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We have decided to start the change with ourselves and revamp XPeng's business with a startup mindset on an elevated platform with new angles. I believe XPeng is approaching an inflection point, as we have clearly identified what our goals are, and what our strengths and weaknesses are. We're now building recovery momentum in our sales and market share expansion. As we do this, we're placing a high premium on improving our organization and cost efficiency to fortify our strong foundation and better position our company for sustainable growth over the long term. Our overarching goal is to make XPeng a leader in the Chinese EV market and ultimately win the global EV race. What excites me is that our strategic adjustment has induced meaningful results in the first quarter of this year, which gives me confidence that we will achieve sustainable and greater breakthroughs in the next few quarters.

My first step to the organizational restructure started with changes and upgrades in our top leadership. Ms. Fengying Wang has joined our team as President of the company, bringing us more than 30 years of experience in the automotive industry. Fengying is taking full responsibility for our product planning and sales operations and is also in-charge of our product platform management scheme. Our extensive industry experience, in-depth market insight and strong execution capabilities will help our product capture customer demand more accurately, while greatly improving efficiency in our sales and services division. At the same time, the adaptations to our management's organization are geared toward a flatter and more concentrated structure. In February, all design, R&D, production, supply chain and organizational management functions directly report to me.

I believe that these shifts will significantly improve our planning capabilities and lift the efficiency of our decision making and execution in the coming months. More importantly, these adjustments have effectively refreshed our execution and competitiveness. For the foreseeable future, I will remain focused on lifting the labor efficiency across our organization by multiple times, though as to generate increased customer value with the same headcount, and greatly reduce costs across a full range of processes through technology and management innovation. With regard to our product planning and design, we concentrate on customer perceived value and product differentiation in our innovation. We will make substantial changes to future product model configuration mix, whole vehicle modulized design and consistency in smart features.

In terms of interior and exterior styling and design to meet XPeng customers' high standards for aesthetics, I am directly running the style and design division and building three teams that compete with each other to generate creative ideas. These initiatives will continuously improve our interior and exterior styling and space design capabilities. At the same time, I incorporated the net promoter score or NPS into the core performance indicators for a variety of business functions and required feedback collection on a monthly basis. The NPS performance evaluation will anchor the transformation of our product planning, design, and development toward a customer-centric pathway. I believe our new products, our OTAs, and new services to come, will demonstrate substantial progress.

In terms of branding and marketing, we'll harness our core differentiation in autonomous driving to the full extent and enhance customer perception. We are broadening our addressable market, expanding our penetration from Tier 1 and Tier 2 cities to Tier 3, Tier 4 cities. So far, we have completed a preliminary merge between our branding and marketing teams and refreshed our overall strategy. This will help us improve the quality, effectiveness and flexibility of marketing activities in an effective way going forward. While significantly reducing marketing expenses, we have already flattened out the management hierarchy in our sales network. Furthermore, we are enhancing our network coverage, increasing competitive capabilities in our frontline sales staff, and developing XPeng's powerful data-driven sales touchpoint in order to achieve significant strides in sales growth.

On March 10, we officially launched the new P7i sports sedan, which is an upgraded version of our highly successful P7 model. Deliveries to customers also commenced in this month. I'm pleased to see our in-store traffic and test driving volume both hit new heights in recent months following the P7i launch. This new products, smart features, dialing design and performance among other clear advantages in livery with similar products were well received among customers. Amid the market's prevailing weakness in new order intake, our results outperformed the market. Our new order intake in February increased 100% over the previous month. With the strong momentum of P7i orders, following its official launch, we expect to see a considerable month-on-month growth of total new order intake in March.

This marks an initial success following our comprehensive transformation, which has also boosted our company morale. Our second new product model coming up this year, the G6 will make its debut at the Shanghai Auto Show. Its official launch and vehicle deliveries will occur around the end of the second quarter. The G6 will bring the most advanced electrification and smart mobility technologies to the 200,000 to 300,000 yuan priced NEV SUV markets. With unrivaled interior space, range, styling and interior decoration, we believe the G6 will become the top-selling model in its market segment. Following the ramp-up of G6 mass production, we expect G6 monthly sales target to be 2x to 3x that of its P7 predecessor sales. In addition, in the second half of 2023, we'll launch a brand-new BEV 7-seat MPV.

