Hello, ladies and gentlemen. Thank you for standing by for the First Quarter 2025 Earnings Conference Call for XPeng Inc. At this time, all participants are in listen-only mode. After management's remarks, there will be a question-and-answer session. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Alex Xie, Head of Investor Relations and Capital Markets of the company. Please go ahead, Alex.

Thank you. Hello, everyone, and welcome to XPeng's first quarter 2025 earnings conference call. Our financial and operating results were issued via Newswire Services earlier today and are available online. You can also view the earnings press release by visiting the IR section of our website at ir.xiaopeng.com. Participants on today's call from our management will include our Co-Founder, Chairman and CEO, Mr. He Xiaopeng; Vice Chairman and President, Dr. Brian Gu; Vice President of Corporate Finance and VW Projects, Mr. Charles Zhang; Vice President of Finance and Accounting, Mr. James Wu, and myself. Management will begin with prepared remarks, and the call will conclude with a Q&A session. A webcast replay of this conference call will be available on our website in the IR section. Before we continue, please note 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 results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the relevant public 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 XPeng's earnings press release and this conference call will include the disclosure of unaudited GAAP financial measures, as well as unaudited non-GAAP financial measures. XPeng's earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. I will now turn the call over to our Co-Founder, Chairman, and CEO, Mr. He Xiaopeng. Please go ahead.

