Hello, ladies and gentlemen. Thank you for standing by for NIO Inc.'s First Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. I will now turn the call over to your host, Mr. Rui Chen, Head of Investor Relations of the company. Please go ahead, Rui.

Good morning, good evening, everyone. Welcome to NIO's First Quarter 2025 Earnings Conference Call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website. On today's call, we have Mr. William Li, founder, chairman of the board and CEO, and Ms. Stanley Qu, chief financial officer. Before we continue, please be kindly reminded that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in certain filings of the company with the U.S. Securities and Exchange Commission, the Stock Exchange of Hong Kong Limited, and the Singapore Exchange Securities Trading Limited. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that NIO's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to NIO's press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. With that, I will now turn the call over to our CEO, Mr. William Li. William, please go ahead.

Hello, everyone. Thank you for joining NIO's 2025 Q1 earnings call. In Q1, the company delivered 42,094 smart EVs, up 4.1% year over year. This includes 27,313 deliveries from NIO and 14,781 deliveries from Envoy. Since Q2, the company's deliveries have picked up pace month over month, supported by a solid start of delivery each night and the five flights, and the growing demand for Anguo L60. In April and May, the total deliveries were 946,231. In late May, we successfully launched and delivered the new ES6, EC6, ET5, and ET5P. We expect total deliveries in Q2 to be between 147,000, representing 25.5% to 30.7% growth year over year. On the financial side, the company continued the cost reduction efforts on all fronts, achieving year over year growth in both vehicle gross margin and overall gross margin. Now I'd like to share some updates on our products and operations. For the NIO brand, the deliveries of ET9, NIO's exact flagship sedan, surpassed BMW 7 Series and Audi A8L in China in the first four delivery months. This marks the first time that a Chinese brand has made a breakthrough in a premium executive long led by BBA. On May 16, we launched the new ES6 and the EC6, and the start delivery on May 20. On May 25, the new ET5 and the ET5T were launched and the delivery starts on May 27. This upgraded model delivers great perceived value and product strength, along with major improvements in cost. For the NIO brand, for the Anguo brand, since April, Anguo has rolled out a service operational and organizational adjustments. Significant improvement in the productivity and operation efficiency of the sales force. Such change also shifted onboard towards a cost cycle of brand awareness and product reputation. With that, Anguo's orders…

Thank you, William. Let's now review our key financial results for the first quarter of 2025. Our total revenues reached 12,000,000,000, increased to 21.5% year over year, and decreased to 38.9% quarter over quarter. Vehicle sales were 9,900,000,000 RMB, up 18.6% year over year and down 43.1% quarter over quarter. The year-over-year growth was mainly due to higher deliveries, partially offset by a lower average selling price from product mix changes. The quarter-over-quarter decrease was mainly attributable to fewer deliveries impacted by seasonality. Other sales were 2,100,000,000 RMB, grew by 37.2% year over year, and decreased 5.9% quarter over quarter. The annual growth was from increased sales of parts after-sales vehicle services and the provision of power solutions, along with a rise in sales of used cars and technical R&D services. The decrease quarter over quarter was due to decreased sales in technical R&D services and auto financing services. Looking at margins, vehicle margin was 10.2% compared with 9.2% in one last year and 13.1% last quarter. The year-over-year increase was mainly due to lower material cost per unit, partially offset by changes in product mix. The quarter-over-quarter decline was mainly due to the increased manufacturing cost per unit from lower production volume. Overall gross margin was 7.6% compared with 4.9% in Q1 last year and 11.7% last quarter. The year-over-year increase was mainly driven by first, higher sales of parts, accessories, after-sales vehicle services, and technical R&D services, which carry relatively higher margins. Second, higher vehicle margin. And third, they reduce the gross loss rates from power solutions as our user base grew. The decrease quarter over quarter was mainly attributable to lower vehicle margin. Turning to OpEx. R&D expenses were RMB 3,200,000,000, increased 11.1% year over year, and decreased 12.5% quarter over quarter. The year-over-year increase was mainly due to the incremental design and development costs for the new products and technologies, as well as the increased personnel cost in R&D functions. The quarter-over-quarter decrease was mainly driven by decreased design and development costs resulting from different stages of development partially offset by increased personnel costs. SG&A expenses were 4,400,000,000 RMB, up 46.8% year over year, and down 9.8% quarter over quarter. The year-over-year increase was mainly driven by the increase in personnel costs related to sales functions, and the increase in sales and marketing activities. The quarter-over-quarter decrease was mainly due to the decrease in sales and marketing activities and professional services, partially offset by the incremental personnel costs. Loss from operations was 6,400,000,000 RMB, up 19% year over year and 6.4% quarter over quarter. Net loss was 6,800,000,000 RMB showing an increase of 30.2% year over year, and a decrease of 5.1% quarter over quarter. That wraps up our prepared remarks. For more information and the details of our audited first quarter 2025 financial results, please refer to our earnings press release. Now I will turn the call over to the operator to start our Q&A session. Thank you.

