Good evening and good morning, everyone. Welcome to NIO's third quarter 2018 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. In today's call, we have Mr. William Li, NIO's Founder, Chairman, and Chief Executive Officer. Mr. Louis Hsieh, our Chief Financial Officer, and Mr. Nick Wang, our Vice President of Finance. Louis and Nick will begin with prepared remarks, and William will join for the Q&A session. Before we continue, please be kindly reminded 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 actual results may be materially different from the views expressed today.
Further information regarding risks and uncertainties is included in the 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 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 NIO's press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. With that, I will now turn this call over to our CFO, Mr. Louis Hsieh. Louis, please go ahead.
Thank you, Jade. Hello, everyone. Thank you for joining our inaugural earnings conference call today. On behalf of William and the entire NIO team, we are excited to report our first quarter as a public company, following the listing on the New York Stock Exchange on September 12th. We would like to thank our employees, investors, and particularly our users, whose support has allowed us to continue our journey to fulfill our mission and to execute on our strategies. We are pleased to report a solid set of financial results for the quarter. The smooth ramp of our JAC-NIO manufacturing facility led to the production of over 4,200 ES8s. The brand-new direct delivery system and procedures that we've created successfully delivered 3,268 vehicles in the third quarter. That generated revenues of over RMB 1.4 billion, up substantially for the second quarter.
Deliveries of the ES8 in October reached 1,573, slightly below the September number due to the anticipated slower deliveries in early October when vehicle registration offices were closed for the seven-day Golden Week national holidays in China. We utilized the time during the slower holiday period to modify our production line in our JAC-NIO plant to prepare for the future launch of our ES6. We remain confident that our Q4 deliveries will be in the range of 6,700-7,000 vehicles, which leads to our reaffirmed guidance that the number of ES8 deliveries will reach 10,000 in the second half of 2018. We expect to finish production of all Founders Editions ES8s within the next few weeks and plan to deliver the vast majority of them by the end of the year, as vehicle registration procedures allow.
We plan to start to deliver a small number of base edition ES8s in the production order pool in early December. In the future, as our production continues to ramp, our target is to deliver ES8s to our users within two to three months after the production order deposits are received. The ES8s have been delivered to over 170 cities in China, with over 5,000 vehicles in operation. We have received valuable feedback from our users. Users have lauded the powerful, solid acceleration while also providing reliable braking and other safety features. Users have also noted the spacious and comfortable interiors with a well-thought-out design for families.
Users that compare the driving performance of the ES8 to well-known established premium brands such as Mercedes-Benz, BMW, and Audi, or to Tesla's Model S and Model X, the only premium SUV brand in China, and find the ES8 very competitive or even better in a variety of performance specifications while providing a much more luxurious and spacious interior and comfortable ride with customized entertainment system and applications for an enjoyable driving experience. NOMI, the first voice-enabled deep learning AI digital assistant installed in the Chinese premium cars, has won the hearts of ES8 users. Users tell us NOMI acts as an intelligent and human-like companion that makes driving much more fun. Starting from this month, we are rolling out an upgrade to the ES8 software, version 1.1.0, the first over-the-air software upgrade in our history.
Version 1.1 turns on a 360-degree camera view around the vehicle to assist in parking and provides a positive safety assistance, proactive safety assistance function, such as forward collision warning, FCW, and lane departure warning, LDW, as well as improving many other functions that make driving safer and more pleasant. Thinking beyond the delivery of our vehicles, we continue to expand our service network and enhance our service capabilities. As of today, we have 12 NIO Houses open in 10 cities, including Shanghai, Beijing, Guangzhou, Nanjing, Hangzhou, Shenzhen, Suzhou, Chengdu, Xi'an, and Hefei. We also have another nine pop-up NIO Houses open in large cities where we see increasing demand for the ES8 and brand recognition of NIO. We currently have 38 service centers across 20 cities, mainly in authorized service centers.
Our worry-free services are highly praised by our users, with over 90% of the ES8 users purchasing the worry-free service packages. Our service teams are working diligently to make great service a hallmark of NIO's brand and users experience. The third quarter was also critical to monitor our users utilize our full range of power solutions, including NIO home chargers, NIO App, Power Map, power trucks, Power Swap, and One Click for Power services. More than 70% of the ES8 owners thus far have installed home chargers in their own parking spaces, which gives them the most convenient and cost-effective charging solution. We have 295 power trucks covering 21 cities and Power Swap Stations within 16 cities at the end of September. That is an addition to a growing infrastructure of public chargers across the country, and the NIO App has the location information for more than 130 public charging piles.
