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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello, ladies and gentlemen. Thank you for standing by for Li Auto's First Quarter 2021 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded.
I will now turn the call over to your host, [ Janet Zhang ], Director of Investor Relations of the company. Please go ahead, Janet.
Thank you, Annie. Good evening, and good morning, everyone. Welcome to Li Auto's First Quarter 2021 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; our CFO, Mr. Johnny Tie Li; and our CTO, Mr. Kai Wang, 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 the U.S. Securities and Exchange Commission. 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 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 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 first quarter as well as our newly released 2021 Li ONE, which offers best-in-class safety, efficiency, comfort and intelligence.
In the first quarter, we delivered 12,579 Li ONEs, up 334.4% year-over-year, which brought about total revenue of RMB 3.58 billion, 319.8% higher than the first quarter of 2020 and exceeding the top end of our revenue guidance by 11.2%.
In the first quarter, our Li ONE was the second best-selling new energy SUV in China, as our compelling product offering and superior user experience continues to delight customers and enhance brand awareness, while the unwavering support of our direct sales and servicing network underpins our growth. We were also the only domestic brand ranked in the top 10 bestseller among all premium SUVs in the first quarter. In April, Li ONE remained the first among all new energy SUVs in China. In the rankings, including ICE cars, BEV, EREV and PHEV, Li ONE ranked the second in the large SUV segment and the fourth in the premium SUV segment.
On the profitability side, our gross margin stayed robust at 17.3%, amid our ongoing efforts to enhance investment in R&D as well as to expand our direct sales and servicing network. Our expanding operating expenses increased by 238.6% year-over-year and 27.5% quarter-over-quarter. Despite the deliberate increase on the expense side, we continued with a disciplined cash flow management strategy. Our free cash flow remained positive at RMB 570.2 million. We also raised over USD 840 million in net proceeds through our successful convertible senior notes offering in April, strengthening our capital base for future growth as we increased our R&D investment in leading technologies, prepared for new model launches and gear up for further increase in demand.
We view our direct sales and servicing network an integral component of our closed-loop system that allows us to iteratively improve product features and add new functions for our users by accelerating the expansion of our direct sales and servicing network. We remain committed to proactively serving our users and anticipating future demand for our pipeline vehicles.
As of April 30, 2021, we had 73 retail stores, covering 53 cities and 143 servicing centers and the Li Auto-authorized body and paint shops operating in 105 cities. We are on track to reach our year-end target of 200 retail stores. We have also started reconfiguring our state-of-the-art Changzhou factory for our new model pipeline, especially the full-size premium SUV based on the next-generation EREV platform to be launched in 2022.
As a user-driven automotive and technology enterprise, we deeply value the tremendous trust and support our users bestowed on us. During the 19th International Automotive Industry Exhibition (sic) [ 19th International Automobile Industry Exhibition in April ], a large team of Li ONE owners came to our exhibition to volunteer as brand ambassadors, sharing their experience with the vehicle, their passion for it and their acknowledgment of value Li ONE brings to their families' everyday life. One of them, a Li ONE owner for 11 months, said, "Li Auto is not only a car brand, but also a spiritual partner. It is an integral part of our lives now." We are so grateful to see our mission and vision being recognized and echoed by our users.
As of April 30, our cumulative Li ONE deliveries have exceeded 50,000 units. We took only 17 months to reach this milestone, from the first delivery of Li ONE in December 2019, creating the fastest record among all new energy vehicle companies.
Our users have driven over 500 million kilometers, with more than 65 million kilometers assisted by our ADAS solution at a daily active rate of over 30%. In terms of safety, over 800 million early warnings were triggered, preventing more than 10,000 potential serious accidents, while Li ONEs extended powertrain and ADAS solution that are a standard contribution enable a more free and safe travel experience for our users. Its intelligent cockpit featuring a comprehensive infotainment system is another highlight of the vehicle. We pioneered the [ 4-screen ] interactive in-car system that has been widely praised by our users for the smart space of mobility. It allows the users and each passenger, offering private usage and voice-based interactive connections.
On average, users spend more than 40 minutes in our Li ONE every day while the car itself is parked. Our in-car karaoke function, which was first released before the Chinese New Year holiday, provided on-demand karaoke for more than 30,000 times during the Chinese New Year holiday and more than 80,000 times during the May Day holiday, affirming our long-standing dream of creating extension of homes that bring happiness to the entire family.