Thank you. If you wish to ask a question, please press 1 on your telephone, and wait for your name to be announced. If you wish to cancel your request, please press 2. If you're on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, please limit yourself to two questions. And if you have additional questions, you can then reenter the queue. Your first question comes from Tim Sale with Morgan Stanley.

Hi, William, Stanley, and Tim. Thanks for taking my question. This is Tim from Morgan Stanley. I actually have two questions. The first one is about the bone cells. Because if you look at the announcement, the new year's second quarter volume guidance of 72,000 to 75,000. It goes I think that implies a more moderate sales increase despite the rest of launches of four new models. So looking for how could NIO give the salesman if they tell you the science? Six series. And extra push in the following months to achieve our previous target of 30,000 monthly sales for the NIO membrane by year-end. That's my first question. Thank you.

Thank you for the question. As we have stated, our quarterly guidance for the 72,000 to 75,000 units. In that case, we expect to deliver around 25,000 to 28,000 units in June. And in terms of the core volume driver for the NIO brand as we have just recently upgraded and launched our all-new five five and six six. These are our new E3 six, ES6, ET5, and ET5 team in late May, and we have just started delivery of these four new models. Then they are going to experience their first full delivery month in June. As you can tell from their MSRP, there is actually no major changes with the selling price of these full models yet considering that before the launch of these four models, to clean up the inventories, we had provided some promotions on these four models in the previous generation. With that, the actual price increase is around 10%. From last generation to this generation. So for the next step, we are going to stabilize on the prices of these four new models. And looking at the vehicle growth margin, actually, the improvement is more than 10% from last generation. To the model year '25. And, also, the bigger principle for us is to realize a good gross profit that simply looking at the vehicle sales volume. As we also look at our overall performance, from the P&L perspective, in that case, we really need to strike a balance between the sales volume and also the selling prices of our product. And, also, in the meantime, we will keep improving our operational efficiency and the system. And going to the fourth quarter, we are going to introduce our all-new ES8, the next generation ES8, which is a highly competitive product. With that, we believe that in Q4, for the NIO brand, the monthly delivery will be around 25,000 units. That's around 20% year over year growth from last year's, Q4, which was around 20,000 units a month. In that case, while improving the soft volume, we are also going to improve our vehicle gross margin significantly for the NIO brand to be above 20% in Q4.

And that's Thank you very much, William. Yep. My second question is about the cost reduction. Because we noticed that NIO has implemented a series of cutting measures over the past six months. So we're now going to see more meaningful contribution from such cost reduction effort. And could you please quantify and specify which categories we could probably see more significant improvement in the second half? That's my second question. Thank you.