Hello, everyone. The first quarter of 2025 marked a promising start for XPeng as the company successfully navigated the traditional off-season in the automotive market. Our Q1 deliveries totaled 94,008 units, marking a 331% year-over-year increase and establishing a new historical record for quarterly deliveries. We secured the top position in sales among emerging EV brands, both domestically and internationally. During this quarter, our vehicle gross margin has improved for seven consecutive quarters, propelling the company's overall gross margin to a record high of 15.6% in Q1 2025, with net loss narrowing significantly compared to the previous quarter. Free cash flow exceeded RMB3 billion in Q1. Many are curious about our impressive performance in Q1. I believe it stems from XPeng's systemic enhancement across our capabilities in organization, product development, marketing, technology, and operations, along with a consistent commitment to AI-driven tech innovation and steady and long-term sustainable growth. The Mona M03, introduced eight months ago, has surpassed 100,000 deliveries, securing its place as the best-selling A-class pure electric sedan. The P7+ achieved its 50,000th unit production just five months after its launch, and the 2025 G6 and G9 models delivered over 7,500 units in total in their April debut. Our monthly deliveries have exceeded 30,000 units for six consecutive months. I'm most excited by the fact that our growth potential is just starting to emerge. We're spearheading integrated innovations powered by AI in various fields, including AI Turing AI-assisted driving, smart cabins, Turing chips, embodied intelligent robots, and enterprise productivity tools. In Q2, we achieved significant progress in several areas, reinforcing our conviction that XPeng's comprehensive transformation toward AI has begun to achieve initial success across the full technology stack. Some of our key AI capabilities are poised to create generational leadership within the industry in 2026. I'm confident that through the extensive application of our physical world foundation model and Turing chips in vehicles, the global deployment of AI-powered vehicles and related policies along with the innovative advancement of humanoid robots, XPeng will lead three growth curves and attain sustainable long-term high growth. XPeng has actively embraced a strategy of democratizing technology aimed at reducing barriers to advanced technology through innovative R&D and crafting products that resonate with users. These efforts make premium technology accessible to all. On May 28, we will launch the Mona M03 Max. The full performance edition will debut Turing AI-assisted driving in the RMB150,000 price sector for the first time. This innovation enables tech-savvy young consumers to experience top-tier intelligent features, once exclusive to luxury vehicles, without compromise, ensuring safe and smooth AI-assisted driving. This launch represents a pivotal moment for AI democratization within the automotive sector, shaking up the current landscape where smart urban driving and highway driving are limited to high-end models at premium price points and showcasing Chinese automakers' groundbreaking innovations in physical world AI. In June, the G7 will make its debut to the public, and I'm confident that it will stand out as a highly competitive new product in the RMB250,000 class SUV market. In Q3, we'll launch the new generation P7, a luxury sports coupe, in the RMB300,000 segment. In Q4, our Kunpeng Super Electric models will gradually begin mass production, realizing the one-vehicle dual-energy options approach. The Kunpeng series aims to expand our reach to a wider consumer base, both domestically and internationally, unlocking substantial sales growth potential. XPeng's global expansion represents our second growth curve. We anticipate that our overseas business will experience rapid growth over the next three years, becoming a significant contributor to our sales and profit increase. In Q1 2025, overseas deliveries soared by more than 31,700 year-over-year, solidifying our status as China's leading exporter of mid- to high-end new energy vehicles. During Q1, we opened over 40 new stores abroad, entering key markets such as the U.K. in Europe and Indonesia in Southeast Asia. As a global technology company, we strive to enhance localized R&D, manufacturing, and services globally, establishing unique mid- to high-end brands rooted in technological innovation. Let me now give you an update on XPeng's AI development. 2025 signifies the launch of XPeng's full-scale implementation of the physical world foundation model in AI-powered vehicles, further extending our generational advantage. We have developed the most comprehensive and sophisticated full-stack in-house R&D system with the highest potential in the industry, which includes the Hawkeye Pure Vision ADAS solution, self-developed high-performance Turing chips, ultra-large-scale cloud-based foundation model, fully localized VLA models, vehicle EEA architecture, and physical simulation systems. This strengthens our strategy for advanced autonomous driving, establishing formidable competitive barriers. Moving forward, we'll expedite R&D efforts from L2+ assisted driving to L3 and L4 autonomous driving technologies, widening our generational lead. XPeng is the pioneer in China's automotive sector for implementing urban smart driving without depending on LiDAR. Our Hawkeye Pure Vision ADAS solution, although difficult to develop, greatly enhances the upper limit of safety and user experience. We improved the capacity, parameters, and inference frequency of our visual perception models, significantly reducing end-to-end latency for quicker and safer assisted driving. Our enhanced 360-degree environmental perception performs exceptionally well in intricate urban environments, including turns, U-turns, and adverse weather conditions such as rain, snow, or fog, enhancing both safety and driving experience. Furthermore, XPeng Hawkeye Pure Vision ADAS solution is ideally positioned for the global rollout of high-end autonomous driving and the shift from AI cars to advanced intelligent robots. In my view, the crown of physical world AI lies in chips, models, data, and infrastructure, with chips as the dual. XPeng has been committed to in-house chip development since 2021. In 2024, our self-developed chip succeeded in its first tape-out. The Turing chip delivers three to seven times the effective compute power of mainstream automotive chips. Through full-stack in-house development and closed-loop integration of hardware, software, compilers, and model architecture, we maximize synergy between chips and AI models. Our dedication to chip R&D will not only deliver industry-leading in-vehicle computing power and models but will also elevate the efficiency and overall experience of XPeng's AI models. In the ecosystem of the physical world AI model, the benefits of the scaling law are becoming clear. XPeng is working on larger-scale cloud-based foundation models and AI models. The physical world foundation model in the cloud has achieved 72 billion parameters. To facilitate its training, we established the first 10,000 GPU AI computing cluster in the Chinese automotive industry, maintaining an operational efficiency of over 90% throughout the year. By the end of the year, our high-quality training data will expand to 200 million video clips that depict various driving scenarios across the country. Powered by large computing resources and extensive data, our foundation model can understand the real world and execute complex reasoning similar to human capabilities. It will evolve through reinforcement learning to outperform seasoned human drivers, laying the groundwork for L3, L4 autonomy and autonomous driving and eventually acting as a universal model for all XPeng's physical AI terminals. We create edge models via knowledge distillation and pruning to align with in-vehicle computing power, leveraging the foundation model's capabilities as much as possible to enable industry-leading inference on devices. To truly outperform traditional vehicles, AI-powered cars must possess true intelligence integrated across three core capabilities of the brain, cerebrum, and spinal cord. For XPeng's smart cockpit, we're currently developing a multimodal large model that entirely functions locally on Turing chips. This advancement facilitates smarter voice interactions and a more personalized user experience and ensures smooth operation even in office conditions, significantly enhancing safety and global scalability. This will be China's first large model capable of fully localized multilingual interaction and VLA features in a cockpit, paving the way for rapid improvement in the vehicle's intelligence. Our investments in AI vehicles also provide distinct advantages in humanoid robot R&D in China's robotics industry. The Iron, our fourth-generation robot, celebrated at the Shanghai Auto Show, will soon be followed by a fifth-generation model powered by Turing chips, significantly enhancing on-device computing capabilities. XPeng's robot models will surpass traditional industry technological approaches such as small reinforcement learning models and fragmented systems by utilizing the VLA architecture of our physical world foundation model and taking advantage of our existing cloud AI infrastructure to improve robotic intelligence. As a type of embodied intelligence, humanoid robots will represent XPeng's third growth curve. We aim to launch industry-leading humanoid robots for industrial and commercial applications in 2026 and evolve rapidly through data from mass production scenarios. I'm optimistic that the robust growth momentum will carry on into 2025. In the second quarter, we'll finalize annual upgrades or configuration improvements for five models with two brand new major models set to begin deliveries in the third quarter. For the second quarter, we estimate total vehicle deliveries to range from 102,000 to 108,000 units, reflecting a year-over-year increase of 237.7% to 257.5%. Revenue is expected to be between RMB17.5 billion to RMB18.7 billion, representing a year-over-year growth of 115.7% to 130.5%. I believe we'll not only meet our goal of more than doubling sales growth this year, but we'll also achieve profitability in Q4 and generate substantial free cash flow for the entire year. With enhanced self-sustaining capabilities, we'll drive ongoing breakthroughs in AI technology and product development. Thank you, everyone. With that, I'll now turn the call over to our VP of Finance, Mr. James, who will discuss our financial performance for the first quarter of 2025.

