What impact will our future deliveries have? Will it cause bottlenecks in battery supply in the second quarter?
He Xiaopeng: In the past six months or so, our suppliers have been paying attention to batteries. Regarding the lithium iron phosphate battery, with the emergence of this new P7 model and other models, I believe that the battery problem will face some new challenges in the second quarter. Lithium iron phosphate is a brand new battery, so we will follow our supply Businesses are cooperating closely. I believe that from the perspective of Xiaopeng’s P7 in the second quarter, lithium iron phosphate batteries may be a climbing process, but I believe there will be a significant increase in the third and fourth quarters of this year. At the same time, from our previous experience of launching a cruising range of less than 500 kilometers on the G3, we have strong confidence that lithium iron phosphate can be gradually and quickly added.
Gu Hongdi: Let me add the LP (lithium iron phosphate) version of the car mentioned by He Xiaopeng just now. In fact, we see that consumer demand for our LP cars is still very healthy and strong. Since its launch, the P7 order volume of the LP version has increased by about 20%, which is very exciting. As for the supply problem mentioned by Xiaopeng, I think the supply challenge will be resolved in the second quarter of this year. Therefore, in general, we believe that the delivery volume in the second quarter will have a relatively healthy growth compared to the first quarter.
Edison Yu, analyst at Deutsche Bank: Thank you to the management for accepting my question. The first is about recent issues. We just mentioned that there will be a chain growth in the second quarter. What I want to know is not only the second quarter, but does the management have a guideline for the second half of the year? Of course I am not asking for a specific number. Take demand, for example, how will our monthly sales in the second half of the year be? Will the chip shortage affect sales?
Gu Hongdi: First of all, we will not give a long-term guideline, but Xiaopeng also mentioned just now that in the next few quarters, we will launch a new product every quarter. Therefore, we believe that the chain growth will be healthier. As for the problem of chip shortage, at present, our chip supply can be maintained for two to three months. In the long run, we are also paying close attention to the supply of chips to understand the overall impact of chip supply on our supply chain at any time. But in the short term, the shortage of chips will not affect us. But we are indeed very concerned about this. At the same time, other large OEMs may face more serious problems, but our output is relatively small, so the solution to the problem of chip shortages is more flexible. However, it must be emphasized that we will still pay close attention to the chip industry.
Edison Yu: I also want to ask another question about XPilot. For the next generation of XPilot, Would you consider adopting a subscription fee model? If this model is not adopted, how will XPilot’s pricing increase in the future?
He Xiaopeng: For different versions and higher levels of XPilot, we will charge higher levels. However, whether this fee is a one-time fee or an annual or monthly fee, we will determine it based on actual customer feedback and our thinking, but the overall price will definitely be higher and higher, which is beyond doubt.
Citibank analyst Jeff Chung: Hello, everyone. First of all, my first question is to ask what will be the difference between the sales of electric vehicles that use two different batteries in our sales in the future? What are our expected differences?
Gu Hongdi: In terms of LP batteries, it is obvious that the new orders for the LP version of P7 have increased by 20%. For the LP version of G3, the increase in new orders should be around 10%. We believe that this proportion will continue to increase as we continue to introduce new LP versions of models. In addition, since we no longer provide low-end models, the LP version of P7 electric vehicles equipped with XPilot software accounted for a higher proportion of sales. The overall huge base of P7 is very likely to promote a higher XPilot software penetration rate in the future.
Jeff Chung: I also want to know what the long-term marginal trends of lithium iron phosphate battery electric vehicles and ternary lithium battery electric vehicles are like, excluding the software part and looking at the electric vehicle hardware itself. ? How does the company view the long-term trend of the market?
Dennis: We launched lithium iron phosphate battery products for two purposes. One is to promote sales, and the other is to reduce costs. There is no doubt that the version of the lithium iron phosphate battery will increase our sales and marginal profit. Although I can’t give specific figures on the increase in marginal profits, the marginal profits of P7 and G3 that use lithium iron phosphate batteries will increase.