Li ONE is a proven success catering the needs of families in China and have effectively addressed the current challenge to BEVs in terms of energy replenishment. The success of Li ONE demonstrates our extraordinary product-defining capability, which lay a solid foundation for the development of our future models. We will continue to develop new NEV models with best-in-class performance. In parallel, we are developing our next-generation extended-range platform and high-power charging BEV platforms, both of which will be deployed with our proprietary autonomous driving technologies.
We plan to introduce a next-generation EREV platform in our new vehicles planned for 2022 and 2023. With next-generation EREV technology, we aim to support longer-range, higher energy efficiency and better NVH performance of our EREVs. We are also investing in the research and the development of next-generation electric vehicle technologies, including high C-rate battery, high-voltage platform and other ultra-fast charging technologies. Leveraging these technologies, we are developing 2 platforms, Whale and Shark, for our future HPC BEVs.
Starting from 2023, we plan to launch at least 2 new HPC BEV models each year. Our development progress in these technologies has been on track, and we plan to unveil our milestone achievement in the 2022 Beijing Auto Show. We are very excited to officially release our 2021 Li ONE yesterday. The new Li ONE features comprehensive upgrades in areas such as the EREV, powertrain, ADAS solution, intelligent cockpit, interior design for right comfort and exterior design for style, offering user premium features in a standard configuration at the flat retail price of RMB 338,000. Deliveries of the new Li ONE will commence on June 1, 2021.
We believe the new 2021 Li ONE is an outstanding product with advanced technologies and a very competitive feature for our target customer group. It has alleviated the extended-range electric technology to a brand-new level. It features an all-new 3-in-1 rear-drive electric motor, offering high energy efficiency as its energy efficiency in fuel model is only 6.05 liters per 100 kilometers based on the ADC standard operational condition. Best-in-class among large-sized 4-wheel drive SUVs, with software and hardware optimization and its integrated powertrain system. The new Li ONE achieved an ADC range of 1,080 kilometers and WLTC range of 890 kilometers. We are very proud of our R&D team's successful effort to improve the range-extended technology.
In keeping with the company's core belief that safety should be standard, not optional. The new 2021 Li ONE offers a full-stack self-developed ADAS in a standard configuration. All existing Level 2 ADAS functionalities have been redesigned and optimized in-house by our own R&D team. We also launched the NOA system, making the company the first OEM to implement full-stack self-developed and NOA based on domestic application processors. The 2021 Li ONE is also the first model in the world with NOA capability as a standard configuration.
Li ONE has been well loved by family users for its spacious 6-seat interior layout. The new Li ONE enhanced its excellence in space, comfort and intelligence by equipping the front and the second row seats with lumbar massage function. The leg room for the third row is increased by 41 millimeter, while its trunk can still hold a 28-inch suitcase or a large-sized stroller. It also features a smarter in-car voice assistant, Li Xiang Tong Xue, providing a higher caliber and overall more spacious, more comfortable and more intelligent space for family.
We believe that 2021, new Li ONE is going to be a smart electric vehicle bringing happiness to all families it serves, with a powerful extended-range electric system that enables more pleasant road trips, ADAS in a standard configuration to ensure safety -- safe travel for everyone and the spacious smart interior layout that enhance comfort for every occupant in the car. We believe the new Li ONE will help us gain much higher market share than its predecessor. We have seen a very strong order intake just in the past 24 hours, taking into consideration of the production ramp and the ongoing global shortage of semiconductor, we expect our delivery for second quarter to be between 14,500 and 15,500.
With that, I would like to turn it over to our CTO, Kai, for a closer view of our technology advancement and the new Li ONE. Since Kai joined as CTO in September last year, we have made numerous breakthrough in autonomous driving as well as intelligent cockpit technologies. Kai, please go ahead.
Thank you, Kevin. Hello, everyone. Let me provide more details about our 2021 Li ONE ADAS functions and other technical updates. As Kevin mentioned, the full-stack Level 2+ ADAS functionalities were self-developed by our own R&D team, defined in-house perception algorithms and Level 2 ADAS functionalities. We also launched an NOA system. I'm very proud of our team, their effort and their dedication and at the level we have reached in such a short time.
