Hello, ladies and gentlemen. Thank you for standing by for Li Auto’s Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today’s conference call is being recorded. I will now turn the call over to your host, Janet Zhang, Investor Relations Director of Li Auto. Please go ahead, Janet.

Thank you, Jason. Good evening, and good morning, everyone. Welcome to Li Auto’s second quarter 2022 earnings conference call. The Company’s financial and operating results were published in the press release earlier today and are posted on the Company’s IR website. On today’s call, we have our President, Mr. Kevin Yanan Shen; and our CFO, Mr. Johnny Tie Li, to begin with prepared remarks. Our Founder and CEO, Mr. Xiang Li, will join for the Q&A discussion. Before I continue, please be reminded that today’s discussion will contain Forward-Looking Statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-Looking Statements involve inherent risks and uncertainties. As such, the Company’s actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain filings of the Company with U.S. Securities and Exchange Commission and the Hong Kong stock exchange. The Company does not assume any obligation to update any Forward-Looking Statements, except as required under applicable law. Please also note that Li Auto’s earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to Li Auto’s disclosure document on the IR section of our website which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. With that, I will now turn the call over to our President. Please go ahead, Kevin.

Thank you, Janet. Hello, everyone, and thank you for joining our call today. I will review the key highlights of the second quarter and discuss our flagship mark SUV Li L9 which have received the highly positive feedback from family users for its best-in-class combination of driveability, safety, comfort and intelligence. We witnessed continued the consumer adoption of EVs in the second quarter. China's retail sales of new energy passenger vehicles surpassed 1.17 million during this quarter, more than doubled year-over-year according to the China Passenger Car Association with penetration rates climbing to 27.1% from 21.8% in the first quarter. We believe it will continue to rise, supported by more AEV model launches, continuous iterations of smart features and the increasing user preference for clean mobility. We remain focused on offering state-of-art product to our family users. Despite the challenges posed by the COVID-19 resurgence across cities national light from the March to May we delivered 28,687 vehicles during the second quarter, representing a 63.2% year-over-year increase. These strong delivery results contributed to 73.3% year-over-year increase in total revenues, which totaled RMB8.73 billion. Our deliveries in July reached 10,422, up 21.3% year-over-year. On August 1st, we proudly rolled the 200,000 Li ONE off the production line at our Changzhou manufacturing base. It took us just 986-days to reach this production milestone. Once again, setting a record speed among China's emerging EV manufacturers following our historic speed in reaching the 100,000 unit mark. Li ONE is also the first domestic branded premium model priced above RMB300,000 to achieve this production milestone. Moving to our supply chain, the COVID-19 resurgence severely affected the auto supply chain in the second quarter. Currently, there are remaining disruption and difficulties. But we moderated - they moderated as the pandemic became more campaigned. Although we are…

Thank you, Kevin. Hello, everyone. I will now go over some of our financial results for the second quarter of 2022. To be mindful of the length of this call, I will address our financial highlights here and encourage you to refer to our earnings press release, which is posted online for additional details. Total revenues in the second quarter of 2022 were RMB8.73 billion or US$1.3 billion representing an increase of 73.3% from RMB5.04 billion in the second quarter of last year. This included RMB84.8 billion or US$1.27 billion of vehicle sales in the second quarter of 2022 representing a increased of 73% from RMB4.9 billion in the second quarter of 2021. The year-over-year increase in vehicle sales was mainly attributable to the increase in vehicle deliveries in the second quarter of this year. On a quarter-over-quarter basis, affected by supply shortage due to the COVID-19 in the second quarter of 2022 total revenues and the vehicle sales decreased by 8.7% and 8.9% respectively. Revenues from other sales and services were RMB249 million, or US$37.2 million in the second quarter of 2022, representing an increase of 83.6% from RMB135.7 million in the second quarter of 2021 and a decrease of 1.7% from RMB253.4 million in the first quarter of 2022. The increase in revenue from other sales and services over the second quarter of 2021 was mainly attributable to the increased sales of charging stores, accessories and services in-line based higher accumulated vehicle sales. Cost of sales in the second quarter of 2022 was RMB6.85 billing, or US$1.02 billion, representing an increase of 67.7% year-over-year, and a decrease of 7.4% quarter-over-quarter. Gross profit in the second quarter of 2022 was RMB1.88 billion of US$280.4 million representing an increase of 97.1% year-over-year, and a decrease of 13.2% quarter-over-quarter. Vehicle margin…

Thank you. [Operator Instructions] Our first question comes from Fei Fang from Goldman Sachs. Please go ahead.