All of these resources are accessible through the NIO App, which provides users with OneClick service to these charging solutions. The total number of OneClick services just exceeded 10,000 last week, demonstrating that the charging capabilities are well supported by flexible infrastructure, investment, data-driven optimization, and solid execution. Speaking of growing user community, we engaged with the growing user community through offline and online platforms. Our NIO App has over 626,000 active users in total and more than 170 active daily users by the end of October. We are pleased with the way our brand and our vision of a joyful lifestyle have been received by our users, and we are excited to continue to grow the NIO community. We have built a strong team to support our future growth.
Our focus remains deliver vehicles with the highest quality to further improve the user experience and to prepare a successful launch of our ES6. I will now turn the call over to our Vice President of Finance, Mr. Nick Wang, to provide the financial details for the quarter. Nick, please.
Thank you, Louis. Speaking as one member of the NIO family, I echo Louis' sentiments and am very excited about our prospects for the future. Our solid third quarter results get us off to a strong start following the first full quarter of production and deliveries. I will now go over some of our financial results for the third quarter of 2018. To be mindful of the length of this call, I will address financial highlights here and encourage listeners to refer to our earnings press release, which is posted online for additional details. Our total revenues in the third quarter were RMB 1.47 billion, or $214 million, representing an increase of 3,095.3% from the second quarter of 2018. Our total revenues are made of two parts, vehicle sales and other sales. Vehicle sales were RMB 1.43 billion, or $207.8 million, representing an increase of 3,113.8% from the second quarter of 2018.
The increase over the second quarter of 2018 was attributed to accelerated delivery of the ES8 in the third quarter. Remember that we only started making deliveries of the ES8 in the last three days of June, so our second quarter sales figures reflect sales from June 28th through June 30th. Other sales were RMB 42.7 million, or $6.2 million, representing an increase of 2,581.8% from the second quarter of 2018. The increase over the second quarter of 2018 was mainly attributed to increased revenues recognized from the home chargers installed in the third quarter. Cost of sales was RMB 1.6 billion, or $230.9 million, representing an increase of 696.2% from the second quarter of 2018. The increase over the second quarter of 2018 was mainly driven by the delivery volume of the ES8.
Our gross margin was -7.9%, compared with the -333.1% in the second quarter of 2018, mainly driven by the larger scale of production and delivery of the ES8. We expect gross margin to turn positive in the quarters ahead as production and deliveries increase. Research and development expenses were RMB 1.02 billion, or $149 million, representing an increase of 37% from the third quarter of 2017 and an increase of 33.7% from the second quarter of 2018. The increase was primarily attributed to the three items. Number one, increased share-based compensation expenses recognized related to stock options granted to the company's employees. Number two, an increased number of personnel related to product and software development teams. Number three, Increase the development expenses of the ES6, the five-seater premium electric SUV, which is expected to be launched by the end of 2018.
If we exclude share-based compensation expenses, R&D expenses were RMB 947.3 million, or $137.9 million. Our selling, general, and administrative expenses were RMB 1.7 billion, or $243.2 million, representing an increase of 208.9% from the third quarter of 2017, and an increase of 74.6% from the second quarter of 2018. The increase in SG&A expenses over the second quarter of 2018 was also primarily attributed to three items. Number one, increase to share-based compensation expenses. Number two, an increased number of personnel related to user development and service-related teams. Number three, increased selling expenses for test drives and other promotional events. Excluding share-based compensation expenses non-GAAP, SG&A expenses were RMB 1.3 billion, or $192.5 million. Loss from operations was RMB 2.8 billion, or $409.1 million, representing an increase of 118.2% from the third quarter of 2017, and an increase of 49.9% from the second quarter of 2018.
Excluding share-based compensation expenses non-GAAP, adjusted loss from operations was RMB 2.3 billion, or $346.2 million. Operating margin was negative 191.2%, compared with the negative 4,076.8% in the second quarter of 2018. Excluding share-based compensation expenses non-GAAP, adjusted operating margin was negative 161.8%, compared with negative 3938.9% in the second quarter of 2018. Share-based compensation expenses were RMB 432.2 million, or $62.9 million, representing an increase of 2380.6% from the third quarter of 2017, and an increase of 581.2% from the second quarter of 2018. The increase in share-based compensation expenses was primarily attributed to increased share-based compensation expenses recognized because of the successful completion of our IPO. We recognized SBC expenses related to the stock options granted to the company's non-U.S. employees, whose grants included the condition of an IPO, which was a significant one-time non-cash charge and won't recur in the future at a similar level.