Photo by Michael Fousert on Unsplash

This new MPV model is designed to cater to customer cohorts that demand a larger interior room while serving the needs of our family customers for a human machine co-pilot. Recently, ChatGPT 4.0 and other AI-based applications have created a buzz among hundreds of millions of users on the massive potential of generative AI models. I am also very excited about this. It represents a brand-new phase of artificial general intelligence, which on premise -- with on-premise deployment that does not rely on cloud end, which not only redefines the pathway to realize autonomous driving, but also increases its efficiency. Given this development, there is an even higher possibility that autonomous technology further advances from L4 to L5. We expect to incorporate GPT technology deeply into XPeng's business across the board to create ground-breaking user experiences and exceptional improvements to our operational efficiency.

In late March, we began accelerating the OTA rollout of City NGP compatible with multiple models in several cities, including Guangzhou, Shenzhen and Shanghai. Through City NGP's OTA, we took the lead in mass producing the transformer-based BEV time-series network or XNet in China, which achieved a milestone in deep learning algorithm development and application. In the second half of this year, XNGP powered by XNet's deep learning algorithms will no longer depend on a high-definition map. That said, XNGP will be supporting drivers on more urban roads across over 10 cities in China. Results from our testing showed the new version of XNGP outperformed peers' actual on-road performance in the United States. This leads us to believe XPeng's autonomous technology and its customer adoption is approaching a pivotal turning point.

We have built notable leadership in smart technologies as well as customer adoption of smart technologies compared with peers. We're driving our technology road map and commercialization pathway to cross over the inflection point and reach an accelerated growth curve. While keeping high safety standards remains a top priority of our technology advancements, will also be focused on the development to improve scenario coverage, user experience and software and hardware cost optimization. In terms of scenario coverage, we have expanded the usage of the advanced technology from highway scenarios into city scenarios where ADAS are used at high frequency and even become an essential driving tool. Going forward, we'll strive to further broaden ADAS usage to more end-to-end driving scenarios such as internal compound ways and non-public roads and expand our geographical coverage from three cities to more major cities nationwide beginning in the third quarter.

In terms of user experience, we have achieved an important psychological barrier for customers to use autonomous driving to relieve drivers, that is, drivers can let the machine safely take the wheel, resting assured that they are acting only as a supervisor. Looking ahead, we expect that through continuous OTA upgrades, XNGP's driving skills will escalate every year and in two, three years reach a level that is equivalent to a human driver with three years of driving experience. We also expect that the number of manual takeovers per 100 kilometers will be reduced to 1 or fewer. Regarding cost efficiency, we plan to cut XNGP's BOM costs significantly next year and adjust our sales model from one that bundles sales of software and hardware, to one that splits the sales of software and hardware, which is going to enable autonomous driving on all of our new vehicles, and allow more customers to use the latest autonomous driving capabilities.

In pursuit of breakthroughs in the aforementioned three realms, we will bring great value to our customers and build out competitive edge in technologies, delivering long-term, sustainable revenue growth at scale and with improved margin contribution. It has been said that the past five-year period was the golden age for new energy vehicles. I believe the next five-year period will be the golden age for autonomous driving. During the five years to come, XPeng's highly advanced autonomous driving technology will help XPeng accelerate our ability to gain top market share. More powerful cost control will be the core competitive edge that will enable XPeng to secure its leadership in the EV market. We will advance the platform-based approach and technology innovation to propel our cost reduction strategy.

Entering 2023, we are applying a full platform engineering approach for our BEV vehicle platform, electrical and electronic architecture, powertrain system and ADAS software and hardware development. This signals that we are entering a new phase of car-making in a unified system. In this way, we are able to develop products with superior customer experience at a faster pace and a lower cost. In the past, our R&D strengths were primarily manifested by our leading product performance. In the future, our R&D strengths will be underlined by maintaining the leading performance while achieving remarkable cost reductions. We have mapped out our strategic execution roadmap with associated cost reductions include an over 50% decrease for autonomous driving costs and an about 25% decrease for vehicle hardware costs, including powertrain, over the 2023-2024 period by means such as technology innovation and optimized configurations.