The 2021 Li ONE comes equipped with 2 Horizon Robotics Journey 3 AI acceleration processors for automated driving. The 2 processors are dedicated to processing driving data, not only at a high efficiency, but also with redundancy backup for enhanced safety. The vehicle is the first production model in the world with 8-megapixel, front-view camera, providing 4K definition, Compared with the mainstream today, the 8-megapixel camera has an effective visual range of 200 meters, wider lateral detection range and a stronger perception ability on RAM and log load curve recognition. In short, it sees further, more clearly, more widely and is, therefore, safer.
In addition, the 2021 Li ONE has 5 fifth-generation millimeter-wave radars made by Bosch that have a wider detection range, better resolution, higher accuracy and improved range of recognition. We have a detection range of 110 meters and 150-degree field of view, allowing 360-degree overall coverage without any blind spots in system level. Supported by rich sensors and redundant capable hardware, along with full-stack in-house software, the 2021 Li ONE can recognize traffic lights, traffic cones, road curbs and other complicated objects. It supports a more efficient NOA feature for on and off ramp, automatic adaptive acceleration and lane change on certain limited access roads. It also supports fully automated parking assist feature known as FAPA, which is vision-based automatic parking function. We are confident the 2021 Li ONE delivers a safer, easier and more comfortable driving experience, exemplifying our deeply held core value that safety should be standard, not optional feature.
As we roll out high-definition maps in cooperation with AutoNavi, the NOA will be made available to 2021 Li ONE users through OTA update, starting in the third quarter this year and will gradually cover more roads and areas in China.
In addition to ADAS functions discussed above, the 2021 Li ONE will also provide users with a more intelligent space, including a smarter in-car voice interaction system. Looking ahead, we will continue executing the parallel development of EREV and BEV, further strengthening of R&D team and developing cutting-edge technologies.
Now I will turn this call over to our CFO, Mr. Tie Li, to review our financial performance in the first quarter. Please go ahead.
Thank you, Kai. Hello, everyone. I will now go over some of our financial results for the first quarter of 2021. To be mindful of the length of this call, I will address financial highlights here and encourage you to refer to our earnings press release, which is posted online, for additional details.
Our total revenue for the -- in the first quarter of 2021 were RMB 3.58 billion or USD 545.7 million, representing an increase of 319.8% from RMB 841.7 million (sic) [ RMB 851.7 million ] in the first quarter of 2020. This included RMB 3.46 billion or USD 528.7 million of vehicle sales in the first quarter of 2021, representing an increase of 311.8% from the first quarter of 2020. The increase in vehicle sales was mainly attributable to the increase in vehicle deliveries with the continuous expansion of our sales network.
On quarter-over-quarter basis, total revenues and vehicle sales decreased 13.8% and 14.6%, respectively, primarily due to the seasonal factors related to the Chinese New Year holidays as well as the localized COVID-19 outbreaks in Northern China in February 2021. Revenues from other sales and services were RMB 111.5 million or USD 17 million in the first quarter of 2021, comparing with RMB 10.6 million in the first quarter of 2020 and RMB 89.2 million in the fourth quarter of 2020. The increase in revenue from other sales and services over the first and fourth quarters of 2020 was mainly attributable to the increased sales of charging stalls, accessories and services in line with higher accumulated vehicle sales.
Cost of sales in the first quarter 2021 was RMB 2.96 billion or USD 451.6 million, representing an increase of 277.6% year-over-year and a decrease of 13.5% quarter-over-quarter. Vehicle margin in the first quarter of 2021 was 16.9%, comparing with 8.4% in the same quarter of 2020 and 17.1% in the fourth quarter of 2020. The increase in vehicle margin over the first quarter of 2020 was primarily attributable to lower material cost and the lower unit manufacturing overhead cost derived from the increased production volume. The slightly decrease in vehicle margin from the first quarter of 2020 -- from the fourth quarter of 2020 was primarily due to the lower average selling price caused by promotional activities launched in the first quarter of 2021, partially offset by the decreased material cost. Our gross margin in the first quarter 2021 was 17.3%, compared to 8% in the first quarter of 2020 and 17.5% in the fourth quarter of 2020, which was mainly attributable to the change of vehicle margin.
Operating expenses in the first quarter 2021 were RMB 1.02 billion or USD 156.4 million, representing an increase of 238.6% year-over-year and an increase of 27.5% quarter-over-quarter.