Thank you for the question. As you've mentioned, since March, we have conducted a series of cost control and efficiency improvement measures. And here, I would like to further elaborate on that from the following aspects. The first is regarding our short-term work. Basically, we'll review and sort out all the key matters, projects, and organizations and to look at the things that are not going to generate positive return on investment within the year, and we made determined actions in terminating or postponing them for the short-term return. And the second is regarding the efficiency improvement. This is also mentioned by William in his prepared remark. In terms of improving efficiency, we also conducted the following aspects. The first is from the R&D perspective. We have established a new mechanism called vehicle product line. With that, we have majorly merged the R&D resources of the NIO brand, Amo brand, and the Fly brand to further improve the overall efficiency of our R&D activities. And the second is regarding the industrialization cluster. We have optimized and restructured the logistics functions, quality functions, and also supply chain functions by streamlining the team and also merging repetitive roles. And certainly, we have also made improvements in the sales and the service side for the non-fund line teams, we have also made major improvements and also consolidations on the teams, including their roles and also positions to better improve the efficiency and the productivity of the teams, especially the back-end teams. With that, we are going to witness the savings from the operating spending perspective, and such saving will be reflected in our Q2's earnings and also the corresponding results. More specifically on the tighter control over the spending. So regarding the R&D spending, in Q2, our target is after excluding the one-off impact we would like to a 15% improvement where actually R&D spend reduction. And in Q4, as we also have the breakeven target, we aim to control our R&D expenses to be within 2 to 2,500,000,000 RMB per quarter. That represents a 20 to 25% year over year decrease from last year. And regarding the SG&A expenses, as this is also relevant to the marketing activities and also the tightened competition in the market as well as our self-performance. So we will also manage the SG&A expenses in a very careful and prudent way carefully balancing the return and also the investments on all these campaigns and activities. The target is to reduce the SG&A expenses quarter over quarter from Q2 this year. And by Q4, considering the breakeven target as well, our target is to control our non-GAAP SG&A expenses to be within 10% of the sales revenue.

Thank you, Tim. Thank you. Thanks a lot.

Your next question comes from Ming-Hsun Lee with Bank of America.

Thank you, management. This is Ming. I also have two questions. My first question is related to your new water model. So after you launch the new and new new word model, it may what is the feedback from your users? And also, compared to your original rule-based autonomous driving solution how more advanced after you launch your water model. And for your chip because right now, in certain models, you are using your own desired trip. So you already save some cost Do you also give up the those benefit to the users. In the future, we'll Anguo also use the the same chips Thank you. That's my first question.

Thank you for the question. In late May, we have started to release and roll out our March 1 driving version based on the new word model, NWM, to the Banyan users. Those are the users who are running on our second-generation platform product. And, actually, in the previous versions, we have already released a series of active safety features based on our end-to-end architecture and solution. With that, we also see significant decrease in the accidents and also the avoidance of the accident and a better driving safety with our active safety features. For example, for the new model, we have also released the emergency safety pullover. This also is one of the first in the industry. Overall speaking, our vision for smart driving is to reduce traffic. And in that case, our active safety and our smart driving feature in general has been leading in the industry. And the second key vision of our smart driving is to release the driving pressure and stress. In that case, NWM-based version has also provided better experience across all scenarios. For example, we have we are also one of the first to release the point-to-point smart driving and also parking. Our overall experience is better than our peers in the industry. With NWM, we have achieved better experience in highways and also urban expressways. Our original experience is on previous version was already good. And right now, we have made the overall smart driving experience even more seamless. For example, automatic pass through of the toll gates on highways. And in terms of the smart driving in urban roads, we have also achieved very good point-to-point smart driving. That's basically smart driving from a parking lot to parking lot where the high usability and good experience. So, basically, we have achieved…

So our next question is related to, Amo brand. So, after you have some, management, change, what is the strategy to enhance the volume sales of L60 And, also, what is your expectation of L80 and L90?

Thank you for the question. In April, we have made major organizational and operational adjustments to Envo, including the adjustments to the core management team, sales team, as well as the regional teams. As we were making major investments, the good sign is that we didn't see major impact or impact on the sales volume of L60. As in late April, we witnessed the growing order momentum of this project. And in May, the monthly delivery of L60 is more than 40% higher than in April. And these are the positive changes that we've seen. And if we look at the product performance and competitiveness in the market regarding L6 in the first four months of this year. Among the battery electric vehicles priced between 200,000 to 300,000 yuan, our L650 has been the top three best-selling products in that segment, and we also expect its performance to continue to pick up in May and June. And this has also demonstrated the strong product performance and strength in the market. However, the process competitiveness and performance is just one of the foundations. In the meantime, we also see the maturity with our self and service network. Amo now has more than 440 stores and the all many of the stores, including the frontline and the follow teams, are also getting more mature and adapted to the job. In that case, for the next step, we will also as they are making major contribution or growing contribution to the South Volum, for the next step, we will also keep improving the operating efficiency and also productivity. Of the teams and stores. And the third key driver is regarding our battery swap and also battery charging and swapping network. Mainly the battery swapping network. Right now, in China, more than 1,900 power…