I am pleased to see the design, technology R&D, supply chain and manufacturing teams are now working in a synergetic way to make our products more competitive through innovation. In terms of cash liquidity, our cash on hand at the end of 2022 amounted to over RMB38 billion. As we have nearly completed our investments in our two manufacturing bases over the past few years, our CapEx will decline substantially. We have also established three powerful vehicle platforms that can support a serial of new model launches over the next three years. Our R&D will further concentrate on initiatives that best correspond with long-term trends and further differentiate our product in terms of customer experience and cost. We will also pursue improvements in our operating efficiency throughout the entire process.

For example, within our sales operations, we strive to improve same-store efficiency by optimizing our store network. We believe these cost optimization efforts will start to deliver material results beginning in the coming several months, including in the second half of this year. It has always been my intention to build a successful company that can grow in scale instead of a small company in a niche market or just any generic company out there. Expanding our scale and market share to achieve economy of scale in both software and hardware is the primary goal in our long-term strategy. Although the product and management adjustment cycle in the automotive industry is more difficult than other industries and takes a longer period of time, we are still willing to sacrifice short-term sales and more patiently pursue greater victories in the medium- and long-term.

Excitingly, as we rapidly implement adjustments and changes to our management, in addition to instituting a host of upgrades and iterations in our product portfolio and marketing capabilities, we have seen encouraging changes and positive results. I am firmly convinced that beginning in the third quarter of this year, XPeng's monthly sales number will achieve significant growth, both sequentially and year-over-year, as well as be much higher than the industry's average growth rate. I would reiterate that our current focus is on building and improving our capabilities in organization, product design, marketing and cost control. Continuous efforts in refining management and accelerated new product launches in the era of autonomous driving will lead us to the next level of exponential growth.

We will continue to strive for this goal. Lastly, we expect our total vehicle deliveries to be between 18,000 and 19,000 units in the first quarter of 2023 and revenue to be between RMB4 and RMB4.2 billion. Thank you, everyone. I will now hand over to our Finance VP, Dennis Lu.

Dennis Lu: Thank you, Mr. He, and hello, everyone. Now I would like to provide a brief overview of our financial results for the fourth quarter of 2022. I will reference RMB only in my discussion today, unless otherwise stated. Our total revenues were RMB5.1 billion for the fourth quarter 2022, a decrease of 39.9% year-over-year and a decrease of 24.7% quarter-over-quarter. Revenues from vehicle sales were RMB4.7 billion for the fourth quarter of 2022, a decrease of 43.1% year-over-year and a decrease of 25.3% from the last quarter. The year-over-year decrease was mainly attributable to lower vehicle deliveries for G3 and P7, while the quarter-over-quarter decrease was mainly due to lower vehicle deliveries for the P5 and P7 with partially offset by the newly launched G9.

Gross margin was 8.7% for the fourth quarter of 2022 compared with 12% for the same period of 2021 and 13.5% for the last quarter. Vehicle margin was 5.7% for the fourth quarter of 2022 compared with 10.9% for the same period of 2021 and 11.6% for the last quarter. The year-over-year and quarter-over-quarter decreases were mainly explained by the increased sales promotion. R&D expenses were RMB1.2 billion for the fourth quarter of 2022, a decrease of 15.3% year-over-year and a decrease of 17.9% quarter-over-quarter. The year-over-year and quarter-over-quarter decreases are mainly in line with timing and progress on new vehicle programs. SG&A expenses were RMB1.8 billion for the fourth quarter of 2022, a decrease of 12.9% year-over-year and an increase of 8% quarter-over-quarter.

The year-over-year decrease was mainly due to the decrease of the commission paid to the franchise stores associated with the lower vehicle deliveries. The quarter-over-quarter increase was mainly attributable to higher marketing, promotional and advertising expense to support vehicle sales. As a result, the foregoing loss from operations was RMB2.5 billion for the fourth quarter of 2022 compared with RMB2.4 billion for the same period of 2021 and RMB2.2 billion for the last quarter. Net loss was RMB2.4 billion for the fourth quarter compared with RMB1.3 billion for the same period a year ago and RMB2.4 billion for the last quarter. As of December 31, 2022, our company had cash, cash equivalents, restricted cash, short-term deposits, short-term investment and time deposits in total RMB38.3 billion.

To be mindful for the length of our earnings call, I will encourage listeners to refer to our earnings press release for further details of our financial results for the fourth quarter and full year 2022. This concludes our prepared remarks. We will now open the call to questions. Operator, please go ahead.

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