies, and it has been road tested in the extreme cold conditions and the response time is 0.5 milliseconds. And second highlight is, first, in the industry, new generation, hybrid electric drive system. And thirdly is the fully hybrid transmission technology, and this has entered the validation phase. This is going to further enhance our technology development, paving the way for future leadership.

In 2025, our battery business continue to develop. We focus on sustainability and high-quality development. Number one, battery chassis integration has developed ahead of our schedule and being recognized by the officials. And secondly, we are using this faster charging and solid-phase battery technology as well as lightweight technologies. These are industry-leading technologies, ensuring that we still -- we can become industry leaders. And thirdly, we got SGS certification for our -- as well as TOAs joint recognition for our safety grade.

Together with the recognition of our development process, in terms of sales channels, at the end of 2025, our sales and service network has covered 259 cities increased by 31 cities versus last year. We have 950 sales stores and 256 service stores. In 2025, we also launched our investment seed project, encouraging new investors to us. In 2025, our seed investors has served 205 stores. Our single store output improved by 85.1% versus last year, improving efficiency of our channels. At the same time, we're going to further improve users' purchasing experience. We will have a new presentation and image of our stores to improve brand image.

And then in 2025, covering the life cycle of the customers, we focused on customer satisfaction and refined our business. Our key metrics has improved, including our potential customer management and the whole journey management. We have increased our order number by over 100%. And the satisfaction -- customer satisfaction focus on placing orders and configuration as well as customer service aftersales, providing all-around services.

And then for the delivery process, our delivery has grown by 103.1% among all the EV start-ups, we are a leader in this regard. In terms of service, we implement our service philosophy focusing on enhancing our service capabilities. In '25, our NPS 46 increased by 74% month-on-month. While for spare parts management, we implemented digital technology, improving our service capability, optimizing our spare parts inventories, the fulfillment rate for spare parts also improved.

As for user experience, while the repair and maintenance service has been further enhanced in efficiency, we also launched our full service commitment, ensuring that our after-sales service can be easily booked and delivered. By doing so, we can really provide more ease of mind for our users. In terms of capital and strategic partners by March 26, [indiscernible] has announced and approved our private placement applications by August, we fulfilled this placement. The total finance amount is RMB 2.6 billion. We have newly added 70 million shares. And then we are also becoming the constituent shares in Hang Seng.

This indicates our capability and it is recognized by the capital market, improving our brand impact. On March 3, FAW Group signed a strategic agreement with Leapmotor. In the future, we're going to utilize our expertise in R&D and have a joint development for new energy passenger vehicles. The first model has been implemented. We are progressing this project by December 28. We also signed agreement with FAW and FAW is going to invest in Leapmotor paving the way for further foundation.

In January 1, 2026, with Jinhua Jinyi Hi-Tech company, we also signed the subscription agreement. They are going to invest RMB 3 billion in us. This is going to enhance our industry cooperation in that region. In 2025, our export volume ranks first. The total export is 67,051 units. And by the end of '25, we have already achieved 100,000 export volume. Q4 2025, we ranked second in terms of export for passenger cars. By the end of 2025, Leapmotor International has business in Middle East, South America, et cetera, established altogether 900 sales and service outlets. Over 800 in Europe, Asia Pacific 50, South America over 30.

On November 4, 2025, we launched C10 in that market. Right now, our store number in Brazil has exceeded 30. November 21, C10 and B10 also launched in the auto show entering the South America market. January 1, 2026, our SUV A10 was debuted in Brussels Auto Show.

This meets the needs of European customers being highly recognized by the European media. Right now, our project in Spain has been initiated, B10 and B05 will be the focus. By September '26, the production will be commissioned. And by June, by 2027, another model will be commissioned. We have finalized the location for the factory. It is expected that we're going to start the production of battery packs in June next year.

We are also working closely with the Stellantis Group, trying to diversify our partnership. Some projects has been in the closing phase of the negotiation. In 2025, based on our high-quality product, by utilizing the channel capability of Stellantis, after establishing Leapmotor International, we managed to be profitable, generating returns to the company.

While for ESG, Leapmotor focused highly on ESG and integrate that into our daily operation. For the third consecutive year, we were rated MSCI and ESG as the highest grade. At the same time, for the international leading rating industries, we become silver from the red and our rating has entered the top 15% from the top 35%, meaning that our ESG governance capability has entered a new high.

At the same time, we focus on green manufacturing and we were approved as a green factory by the state government. In the future, we will continue to explore the possibilities of green and sustainable manufacturing providing more returns to our shareholders and other stakeholders. Thank you.

Thank you. Now we are going to have the question-and-answer sessions. [Operator Instructions] Investors with the phone 0464, please introduce yourself before popping the question.

I'm with CICC. I have 2 questions. These questions investors are following very closely. Number one, we noticed that the price markup pressure is there. For instance, raw material, have you analyzed the raw material price changes? And how can that pass on to our GP margin in the future? So that's my first question.

And the second question, we see that in 2025, the revenue from service and other areas are RMB 2.72 billion. Can you break down the mix of this revenue? And how sustainable are those revenues?

Now for the first question, raw materials and the price markups impact on our cost. We did notice that the price increase in raw materials, including those basic materials and lithium carbonate as well as the memory price change. From company perspective, in order to address all these problems, we will improve our cost control.

From cost control perspective, we will further enhance our in-house development and in-house production rate. We're expanding that over the years. For instance, in 2025, for the battery solutions, motors. We produce our own compressor and power source as well as thermal management systems.

And then for each part, we are also exploring vertically to further enhance our in-house development and manufacturing. While for seats, bumpers, these high value-added parts were -- we also managed to develop and manufacture in-house in 2025. So I think what we're doing is to further optimize our cost control this is our countermeasure in facing the raw material price change.

We also believe that these price change cyclic in the past years of development, there are several rounds and cycles of raw material price change. There are fluctuations over time. But we believe that the overall price increase for raw materials will not last forever. It's going to be cyclic. So based on the 2 factors, I would say the raw material price change and not having a huge impact on our GP margin. We believe that in 2026 through our cost control, we can offset the price change from a raw material perspective.

And it is not going to cause any huge impact on our business revenue. That's addressing your first question. And then the second question, can you repeat the question?

Yes. Service and other sales revenue that RMB 2.72 billion. Can we have breakdown of the mix of the revenue?

I'll focus on the major contributors. This RMB 2.72 billion includes carbon credit revenue in overseas market. It also includes some revenues and license fees together with our partners. It also includes our export-related revenues. For instance, the international shipping premium revenue. So these are the major areas of revenue. And you also asked about how sustainable can this revenue be?