Thank you, Xiaopeng. Now, let me provide a brief overview of our financial results for the first quarter of 2025. I'll reference RMB only in my discussion today, unless otherwise stated. Our total revenues were RMB15.81 billion for the first quarter of 2025, an increase of 141.5% year-over-year and a decrease of 1.8% quarter-over-quarter. Revenues from vehicle sales were RMB14.37 billion for the first quarter of 2025, an increase of 159.2% year-over-year and a decrease of 2.1% quarter-over-quarter. The year-over-year increase was mainly attributable to higher deliveries. Revenues from services and others were RMB1.44 billion for the first quarter of 2025, representing an increase of 43.6% year-over-year and an increase of 0.5% quarter-over-quarter. The year-over-year increase was mainly attributable to the increased revenues from technical R&D services related to the Volkswagen Group, repair and maintenance services and auto financing services. Gross margin was 15.6% for the first quarter of 2025 compared with 12.9% for the same period of 2024 and 14.4% for the fourth quarter of 2024. Vehicle margin was 10.5% for the first quarter of 2025 compared with 5.5% for the same period of 2024 and 10% for the fourth quarter of 2024. The year-over-year and quarter-over-quarter increases were primarily attributable to ongoing cost reduction and economies of scale, driven by the increase in sales volume, partially offset by inventory provision and losses on purchase commitment related to the upgrade of certain vehicle models. R&D expenses were RMB1.98 billion for the first quarter of 2025, representing an increase of 46.7% year-over-year and a decrease of 1.3% quarter-over-quarter. The year-over-year increase was mainly due to higher expenses related to the development of new vehicle models and technologies as the company expanded its product portfolio to support future growth. SG&A expenses were RMB1.95 billion for the first quarter of 2025, representing an increase of 40.2% year-over-year and a decrease of 14.5% quarter-over-quarter. The year-over-year increase was primarily attributable to the higher commissions paid to the franchise stores, driven by higher sales volume. The quarter-over-quarter decrease was mainly due to lower marketing and advertising expenses. As a result of the foregoing, loss from operations was RMB1.04 billion for the first quarter of 2025 compared with RMB1.65 billion year-over-year and RMB1.56 billion quarter-over-quarter. Net loss was RMB0.66 billion for the first quarter of 2025 compared with RMB1.37 billion year-over-year and RMB1.33 billion quarter-over-quarter. As of March 31, 2025, our company had cash and cash equivalents, restricted cash, short-term investments, and time deposits in total of RMB45.28 billion. To be mindful of the length of our earnings call, I would encourage listeners to refer to our earnings press release for more details on our first-quarter 2025 financial results. This concludes our prepared remarks. We'll now open the call to questions. Operator, please go ahead.