Research and development expenses in the first quarter of 2021 were RMB 514.5 million or USD 78.5 million, representing an increase of 171.2% in the first quarter of 2020 and an increase of 37.5% in the fourth quarter of 2020. Excluding share-based compensation expenses, non-GAAP research and development expenses were RMB 397.9 million or USD 60.7 million, representing an increase of 109.8% year-over-year, an increase of 7.8% quarter-over-quarter. The increase in research and development expenses over the first and fourth quarter of 2020 was primarily attributable to: first, increased share-based compensation expenses derived from incremental share options granted with higher fair value in January 2021, while no share-based compensation expenses were recognized for stock options with service condition and a performance condition related to our IPO in the first quarter of 2020; second, the increased R&D activities for the company's next vehicle models; and third, increased headcount.
Selling, general and administrative expenses in the first quarter of 2021 were RMB 509.9 million or USD 77.8 million, representing an increase of 352% in the first quarter of 2020 and an increase of 18.8% in the fourth quarter of 2020. Excluding share-based compensation expenses, non-GAAP selling, general and administrative expenses were RMB 449.8 million or USD 68.7 million, representing an increase of 298.8% year-over-year and an increase of 5.4% quarter-over-quarter. The increase in selling, general and administrative expenses over the first and fourth quarter of 2020 was primarily driven by increased marketing and promotional activities, increased headcount and rental expenses with the expansion of the company's sales network and increased share-based compensation expenses. Losses from operations in the first quarter of 2021 was RMB 407.7 million or USD 62.2 million, representing an increase of 74.1% in the first quarter of 2020 and an increase of 416.7% in the fourth quarter of 2020. Excluding share-based compensation expenses, our non-GAAP loss from operations was RMB 224.8 million or USD 34.3 million, representing a decrease of 4% year-over-year and an increase of 216.2% quarter-over-quarter. Net loss was RMB 360 million or USD 54.9 million in the first quarter of 2021, comparing with RMB 77.1 million net loss in the first quarter of 2020 and RMB 107.5 million net income in the fourth quarter of 2020. Non-GAAP net loss was RMB 177 million or USD 27 million in the first quarter of 2021, compared with RMB 253.4 million net loss in the first quarter of 2020 and RMB 115.4 million net income in the fourth quarter of 2020. Turning to our balance sheet and cash flow. Our cash and cash equivalents, restricted cash, time deposits and short-term investments totaled RMB 30.36 billion or USD 4.63 billion as of March 31, 2021.
Operating cash flow in the first quarter of 2021 was RMB 926.3 million or USD 141.4 million. Free cash flow was RMB 570.2 million or USD 87 million in the first quarter of 2021. And now our business outlook. For the second quarter of 2021, the company expects deliveries to be between 14,500 and 15,500 vehicles, representing an increase of 119.6% to 134.7% from the second quarter of 2020. The company also expects second quarter total revenues to be between CNY 3.99 billion and CNY 4.27 billion or between USD 609.0 million and $641.7 million (sic) [ $651.7 million ], representing an increase of 104.6% to 119% from the second quarter of 2020. I will now turn the call over the operator to the Q&A session. Thank you.
[Operator Instructions] Our first question comes from the line of Tim Hsiao of Morgan Stanley.
So I've got 2 questions. The first question, could you please update your effective capacity at the moment? With output of new Li ONE models suffer from a greater impact for the component bottleneck, for example, like a chip shortage and the battery or any other key components. And if that's the case, when do we expect the output of new Li ONE could be back to a more normal level? My second question is, how is the gross margin of the new Li ONE compared to the previous version? Will a CNY 10,000 price hike fee more than enough to offset the cost increase from the feature upgrade and raw material inflation and further advance second quarter gross margin? [Foreign Language]
Thank you, Tim. This is Kevin. I will answer the first question. Of course, as we all know, we are -- the whole industry is suffering from the shortage of the semiconductor. Right now, in terms of our capacity, our Changzhou factory, with 2 shifts already ready, we can do more than 500 per day. But of course, due to the ramp of the new Li ONE and also the -- some of the timing issue of the chips, we are -- the volume cannot achieve that high. We expect -- starting from September, we expect our monthly production will be more than 10,000. And I will ask Johnny to answer the gross margin.
For the gross margin, in the long run, it's -- the [ bottom has ] remained at the same level of the current Li ONE, with some additional hardware, as you may know, for the NOA parts and also some savings from some traditional parts like the rear model. It's net-net.
And for the second quarter, I think it will be a net of April, May with some promotion on the current new -- the current Li ONE and also with 1 month new Li ONE with RMB 10,000 sales price overhead there. So it will be a mix.