Well, for carbon credit revenue, international shipping, business revenue, now for these overseas related business, with our increased export volume in -- especially European market, we believe that the revenue in this area is also going to increase year-on-year. But of course, carbon credit this year, each vehicle versus 2025, dropped slightly, but our overall sales volume increased by a larger margin. So carbon credit revenue, we believe, versus '25 will continue to grow.

You also asked about some project on license and the license fee. In my introduction, I talk about our project with Stellantis. These projects has reached very critical moments for negotiation. And both sides are working very hard to collaborate on more than one project. And then with our domestic partner, FAW Group in China for our first model, which went on very smoothly. And on top of that, we are discussing future cooperation possibilities. And all this has been fully agreed and recognized by both managements. We think that within this year, our domestic and international partners will continue to work with us, and we can expect some very good news contributing continuously to our business revenue. No other questions.

Next, investor with phone #4530.

I am Ming. Two questions from my side. First question is the overseas business. Because in your instruction, you talk about B10 and B05, which will be commissioned for production very soon. And then you also have set your overseas sales volume. According to your estimates, what is the mix of export from China and localization production what are the mix? And then based on this situation, together with the geopolitical tensions and oil price volatility so the transportation cost will also change. How can you better manage the transportation costs for the export?

And you also talk about the future production of battery pack. Do you have any plan to purchase sales locally in the future?

As you were saying, our localization project in Spain, B10 will be commissioned in October 2026. This is the only model with localized production in Europe. So it will only account for 1/4 of the total B10 sales volume. Only 1/4 will be localization production and other B10 sales will be exported to European market and to overseas market actually.

In order to cope with the geopolitical changes from company strategic perspective, we believe that localization is the definite direction for global expansion of Chinese EV companies. We have been actively planning in European market, not only in Spain, not only 1 production facility in other continents, we're also planning on the production facilities.

As for the transportation cost, logistics cost, because of the geopolitical conflicts, I think the biggest bottleneck is transportation capacity. We're not seeing the obvious impact on the cost of transportation, but we're looking at the situation development very, very closely.

How long it will last? What kind of changes it will generate on the macro? So the increase of transportation cost will be on the whole automotive industry not just impacting us. And the next part of the question is cell purchase. In Spain, our mass production is C2C battery pack. It's an assembly factory. The early-stage cell will be purchased from China. But we're actively planning on working with our peers in the industry, especially sales suppliers very actively. We want -- we're planning on localized the purchase of cells as well. Cell companies are also expanding globally, so including also into European market. And we know that in Europe, there will be some new regulations being launched very soon.

So our plan is closely related to all these factors. How those manufacturers are expanding globally and what kind of new regulations will be facing? But with that being said, localization is the future trend for us in terms of strategy. Whenever there are opportunities, we are going to accelerate localization of cell purchase.

Another quick question. This year, European market will still be dominated by export from China market. The tariff is shouldered by the joint venture company. Any models for your export business can apply for the minimum price -- cell price so that you can be exempt from the increase the tariff.

For tariffs, our export business is through Leapmotor International. Well, as for your question, for Leapmotor or Leapmotor International or Stellantis Group, we are following European regulation framework very closely. We're trying to understand and analyze all these new policies and regulations. Once these regulations will benefit our sales in Europe, we will spend no efforts in filing for the benefit.

We have a very strong partner in Europe. We believe that as compared with Chinese companies, they know better about European regulations. They have better intelligence access. They have very strong expertise. So that is why we're working closely with our partner to look very closely and following very closely at the development of the regulations.

As long as we can see a shred of opportunity that our model fits the requirements, we will definitely go for that.

Next question 9915.

I'm [ Zhang Jueying ] from Haitong. Follow-up question for the cost change. Any impact on our Q1 results or in Q2? That's the first question. The second question is the GP margin. Mr. Li, what is the GP margin in Q4 last year? And for Q1 this year, because of the seasonalities and the price changes, what is your estimates of Q1's GP margin? And third question, for Q4, the sales expense was higher than the previous quarters. Why? And what is the guidance for this year's sales expense?

The first question. In fact, I have covered this in the introduction from raw material price change and it's passing on to the OEMs, it takes some time. It doesn't happen immediately, because there are different, say, players throughout the industry chain. It takes time.

And secondly, the impact. I -- as I was saying, starting last year, actually, we have always been focusing on cost optimization. We will have further measures for cost control. We believe that the raw material price markup will not impact on our GP margin, at least for the first half of the year, no major impact. While for Q4 GP margin, Q4, 15% GP margin and the vehicle margin is around 12% and other GP margin is 3%. So that's the breakdown.

As for Q1's estimates for GP margin, we know for Q1, the overall sales volume dropped dramatically versus Q4 last year, that means the GP margin will also drop. And thirdly, for sales expense, Q4 last year, Q4 is a high season for our sales, and that is why we invested a lot of resources to ensure that we can fulfill our Q4 sales target, ensuring that our market share and sales volume hit the targets.

In 2026, our total marketing input will be higher than '25. Because on one hand, our total sales volume is increasing and our brand is developing, however, sales expense for each vehicle will go down versus 2025.

6132?

I'm with CITIC, I'm Wu Pingyue. My question is that by the end of your overseas 2025, as you mentioned, you have 900 sales outlets in overseas market. So next year, as you expected, the export will continue to grow. What about your sales network next year in overseas market?

Sales channel in other markets. As you have seen, in Europe, we have over 800 stores. In 2026 in Europe, we will continue to expand our channel in Europe, especially in the European countries where we have fewer stores. Other than that, in '26 in South America, including Asia Pacific, our store count will increase very fast.

As I introduced in October 2025, we have officially entered the South American market. Our sales in South America has been going very smoothly. The products are very well received and highly recognized by the consumers. In 2026, therefore, South American market will be a very important focus for Leapmotor and Leapmotor International. So our market share and our network will be expanded.

In Asia Pacific, in 2026, we will summarize our experience in 2025 and remediate existing problems so that we can further refine our network in Asia Pacific. Our channel number will be further enhanced in 2026 in Asia Pacific as well.

Cell phone 7490, please raise your question.

Hello, Mr. Li. I have 2 questions. First, concerning the sales target this year for domestic and overseas market, because a lot of concern for market demand this year. So what is your target this year? And the second question, for South American market, what are the key countries? And what are the models that will be our focus for this year?

First, for sales target, we have guidance last year our annual sales target is 1 million units, including 100,000 to 150,000 sales in overseas market. So we believe that throughout the year, the passenger car market in China as compared with 2025, will have no major fluctuation. It will be similar to 2025.

With the market being similar we think that new energy vehicle penetration will continue to grow compared with the previous year. Therefore, for our trend in domestic market in 2026, we believe we are actually optimistic. We're not as pessimistic as some other peers because we believe that from a demand perspective, January and February, the demand tend to be weaker, but I think we believe this is just a different cycle for the demand. January and February's weak demand will be released in later months over the year. We are confident to achieve our sales target this year. We are not planning to revise that target.