Your next question comes from Bin Wang with Deutsche Bank. Please go ahead.

My first question is about the second quarter. Because you got a new best of the products after higher price and use the in-house semiconductor. In any chance, you got a further margin expansion in the second quarter for your vehicle margin. Which will help the overall gross margin back to double digit.

Thank you for the question. As in Q2, we have completed the product transition for the NIO brand. We have successfully launched and started to deliver our new ET5, ET5T, EC6, and the ES6. With that, we also witnessed the increase in the average selling price of the new models. And, also, as the new models are equipped with the in-house developed chip, this can also contribute around the 10,000 RMB saving and cost reduction per unit. With that, in Q2, the vehicle gross margin of the NIO plan will be improved to around 15%. And for the Onward brand, as in the second quarter, it will still only have one product L60, as the L90 will be released in Q3. Then with we expect the growing volume for the L60, we also expect certain improvements regarding the manufacturing cost. Driven by the volume increase. But as it is only contributed by one model, the improvements from the manufacturing cost perspective will be limited, and the major gross margin driver for the Ambu brand will still be happening in Q3 driven by the launch of the new model. With that, we believe that the overall gross margin in Q2 will be coming back to double digit. That's our target. And a little bit more information on the new products. As our core volume products, five five and six six were having the vertical products transition during April and May with that to clean up the inventories for the previous generations. We offer the promotions with that the actual vehicle margin for that generation was relatively low. But starting to and as we are rolling out and delivering new products, we also witnessed better or improved the margin on this product. For ES6, the vehicle gross margin will be around 20%. EC6 is slightly higher than the ES6 and also for the EQ5 and EQ5 touring, we also expect to improve the growth vehicle gross margin. So overall speaking, for the NIO brand, the vehicle margin improvement is on the right track.

And what relevant is going to see the woman My question is about the number four quarter breakeven assumptions. Basically, SkyNet NIO brand will reach 25k mono in the number four quarter this year. Similarly, OVO brand will also have a 25k. Let's assume they can sell 130k in the number four quarter. We have 250,000 NT. Roughly, we can reach 35,000,000,000 on top line. So until we until we got 18% gross margin, we can reach roughly 6,000,000,000 on gross profit. You have mentioned you prefer you you're kinda on this test with the client to 2 to 22,500,000,000.0. You also actually got that in the same space, we will be around 10% on top line. So overall, the total OpEx will be around 15. And I assume this is roughly the assumption to reach a breakeven in number four quarter. Thank you.

Thank you for the question. Actually, the equation you have mentioned is more or less our operational target internally as well. Regarding the monthly sales volume, slightly over 15,000 units a month. VCO gross margin, 17 to 18%. Combined margin. SG&A expenses, within 10% of the sales revenues and for the R&D expenses also achieving that level of management and control. With that, we are able or we have the confidence of achieving the breakeven as we see also our peers who achieve the profitability run on a similar scale and also the similar numbers. Back in 2021, when we just had one NIO brand, we also managed to achieve a vehicle gross margin of over 20%. But back then, we haven't started the major investments in the R&D or the multi-brand strategy. As starting within years, we have witnessed quarter over quarter losses mainly because of our intensive investments into the R&D of the new product and technologies, multi-brand strategy, and also the network development especially infrastructure network. But starting Q2 this year, we are also starting up a year of a harvest or a period of a harvest where we are going to see the tangible results starting Q2 and then towards Q4 this year the results from our brand development product development network, and also network development, as well as the cost reductions and efficiency improvement. With that, I think your equation or your assumption is kind of also a guidance for us to achieve our operational target and also profitability. In Q4 this year, and we are confident in that.

