Hello, ladies and gentlemen. Thank you for standing by, and welcome to the NIO Inc. Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today's conference call is being recorded. I would now like to hand the conference over to your host, Ms. Eve Tang from Capital Markets. Please, go ahead.

Good morning and good evening, everyone. Welcome to NIO's fourth quarter 2022 earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted at the company's IR website. On today's call, we have Mr. William Li, Founder, Chairman of the Board and Chief Executive Officer; Mr. Steven Feng, Chief Financial Officer; Mr. Stanley Qu, Senior VP of Finance, and Ms. Jade Wei, VP of Capital Markets. Before we continue, please be kindly reminded that today's discussion will contain forward-looking statements made under the safe harbor provisions of the US 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 US 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 news 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 2022 Q4 earnings conference. In Q4, 2022, NIO delivered a total of 40,052 smart electric vehicles, up 60% year-over-year, achieving a new quarterly record. According to the retail data released by CATRC, the China Automotive Technology and Research Center, NIO was the best-selling brand in China's premium EV market, priced over RMB 300,000 with a market share of 54.8%, while our market share in the premium EV market priced over RMB 400,000 reached 75.8%. In 2022, despite the impact posed by COVID and supply chain disruptions, NIO delivered a total of 122,486 smart electric vehicles, up 34% year-over-year. In January and February of 2023, we delivered 20,663 vehicles, representing a 30.89% increase year-over-year. We expect total deliveries in the first quarter of this year to be between 31,000 and 33,000 units. As the penetration rate of the premium EV grows and more NIO products are expected to be delivered in the second quarter, we have strong confidence in the market demand in 2023. Next, I would like to share some recent highlights of our products, R&D, and operations. Since we started to deliver ET5 in September 2022, production and delivery have been ramping up steadily. According to CATARC's retail data, this January, among all the mid-size sedans priced over RMB 300,000, the NIO ET5 outperformed popular internal combustion vehicles from well-established brands and became the top-selling model in Beijing, Shanghai, Guangzhou, Shenzhen, and other 15 cities in China and the second best-selling model nationwide in China. On December 24, 2022, we held NIO Day 2022 in Hefei, where we launched the smart electric flagship coupe SUV EC7 and all-round flagship SUV, the All-New ES8. EC7 is a large-sized coupe SUV that embodies NIO's high-performance DNA and delivers ultimate handling and riding experience. The delivery of EC7 is expected to start in May. As NIO's flagship SUV based on the technology platform 2.0, the six-seater All-New ES8 offers two seat layouts, catering to all scenarios including work, family, social, and exploration. The delivery of the All-New ES8 is expected to start in June, and both new products have attracted wide attention and received great feedback. In the first half of this year, NIO will gradually launch more new products and shorten the waiting time for our launch to user delivery. Other supply chain and manufacturing teams have been preparing for new product launches and production ramp-up, ensuring that supply and production align with the growing demand for the new products. For intelligent driving, NIO has gradually rolled out NOP+ Beta to all NT2.0 vehicles. Based on our full stack in-house developed intelligent driving technologies and closed-loop data management, NOP+ Beta has realized significant improvements in areas of reassurance, comfort, and efficiency. The utilization rate has doubled with a total engaged mileage of over 1.75 million kilometers in the recent week. We plan to roll out more features and functions to our users and will gradually release power swap pallets for highways in the first half of this year. Regarding the sales and service network, we now have 375 NIO houses and NIO spaces in 141 cities and 305 NIO service centers and NIO delivery centers in 148 cities. In terms of the charging and swapping network, NIO has installed a total of 1,331 power swap stations and provided over 18 million battery swaps for our users. In the meantime, NIO has accumulatively deployed 60,385 power chargers and 7,558 destination chargers. Over power map has connected to over 1.04 million third-party chargers. In 2022, 50% of the power charged by our users came from battery swapping stations, which has become the most convenient and favorite solution among new users. In 2023, NIO will speed up the development of the battery swapping network and plans to install an additional 1,000 power swap stations. By the end of 2023, there will be more than 2,000 to 3,000 power swap stations in total. So far, the mass production of power swap station 3.0 is going forward smoothly with large-scale production expected to start in April. The accelerated deployment of power swap stations can not only provide existing users with experiences beyond expectations but also significantly boost user demand. In Q4 2022, NIO started to offer NT2.0 products and comprehensive services in Germany, the Netherlands, Denmark, and Sweden. NIO products have been highly recognized by professional media in Europe, and the user satisfaction rate has also reached expectations. After obtaining the prestigious Golden Steering Wheel award, ET7 was honored with multiple awards in Europe, such as the Technological Front-Runner of the Year at the Danish Auto Awards, Car of the Year, and The Best in the Luxury segment by Auto Motor Sport, Sweden and the Promise of 2023 by the Association of Business Drivers in the Netherlands. On January 31, 2023, we started to deliver EL7 of mid-large smart electric SUV to the first batch of users in Europe. As we continue to introduce a more diversified product portfolio, expand our sales to service and power network, and improve our brand awareness, we are confident in our long-term development in Europe. The efforts of our strategic NIO business, including batteries, AD chips, and mass market brand, are also well on track. The development of NIO wouldn't have been possible without our users and customers. In 2022, 4,447 users volunteered at auto shows, NIO Day, and other events. NIO users have also been actively making contributions to society, with the participation of public welfare activities reaching 60,204 times in 2022. On January 18, 2023, NIO was recognized in the Corporate Knights 2023 Global 100, the world's most sustainable companies list, among 333 companies in the car and truck manufacturing, including parts category, NIO ranked first. In the meantime, on January 31, 2023, NIO opened the second advanced manufacturing base with certified 3-star green buildings, marking the first of its kind in China. We attach particular importance to low carbon development, environmental protection, and ecosystem co-construction and actively practice sustainable philosophy to continuously improve our performance over the years. In 2022, to build our long-term competitiveness, we made decisive investments and achieved positive strides in the research and development of core technologies and products, the deployment of charging and swapping infrastructure, as well as the sales and service network and global market expansion, laying a solid foundation for the company's long-term growth. As we transition our product portfolio to NT2.0 with more NIO products to be launched and delivered in 2023, we will do our best to provide users with experiences beyond expectations. At the same time, we aim for all-around execution efficiency improvements to compete in the global EV market in the long run in an agile and efficient manner. As always, thank you for your support. With that, I will now turn the call over to Steven to provide the financial details for the fourth quarter. Over to you, Steven.