Our next question is from the line of Fei Fang of Goldman Sachs.
I have 2 questions. First, about your store number. Also, you reported 52 stores by the end of 2020. And then you reported 73 stores by April, and then you guided 200 stores by year-end. So what that means is that you have added 21 stores in the first 4 months of the year, but you plan to add 130 stores in the next 8 months. Is that the right way to look at it? And also, 130 stores in 8 months is not something that we've seen before. So is there any execution risk with regard to that? Second is about pricing. Now you've raised prices in the facelift, which is obviously very different from some of your competitors or other EV manufacturers who have lowered prices over time. So does that mean that Li Auto plans to move further into the premium segment in the forward product cycles? [Foreign Language]
Okay. Thank you, Fang Fei. I will answer your question. So as of today, right now, we have 75 stores. And in the first quarter, because of the impact of Spring Festival and some areas have COVID-19 outbreaks, the pace of the opening new stores was a bit slow than our expectation. However, we have been making a very good progress in site selection. In fact, right now, we have another 50 stores in our pipeline actually under construction. So therefore, the -- for the whole year, the 200 retail store targets remain unchanged, yes. We are just a little bit behind the track. We think we'll catch up in the second half. And for the pricing strategy, the methodology we took is to price our product based on its value to the customer, yes. And Li ONE is very, very competitive and delivered a lot of value. And with more feature functions we added into the new Li ONE, we think just RMB 10,000 higher price is very fair, yes. And the new Li ONE will be even more competitive than its predecessor.
Next question is from the line of Ming-Hsun Lee of BofA Securities.
So I have 2 questions. The first question is regarding your new supplier of your processor, which is Horizon. So you know that Horizon should be able to give you a better exposure to data they collect. Could you give us more details regarding your strategy to choose Horizon for your processor supplier? And in the longer term, will you continue to take use of Horizon? Or you will also consider some other foreign brands? This is my first question. And the second question is actually regarding to the detailed road map of your autonomous driving. Currently, you already gave a very detailed explanation about your new NOA system to be launched by the end of this year. So could you give us some pipeline for 2022 or '23? What kind of new autonomous driving function you provide in the next 2 years?
[Foreign Language]
Thank you, Mr. Lee. Kai, do you want to take these 2 questions? Thank you.
Yes. Okay. Thank you. So basically, we have 5 criteria for SoC selection. So basically, that can explain why we choose our Journey 3 from Horizon as our SoC supplier. So the first one is the performance, of course, when we define the feature we want to achieve and the performance of the chipset must meet the requirement. And from that perspective, Journey 3 is enough for the target. The target is Level 2+ functions with, for example, NOA features.
And then the second criteria is the openness and flexibility. So for example, our previous generation, we used Mobileye, so it's not very flexible for our own algorithm development. So from that perspective, both Orin and Journey 3, they are more open, then we can use our own algorithm there. So the third criteria is about support. We need a very solid support from our supplier so that we can keep our high speed, let's say, development and also the phase of iteration. So Journey 3 is from Horizon Robotics. Their headquarter is also in Beijing. So from that perspective, they can provide the best service or support locally. So the reaction of this interaction between economies, much more convenient. The fourth criteria is regarding the SOP timing. So the chipset today will evolve every year. There will be new chipset available from the market. So from the time line, we SOP our 2021 Li ONE, so Journey 3 is better. So the fees, but not the least, criteria is the price. So the price of Journey 3 can offer capable performance. At the same time, the price is affordable. So basically, overall, these 5 criteria, eventually we come out always with the idea that we use Journey 3 here. Regarding the road map of our autonomy, so we already mentioned in the previous description that we will by now just right away launch our in-house algorithm to support Level 2 ADAS functions with our own perception, own prediction, planning, execution and software. And then the fourth quarter, we will provide NOA because we need some time for the adaptation of HD map covering more and more roads and areas in China. So -- and then the next year, we already introduced, let's say, the next-generation platform on basis now for Orin. And that one, we will provide even much more processing power among even greater -- that support more features. So hardware-wise, we can move it up to Level 4. But software-wise, of course, we need to step by step release more function of via OTA. That's the plan in general. Thank you.
Next question is from the line of Bin Wang of Credit Suisse.