And secondly, as per your South American market right now, we focus on Brazil, Chile, Argentina, Ecuador and Colombia. We will take a step at a time. Brazil is the largest market in South America, and it's going to be our top priority. As for models, C10, B10 have already hit market in South America. In Sao Paulo Auto Show, we also brought our models to the auto show, including some other models we're working on right now. We are working with the South American team from Stellantis to communicate thoroughly so that we can introduce the models that suits the needs of South American market.

7074, please ask your questions.

Congratulations on the excellent performance. I'm [ Lou Ling ]. Two questions here. First question is, for these 4 new models this year, what is the time table for their launch A10 followed by which models? The first question. And secondly, now previously, in an interview, Mr. Zhu mentioned that in the future, innovation will be centering around use cases or scenarios. So how do we understand this scenario here or use cases in Mr. Zhu's interview?

For our 2026 four model launch, the first one is A10 will be launched in 10 days, March 26th, it will hit market by then. Right now, the demo cars, the test drive models have already arrived to the dealers. So please go and take a look. And the second model will be D-series D19, the first model. It will be launched at the end of April. The third model is A05. A05 and D99 will hit the market at a similar time line around June -- second half of the June or the middle of the June or the beginning of July. Those models will hit market. So that's the timetable.

And secondly, you talk about innovation centering around use cases or scenarios because this has to do with the new product development of the company. So right now, it's highly confidential. That is why I am not in a position to elaborate on this question.

Another quick question. Any guidance for the profit this year?

From a company perspective, in 2025, we have already given the capital markets the guidance of 2025 net profit of RMB 5 billion. We're not changing the target this year.

9518, next investor.

I'm [indiscernible] Quasi Auto. I have one question. For the smart technology because earlier, you mentioned your smart technology deployment. Are you going to develop in-house or work with a technology vendor?

Well, for smart driving, I'm not going to repeat the progress, but we believe that this year's Smart Driving will be a very important year for Leapmotor's technology breakthrough. According to our strategy, from H2 '24 throughout 2025, we have been increasing our investment in Smart Driving including on human resources, technology and capital investment. We have increased this input tremendously. And we have made very rapid progress. Well, I have introduced the progress earlier in the introduction. This year, we will also invite investors to experience the latest products of our Smart Driving technology. This year, we hope that by the end of 2026, Leapmotor's Smart Driving can be truly recognized by the market, and we want to be recognized as a Tier 1 brand in this area.

Now as for how we do it? Full stack in-house development for Smart Driving technology is our strategic direction. This is our unwavering commitment. We won't change that. In the R&D process indeed, we are communicating with the partners, but this is not going to change our in-house development direction for full stack technology.

0521, next investor, please.

Hello. I'm [ Wang Zihao ] from Changjiang Auto. Two questions from my side. Number one, for overseas market, any new guidance for the profit in overseas market because this year, you mentioned you're going to step up your efforts in South America and Asia Pacific. What about profit in those markets? And oil price is increasing in European market recently. So a lot of voices are saying that with the increased oil price, new energy vehicle will penetrate even faster in European market. Have you changed -- feel this change? And secondly, is R&D expense. Last year is RMB 4 billion R&D expense. This year, any changes? Any plans on that?

First question for profit in overseas market. Last year, I have said on many occasions that we actually have agreed with our partner. Both sides agreed that when Leapmotor is going global, for the first 2 to -- 3 to 4 years is investment period. So shareholders from both sides will continue to invest in the development. So that means for the upfront 3 to 4 years, there will be more support from shareholders, especially to Leapmotor International for rapid development and for faster access to global market. In 2026, Leapmotor International was established for the second full year. From the time horizon perspective, it's also a third year. That means we will continue to provide tremendous support to Leapmotor International so that we can grab more market share in Europe, South America and Asia Pacific market. Therefore, for 2026, overseas market, we are not giving any target for profitability. We still want to increase the sales volume in overseas market. Well, as for the new energy vehicle penetration in European market, well, it depends on the international macro environment. If the currency situation lasts only for a short time frame or it may last longer, the result will be different. I think the impact on oil demand is not just caused by the Middle East wars, but also by the Russian-Ukraine war. So all this is having a huge impact on the supply of oil and gas in European market. Well, if the current situation continues, the supply of oil and gas in European market continue to deteriorate and the price continues to go up I would say this is going to accelerate the increase of new energy models in European market, but it all depends on the change of international geopolitical landscape. I think even without the war, the new energy vehicle growth is faster than expectation from many experts. So that is why our sales performance in Europe has been very good, and we're recognized by European consumers.

And R&D expense compared with '25, we plan to increase our R&D expense in 2026. This is because of our investments in new technology and new model development, we will accelerate that. And secondly, we will have new talent joining us. So R&D expense will have an obvious increase versus '25.

No other questions. We will have the final 2 questions. 1909, next investor, please.

Hello, I'm from [ Dongu Automobile ]. First is parts export. Any current progress? Because you mentioned that in 2026, there will be sales revenue from parts export. Any progress on that? And second question. For Q4 2024, non-vehicle revenue, how much is that?

First question for parts export, as I said last year, with mass production of our models, a lot of the projects will be commissioned by the second half of 2026. So in '26, we will have export revenue, but not in large scale. It's revenue for export will be within RMB 1 billion. The major growth will occur in 2027.

Secondly, I think you asked about the revenue of carbon credit. Yes. In 2025, the carbon credit revenue -- let me share with you some figures. The revenue is around RMB 1 billion in 2025.

7820, next investor, please.

I'm [indiscernible] from Jefferies. I have 2 questions here. Number one, what is the inventory level right now? Just now you talk about the sales target remain unchanged. So given the new launches, the 4 series have been revised versus previous announcement. So does that change anything or change the inventory level?

Can you repeat the question?

First is the inventory level, how many months is your inventory level?

Inventory level at the outlets. In December 2025, we are trying to reduce the inventory level. In '25, our sales volume is 596,000 units, however, we didn't exceed 600,000 sales volume as estimates by some institutions. Well, for Q1 2026, we believe that the market condition is -- will not be good enough. So that is why starting '25, we want to lower the inventory level. Well, January and February 2026, this trend did happen according to our expectation. We will continue to reduce the dealers' inventory. Right now, according to our standard judging from the past 8 weeks of sales volume, our total inventory level is 1.5 to 2 months. Well, because when there are fluctuations in sales volume in January and February, the way we look at the inventory level is not objective enough. We're trying to revise that. We're estimating our March sales performance and April sales performance so that we can dynamically optimize the dealers' inventory.