Jeff Chung: My second question is about the revenue of autonomous driving software. Considering that XPilot 3.0 was installed on some P7 vehicles before, XPilot 3.0’s revenue will also be included in the first quarter’s revenue. But the software revenue guidance given by the management just now is relatively conservative. So I want to know why this is? Then, what is the current penetration rate of XPilot 3.0? And what level will the penetration rate of XPilot 3.5 reach in the future?
Gu Hongdi: I seem to have mentioned before that P7 with XPilot 3.0 software activated accounts for all P7 vehicles.The ratio is 20%. Coupled with the OTA launched in January, we see that the penetration rate of software is slowly rising. Then we also see that the product usage rate is as high as 50% or more. We believe that as more and more products are equipped with XPilot 3.0 architecture, the penetration rate will continue to rise. The penetration rate of XPilot 3.5 is currently difficult to predict. But as we plan to release our third product in the fourth quarter, the new product will be equipped with XPilot 3.4 or 3.5 software, which means that more than 80% of new models will increase our software revenue. So we can expect that the penetration rate of new products will be higher than P7.
He Xiaopeng: I would like to add that as we continue to upgrade XPilot, we will remove the old version of XPilot in the updated models. For example, we plan that our third model will not have the functions of XPilot 2.5, all of which are paid functions of 3.0 or above. In our fourth car, even we will only provide such an autopilot function of XPilot 4.0. We believe that with the improvement of the software and data capabilities of autonomous driving, as well as the reduction in the size of hardware and the price of technology integration, in the near future, we will achieve all models, and we may bring all related hardware for intelligent driving. , And the feasibility of charging through software.
Bin Wang, Credit Suisse analyst: Thank you all leaders. I have a question about autonomous driving. It seems that the automatic driving in this guide is a bit advanced, because it seems that the next medium-sized sedan can achieve XPilot 3.5, which means that it can achieve NGP in the city, which means that it can achieve a 90° turn in the city. I would like to ask if this is already ahead of schedule, because it seems that the original XPilot 3.5 will be implemented in 2022, but from today’s conversation, it seems that it should be implemented by the end of this year. Including XPilot 4.0, it was originally also in 2023, but today it is mentioned that 2022 can also be achieved, so I want to confirm whether the time has been advanced. This is the first small part. The second question is whether it is said that XPilot 3.5, which is equipped with lidar, can realize the automatic driving of urban roads, and then XPilot 4.0 can only be realized by using the next hardware. So I want to confirm whether it is possible to achieve a 90-degree turn of urban roads by the end of this year. And if we accelerate the research and development of autonomous driving, correspondingly, will our research and development expenditure in the next two years have a big increase? Thank you.
He Xiaopeng: In 2020, with the development of XPilot 3.0, we are veryAs of 5.0 in the future, we are more confident, and compared to the original plan, the longer the future, the more we plan ahead. From the perspective of 3.5 and 4.0, we will moderately launch it earlier than our original plan. This is also based on the very large amount of usage data of our XPilot 3.0. In this regard, we are more confident. This is the first one.
Then we believe that lidar and smart cars with higher levels of computing power will be the standard equipment for autonomous driving in the future. This lidar can be better integrated with millimeter-wave radars and cameras to provide better security. Then stronger computing power can really help us on the first-level highway in the city, then to the second-level highway and then to the whole area. On the roads of this city, it can provide safer and better interaction, as well as a better autonomous driving experience. But I believe that the use of autonomous driving in a wider area or even fully autonomous driving in China will still take a long time. But to reach a quasi unmanned driving, we believe it will be faster than we thought.
As for the investment in research and development, our investment in research and development this year will be a considerable increase compared to last year, and we will focus on automation-related fields, including autonomous driving software, data, algorithms, and the internationalization of autonomous driving. And the 4th generation of next-generation autonomous driving technology and software-driven hardware changes related to autonomous driving. In these areas, we are making very large investments.