Great, yes. Thanks for taking my question. Now the second quarter performance was impressive despite COVID and L9 has outstanding traction for its price point. So congratulations on those, they were well done. My question is about your guidance. So the third quarter is in question for the 27,000 to 29,000 unit guidance that you provided it, can you break it out by Li ONE and L9 and also as you ramp the production off the high [ASP] (Ph) L9 but will gross margin improve? So that is the first question. My second question is about L9's retail traction. So the company disclosed the early August that L9 has received 30,000 confirm orders. So just wonder if we can have a refreshed discussion in terms of this latest retail trend feedback, especially competition with the other new energy SUVs and MPVs that some of your EVP’ have put in the market? [Foreign Language]

Alright, well Fei this is Kevin, thank you for the question. So your first question. For the guideline, actually, we still stick to our previous projects and that for September, we are going to ship more than 10,000 L9. And for your second question, actually - for gross margin L9 will be higher, increased high end product. Your second question about the traction right now, although, last month, we already kind of received almost the 30K order of L9. Today in the past two weeks, we still see a strong demand coming for L9.

Okay got it. so part of my second question was to perhaps Kevin, if you can comment on sort of L9 in the context of this competition with other SUVs and MPVs that some of your competitors have put in the market. But as far as BYD and so on so forth. Are you seeing competitive threat from them that sort of cause you to change your strategy or introduce more marketing incentives in front of customers?

Yes. In fact, the L9 has a very unique product positioning, actually, in this price band with this kind of size and smart features. We don't see there are any products that have kind of a product proposition close to our L9. Right now, it is more about the how much we can convert our customer to place order on our L9, when they have the budget between RMB400K to RMB500K so.

Okay. That is helpful. Thank you.

[Operator Instructions] And our next question comes from Tim Hsiao from Morgan Stanley. Please go ahead.

[Foreign Language] So my first question, just wanted to follow-up on the quarter guidance, because I think third quarter volume guidance of 27,000 to 29,000 - conservative. So considering the launch of L9 and improving supply dynamic. Should we attribute the conservative sell valid to the transition of Li ONE only or as the production ramp up of L9 is there any expectation or if there is any other reason we should take into consideration. So just simply due to the hiccup for Li ONE, how long do we should we expect this kind of impact will last? And my second question is about the sales mix of EREV, the plug in hybrid and BEV next year. How should we think about the mix in 2023 and could you provide some updates regarding the numbers of new models? If the mix of the BEV is going to increase substantially next year, should we concern about potential dilution to our margin or could that hurt our cash flow? So those are my two questions. Thank you.

Yes, Tim this is Kevin, thank you for your question. About the first question, in fact the - when we give out this guidance, of course, we have seen some slowdown of the Li ONE order intake. I think primarily the issue right now is that when we have the new product into our retail stores, a lot of attention has been attracted by the new product, rather than the old product, actually, we are working with our sales team to regain the attention from our potential customers for Li ONE. So on the other hand, about the potential launch of the new product, actually, the only comment I can give right now is that it will coming soon and will come sooner than the expectation. Yes, that is the only comment I can give. And about the new product and model, BEV model we are going to launch - we plan to launch next year. In fact, as you can expect that for any new model we launch into the market we have intention to increase the revenue also to improve our cash flow, improve our profitability. So therefore, with the new BEV model in our plan, we plan reasonable profitability of cost so it won't hurt our cash flow, it won't hurt our gross margin next year.

That is perfect. Thank you very much Kevin.

Your next question comes from Bin Wang from Credit Suisse. Please go ahead.

[Foreign Language] Basically I got one question about a Li ONE because investor told me like three things number one Mahira to me Li ONE would impact me just to two or three weeks? Secondary now from this month, Li ONE offer around RMB7000 kind of promotion for insurance. Number three, [indiscernible] which will be the next generation and Li ONE we are launching in November this year. Can you confirm this three things from investors? Thank you

Thank you for your question. First of all about the week in time, actually the week in time right now is of course shorter than last month. As I already explained that the order intake is slower right now so therefore we can turn over the delivery faster. And about the RMB7,000 kind of a promotion. Actually, you got the information very updated that we kind of released this policy just this Sunday. About the new product you are asking about, I think the same answer, I already provided that it will come soon and the sooner than our expectation.

Okay. Thank you. Thanks so much.

The next question comes from Paul Gong from UBS. Please go ahead.

[Foreign Language] So just translate my two questions. The first question is regarding the cannibalization of L9 versus Li ONE. How much of the recent weakness of the Li ONE orders is due to the cannibalization of the new model and how much of it do you think yes is due to the weakening macro environment as well as the weakening demand for the cars in general? My second question is regarding the features. So, the key highlights of the BEV, I think management previously mentioned that the BEVs and EREV, they should be - based on different models, they have different features. And can you give us a little bit of color? How shall we think about the uniqueness or the attractiveness of your BEV view of such a crowded markets in the BEV market already?

Paul, this is Kevin. I will take your first question and Xiang Li will address the second question. The first question, the thing is that before we putting the car, L9 into our retail stores before people start to test drive it actually a we see no change of the order intake pattern of the Li ONE. But it is to a certain extent days, to our surprise that when we have the customer coming into the stores, to test drive some of the customer our original plan was to test drive Li ONE, but when they see L9 and when they after the test drive to L9. We see especially the customer with enough budget, we see a lot of them converted to our L9 customer. So right now, as I just say explained that that is why one of the reason why we also have some more promotion plans for Li ONE, yes. And I think but on the other hand, we still have a confidence that Li ONE is still a very competitive product, because if we compare it with the existing products other than L9 other products are in the same price band RMB300k to RMB400k price then Li ONE is a still one of the most competitive product in the market.