Thank you. Your first question comes from Tim Hsiao with Morgan Stanley.

So, my first question is about the volume sales because XPeng has successfully maintained a monthly run rate of about 30,000 units for six consecutive months, outperforming other EV startups during the low season. Given the strong model pipelines mentioned by the CEO, should we anticipate a more significant increase in sales in the upcoming quarters? I would like to get more clarity on the potential for volume growth. That's my first question. Thank you.

Thank you for your question. Our performance in the past quarter aligns with our long-term strategy of steady development. We are laying a strong foundation for future growth. In Q2, we expect to launch five upgraded versions, which may bring short-term changes in the market but will be beneficial in the long run. I want to highlight three key points. First, starting in Q3, we will be launching new models more aggressively as we move towards 2026, which will increase our deliveries. Second, our advancements in AI and R&D are improving our cars and robots, helping us maintain industry leadership and differentiate ourselves from competitors. Finally, I want to emphasize our Kunpeng Electric Drive System, which will be essential for our future lineup. Thank you.

Yeah, Tim, it's Brian. Let me add to what Xiaopeng mentioned. First of all, the steady performance we observed in the previous months reflects improved operational quality. For example, the first quarter is usually a low season for Chinese auto sales, yet we still maintained steady growth. Additionally, in the second quarter, despite the transitions involved in refreshing our products, we continued to see stable delivery numbers. These factors represent the operational quality we possess. Looking ahead, we are very confident that with numerous new launches, such as the Mona Max at the end of this month and the G6 and G7 in the coming months, these will serve as catalysts for further growth. We believe that in the third quarter, our delivery numbers will continue to grow and hit historical highs again. I also want to highlight that the new models we're introducing will fall into higher price categories and offer better gross profit margins. This will positively impact our overall product mix. I'll have James comment on that. Okay, just the next question then.

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

So, for your export business, could you provide the latest guidance on your growth in 2025? Among all the different regions, which area do you anticipate seeing higher growth? Also, regarding the European Union, given that they increased the tariff on EVs made in China since last year, what is your current strategy in this market? Thank you.

Hey, Ming, it's Brian. Let me address your question. Yes, indeed, we have seen very strong international growth and also contribution to our results, both on the top-line as well as on the bottom line. It is actually an area we are increasing our efforts with investments as well as our team focuses. I would say that this year, our continued focus will be on the European, Middle East, and Southeast Asia, those three core regions. And also, some of the regions, we have also launched recently, for example, the U.K., Indonesia, as well as I think continued growth we are seeing across a number of the markets that we entered later last year. So, I would say these are showing pretty balanced overall growth, all reaching triple-digit growth, I would say, in the last quarter year-over-year. Going forward, I think we are continuing to expand to additional markets. We're looking at also some of the other regions that we currently don't have a focus yet, for example, Latin America, as well as some other countries in the Asian region. The issue on the tariff is something that we are very, very focused on. Clearly, it's having an impact on the profitability of our business, for example, in Europe. However, I think we are committed to building for the longer-term. We are also looking at ways to reduce the impact of these tariffs through more collaboration with our partners, changes in product mix on the ground, as well as potentially local investments that give us the ability to navigate some of these tariff hits. So, these are things that we are focusing on at the moment. And I think if there's any further progress, we'll be definitely sharing with you as well as the community.

So, my second question is about your Turing chip. Will the G7 be the first model to incorporate the Turing chip in your product lineup? Also, will all your XPeng branded electric vehicle models feature Turing chips in the future? I understand that by using these chips, you might be able to lower your costs. Will you pass on the cost savings to your customers? That's my question. Thank you.