According to our March sales estimates, our network inventory is around 1 month and even less than 1 month. From Leapmotor's perspective, dealers' inventory level is included in our sales management. It is a very important priority of our work. We believe the dealers' inventory level will have a huge impact on our total sales volume. So we will never ask the dealers to overstock. We want to control the inventories together with them. But then on the other hand, we cannot have overly low inventory level because it will affect our delivery speed. So we want to have a balance. According to the usual months, our inventory level is around 0.8 to 1.2 months. In 2025, for the majority of the months, we did manage to achieve that. However, if there are drastic changes in sales volume, the overall inventory level may seem to go up, but it takes some time for everything to ease off and to offset with each other. So we believe that our current inventory level is still a very virtuous level.

The second part of my question is actually the product mix. With the new launch in A, B, C and D series, among this 101 million sales volume, what is the breakdown between these different series?

We want to increase our overall performance versus 2025. So 600,000 sales volume, we want 400,000 sales volume coming from the new models. So new and old models will be 60% and 40% in the total mix. This is just a general estimate. We may have more detailed assessment based on the market situation.

Another question is you're working with FAW for some new models. It will be mass produced second half of the year. So what is Leapmotor's responsibility? And what is the estimated revenue?

Our first model with FAW will be produced in Q3 this year, Leapmotor is responsible for R&D of the model as well as manufacturing of the model because it's going to be sold in overseas market. As for the revenue generated, it depends on the sales of the car. In Q3, around September, it will be produced, however, there is a cycle for the sales. It all depends on the launch of the model, which will be at the end of 2026. Therefore, its impact on '26 revenue may not be that obvious.

Thank you, management from Leapmotor, and thank you all for the investors. We look forward for our next conference call. If you have any other questions, please reach out to the IR of Leapmotor. That's the end of today's conference call. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

[Audio Gap] Those forward-looking statements may be different. We remind all participants not to place undue reliance on the forward-looking statements discussed in this call. This discussion reflects the management's view only as of today, and the company assumes no obligation to update or revise them in light of new information, future events or other circumstances. The forward-looking events discussed may not occur due to various uncertainties and assumptions.

While this disclaimer applies to all forward-looking statements mentioned in this call, I remind all shareholders and potential investors not presented in this earnings call constitute investment advice nor that they form the basis of any contract commitment or investment decision, please exercise independent judgment and caution when trading the company's shares.

Thank you. Next, I'm invite Tengfei to share the company's performance in the quarter 3 of 2025.

Good afternoon, I'm Li Tengfei. Next, I would like to report our performance in Q3. The net profit is CNY 150 million, I [indiscernible] CNY 180 million compare to the first 3 quarters [indiscernible] and gross profit margin is 14.5%, [ up ] 0.9 percentage points to Q2. Our delivery volumes rose to 170,000 and boosting the top line is [indiscernible] delivered over 70,000 units for [indiscernible] and our CNY revenue IS CNY 19.54 billion year-on-year [indiscernible] in Q3, gross profit margin is about 14.5%, year-on-year increase of about 8% compared to the 13.6% in Q2 is a significant improvement. In Q3, the net profit attributed to unitholders of company was CNY 150 million compared with the loss of CNY 690 million in the same quarter of 2024. The year-on-year increase in profit was mainly due to the increase in vehicle sales and the optimization of [indiscernible] revenue capacity.

The complete analysis cash flow of CNY 4.88 billion from Operating activities in the third quarter and the cash flow was CNY 3.84 billion and the company has ample funds on hand. As of September 2025, cash and cash equivalents were restricted including financial assets measured at fair value through profit or loss. in Q3 2025, the company's sales [ ratio ] 173,000 units, a year-on-on increase of 101% and month on month increase of about 29%.

The company's sales volume is down significantly in the third quarter reaching about [ 51,290 ] units in July, in August, there was 57,000 units sales sold; in September, it reached 66,657 units; in October, monthly sales exceeded 70,000, for the first time, reaching 70,289 units, the year-on-year growth of 84%, ranking first in sales for 8 consecutive months and it's the first new -- first company to launch a model with over 70,000 monthly sales. It's Cumulative sales exceeded 200,000 units in 18 months.

In the first quarter of 2025, the average monthly sales volume reached 15,000 units; in October alone, the monthly sales volume exceed 20,000 units, the first product to reach a monthly sales volume of over 200,000 units. The model achieved explosive sales upon launch, with deliveries for 3 consecutive months. As of October 31, the cumulative sales exceed 64,000 units. And they have also achieved remarkable results with monthly sales exceeding 10,000 units.

On September 25, [indiscernible] the historic moment of 1 millionth unit, especially the vehicles and [indiscernible] production line less than 1 year from the 500,000th unit to 1 millionth unit. This milestone not only records the company's remarkably development but also simplifies our systemic capabilities. On November 15, the company [indiscernible] its annual sales target of 500,000 units and half month ahead of schedule, is expected to have annual sales volume to exceed 600,000 units.

Since its launch in 2021, C11 has accumulated sales of about 300,000 units, has become a market [indiscernible] product in the SUV segment. On July 10, the C11 [indiscernible] launched on a new market [indiscernible] achieving a comprehensive upgrade in styling, cockpit, [indiscernible] design and assisted driving [indiscernible] further consolidating its the benchmark status in C11 model in the mid-size SUV market.

In October alone, the monthly sales volume exceeded 11,000 units and B01 model is positioned as a high intelligent design and it was launched on July 24. The 3 core elements of leading brands intelligence, comfort and safety are our core technologies based on the LEAP Motor 3.5 architecture. It adopts a combination solution of Qualcomm’s 8650 chip and Qualcomm’s 8295 intelligent chip. We support multiple ADAS functions with spacious design and comfortable feature reaching 86 points high accuracy rate and the interior is environment friendly and healthy with vertical [indiscernible] body for safety 48-hour thermal runway protection equipped with chassis jointly developed by China and Europe.

Since the launch in April 2019, B01 has sold monthly 10,000 units. Since its launch, the all-around and fully equipped model has penetrated into compact sedan market.

The Leapmotor, on 8th of September [indiscernible] Munich Motor show officially opened a new chapter and our LEAP 3.5 technology architecture, flagship intelligence platform with outstanding [indiscernible] and topnotch quality on November 7 and officially launched in China on November 27 to the global market for the second quarter of 2026.

[indiscernible] D19 made it's debut in Shanghai attracting more market attention than expected. As the first model of the flagship, [indiscernible] bringing technology and experience to the CNY 300,000 from the flagship range intelligent driving control, safety, comfort and effective leadership [indiscernible] the shift in the value standard for full-size luxury SUV in the RMB 300,000 segment, truly making luxury accessible with the first model of the A-Series A10 will be unveiled at Guangzhou Auto Show on November 21.