Thank you, you very much.

Your next question comes from Paul Gong with UBS. Please go ahead.

Hi, William. Thanks for taking my question. My first question is regarding the market feedback after the delivery of the five series and six series. I have seen some, like, positive comments, but also have seen some disappointment among some of the car buyers saying it is still using, like, 400 volts. Battery instead of, like, the 900 volts on, the ET9. Do you have any plan to switch into the 900 volts battery system at certain points? And what other feedback have you received? Received from the car buyers? That's my first question. Thank you.

Thank you for the question. Since the launch of our new ES6, ES6, ET5, and ET5 change in late May. We have received quite a lot of market feedback and mostly positive as people do see significant improvement in the product competitiveness. Especially for the chip technologies DaiOS, the core operating system, and also active safety features we have debuted on the ET9 are also now available on the five and the six series models. And regarding the high voltage platform, for the five five and the six six, they are still running on the 400 volt. The overall feedback is also okay as we not only have improved the energy efficiency of these four models for extended driving range than the previous generation. We also have our power swap network that can ensure a good experience for our users, especially we have this chargeable, swappable, and upgradeable network enabled by the power swap. We also provided the flex battery upgrade vouchers to our users for the new five five m six models. In that case, they have the flexibility to upgrade to 100 kilowatt hour battery for longer range. And if they would like to have an even longer range, they can also choose to upgrade to 150 kilowatt hour battery with more than 1,000 kilometer driving range. So overall speaking, with improved energy efficiency and also chargeable swappable network, the feedback on the high voltage system is fine. And for the short term, we don't have a plan to upgrade these four models to the 900 volt architecture platform. Thank you, Paul.

Yeah. Thank you. My second question is regarding the channel network. Right now, have the NIO and the Envoy two networks, and Firefly is sold within the NIO system. And just now, you have mentioned that there is some innovative and new exclusive solutions by diversion with a battery swap station and to do the product demo and show up. Do you foresee at certain points that you could further reform the channels and by differentiating with the synergies between the two networks and perhaps some cross-sell or sometime like yeah, virtual offline network? How do you think about the channel management?

Thank you for the questions. Regarding the point of sale, for the Envo and the NIO brands, we will still keep them separated. But in the mid and the back end, we are leveraging the synergies and also better integrate between these two brands, both in the headquarters and also in the regions. As actually, in many regions, the general managers of those regions are taking the concurrent roles to manage the sales of both NIO and the Ambu brand. So overall speaking, we will better integrate these two brands from the mid and the back end perspective for better efficiency and synergies. But in the meantime, we will also need to strike a balance between efficiency and the brand differentiation. So the longer term is to further integrate and leverage the synergies but we will not be combining the point of sale. Regarding using power swap stations as a point of sales, we are doing some demonstrations and the pilot runs in certain regions where we will not open the source, but use the power swap stations as a window to get to reach out our users and to demonstrate our products and services. In that case, we will have the sales team and the fellows on-site, but they will promote the product without having the stores. This is actually a unique selling point or unique advantage of the NIO company by leveraging the power soft stations. And especially for the onboard users, in our survey, we have found that around 60% of our users actually think power swap station or the capability of doing power swap is the top purchasing reason for them to buy the Envo product. This is another demonstration of the significant value of a PowerSwap for the EnVo products and ENVOL cells. And the same actually happens to the NIO brand as there is a small county in Shandong, Kop Xing Fu County. And in that place Town. Actually, it's a town. There's a town in Shandongkok, Xingfu Town. And in that place, we have no stores or showrooms. But only several power swap stations. Yeah. In that place, we have more than 1,000 NIO users. This is also a lively case showing how PowerSwap Station can contribute to the sales volume. In that case, we are doing a series of systematic measures and also designs centering on using power swap as a point of sale.

Thank you very much, William. That's quite helpful.

Your next question comes from Yuqian Ding with HSBC. Please go ahead.