Thank you for the question. The development of our Turing chip has been progressing exceptionally well, not just in its application in our vehicles but also in enhancing our autonomous driving capabilities across many models. Everything is on track, and we started production in the second quarter of this year. We anticipate mass production of additional models featuring the Turing chip in the third quarter. We expect broader mass production to commence very soon, as the development of our chip will not only strengthen our autonomous driving prowess but also enhance the capabilities of our other products. The Turing chip itself offers impressive AI computing power, leading the industry with performance three to seven times greater than that of typical AI chips. This marks a significant advancement. As we harness the Turing chip, we will elevate our position in the AI landscape, particularly in the realm of physical AI. Our robust physical world foundation model and AI models will empower us to achieve higher levels of autonomous driving. We believe that soon we will showcase our generational advantage in this area, moving beyond current metrics concerning human intervention in driving. At that point, we can significantly enhance user experience for consumers. As we launch new models with advanced autonomous driving capabilities, combined with our smart cockpit and localized VLA features, XPeng cars will offer a completely new experience. Our goal has always been to make high-end technology accessible to everyone, and we hope that all can enjoy this advanced technology as soon as possible. We believe the dual Turing chip will facilitate this vision. Thank you.

Thank you. That's all my questions.

Your next question comes from Ping Le Wu with CITIC Securities.

Thank you for taking my question. My first question is about Mona. I'm looking forward to the release of Mona Max. What role does the Mona series play in our strategy, and what percentage share of Mona Max are we targeting? Thank you.

Thank you for the question. This is definitely a topic we are going to investigate further. We are also intrigued by it because in the current market, there are no real implementations of end-to-end large models or computing power of 500 tops and above within the RMB150,000 segment. The cars available now do not represent full-performance models. We are very excited about Mona and curious to see its market penetration rate. I have high hopes for it given our capabilities. When looking at the industry, even for cars priced between RMB150,000 and RMB200,000, there are very few full-performance versions on the market. We are unsure what the penetration rate will be—whether 50% or 70%—but we are eager to find out and will strive to achieve the best possible outcome. Thank you. Regarding your question about our M03 and the Mona series, M03 is the initial model in the entire Mona series. We expect to see more models from this series in 2026. The Mona series is designed to appeal to younger consumers, emphasizing a cool and attractive aesthetic that fosters emotional connections. We are confident in our ability to meet this demand, and we believe that after next year, the full potential of this series will become evident and make a significant impact in the industry. Thank you.

And my second question is about the research and development investment. For 2025, what percentage of the R&D expense will be allocated to AI-related areas, or how much of the increase in the R&D expense will go towards AI-related areas? Thank you.

Thank you. This is James. I'll address your question about the overall R&D expenses for this year. Our total R&D expenses in 2024 are approximately RMB6.5 billion. In 2025, we anticipate around RMB8.5 billion for the full year in R&D expenses, and this estimate remains unchanged. A significant portion of the increased R&D expenses will be directed towards AI-related activities, which will mainly enhance our computational capabilities on a cloud basis. This investment will be utilized in AI vehicle autonomous driving training as well as in our humanoid robot line. Additionally, we will continue to invest in other areas, including vehicle development. As you know, we will launch more vehicle models this year and into 2026, which will strengthen our product portfolio and support our long-term objectives.

We aim to enhance our computational capability through cloud technology. This will be utilized for AI vehicle autonomous driving training and our humanoid robot line. Additionally, we will keep investing in other areas related to our vehicles. We plan to launch more vehicle models this year and into 2026 to strengthen our product portfolio and ensure its long-term completeness.

Your next question comes from Bin Wang with Deutsche Bank.

I have two financial questions. The first is about the government subsidy in the first quarter. What is the reason for such a significant government subsidy? Additionally, I would like you to elaborate on the factors driving the FX gains. Thank you.

Hey, Bin, this is James. So, let me clarify. So, in the first quarter, we did receive some level of, let's say, regulatory subsidies as well as tax rebates, tax handling fees, refunds, things like that. The recognition of those revenues is based on the actual receipt of the cash proceeds, which occurred in the first quarter. Now, this is in the nature of, I would say, cash collections into the next couple of quarters. I'm not sure we'll continue to be benefited from this type of revenue recognitions. So, that is on the other income side. You also asked a question about the FX movement in the first quarter. This is primarily driven by our business in Europe. We have a pretty sizable, I would say, deliveries. We actually delivered more than 10,000 units in Europe over the course of last year. And we are exposed to euro from a revenue perspective. The strength in euro in the first quarter resulted in a portion of FX gain in the first quarter, but we've seen that to circle back a little bit in the recent months in April and May, but we'll continue to monitor that exposure and be able to control our exposure to euro and not to ensure that FX impact through our exposure is not a surprise going forward. Thank you.

