Shulou(Shulou.com)11/24 Report--

Beijing time on September 7 evening news, Weilai Automobile today released the second quarter of 2022 financial results as of June 30. Total revenue for the second quarter of Weilai was 10.2924 billion yuan ($1.5366 billion), up 21.8 percent from the second quarter of 2021 and 3.9 percent from the first quarter of 2022, according to the financial report. The net loss attributable to Weilai's common shareholders was 2.745 billion yuan ($409.8 million), up 316.4% from a year earlier and 50.4% from the previous quarter. Without GAAP, the adjusted net loss attributable to ordinary shareholders of Weilai Automobile was 2.1856 billion yuan ($326.3 million).

After the release of the earnings report, Wei Lai founder, chairman, CEO Li Bin, CFO Feng Wei, vice president of finance Qu Yu, vice president of capital market Jade Wei attended the subsequent conference call, interpreted the earnings report, and answered analysts 'questions.

The following is a transcript of the analyst Q & A session:

Morgan Stanley analyst Tim Hsiao: Two questions. The first question, according to the company's guidance for Q3 production, the impact of the parts shortage is longer and more significant than before. Do we need other supply bottlenecks that will affect the next ES7, ET5 shipments in Q4? In view of the development of a new round of epidemic, how do we see its impact on the fourth quarter? Did NELA take any further precautions? For second half deliveries, or even next year's 866 refunds? Second question, how does the management view the recent ban on US high-end chip exports to China? I understand that the short-term impact on vehicle enterprises may be small, but from a medium-and long-term perspective, will Weilai accelerate cooperation with domestic chip factories in the next models? Or accelerate the self-research progress of Weilai Automobile in the field of self-driving chips?

Li Bin: Regarding the first question, July and August in the third quarter did encounter repeated impacts of the epidemic. After September, the epidemic situation in many parts of China must have an impact on the supply chain. However, at present, after the experience and lessons of the epidemic situation in Shanghai from March to May, I think the impact of the epidemic on the automobile supply chain is relatively controllable compared with that in the second quarter. In July and August, including September, we were indeed affected by the yield of integrated die casting, and the output of our supply chain partners did not meet expectations, which had a certain impact on our delivery volume in the third quarter. Of course, we have also taken many measures to help our partners improve their yield. We have sent dozens of engineers and many skilled colleagues to help them improve their yield. Now there have been some significant improvements. We have also introduced some new supply chain partners. We believe that, overall, this issue has been initially resolved, and we believe that this issue can be fundamentally resolved in October. On the whole, we are still very confident about the delivery in the fourth quarter, and for the whole year, we are also very confident about achieving the delivery target for the whole year. Of course, this also means that the pressure on our supply chain production in the fourth quarter will be greater.

Regarding the second question, regarding the recent U.S. policy on the export of large computing power training chips to China, we believe that it will not have a substantial impact on our business in the short term, because it does not involve chips for vehicles, but the training chips for artificial intelligence, the computing power we have formed, can support the algorithm training needs of the next stage of automatic driving, we are still cooperating with Nvidia, and we also hope to pay close attention to this development, including the cooperation of cloud service providers. Actively evaluate long-term programs. We also note that there are many training chip companies in China whose products are already in mass production, and we will actively evaluate all possible technical solutions, including working with more chip companies. Overall, we do not believe that recent changes will have a material impact on the company's long-term strategy.

In addition, we need to add that we are also in the core technology field, including chips, the goal is to establish self-research capabilities, we believe that the core technology research and development investment, not only can help us cope with these industrial policy risks, but also can improve our gross profit margin in the long run, including technology competitiveness.

Ming Hsun Lee, Bank of America Merrill Lynch analyst: I have two questions. The first question is that the competition in the whole industry, including the company, has been fierce recently. Does the company have guidelines for marketing and R & D this year and next year? Are there any new targets for sales outlets? Second question, ET5 and ET7 have received good feedback at Chengdu Auto Show. The product iteration speed of the whole industry is getting faster and faster, including new players. How does the company see the competition of the whole industry? Will it accelerate the launch of new products, including the product launch next year? Can the company give some guidance? In addition, there have been media reports that the company may launch a third brand, can you confirm whether the company has such an idea?

Li Bin: We do see that our peers have launched very good products, but generally speaking, our investment in expenses is still advancing at our own pace, including investment in R & D. This year is a year when we increase investment. In order to enhance competitiveness, we have made a very large investment in R & D. The percentage of marketing and general expenses in our sales is definitely declining, and it's definitely a basic rule, so we're less likely to change our strategy and pace because of external competition. Overall, we will definitely continue to invest in R & D, which is our established strategy, and the proportion of marketing and general expenses in our sales will definitely continue to decline, in line with our rhythm.

On the second question, ET5 has been fully displayed at some exhibitions including Chengdu Auto Show, and the media has fully reported on the appearance and interior. We see that the popularity of ET5 continues to rise, and the expectations of users are very high, so we believe ET5 will become a very popular product. Next year we will have more new models and replacement models released, existing 866 products, next year will switch to our new NT2 platform, these are all things we plan, for next year all our products are switched to NT2 platform, and the performance of the whole market, we are still very confident. Whether it is on ET7, ES7 or ET5, we have seen the competitiveness of NT2 platform technology, users also very welcome our technological innovation, we will find time to communicate with you about specific details, but overall, we will accelerate the pace of new product launch next year.

The third question, we have always hoped to make our products and technology more people use, but on the other hand, we do have to pay attention to different price ranges, user needs, including brand awareness and product technology needs are different, we are actively thinking about how to make more market segments users can enjoy intelligent electric vehicle technology, we will actively carry out these aspects of planning.

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