Yep. Thank you, Tim. I got two questions. The first is continuous on the on the on the model. So the two two new model is actually at a higher pricing point. What was the key selling point against the the current backdrop? Is seems to be a little bit consumption downgrade this year? And roughly, what's the mix between 60, 80, and 90 expectation especially into by the end of the fourth quarter?

Thank you for the question. Envoy L90 is a smart large space flagship SUV. It's a three-row SUV, and the L80 is a large five-seater SUV. And both models are mainly for the family users. And speaking for the ARMOS product, it is based out on new technology and innovation with a targeted and targeted design for the family users. And with that, we actually studied the mainstream family users in the Chinese market, and we have developed a value equation. For the product to define definition and also development of the our brand. With that, our design and also functionalities of the project will mainly serve the value creation for the family users. And as we have debuted the L90 at the Shanghai Auto Show, we have demonstrated how large the space is with this model. Especially with its big trunk. With six occupants onboard, there is still enough to accommodate 10 suitcases. Actually, this is an unprecedented functionality. For an SUV, be it running on factories where ice where range extender. This is actually a product innovation driven by our tech innovation and space innovation. And in the recent information release by the MIT people is also impressed by the low energy consumption and the energy efficiency of L90. Because it's such a big three-row SUV and running 85 kilowatt hour battery, the car still manages to achieve 600 kilometer driving range. This is actually an impressive result achieved on this model and also a very important advantage for the family users considering the overall driving range and also the cost of their ownership. Driven by the tech innovation and also the lowering lithium price or, in general, battery cost, we are seeing a turning point for the growth of the mid and the large SUV battery electric SUV. If you look at the first four months of this year regarding the growth rate in the mid to large and also large SUV segments. The growth rate for the BABS models is actually 63% year over year, for the range extended version, it's only 1%. For P hive, it's also roughly 60%. With this as a backdrop, we believe that L80 and L90 will be two game changers in this segment. And we have confidence for that as we are creating better experience and also more user value our tech innovation and the product innovation. Plus, we have our nationwide available power swap network to help relieve the range anxiety of our users. With that, we believe that this year, we'll also witness the turning point for the growth of mid and the large battery electric SUV segments.

Thank you, William. Yeah. Sorry. Please. While the company is heading towards the fourth quarter breakeven target, we're also conscious that gearing ratio is also running high. Could you share a little bit more about the cash flow improvements and the cash management?

Thank you for the question. In Q1 this year, we see the lowering of our cash position. This is partially due to the seasonality of the car sales as in Q4 last year, our sales volume was seventy-two thousand units while in Q1, it's 42,000 units. That has actually costed the outflow of the working capital of more than 10,000,000,000. And in the meantime, we also have some capital expenses as well as the one-off expenses, for example, the put option for our convertible bonds, which is around 2,700,000,000 RMB. But in the meantime, we are also raising funds in late March. We have completed the fundraising through our in Hong Kong Stock Exchange and raising around 4,030,000,000 Hong Kong dollars. Yet this part of fundraising was not recognized until early April. So it was actually not recognized in our Q1 financial results. But as we have shared, starting April, we are seeing our soft volume to pick up the pace. With that, this will also help bring our operating cash flow to the normal track. And as we have mentioned, our volume guidance for Q2 is between 72,000 to 75,000 units. This will help improve further improve our operating cash flow. And in Q3 and Q4, we have a higher expectation and targets for the sales volume, which will help our operating cash flow to continue to grow and improve in Q4 this year. And for the full year, we also see the possibility of achieving positive free cash flow. In the meantime, we will continue our cost and efficiency improvement efforts to have a tighter control over our OpEx and the CapEx to make sure that our expenses are necessary. Thank you.

Your next question comes from Xing Chang with CICC. Please go ahead.

Thank you for taking my question. I will have one question about overseas market strategy or target and especially for the Firefly Global. Expansion. So regarding the overseas market, I think that the last year, we have already achieved sales volume of 7,000 units. Especially in the European market. So in this year, from the beginning, we see that several brands in the European market, they expand a lot and grow rapidly. And also considering the potential adjustment of the TerraPod policies. Well, if you market our overseas extension, become a strategic priority for 2024, and what's our overseas sales target for this year? And, also, we see that we have mentioned the Fireflies global expansion. So ClearShare more details including the timing of also region priority. And also the pricing strategy.