Positioned as an intelligent premium, long-range SUV, the A10 brings LIDAR and other exclusive performance that's exclusive and premium within CNY 100,000. For the first time [indiscernible] shift the competitive landscape of the mainstream commuting vehicles becoming a new benchmark for global compact SUV. We offer an attractive design philosophy and affordable price.

With the launch of D series and A series, we will complete the comprehensive rollout of [indiscernible] targeting multiple market categories such as sedan, SUV, and complete automatic.

In terms of R&D, new flagship technologies were released on October 16, the first enterprise loyalty enhancement version equipped with a large battery capable of delivering 500 kilometers of pure electric range of about 30 Celsus degrees. The vehicle innovatively adopts the intelligent 4-wheel drive system with the first launch of flagship model powered by dual electricity at 1000 kilo volt is [indiscernible] super hybrid battery pack and 1000 volts power system throughout the vehicle, is also equipped with the dual Qualcomms 8797 chip offering 1,280 TOPS computing power enabling ADAS, assistant driving the observation and is equipped with a flagship architecture with the 2.0 system featuring high-speed dual wheel higher and stable [indiscernible] videos higher, it's more functional and it's not only featured ultra-high-strength steel and 10-layers of battery safety protection and ADAS configurations.

It also offer safety, flagship comfort features such as leather seats and 120-degree zero power seats. It's also the first time in the industry to integrate the vehicle-grade oxygen generator into the car. In 2025, in our summer test, we completed and passed over 2,900 various tests. It covers key items such as the charging speed in extremely hot environment and performance at high temperature air conditioners, extreme temperature 100 kilometer acceleration capacity and extreme temperature, explosion resistance parameters, other the conditions of high temperature and complex conditions with cumulative test mileage reached 1.15 million kilometers, truly reproducing the users' driving scenarios in extremely hot environment and comprehensively verifying environment.

Since 2025, the company has brought the leading edge technologies to new users and upgrading 5 models, and safety features have been added and optimized, including commuting navigation [indiscernible] roadside driving recorders, et cetera. We also offer many other advanced packages such as commuting navigation assistance [indiscernible].

2021 model and other older models, C11 and C01 series had undergone 4 OTA upgrades adding and optimizing [indiscernible] including mobile integration, bluetooth key strategies.

As of September 30, 2025, the company's sales and service network has expanded to 292 cities, an increase compared to the same period of last year. A total of 866 sales stores and 493 service stores has been deployed.

In terms of channel development, we have focused on introducing and expanding high quality resources [indiscernible] business clients for cultivating high quality investors and the new introduced ideas. From January to September 2025, our state operators and local strong players jointly established 120 new stores significantly driving improvements in sale and quality of various distribution channels.

Year-on-year growth, it's growth reaching about 30% in retail in the first half of the year based on the folding digital marketing and service system of the previous year. The third quarter continued to deepen on the user integrated operation system achieved a significant improvement in terms of user efficiency and conversion quality to ensure seamless integration from online investment to offline experience which provides users with an integrated and valuable brand experience.

And our onsite test-drive rate for the entire fleet has increased by 8.4 percentage points in terms of service. In 2025. The company continues to implement the service concept of Three quicks and Two Saves in vehicle maintenance relying on our globally developed technological advantages. We have launched the intelligent cloud diagnosis, providing proactive services to achieve fault diagnosis within seconds and service preparation, such volume increased by 4.8 percentage points in terms spare parts supply by establishing 1+7 warehouse distribution network and applying an intelligent inventory forecasting model, the 48-hour delivery rate was increased to about 92%, year-on-year increase of 25 percent points.

In terms of globalization, we exported a total of about 3 17,397 units in the third quarter with cumulative export from January to September, reaching about 33,000 units, leading the new [indiscernible] segment with shipment volumes in September achieved the lead in the automotive market in several European countries such as Germany, Italy and France, ranking among the top 3 in terms of sales volume for Chinese new energy brands.

In October, the number of overseas end customers signed contracts increased by over 100% compared to September. As of September 30, we led the international market with over 700 outlets both the sales and after sales and aftersales services functions have been established in international markets. We have about 30 countries, including Europe, Middle East, Africa and Asia Pac regions, has already [indiscernible]

In October, over 1,000 European users placed orders highlighing the globalization efforts in 2026 [indiscernible].

In ESG, in September, the [indiscernible] automotive circular manufacturing was officially launched and put into operation. The center will effectively reduce resource consumption and carbon emissions.

okay, let's go to Q&A.

Hello, I'm the host for today's session. And analyst from the [indiscernible] asked 2 questions. well, this year, we've seen that our cumulative deliveries in the market has exceeded 5000 units target for 2025 ahead of schedule. If we look ahead to the next year, which new products will launch and which products will be further enhanced to strengthen our capacity?

My second question is about overseas. In 2025, you saw concurrent increase in the penetration rate of the new energy vehicles in Europe. The company sales volume in European export this year has also been very impressive. So I would like to ask whether the growth trend in exports can continue in 2026. 2 last year, the company's sales target for overseas markets, including the sales guidance and profit target.

Well, there are many -- that's my 2 questions. So do you think you have launched a new product in 2026. In fact, one of them has already made, which is our platform for the [indiscernible] first model product [indiscernible] another product launched in 2026, the flagship products for the [indiscernible] will introduce in 2026.

I mentioned that we will launch the first product of our A10 that also will be another flagship product next year. And A10 will be launched in the first half of next year in 2026. [indiscernible] model will be launched in 2026 and next very we will have 2 new A Series products.

And with this, we'll also have new products into service. So our new products will be going to very soon [indiscernible] 2026 [indiscernible] leading products in March. [indiscernible] product which is our [indiscernible] launched at the end of this month. So there will be upgrades to existing products and the emergence of new products and this product will further enhance our capacity.

The second question on overseas sales. As I mentioned, overall overseas sales in quarter 3 saw a significant increase compared to second quarter. I'm very pleased to inform that we achieved overseas sales in October and November and explosive growth. In October, our overseas sales order reached 12,000 units. In November, we expect to another -- to exceed 15,000 units as we roll out our entire C10 platform and continue to see new brand awareness in Europe, whether it's the continent as a whole or the individual regions after [indiscernible] familiar with and after our product launch, we will continue to achieve better sales.

Looking ahead to 2026, we believe that based on the good momentum right now, we will continue to make progress -- good strides [indiscernible] progressing in this new markets such as countries in South Africa and the gradual rollout of products in other countries such as Middle East and Central Asia will also give us new momentum. So in the fourth quarter of this year, we expect hybrid growth.

We expect the company's current sales target for overseas market to be between 100,000 and 150,000 units. That's our projection for the next expectation for next year.