Thank you, William. I will now go over our key financial results for the fourth quarter of 2022. To be mindful of the length of this call, I will reference RMB only in my discussion today. I encourage listeners to refer to our earnings press release, which is posted online for additional details. Our total revenues in the fourth quarter were RMB 16.1 billion, representing an increase of 62.2% year-over-year, and 23.5% quarter-over-quarter. Our total revenues are made up of two parts: vehicle sales and other sales. Vehicle sales in the fourth quarter were RMB 14.8 billion, representing an increase of 16.2% year-over-year and 23.7% quarter-over-quarter. The increase in vehicle sales year-over-year was mainly attributed to higher deliveries as a result of a more diversified product mix offered to our users. The increase in vehicle sales quarter-over-quarter was mainly due to the volume ramp-up of the ET5 and ES7. Other sales in the fourth quarter were RMB 1.3 billion, representing an increase of 90.3% year-over-year and an increase of 22% quarter-over-quarter. The increase in other sales year-over-year was mainly due to the increase of revenue from rendering of research and development services and an increase in other revenues in line with the incremental vehicle sales. The increase in other sales quarter-over-quarter was mainly due to the increase of revenue from rendering of research and development services and increasing sales for accessories, charging piles, and used cars in line with the incremental vehicle sales, partially offset by the sales of automotive regulatory credits in the third quarter of 2022. Gross margin in the fourth quarter of 2022 was 3.9%, compared with 17.2% in the fourth quarter of 2021 and 13.3% in the third quarter of 2022. The decrease in gross margin year-over-year was mainly attributed to decreased vehicle margin. The decrease in gross margin quarter-over-quarter was mainly due to decreased vehicle margin and the decrease in other sales margin, mainly resulted from the sales of automotive regulatory credits with high gross margin in the third quarter of 2022. More specifically, vehicle margin in the fourth quarter was 6.8% compared with 20.9% in the fourth quarter of 2021 and 16.4% in the third quarter of 2022. The decrease in vehicle margin year-over-year was mainly attributed to: first, increased inventory provisions, accelerated depreciation on production facilities, and the losses on purchase commitments for the existing generation of ES8, ES6, and EC6 which are expected to have lower production levels and deliveries due to the transition to new models on the NIO technology platform 2.0, collectively impacting vehicle margin by 6.7%; and second, increased battery cost per unit. The decrease in vehicle margin from the third quarter of 2022 was mainly due to the increased inventory provisions, accelerated depreciation on production facilities, and the losses on purchase commitments for the existing generation of ES8, ES6, and EC6. R&D expenses in the fourth quarter were RMB 4.0 billion, representing an increase of 117.7% year-over-year and 35.2% quarter-over-quarter. The increase in R&D expenses year-over-year and quarter-over-quarter was attributed to increased personnel costs in research and development functions as well as the incremental design and development cost of new products and technologies. SG&A expenses in the fourth quarter were RMB 3.5 billion, representing an increase of 49.6% year-over-year and 30% quarter-over-quarter. The increase in SG&A expenses year-over-year and quarter-over-quarter was primarily due to: first, the increase in personnel costs related to sales and general corporate functions; second, the increase in marketing and promotion activities to promote our vehicles in China and Europe; and third, increased expenses related to the company's sales and service network expansion. Lastly, operations in the fourth quarter was RMB 6.7 billion, representing an increase of 175.5% year-over-year and 74% quarter-over-quarter. Operating costs net in the fourth quarter of 2022 was RMB 315.7 million, representing an increase of RMB 262.2 million from the fourth quarter of 2021, an increase of RMB 811.3 million from other losses of RMB 495.6 million in the third quarter of 2022. The increase was mainly due to gains from the revaluation of our overseas RMB-related assets as a result of the appreciation of the RMB against the US dollar in the fourth quarter of 2022. The net loss in the fourth quarter was RMB 5.8 billion, representing an increase of 169.9% year-over-year and 40.8% quarter-over-quarter. The net loss attributable to NIO's ordinary shareholders in the fourth quarter was RMB 5.8 billion, representing an increase of 168.3% year-over-year and 41.2% quarter-over-quarter. Our balance of cash and cash equivalents, restricted cash, and short-term investments in long-term time deposits was RMB 45.5 billion as of December 31, 2022. This concludes our prepared remarks. I will now turn the call over to the operator to proceed with our Q&A session.