Ming Hsun Lee, analyst at Merrill Lynch Bank of America: Hello, management, my question is mainly about the development of overseas markets. First of all, can you please give us some more guidance, that is to say, the establishment of our overseas market sales center this year will be different from our domestic development. Another issue is that the internationalization of autonomous driving was also mentioned just now. I want to know about it, because it includes other software or hardware for autonomous driving overseas. Is there a need to change suppliers? And the other one is that because we are in China, the smart cockpit is also one of our strengths. So will this encounter any challenges and bottlenecks in internationalization? Then I want to know about the development of overseas, at least in terms of the development of smart cars, can Xiaopeng Motors keep pace with domestic development? Or is it because internationalization still has some limitations and restrictions, so there may still be some six months to even one year of technology gap?
He Xiaopeng: Regarding the development of overseas markets, when I first started my business in 2010, I started doing overseas business. My emphasis and views on the international market are different from those of many entrepreneurs. It takes a very long time for the overseas market to lay the foundation before it is possible to obtain huge opportunities. Our domestic development and our overseas development, from the overall model, we currently expect a similar model, Will not make huge changes. This ensures that the capabilities of multiple product lines in the future and our operations and organizational capabilities can be replicated and expanded relatively quickly.
Then in terms of the internationalization of autonomous driving, we will directly start to develop the overseas version of XPilot 4.0 on the basis of XPilot 2.5. We will mainly focus on Europe and more developed countries and regions to promote our overseas markets. So in the field of smart cockpits, because most of Xiaopeng’s smart cockpits are self-developed by Xiaopeng. We are overseas. We have already had a certain team since 2020 last year. We will further expand our team this year to start self-research. Of course, the process of laying the foundation for self-study may be slower, and it may take 12 months or more. But once a relatively good foundation is achieved, the speed, cost and efficiency of subsequent expansion will be very good. Therefore, when we are overseas, whether it is autonomous driving, smart cockpit or our platform-based capabilities, we are all in the recent past. In the past few years, in many countries (mainly developed countries), the foundation will be well established, then the brand will be established, the channels and services will be established, and the intelligent capabilities will be self-developed. At this time, we believe that we can quickly replicate and grow rapidly in overseas markets in the future.
UBS analyst Paul Gong: My first question is about the size of the R&D team. I remember that when the company went public, there were about 1,500 R&D engineers, and about one-third of them were in autonomous driving. Then Xiaopeng Motors’ current financial resources are more abundant than before, and you mentioned just now that it will significantly increase research and development expenditures this year. Can you share what scale the R&D team will expand to in the future? This is my first question.
He Xiaopeng: Starting this year, Xiaopeng’s R&D team and sales and service system personnel will have very rapid growth. We expect that by the end of 2021, our number of R&D personnel will probably be more than double what we had before. At the same time, we will also deploy a large number of technical research and development personnel in our ecosystem.
Paul Gong: Thank you, my second question is about the realization of autonomous driving or software. Because at present, XPilot 3.0 is still more expensive than 2.5. As far as the loading rate is concerned, it is only about 20% on the P7. Have we ever thought of strategically adjusting the price difference between XPilot 2.5 and 3.0, either by lowering the price of XPilot 3.0 or increasing the current price of the old version 2.5, and then let consumers use this software as much as possible. Because the development cost of this software is fixed, the more people you use, the more data you collect. canCan strategically choose not to pursue the realization of advanced autonomous driving in the short term, but to choose to obtain data.
He Xiaopeng: We have no plans to do this. Because we need to concentrate all the capabilities to be able to move forward technically, and be able to achieve the world’s number one autonomous driving technology, we will not consider compatibility with past autonomous driving technologies on new models. This is one of them. Second, we can see that in different situations of high-level autonomous driving and even unmanned autonomous driving, in addition to software service fees, I believe there are many new ecosystems and new expansion scenarios. We are more confident that there will be a better user experience and higher income in these scenarios. (End)