[indiscernible] analyst from company asked first 2 questions So first is about confidentiality of the model [indiscernible] and also after the launch of the service, will there be any changes in our marketing and channel strategy and [indiscernible] approach rather is [indiscernible] high-end on attributes of our platform. That's my second question -- My first question.

My second question is about the overseas platform and plan next year and the progress of our domestic market to help us to go out. And regarding the volume, we always have doubts about the entire overseas profitability. So could you share us more insights in those regards?

Thanks for your question. Well, the first question regarding our gross profit margin. As I mentioned, our company aim to maintain the gross profit margin of vehicle products of about 15%. And as we enter the high-end market, we want to achieve a higher gross profit margin, [indiscernible] products are currently priced at higher than the existing model. We not aim for even higher gross profit margin. And now [indiscernible] 50% and this level will fluctuate around -- fluctuate according to the market conditions and the overall type of the vehicle.

Regarding the overall gross profit margin, we're considering how to finalize the level our -- responsible person stated that our leadership and management will always adhere to a high benchmark pricing, but we don't pursue particularly high gross profit margin for products with such attributes based on our current estimation. So the gross profit margin will range between 15% to 20%. To how to build our B platform. Well, by far, we think that the performance of the service is excellent since the launch in the Shanghai Auto Show.

[indiscernible] successful And we also invite our Ke Shen to please our representatives. By far it has reached great success. So both with the industry and among our user community Mr. Ke Shen collaboration has received a high level of attention and that's an innovative manifestation on the B series, which we also understand to be our most advanced and most expensive product at present. Whether it's the brand promotion, channel strategy or the end-to-end process, we always have some ideas and approaches that go beyond what is currently on sale and that enable us to connect with the users.

Okay. And we will like to ask what's your outlook [indiscernible] overseas operations in 2026.

Well, we will have about 2 overseas projects [indiscernible] in 2026 and one project will be in Malaysia. [indiscernible] half of 2026 with localization projects soon will be set up.

Our projects in Malaysia [indiscernible] localization product which is a [indiscernible] and in Malaysia our plan to further develop and we have made plans about what kinds of models should be exported to different markets.

In terms of overseas, the profitability in 2026, friends who are familiar with this model know that it was [indiscernible] to our international markets. In the first 3 years going global we will maintain a relatively low gross profit margin. Once it expands, the international markets first, in 2026, our overseas gross profit margin will be very similar to the margin this year.

Okay. I hope that Leapmotor will achieve greater success and better performance.

Let's welcome the user with the ending numbers 2110 to ask questions.

I have 2 questions. First the new energy tax has been reduced [indiscernible] 5 questings. To subsidies, the trading subsidies for new energy vehicles also got reduced. In the segment of vehicles around CNY 200,000 are generally sensitive to subsidies. So I would like to how you would adjust to these changes to maintain or to reach your target of 1 million domestic users?

And also I would like to ask in the future, whether you will focus on the domestic or the overseas market. You also mentioned in the overseas market when you will launch your first model.

Okay. You mentioned changes in the whole industry. It's expected that next year, there will be changes such as changes in the subsidies in purchase tax, et cetera. But at this point, we don't see for sure how changes will look like next year. So on the other hand, from my perspective, I don't think there will be significant changes next year. Next year in China, I believe that overall sales in urban areas [indiscernible] compare to this year.

We can refer to the situation in 2022 and 2023. In 2023, the natural subsidies also changed and [indiscernible] subsidies will be phased out but the number of total sales hasn't changed significant compare to 2020 in China. For us, the China's new energy vehicle significantly and rapidly, whether there are subsidies or not Chinese new vehicles will go global and users will purchase it.

And when all products are put together, it's for us to compete. In the long run, I think what matters is how to turn customers demand into real sales. At Leapmotor, we will closely follow up with the latest policy changes and to closely monitor our competitors measures. we will launch coping Strategies. On one hand, we want to enhance -- improve our own products to optimize our configurations and advance our technology and to develop our [indiscernible] advantages.

That's how we can maintain our competitiveness. So don't have concerns whether we can achieve the 1 million sales target. We think we are confident that this 1 million sales target can be realized by next year. And at Leapmotor, we will make all efforts to realize this 1 million sales target. [indiscernible] tell the markets our sales target next year is 1 million so we have no use of [indiscernible] so we have to achieve it. We already the market target next year is we have no room. So we have to achieve it.

You also mentioned our cooperation. We actually, this March, we announced a memorandum of understanding with our partners. So the overseas model is expected to be launched in the second half of next year. Mass production and sales will follow up after that. So the 2 partners now are currently working together advancing the progress of the new models and we rely on each other's strengths to offset weaknesses, to overcome difficulties together, whether it's in China or in overseas market, I believe the market is a [indiscernible] new car company, has its advantages but also faces challenges.

We need to learn from traditional car makers and by working with FAW China, we can learn from a traditional company so they have strength in technology, in R&D production in creation and supply chain. So by working with WAF we can achieve joint progress and now we conduct in-depth exchanges and [indiscernible] in many areas, I believe that it's a good start and very soon, you will see our cooperation results.

next, the user with ending number 5006.

[indiscernible] I have 2 questions. The first question is could you tell more your sales in [indiscernible]. What's your sale revenue [indiscernible] in quarter 3.

The first model has been sold very well in [indiscernible] sales ally continue to expand. And how do you expect the European market increase.

we work with Stellantis and in Europe, we have revenues from carbon credits in quarter 3. the number is about CNY 250 million. And we expect that in this quarter 4 -- this figure for quarter 4 will be either higher, since we expect the overall sales volume in quarter 4 will be greater than that in quarter 3 and And those carbon credits are directly linked with our sales and with our revenues.

So it's expected that in quarter 4 the revenue cost by carbon credit will be about CNY 500 million.

And your second question is about the inventory in Europe, well basically, our inventory is in line with the overall order as our new inventory is currently value lowed. And today -- by the end of October, I just finished the meeting this afternoon. So we are working with our dealers to see how we can further reduce the inventory to -- right now, the dealer's inventory is only between on 1,000 to 1,500 units.

And you regarding our models with exports, there are also impacts on [indiscernible] including maritime trending and the customs clearing and many other issues. So overall, the inventory in Europe is quite low.

Okay. A follow-up question. Since the electronic parts from upstream have become more and more expensive, and we see the tighter supply chain, do you negotiate with the battery supplier to see if they can give us certain discounts and whether that will impact on your gross profit margin in 2026.

Well, yes, the raw materials for battery has become more and more expensive. I also heard about that from the media. We also talked with our suppliers and the leaders. According to the feedback from our suppliers, the price of the battery raw material fluctuates slightly, not significantly. So this wouldn't have a significant impact on the procurement price of the entire battery sales.