Thank you. Our first question today comes from Tim Hsiao with Morgan Stanley. Please go ahead.

So my first question is about the supply chain and also the automotive because NIO shipments last year were seriously dragged by the supply bottleneck of aluminum parts, CDS, and chips. According to the announcement of NIO's first-quarter volume guidance of 31,000 to 33,000, does it suggest more moderated vehicle sales in March? Is that because components still suffer from supply constraints? What is the current vehicle production run rate, and how fast can you ramp up on a weekly basis as we pace into the second quarter?

Thank you, Tim, for your question. In the fourth quarter of last year, the supply of parts did affect our vehicle deliveries to some extent. But starting from the first quarter of this year, we have seen that the control and prevention measures regarding COVID have been lifted. So currently, we believe the supply of parts is not a bottleneck for us. Starting from the second quarter, we believe with our new vehicle deliveries, we will need some time to ramp up production, but we do not expect part supply to be a constraint for us.

So my second question is about battery costs and gross margin because the fourth quarter vehicle gross margin dropped significantly. We think the 6.7 percentage point margin drop mentioned in the announcement; how much of that is one-off, and how much will last into the first quarter? Meanwhile, on the bright side, I think battery prices declined below the vehicle margin for NIO this year. So how should we think about the contribution from the new battery country prices? Because I recall that we mentioned that a RMB 100,000 decrease in battery costs would lead to about a 2 percentage point vehicle gross margin expansion. So could you please share some updates regarding how much more contribution from the lower base cost should we expect this year or in the first half? Thank you.

Thank you, Tim. This is Stanley. First, I want to further clarify the Q4 2022 gross profit margin. Since our brand new ES8, ES6, and EC6 will start user delivery in Q2 2023, we lowered our order forecast for the current generation ES8, ES6, and EC6 in Q4 2022. So, inventory provisions and losses on purchase commitments related to those products were booked in Q4, totaling RMB 985 million. Excluding this impact, the vehicle margin in Q4 was 13.5%. The decrease results from the change in product mix, especially with more ET5 sold in Q4, which has a lower gross profit margin. For the forecast of gross profit margin in 2023, I will ask William to elaborate.