As mentioned, starting this year, we have started to change our global expansion strategy before. In Europe, we mainly relied on our own self and service network via the direct sales model. Starting this year, we started to switch to look for local partners for each country. And as I've mentioned, we have already partnered with more than 10 partners in more than 15 markets, and we are bringing more partners onboard for more or for broader market entry. And regarding the overall global expansion and the strategy, we actually have a pretty long-term view for our international development. For the first live brand, it will be rolled out to several European countries as well as several other countries this year. And regarding the product from the Amo and the NIO brands, depending on the demand of the market we will also see if there are good products for some countries and regions where. But overall speaking, we don't have a very aggressive volume assumption or target for the global market because we mainly look at this for a very long-term perspective.

Thank you, Sandeep. Next question comes from Tina Hou with Goldman Sachs. Please go ahead.

Thanks, management, for taking my questions. I have two questions. The first one is as we are targeting to reach the more than 50,000 monthly volume at the 4Q of this year, how are we planning our production capacity? What kind of production capacity do we have now, and then what level will we reach by 4Q? And then are we adding new life or adding double shifts to achieve that?

Thank you for the question. Our current production will be enough to support our delivery assumptions for Q4 this year. We are preparing our third factory, and it will be put in operations starting September this year. And for certain production lines, in some factories, we also have the flexibility to arrange double shifts. In that case, production capacity won't be a problem for us.

Thank you. And then my second is regarding our working capital. Our conversion cycle because we have observed that both if we look at full year 2024 versus 2023, the account payable days, account receivable, as well as days have actually gotten longer. If we look at 1Q 2025 versus 1Q 2024, these days also got longer on a year-over-year basis. So going forward, I think for the full year of 2025, that may be longer term how should we think about this cash conversion cycle? What is the, like, optimal days for these working capitals?

Thank you for the question. As you have mentioned, two key parameters, inventory level and also the accounts payable. Regarding the inventory level, as we see growing intensity in terms of the market competition, we are also switching our sales model from OTD that's order to delivery model to more inventory-based. In that case, this is also a better practice to cater to the demand the consumers where many of them would like to pick up their cars as soon as possible. So as now we are switching to the inventory-based sales model, we also are seeing higher inventory levels regarding the vehicles as well as the production in comparison to the OTD mode. If we would like to continue to keep up the cell volume against the growing fierce competition, then we will also see the growing level of the inventory. But we will have a very strict and tight control over the inventories of both vehicles and the materials. Basically, the reasonable inventory level of the vehicles will be around one third to half of the monthly sales volume of each brand. And regarding your second question on or the second parameter on the account payable, actually, the payment duration we set for our suppliers has always been the same. That's around ninety days. But due to the accounting and also financial releases quarter over quarter, there are certain fluctuations that are also mainly related to the use of the check for the payment. Within the ninety-day payment duration, we normally will ask we're normally, we will pay half in cash to our suppliers and another half in check. But depending on the supply of the goods and also the urgency of the supply were the types of suppliers, will also have a variety of terms and conditions for the payment. Certain receive a % payment only a % payment in check, uncertain will only receive or allow for a % payment in cash within sixty days. So the payment terms and conditions also vary from a supplier to supplier, but the overall duration is consistent. As we see growing soft volume, in that case, we will also see growth in the purchasing value of these commodities and goods from our suppliers multiplied by the volume and also the duration, we will also see the rising level with our account payable. But overall speaking, that's actually normal as it's relevant to the volume the sales volume of the product.

Thank you. That's very clear. Thanks, William and Stanley.

As there are no further questions, now I'd like to turn the call back over to the company for closing remarks.

Thank you again for joining us today. If you have further questions, please feel free to contact our IR team through the contact information on the website. This concludes the conference call. You may now disconnect the line. Thank you.