The second question is regarding the guidance for ASP and gross margin in the second quarter. It appears that your product mix has improved in the second quarter due to a lower contribution from Mona M03. Can you share your guidance for ASP and gross margin for the second quarter? Thank you.

Sure. This is James again. From a gross margin perspective, so first of all, I think we've observed we have achieved a seven consecutive months vehicle margin improvement. This is primarily due to our cost reduction efforts as well as the achievement of certain levels of economies of scale. Looking into Q2 and beyond, what I would say is there are still several areas we see that can help us further improve our vehicle margin. The first is to continue the product mix, as you mentioned. As we introduce new models, even with the model year changes on G6 and G9, we've seen healthier margins compared to the old models. And this in line will also help us to further higher our average sales price. What I would say is the ASP you've seen in first quarter is probably the lowest throughout the year. We will continue to sell better product mix to help us increase average sales price in the following quarters into 2025. The other thing that we continue to see is the material cost reduction through our supply chain optimization. Lastly, based on the volume projection and higher volume potentials in the third and fourth quarters, we should be able to achieve higher scale, which will help us to lower allocations and improve vehicle margin as well. So, with all of that, we are pretty confident at this point that going into second half and into Q4, we believe that our total company gross margin should be able to get close to the high-teens level to support us eventually achieve profitability in Q4 as we communicated earlier. Thank you.

Thank you very much.

Your next question comes from Xiaoyi Lei with Jefferies.

My question is about the humanoid robots. We've seen that Iron has garnered significant attention at the Shanghai Auto Show. How can we utilize our current expertise from autonomous driving in the field of robotics? What are the benefits of our products? Additionally, do we have a specific target for the mass production of humanoid robot products? Thank you.

Thank you. Essentially, our robotics division operates as an independent center within the company but utilizes our comprehensive in-house R&D capabilities. For instance, the electronic architecture of our robots is developed by the autonomous driving team from our car department. The joints of the humanoid robots are being designed by our powertrain team at XPeng Motors. Additionally, elements like the spinal cord and the larger brain of the humanoid robots are developed collaboratively by the robotics team and our autonomous driving team. Moreover, we utilize the Turing chip technology for the development of our humanoid robots. I would estimate that 70% of the development for our humanoid robots stems from the same source as our autonomous driving efforts. However, it is important to note that these are two distinct products with different metrics, capabilities, features, and design aspects. There are indeed differences. I believe XPeng stands apart from other humanoid robotics firms. We are data-driven and have redefined how to build a humanoid robot. Our chips and operating systems are developed in-house, and we possess a full-stack capability for both hardware and software development. This strong capability allows us to innovate, particularly in the realm of humanoid robots. We aim to reach a certain level of mass production capacity by 2026 and expect to quickly enter a phase of over-the-air updates. We also plan to introduce some groundbreaking and innovative products that will significantly differ from what's currently available in the market. Thank you.

Thank you. That's very helpful.

Your next question comes from Lou Jia with BOCI.

My first question is regarding the vehicle margin in Q1. I noticed that the vehicle margin is negatively affected by inventory provisions and losses related to some older models. Could you clarify what our core vehicle margin would be if we exclude these factors? Additionally, will this impact continue in the future?

Hi, Lou Jia. So, we will answer your first question first. Thank you.