Regarding the gross margin for the full year of 2023, we are confident that in Q4 of 2023, the vehicle gross margin will return to 18% to 20% due to several factors. The first one is our product portfolio. Starting from the second quarter of this year, we will begin the delivery of vehicle models with higher gross margins. The second factor is that we have recently witnessed cost reductions in raw materials, including lithium carbonate, chips, and other commodities. We believe this will contribute to our vehicle gross margin improvement this year, especially with significant cost reductions in lithium carbonate. We have engaged in discussions with upstream companies in the battery supply chain and secured capacities for lithium carbonate this year. Starting from this year, we expect to see more output from the upstream capacities. At the same time, considering market demand, we believe the demand may not be as strong compared to the past. However, if we balance supply and demand regarding lithium carbonate, we believe it is likely that in the fourth quarter of this year, lithium carbonate prices may drop to around RMB 200,000 or even lower. The third factor is that starting from the third quarter of this year, we will begin more product deliveries due to the launch of new products starting in Q2. Therefore, we believe that with the increased vehicle deliveries, the amortization rate of fixed costs will also improve. Our target is to achieve a vehicle gross margin of 18% to 20%, and we are very confident in achieving that. For the first quarter of this year, we expect to face more pressure on vehicle gross margin due to the transitional period for the company in vehicle sales, as we transition our product portfolio to the NT2.0 technology platform. This means for the existing generation of ES8, ES6, and EC6, we will need to take measures to accommodate subsidy reductions as well as some subsidization of showroom costs. At the same time, modifications on the production line at Factory I in preparation for the launch of the new generation ES8, ES6, and EC6 will affect output, resulting in higher vehicle costs this quarter. Additionally, the EC5 will contribute significantly to overall vehicle deliveries, which will also affect the gross margin in the first quarter.

Great. Thank you very much.

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

So my first question is related to operating expenses. In the past, William mentioned that R&D costs per quarter are expected to be around RMB 3 billion. However, this quarter, we saw expenses close to RMB 4 billion. We want to understand if there is a new guidance for sales and marketing as well as R&D expenses?

Hi, Ming. This is Stanley. The guidance for R&D expenses remains unchanged, and our average base for each quarter of 2023 will be around RMB 3 billion to RMB 3.5 billion. As for SG&A, as mentioned by William, with the start of user deliveries of our NIO NT2.0 products in Q2, we expect our sales efficiency to improve gradually, and the ratio of SG&A versus sales revenue is expected to drop significantly.

Just to add to Stanley's point regarding SG&A, we also need to consider the investment for the European market. In the European market, we are still at a relatively early stage in terms of vehicle sales and deliveries. We believe this is more of an investment period for our global market expansion.

So my second question is related to the product pipeline. This year, you will have a NIO ES8, ES6, and EC6, ET7, and an EC5 version. What will be the delivery timeline for ES6 and EC6? Furthermore, will the ES7 and ET7 receive a facelift to further improve their autonomous driving functions and marketing capabilities? Could you also elaborate on your rough product pipeline for 2024, including the second brand?

Thank you for your question. Actually, for the second quarter of this year, according to our latest plan, we expect to launch four NIO models, including our most important product, the ES6, with expected deliveries starting in July. This is slightly later than our previous plan, which aimed for delivering all five new models in the second quarter. We believe it is better to allow some breathing room between different product launches to ensure higher product quality and ensure the teams can maintain a better pace in product deliveries and sales. In terms of product upgrades, we continue to make improvements and will keep the market informed of any updates. Regarding the product launch cadence for next year, I believe now is not the right timing to share that information since our teams are faced with the pressure of delivering the five NIO models this year with high standards. Overall, our pace and schedule for new product launches and the new brand are on track according to our plan.

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

Thank you. I actually have two questions about guidance. First, do you still maintain guidance for full-year volume at 250,000? Given the recent price changes by competitors and the first-quarter delivery results, do you actually maintain the full-year volume guidance of about 250,000? My second question is regarding NIO brands turning profitable. Given the change in internal competition, do you maintain the same guidance?