The first one go to the price about a [ top serving ] [ stockpile ] in the release of dataset for people payments, but you actually raised the price by RMB 10,000. Can I actually try to elaborate, is RMB 10,000, that's just the price for [indiscernible]? Can I have this explanation about, right? That's number one. And number two, actually, I found one company called Hongjing Zhijia -- Hongjingdrive actually, a media item naturally has been involved in your R&D about Level 3. The products have been launched [ after line ]. So basically, it's the same product as the Li ONE 2021 version. Is this company an auto supplier? Actually I see that it's full stack in-house design. Actually, what's the role of Hongjing Zhijia in this project? [Foreign Language]
Okay. Thank you, Wang Bin. I will take the first question. Actually, the RMB 10,000 is not specifically for NOA or for any new feature of the new Li ONE. It's just -- I'll answer, just I explained, this is overall our pricing strategy. And Mr. Li Xiang already stated that the safety is the standard, not the option though. Therefore, we make all the new ADAS solution a standard function without any charge to our customer. The second question, I will ask Kai to comment. Kai?
Yes. So regarding the role of Hongjingdrive is our hardware Tier 1 provider. So the role of Hongjingdrive is mainly about product validation and also design coordination together with our team and then the final production. So as we already mentioned, actually, for our ADAS team, we have around about 300 people right now covering both hardware and software design. So software-wise, we already explained, it's a full stack in-house software development, including the low-level software like OS and also the middleware and all application software and closed-loop edge-to-cloud environment completely. For hardware part, actually, we also designed hardware part to ensure that we have the complete transparency of the design so that we can react if there are something wrong with our design during the life cycle of the product. So we are also responsible for the complete hardware design, simulation and design validation. So including both electronics and mechanics, but role of Hongjingdrive, they will participate with the hardware design because, from an efficiency point of view, we would like to leverage the outsourced resources to ensure we keep that in a very high level. So overall, they will do the combination, the product validation and then the production reach. We -- on purpose, we don't want to touch because that will lower the efficiency -- overall efficiency. And also that's the part actually Tier 1 could have a better efficiency compared with OEM.
Next question is from the line of Paul Gong of UBS.
Two questions. The first one is you have switched from the Mobileye EyeQ4 to this Journey 3 and you're going to switch to NVIDIA Orin next year. How do you see the data format of all these 3 systems? Can you really use the data connected in the previous system and use now and further develop for the future ADAS function? Or is it since this transition? The second question is regarding your BEV plan for 2023. You mentioned the Whale and the Shark; platform. How do you think, after seeing the Shanghai Auto Show with so many new BEV models, would this change a little bit of your time line, your road map? Would you accelerate the process a little bit in view of the rising competition in the market? [Foreign Language]
Okay. Maybe I take the first question. So regarding different platforms, so actually, that's the reason why we would like to do the in-house deeper. So when you have control of the algorithm development, there are, of course, open algorithms. Basically, you utilize the same mechanism behind. So when you're developing something and then you can really base on different hardware, make a kind of a record software, then you can support different containers basically. That's our idea behind. And from compatibility point of view, there are really lots of common area you can reuse. And also on top of that, so you can see the current development. We do have the edge part and also the cloud part. The cloud part we utilize a massive computing power for training. So both Journey 3 platform and Orin platform, we have the same NVIDIA solution behind for training. So you can see right away, there are already a bunch of common stuff you can share. So then -- we don't have any problem. Of course, if you support more, then you need, let's say, more effort for adaptation between platforms. So we will lower that, of course. Then there's smart selection, as we mentioned. That's the reason why we have a very strict criteria for our SoC selection. Thank you.
Yes. Paul, this is Kevin. Let me take the -- your second question. Of course, we all see a lot of new car models launched in Shanghai Auto Show. However, as we reiterated many times that we think a charging solution is the key competitive advantage we need to gain to compete in the BEV arena. Therefore, we will stay on our track to develop our Shark and Whale platforms with ultra-fast charging capability. We think that's the key to win the future competition, yes. So therefore, we will not alter our plan. Yes, we'll stay very focused. Of course, with more resources, we, of course, want to accelerate the R&D process, for sure. But right now, the outlook is still in 2023, yes.
Thank you. As we are reaching the end of our conference call, I'd like to turn the call back over to the company for closing remarks. Ms. [ Janet Zhang ], please go ahead.
Thank you once again for joining us today. If you have further questions, please feel free to contact Li Auto's Investor Relations team. And that's all for today. Thank you, and have a good one.