[Foreign Language] So maybe two angles, that differentiation. The first one is around charging. In fact, we already have a prototype running right now that can charge 400 kilometers of range in 10 minutes. And the goal here is very similar to range extender vehicle, which is to replace all internal combustion engine vehicle for customers and have no anxiety in terms of range. Our data shows that among our L9 customers, 80% of them have home charging, and 100% of them have stable charging, either at home or in the office. So home charging are often charging is really not the key here. The key challenge is to enable customers to travel freely within key economic zones within China. For example, the Yangtze River Delta region, the Beijing Tangent region, Wuhan and big mega city areas we will support with high power charging so that customers can drive long distances, but no driving with no range anxiety, even if they are driving electric vehicles. So the second advantage when it comes to electric vehicles is space, because of the engineering possibility enabled by electric vehicles and new architectures and new body types. We can provide a lot more space in our electric vehicles compared to range extender vehicles with the same footprint.

[Foreign Language] If the airline cannibalization of Li ONE is higher than expected or how much of the capacity said and we prepare for L9?

Yes. The capacity is 15,000 for L9.

Thank you very much.

Thanks you. [Foreign Language]

The next question comes from Ming Lee from Bank of America. Please go ahead.

[Foreign Language] My first question is regarding the gross margin trend and also the battery cause a trend for second half of this year. [Foreign Language] And the second question is regarding the competitive landscape. Recently, we also see idle brand, volume sales has grown steadily. And besides that we also - how do we expected newly about L8, it is a product competitiveness versus the current Li ONE? Thank you.

Yes. This is Kevin. Thank you for the question. The first question is about the battery cost. Actually, as we all know that the in the recent months that the raw material for battery has come down a little bit, but we would expect that for the coming months this year, the raw material cost will again fluctuate a lot. So therefore for the gross margin outlook it is a lot of time are based on the best cost. Therefore I can only comment down the battery cost will be kind of a half fluctuation. And for the new products that competitiveness, I will ask Li Xiang to comment.

[Foreign Language] So right now around L8 I can share two things. One is that it will be delivered released much sooner than many people expecting are expecting. And the second thing is that the period from release to delivery will be shorter than L9. And when L8 is available, I think that would be a good time to compare the product competitiveness with newly released competitors and we have full confidence that we will dominate all these products with our L8.

Thank you.

The next question comes from Xu Yingbo from CITICS. Please go ahead.

[Foreign Language] I have two questions. So first question is about EREV product with our midterm competitiveness strategy for your EREV product? And the second question is about money raising. Could you please talk a little bit more about ATM and further capital reserve project? Thank you.

[Foreign Language] So talking about Range Extended Vehicles if you are looking over the next five years, we still believe that our REV is the best solution for SUVs period. I will give you one example if you are looking at BYD, there are two main products above RMB200,000. There is a [Hong Sedan, and there is Tong SUV] (Ph). So in terms of Hong, which is a Sedan, the REV sells much better than DMI which is the hybrid vehicle. But for Tong , the case is exactly the opposite DMI sells better than REV. And the reason for that is when people buy cars in the RMB200,000, RMB300,000 range, when they buy an SUV, they have a very clear expectation that they want to go on longer trips, especially post-COVID. So our EV still the best solution up until today for SUV that solves range anxiety. So under that consumption within our biggest goal is to solve the efficiency challenge. And if you look at L9, if I look at - there is many top media that have tested the L9. Our energy consumption levels filled leading in its class. Even with low SoC, the fuel consumption is only around 60% of much smaller internal combustion engine vehicles and it is much better than well many claim to the competitors, which are much smaller SUVs. Because at the end of the day, REV is as an EV is not an internal combustion engine, adding a battery to it. So that is the key difference between [P-have] (Ph) and our range extended electric vehicles. There shouldn't be any discussion of which one is more advanced or which one is more backwards. For the users range extender vehicles is an EV that happens to have an internal combustion engine or…

Thank you.

The next question comes from Jiong Shao from Barclays. Please go ahead.

[Foreign Language] I have two questions. First question is about for the new BEV cars. Are those new cars still going to be family oriented SUVs or something else? The second question is really about the guidance for the second half operating expenses. Thank you.

So I have a short answer for the first question. In terms of the body type for electric vehicle, I still want to keep it confidential before it is released, because it is very unique design.

And now those were add to Allegiant we still serve our family customers with our EVs and for the operating expenses. I think we have a very clear roadmap on our product and our goal for this next year sales target. So we will keep going to events on the R&D side and also on the network expansion to better serve our family customers.

Thank you.

As we are reaching the end of her conference call, I would like to turn the cal back over to the Company for closing remarks. Ms. Janet Zhang, please go ahead.

Thank you once again for joining with us today. If you do have any further questions, please feel free to contact Li Auto’s investor relations team. And that is all for today. Thank you.