For the full year of 2023, we are confident that we can achieve our targets. After we complete our product deliveries, we will see some upside momentum for our vehicle deliveries. This year, we aim to deliver five new products based on the NT2.0 technology platform. Once our entire product portfolio transitions to the NT2.0 platform, we expect to enter a very strong product cycle. We believe this will improve team efficiency significantly since the teams will not need to sell two generations of products simultaneously. Once all products are transitioned to the technology platform 2.0, we believe we can cover approximately 80% of mainstream vehicle models from BMW, Audi, and Mercedes, and we believe our product competitiveness is much stronger. The second driving force will be our charging and swapping network. This year, we plan to deploy an additional 1,000 power swap stations to cover more markets, especially to help boost demand in Tier 3 and Tier 4 cities. Currently, over 50% of our vehicle deliveries occur in Shanghai, Chuzhou, and similar regions. Given the overall landscape of vehicle deliveries for our products, we see huge potential for expansion in other cities and regions as well. We believe that with the deployment of an additional 1,000 power swap stations, we will be able to cover more users and improve the experience of existing users, which will also support our vehicle demand growth in various cities and regions. Additionally, the software features planned for release on the NIO technology platform 2.0 will also significantly contribute to vehicle demand. As I mentioned previously, the engaged mileage of NOP+ Beta exceeds 1.75 million kilometers, and all of our products come standard with strong computing power and comprehensive software features. This foundation allows us to have a closed loop of data management. Compared with competitors, most of whom offer features and functions as options, we provide these features as standard. We firmly believe this provides us with ample opportunity to enhance our users' experiences. In summary, our target remains to double production volume this year, and our teams are confident of achieving this target. Regarding profitability, this is closely tied to gross margin. If raw material cost reductions meet our expectations, as I described earlier, we believe we can still achieve our original target for profitability.

Thank you so much.

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

Thanks, team. I have two questions. First, on ET5, we noticed order book contraction on this flagship volume model ET5. How would management look at stabilizing monthly sales volume on ET5 to still reach 10,000 per month? What are the key drivers supporting that? Is it broadly affected by demand, or is there specific service network expansion support? The second question is on lithium margin. The lithium price is correcting. We talked before about a RMB 100,000 per ton price correction roughly correlating to a 2% margin. So, roughly, we might get a 4% to 8% buffer this year. Can we keep it all, or might we have to pass some to consumers given the overall pricing pressure? On that note, will you take the opportunity of lower lithium prices to lock in more market share with consumers?

Thank you for your question. Starting from the second quarter of this year, we will gradually launch and deliver all the products based on the new technology platform 2.0. When it comes to the total product portfolio, we can assess it in three different dimensions. The first dimension is the volume driver, which includes the ET5, ES6, and the ET5 Touring that we have not yet released but is anticipated. Together, we believe we can achieve 20,000 units per month when considering the addressable market. The second dimension is the volume contributor, which includes the ET7, ES7, and the ES8; we believe each model can achieve delivery volume of around 2,000 to 4,000 per month. Combined, this segment can contribute 8,000 to 10,000 units to overall vehicle delivery and sales. The third dimension is the brand shaper segment where the EC7 and EC6 are included. Since coupe SUVs are relatively niche, we believe this segment can attract users who want to differentiate themselves and showcase their design taste. We expect volumes of around 1,000 to 2,000 per month for each of these products. Overall, we believe our strong and diversified product portfolio should support us to achieve a volume of 30,000 units per month.

Okay, Ian, this is Steven. I would like to address your second question regarding lithium prices. First, it's critical to note that our gross profit margin is very sensitive to lithium prices. As you mentioned, a rise in lithium prices by RMB 100,000 per ton could lead to an approximate 2% gross profit margin boost. Accordingly, we anticipate that lithium carbonate prices may stabilize around RMB 200,000 per ton this year, offering us a good buffer. Over the past few months, lithium carbonate prices have fluctuated; it was near RMB 100,000, peaked at around RMB 570,000 in November 2022, and currently hovers around RMB 400,000 per ton. On the supply side, numerous battery suppliers have made notable investments into upstream raw material resources, yielding meaningful lithium carbonate supply improvements from the second quarter onward. Demand-wise, while China's EV sales volume doubled last year, we estimate this year will see a growth of around 30%. We foresee a significant reduction in the supply-demand gap, resulting in lower and more stable lithium carbonate prices near RMB 200,000 per ton. In summary, should lithium carbonate prices stabilize as expected, this will be beneficial for the entire industry.

Thank you, Steven.