Hey, Lou Jia. This is James. So, yes, we do recognize some level of purchase commitments as we change some of our models. One of the things you probably have seen from the media is that we have reviewed the very next generation of P7, which the outlook design has received very well feedback from the market. So that's part of the recognition that we have done in the first quarter around the current generation of P7. We also have recently launched model year changes for G6 and G9. These have been included in the purchase commitments as well. Overall, I would say the impact of these in the scheme of things is relatively small. It doesn't change the overall trend of our margin improvement for the past seven consecutive months. What I would say is looking into the next couple of quarters in 2025, I wouldn't expect the purchase commitments related to our model changes to be significant. So, you can take that as in your consideration. What I would focus is, as mentioned earlier, our vehicle margin, given our continued cost reduction, continued climbing of higher economy of scale as well as the product mix improvement, we forecast vehicle margin to steady growth in the following quarters in 2025. Thank you.

So, my second question is, as we look towards the second half of the year, how will we prepare to upscale by launching more high-priced models? Thank you.

Thank you for the question. This is Xiaopeng. Regarding our targeted market segment, our current lineup generally ranges from RMB100,000 to RMB400,000, with the Mona priced between RMB100,000 and RMB200,000. Our target market extends from RMB180,000 to RMB500,000. Starting in Q3 and going into 2026, you can expect to see many new product launches featuring innovative capabilities, enhancing not just the car's exterior design but also the smart cockpit and overall autonomous driving functionality. People will be surprised, and I believe many will appreciate our new launches. For instance, our brand new P7, launching in Q3, will integrate new capabilities across various aspects including vehicle performance, architecture, smart cockpit, and craftsmanship. We will focus on these areas over the next three years, showcasing the exceptional quality of XPeng. Our recent performance also indicates that these enhancements have been well received in the market. We are confident that regardless of the market segments we target, we will rank among the top three, if not the leading best-selling models. In the future, we plan to introduce not only battery electric vehicles but also super electric or dual-energy vehicles, reinforcing our confidence in entering the premium market segment. Thank you.

Your next question comes from Nick Lai with JPMorgan.

My first question is straightforward. At the recent Shanghai Auto Show, we noticed several foreign brands, particularly from Japan, such as Toyota, Honda, and Nissan, introducing products designed specifically for the Chinese market with local suppliers, cost structures, and very competitive pricing. Conversations with Toyota and Honda over the past few days revealed that they plan to launch several more such products in China over the next few years. I'm interested in understanding how XPeng views the evolving competitive landscape from here.

Thank you. Yes, we have observed similar trends in the market. Competition is becoming increasingly aggressive both domestically and internationally. This is something we expect to continue. However, we are confident that carmakers will need to enhance their technological capabilities to succeed in this competitive landscape. The influence of technology on the market will grow, while traditional manufacturing capability will become less significant. Another trend I want to point out is that automakers are transitioning from integrated R&D to a more unified, full-stack approach, evolving towards a multi-dimensional, fusion-integrated R&D capability. Though this shift will take time, we are certain it will occur. Ultimately, regardless of how effective sales and marketing teams are, being able to deliver popular products that resonate with customers is crucial. We are pleased to see many companies adapting their traditional practices, and we are learning from them as well. We believe they are gaining insights from us too. During this process, we aim to transition from a full-stack R&D approach to a fusion-integrated R&D ecosystem that encompasses various aspects of research and development. We believe this will enhance our technological strength. In the mid- to long-term, companies that rely solely on integrated R&D capabilities will face difficulties. Thank you.

My second question is for a quick update on our partnership with VW. We noticed major models from VW at the Shanghai Auto Show. Can the Chairman share any recent milestones? Thank you.

Hi, Nick. It's Charles. I think the collaboration with Volkswagen is progressing at a very fast speed. So far, we have met every milestone and we are currently probably less than one year to SOP of some of our products. Yes, as you rightly pointed out, our partner Volkswagen unveiled some of the models, for example, one model based on our G9 platform and also there are multiple models that will be based on the E/E architecture that we are jointly developing. I think that all these models will start to come to market starting from early next year. So, so far, I think that we are meeting all the milestones. Looking forward, I think we continue to work with our partner to jointly develop more products. We are also exploring potential new opportunities that can bring win-win value to our partnership.

Thank you. That does conclude our question-and-answer session. Now, I'd like to turn over the call to the company for closing remarks.

Thank you once again for joining us today. If you have further questions, please feel free to contact XPeng's Investor Relations through the contact information provided on our website.

This concludes today's conference call. You may now disconnect your lines. Thank you.