And Leapmotor sales volume continue to increase and we have the scientific planning for the battery sales, we have a great variety of battery sales. And overall, our chip and battery platform is developed very well. Therefore, although our sales volume for this year is expected to be around 600,000 units, actually, the variety of our battery sales is much smaller than that of our competitors.

Since the variety of our battery sales is low, it's good for our suppliers to produce and to supply. That's very good news for our battery suppliers. And we expect that the battery production line will be operating at full speed. So the capacity wouldn't be our concern. And we also have the manufacturing cost advantage in batteries. So on the basis of this year's good foundation, the overall cost of battery is expected to be even lower next year.

[indiscernible] auto analyst. I have several questions. You mentioned, maybe I heard it not correctly, but I remember you mentioned your income from carbon credit is about CNY 250 million. I would like to ask are there any other types of income, for instance, the revenue by authorizing or licensing to WAF?

And the second question is your R&D expense, in which area you will further develop R&D and invest R&D expense. The first question is in the pure electric vehicle market, your competitors also [indiscernible] and cost competitive [indiscernible] to them.

First question in Q3 in addition to revenue from carbon credit other, we have revenues from other resources or from other business. for Your second question about our R&D expense, while we mainly focus on the first electric motor batteries and electronics [indiscernible] the tell too much details about where we invest in terms of R&D but here I would like to invite [indiscernible] and to experience our flagship.

We also invest in 2 new products and next year, we will launch 4 new products . In 2027, we also have new products. So each year invest a lot to modify the existing products and launch new products that our R&D we will invest in future technologies

We invest a lot to modify the investing production and ot launch low products and that where our our R&D investment goes.

Third, we will invest in future technologies and to reserve the future technologies, especially technologies related to intelligent driving, in high tech electronics. We want to have fully self-develop the technologies. We want to upgrade the Leapmotor platform 3.5 to 4 or even higher versions. That also require a last month of R&D investments. The scale and the depth of our R&D also got expanded.

As to your third question that's related to industrial competition, for instance, what's Leapmotor's competition strategy. Well, as you mentioned, the new energy market is now quite competitive. At Leapmotor, we also build the sales competition from the whole industry. But from the beginning to today, Leapmotor has got used to such fierce competition.

If we don't face a promising market, so do our competitors what we should do is to focus on ourselves to improve our own products in the long run only when we can have fully self-developed technologies and the full stack, we can control cost and really establish outstanding capacities. Compared to our competitors, we will have a better platform-base capacity and the we'll be able to roll out new technologies and apply them in our products.

We want to offer the most cost effective products the offer the best value for money, whether it's our A series or the most premium C series. Our attitude is always the same, attitude is always the same, which is to leverage our competitive advantages in cost effectiveness and to leverage technologies and us in our series models. Our advantages in cost and efficiency will continue to create high-value products. that's our principle as always, whether it's our A series, B series, or D series when faced with fierce competition and our competition strategy will be flexible

according to the specific market conditions. We will adopt a more targeted approach based on different user group in our respective markets.

But overall, we want to benefit our users. So the Leapmotor users will fill our capacity where they buy our products at 100,000 or 300,000, all of them, all of our users can still be most [indiscernible] products from the bottom of our hearts.

[indiscernible] This question is about the management fee, whether the management fee will increase year-on-year or quarter-on-quarter.

The answer is the management fee will increase as normal, but there wouldn't be a significant increase. Your second question is about our profitability in quarter 4. I feel overall, the profitability will be very similar to that in quarter 3. We hope that by the end of the year, the sales will increase significantly. But as local subsidies continue to be phased out, the market is still wait and see. But companies will launch-related strategies to deal with this.

So overall, in quarter 4, we expect to maintain a similar profitability as quarter 3.

The investor with the ending number 7074. [Operator Instructions]

I'm [indiscernible] from Guosen overseas investment team. My first question is on your Investment Day this year, you said your R&D expense will increase. Could you share more about your new products and how those new models or products have been developed? And your sales target next year is CNY 1 million, I would like to ask internally, how did you set this target? Did you divide it into different segments?

As to your first question, about the new models, we finished the strategic planning for new models. We have clear directions for products for our brands and for our sales channels. And right now, we are setting new teams for new models and products are under development. But sorry, I couldn't release too much information about a new model. This new model is totally different from all the available models in the market. I mean it's brand new. It's totally different from all models domestically or overseas.

It's different from all the available products in the market. So from the perspective of Leapmotor, it's a really innovative product. It has pioneered a new category. So we call it the new species. You can look forward to it. It's expected this new product will be launched in 2026 or 2027 or 2028. Well, in terms of the breakdown of sales volume, I don't have the specific number on hand.

It's related to the overall launch of models in China and overseas. So I'm sorry that I don't have too much details or I don't have detailed breakdown of sales at hand.

Okay. The investor with the phone number ending in 0521.

I have 2 questions. First is about internal competition. We have policy changes such as the reduction of national subsidies. And next year is expected competition will be very fierce. Would you have policies to reduce cost and to reduce the supply chain cost to be profitable? How would you be flexible and dynamic to the national policy changes? And second question is about the overseas market.

And right now, I see that new energy has increased significantly in Europe, and you are working with Stellantis. I would like to ask whether -- since the management in Stellantis has changed, whether it will impact on your cooperation.

Well, your first question is about the trading policy and tax. Our competitors said that they have policies for the trade-in subsidy only for this year, not for next year. From our perspective, we are confident that we will have scientific and reasonable sales and the dealers' inventory will also be reduced considerably. And in December, the total in December, we will deliver more finished cars to the end users.

And this year, we will introduce similar measures for our users to deal with the trading policy changes. And overall, we don't concern too much on this issue. Your second question also in China at the national level, actually, the low price and the fierce competition, unfair competition got criticized by the national government and the country has launched some policies to crack down those unfair competition.

From the Leapmotors perspective, we strongly support the country's policy. And we don't think that the policy changes will have a negative impact on the whole industry's development. So we are not worried about the next year's policy changes. And we introduced related strategies based on our assumption of profitability.

So I believe that in the premise of ensuring profitability, the price and the service we can offer is really competitive. Compared with our competitors, our strategies or the price strategies are not very aggressive because we don't think extremely aggressive competition strategies can last very long.

If it's too aggressive, it's really difficult to support the company's long-term development. Therefore, from our perspective, we don't have too much concerns. We have our own calculations, and we will develop and change our policies based on our product capacity and on our cost control capability.

Okay. I would like to repeat my second question because there are many new energy [indiscernible] that are sold very well in Europe and also Stellantis has its own models. Also the -- in terms of the sales, the increase is very minor. So how would you improve your sales in Europe?

Well, yes, as you said, the models of Stellantis hasn't achieved very remarkable sales and our joint venture overseas is controlled by Stellantis. So inside Stellantis, whether it's the [indiscernible], they both attach great importance to the cooperation with Leapmotor. They hope that the faster development of Leapmotor in Europe can support Stellantis position in their new energy transformation. So whether it's our joint venture or our sales networkers in Europe, Stellantis has placed a greater emphasis.