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

Hi. Thanks for taking my questions. The first one is regarding the latest sales trend of ES7 and ET7. I understand that the ES6 and EC6 are phasing out. This is temporary before switching to the new platform. I also see you have set high expectations for the NT2.0 platform products. But what has been driving the recent weakness of the ES7 and ET7? Is that due to the immediate hangover effect of the subsidy cuts, supply chain bottlenecks, or is it capacity allocation to the ET5 that's cannibalizing ES7 and ET7 sales? What has caused this recent weakness in sales for these two flagship NIO platform models? My second question is about efficiency improvement. I think William mentioned earlier this year regarding key areas for efficiency improvement. We can see you invest significantly for the future, including the planned deployment of 1,000 power swap stations this year and an expansion of NIO houses in Europe. However, where will we find the efficiency improvements or reductions for the rest of this year?

Thank you, Paul, for your question. We see that for the first two months of this year, market demand is not particularly strong, especially for BEVs. This has impacted everyone in the market. A vital factor contributing to this is the subsidy cuts, which will create a short-term effect on everyone in this market. However, NIO, which has a relatively higher MSRP, will face less impact compared to others. Since February, we have observed demand steadily recovering week by week, including for the ES7 and ET7, compared to January. Both models remain highly competitive in their respective segments, and we are confident in demand for both in the long run. Admittedly, we face short-term pressure due to multiple factors, such as the Spring Festival and the seasonal lows in the auto market, as well as the subsidy cuts affecting micro conditions. Overall, we remain confident in our product competitiveness in these segments. Regarding efficiency improvements, this is our top priority this year. Last year, due to multiple projects, our human resources grew more rapidly than before. This year, the focus will be on improving outputs and efficiencies per person throughout the organization. This includes refining processes related to R&D, sales, service, and management. Additionally, we must prioritize different project types, including R&D activities and our capital expenditure investments.

Thank you.

The next question comes from Nick Lai with JPMorgan. Please go ahead.

My question is very fast. The first question is about the cooperation agreement with CATL and the pricing arrangement with them. Can you provide updates on that? Secondly, can we talk about the potential investment size for new initiatives? Thank you.

For this year, we will introduce new battery partners. I believe, around March, we'll launch new battery packs in collaboration with another supplier. At the same time, we will maintain our long-standing strategic relationship with CATL. Currently, discussions regarding a new agreement with CATL are ongoing, but we haven't signed anything yet. Discussions revolve around battery providers sharing the volatility of raw material costs throughout the supply chain. Regarding the semi-solid battery, we have commissioned our teams to assist partners in semi-solid battery production. We apologize for the delay; we estimate it will be available in several months. Regarding investments in new strategic businesses, for the full year, we estimate around RMB 4 billion to RMB 5 billion, which translates to about RMB 1 billion quarterly. The overarching goal for the company remains to achieve breakeven by 2024.

The next question comes from Edison Yu with Deutsche Bank. Please go ahead.

Hey, thank you for taking the questions. First, can you provide some feedback regarding your European operations? You've been in Norway for over a year, and recently you launched in several other countries. What user feedback have you received, and what volume expectations do you have over the next few years? Secondly, on the other margin, it remains quite negative. When can we expect it to recover?

Regarding our European markets, we have delivered products to users, and they have provided positive feedback regarding our offerings. We track user satisfaction rates weekly and believe these meet expectations. One area where we lag is in infrastructure deployment, with only 11 power swap stations currently in Europe, which is below our original plan. This, coupled with the slow deployment of NIO houses in Europe, has affected delivery and sales. Looking at user demand and test drive data, we observe improvements on a weekly basis, but accelerating infrastructure deployment is crucial. For this year, our sales target in Europe is likely below 10,000 vehicles as our focus is on user satisfaction. In the long run, we remain confident in our European market performance based on user satisfaction rates and our strong product portfolio. Regarding margins, the losses from vehicle repair and maintenance will continue as our car product sales grow in China. We expanded our power swap station network in 2022, which will lead to increased losses this year. However, the infrastructure expansion will significantly improve user satisfaction and aid vehicle sales.

To add to that, we expect that the loss in other businesses will continue to increase in 2023. However, we believe that our efforts to expand our power infrastructure will enhance user satisfaction and subsequently boost our vehicle sales. Thank you, Edison.

Thank you once again for joining us today. If you have further questions, please feel free to contact the NIO's Investor Relations team through the contact information provided on our website. This concludes the conference call. You may now disconnect your line. Thank you.

Thank you.

This does conclude our conference for today. Thank you for participating. You may now disconnect.