They help us to have more 2B markets -- and Stellantis has really rich experience in 2B markets in Europe and their special and professional team has been working with us to promote sales and they invest a lot of human resources and financial resources. Second, our localization, whether it's localization in Europe or in Southeast Asia, we rely on our local partners. And now we are investigating the market in South Africa as well. The local partners always helped us to enhance the efficiency and help us to have better local cooperation. In the last year, actually, Stellantis has a better understanding. They have a deeper understanding of the importance of Leapmotor.

In the last year, Stellantis, their management really understand how valuable, how important their investment in Leapmotor. And the value brought by Leapmotor is far beyond their expectations. By the end of December as Leapmotor celebrates its 10th anniversary, the Stellantis management and the the President of Alfa will also come to Hangzhou to celebrate the 10th anniversary of Leapmotor. So it shows the significance they've placed on the international cooperation with Leapmotor.

Okay. Next, we will ask the investor with the ending number 0877 to ask questions.

I'm [indiscernible] from International. I have 2 questions. The first, what's your plans for your domestic channels? How many new sales outlets or stores you are about to expand? And what's your expectations for next year's sales or transaction volumes per store?

Second, next year, do you have updates on your profitability targets or your target of net profit?

Okay. In terms of channel, we need to look at both the number and the quality. It's expected by the end of this year, we will have over 1,000 sales outlets. And by the end of next year, the number will exceed 1,500. Our sales channels consists of 3 parts, including the personal experience center and the supermarket-type experience center and our online platforms.

And as our A-series models launched to the market and as our B series reach very good sales, we will open more sales outlets and channels in lower-tier cities such as the fourth tier or fifth tier, we will penetrate to those lower-tier cities and further expand our sales network and to better cope with our new product sales next year.

In terms of channels quality, we insist on the 1+ channel strategy. That's one of our business plans. And now we already have a powerful, very strong channel team. From now on, our overall channel capacity has been continuously optimized.

Fourth, we continue to uphold and strengthen the channel management philosophy and centered on the dealers' profitability in 2026. As of October, the overall profit margin from dealer channels also exceeded 80%, indicating that we've achieved a cumulative profit with 80% of our dealers from January to October. And this situation is very healthy, and we want to maintain it to form a very healthy channel system that is profitable and that's able to control inventory as well.

So dealers can also make a profit and they -- only in this way, they want to invest more to help Leapmotor promote its sales. In terms of the efficiency, next year, there will be 4 models launched to the market. So the sales per store will definitely increase. That's something for sure. And first, as the overall sales is expected to improve, the sales per store will also enhance accordingly, but the per store efficiency will also should be enhanced.

Well, we want to provide better experience from visiting to the dealership to having a test drive to reaching the final deal. This -- the whole experience should be optimized. As a result, we expect to see an increase in sales. And if the conversion rate increased, it will contribute to a higher sales. And second, if we want to convert -- we want to enhance the convert rate, the investment will be enhanced, which we need to think about how to reduce cost.

And next year, our net profit target is about CNY 5 billion, and this is our target. And our sales target next year is 1 million units.

We limited by time, it will be the last question.

The user with phone number ending 780.

I'm [indiscernible] In market from 200,000 to 300,000, we already received some market feedback, and this is the first model that's entering the higher-end segment. I would like to see what's the biggest challenge you see in terms of pricing? Do you think you can strike a balance between price and the sales volume? Or you are willing to compromise price in order to maintain your sales targets?

Sorry, I couldn't hear you very clearly. There are some background noise, but I can generally understand your question. You mentioned the D Series and the market feedback from the D Series and how we strike a balance between the D-Series price and the sales targets. Is that your question?

Yes. Yes.

Well, actually, I've mentioned a little bit those questions. In terms of the feedback of the D Series in October, after the B Series was launched to the market, the market feedback was excellent, was extraordinary. So we achieved our sales target of D sales. As I said that the order volume of D-Series is largest at the same period compared to all of our other models.

So that means D-Series is highly recognized by our users and the market. We are very confident about this product. It's really recognized by the market. Well, in the future, we will release more information about the D-Series and our new products. I believe that if you have a better and deeper understanding of our products, you will recognize it at a higher degree.

And I believe that when the new model is launched to the market, when you see it in the real world, when you take a test drive, you will give it thumbs up. You will also be very confident about this product. Well, you also mentioned pricing and how to strike a balance between price and the sales volume. Well, this D-Series target at the CNY 300,000 segment.

In this market, I believe that D-Series is the most cost-effective model. Well, of course, you can find a cheaper car than D-Series, but the configurations will also be much worse.

For instance, we use very advanced batteries and the mileage can be as low as 500 kilograms. And you couldn't compare our models with -- hybrid models with a mileage of only 100 kilometers, which is produced by our competitors, right? So if you just compare price alone, it's not justifiable. So we need to have a comprehensive evaluation considering both price, technology, experience and configuration. And that's why we set our gross profit margin between 15% to 20%.

At this price range, we believe that when the final D series is launched to the market, is presented in front of you, you will be very surprised. It will be eye opening. It will be mind blowing. You will be surprised how sophisticated, how excellent this series is. We are really confident about our own products, and we are also confident about our dealers and suppliers. We believe that this new D series and D model will be pioneering and will make breakthrough in this market. Thank you very much.

Thanks for your attention. Thanks to the active participation from the management and from all investors, and thanks for the answer from the management. We look forward to seeing and talking with you next time, whether the management from Leapmotor would like to deliver a summary.

Okay. Thanks very much for joining the quarter 3 online meeting. And in the past 3 quarters, I believe that you've seen the strong performance of Leapmotor and that's beyond our expectations, whether it's in sales or in net profit. In sales, we reached a sales of about 460,000 units. And in terms of net profit, we managed to transfer the profit in just 6 months, and the net profit is about CNY 200 million. It is really strong, and we expect that the profitability and the net profit will be even higher in quarter 4.

And overall sales will see an increase compared to the quarter 3. In order to achieve our annual sales target of 580,000 to 650,000 vehicles, we are confident that we will achieve that. And as our Model E and D-Series and A-Series got launched consecutively, we are confident that in all measures, the Leapmotors performance will be stronger and stronger, and we will deliver better results in the capital market.

And ultimately, it still depends on our strength and the capacity, and we are confident that we will achieve the 1 million vehicle target for next year and the whole team, the entire company will focus on achieving it.

Thanks very much, everyone. Thanks for supporting and trusting Leapmotor.

Okay. I would like to have a final thank to all the participants and to the management, and please stay tuned and to see the future performance of Leapmotor.