Net loss was RMB 2.8 billion, or $409.2 million, representing an increase of 116.1% from the third quarter of 2017, and an increase of 56.6% from the second quarter of 2018. Excluding share-based compensation expenses non-GAAP, the adjusted net loss was RMB 2.4 billion, or $346.3 million in the third quarter of 2018. Net loss attributable to NIO's ordinary shareholders was RMB 9.8 billion, or $1.4 billion. Accretion on convertible redeemable preferred shares and accretion on redeemable non-controlling interest to redemption value were RMB 6.9 billion, or $1 billion, and RMB 31.4 million, or $4.6 million, respectively in the third quarter of 2018. Accretion on convertible redeemable preferred shares redemption value was a non-cash event and will no longer recur after the company's IPO.
Excluding share-based compensation expenses, accretion on convertible redeemable preferred shares to redemption value and accretion on redeemable non-controlling interest to redemption value, adjusted net loss attributable to NIO's ordinary shareholders non-GAAP was RMB 2.37 billion, or $345.1 million. Basic and diluted net loss per ADS were both RMB 42.59, or $6.20. Excluding share-based compensation expenses non-GAAP, accretion on convertible redeemable preferred shares to redemption value and accretion on redeemable non-controlling interests to redemption value, adjusted basic and diluted net loss per ADS were both RMB 10.35, or $1.51. Our balance of cash and cash equivalents, restricted cash, and short-term investment was RMB 9.2 billion, or $1.3 billion as of September 30th, 2018. Now for our business outlook.
For the fourth quarter of 2018, the company expects deliveries of the ES8 to be in the range of 6,700 to 7,000 vehicles. Representing an increase of approximately 105%-114% from the third quarter of 2018. Our total revenue to be between RMB 2.87 billion-RMB 2.99 billion, or from $418.5 million-$436 million. An increase of approximately 95.6%-103.8% from the third quarter of 2018. This business outlook reflects the company's current and preliminary view on the current business situation and market condition, which is subject to change. Now, this concludes our prepared remarks. I will now turn the call over to the operator to facilitate our Q&A session.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. To cancel the request, it is the pound or hash key. Once again, it is star one to ask a question. For the benefit of all participants on today's call, please limit yourself to two questions, and if you have additional questions, you can re-enter the queue. First question comes from the line of Dan Galves of Wolfe Research. Please ask your question.
Hello, thank you for taking my questions. Can you talk a little bit about how order flow has progressed over the last couple of months? How do you think things are going in terms of awareness of the product, brand recognition, and what are you doing to actively grow awareness?
Go ahead, Nick.
Okay. Thank you, Dan. Good morning. Great question. I think for order flow, it has remained relatively stable. I know your question relates to backlog. Right now we've delivered over 5,300 vehicles, and we expect to deliver about 2,500 each of the next two months, so November and December each, to reach our 10,000 goal. Every day we're receiving between 50 and 80, sometimes 100, new orders from the 5,000 RMB deposit. Our 45,000 production order deposit is healthy, with a backlog right now of over 5,000. Order and demand remains solid. We're not doing that much as far as any kind of direct marketing, but we have opened up more NIO Houses. Most of the ones we mentioned earlier, of the 12, were opened in the last couple of months. They're beginning to get a lot more visitors.
Our app currently now has 626,000 active users. We are getting awareness throughout the country. Plus, we have 5,000 cars on the road, so people are beginning to talk about NIO. William. Hi, Dan. I will speak in Chinese, and Eve will help me to translate.
Just like Louis mentioned, our community is growing rapidly and gradually. By the end of October, we have around 626,000 users, and the DAU is around 170,000. As you can see, the brand awareness is increasing in the market, and our delivery status is also going quite smooth. We are now doing the user referral and the scenario-based test drives. All this helped us to get more new users. We think this is well-received among all the users.
We think the user referral is a very good approach because one user in Wenzhou actually gave the recommendation to around 10 users, and we're quite confident with the word of mouth reputation building in the market.
That's great information. Thank you very much. One more question. You said that you plan to have positive gross margin, in the quarters ahead. Can you talk about some of the most important items in the plan to improve the gross margin from where it was in Q3? Like, what are the levers? What are the mechanisms to improve gross margin? Any examples.
Go ahead, Nick. Yeah. There are two major components in the gross margin. One is the bill of material or material cost, and the other one is the fixed cost. We anticipate improvement on these two areas in Q4 because of the better economy scale and better leverage that we have with our supply chain.
Okay, thank you very much.
We expect the gross margin to improve, and we expect the vehicle margin, if we hit our deliveries of 7,000 this quarter, the vehicle margin should definitely turn positive if we hit the 7,000.
Okay.
Thank you.
Great. Thanks very much.
Thank you. Our next question comes from the line of Nick Lai of JPMorgan. Please ask your question.
Thank you, William and Louis and Nick. It's Nick from JPMorgan. Two very quick questions. First, on profitability and profit margin, can you share with us our view that our profit outlook in 2019 after taking into account of two major factors? One is potential subsidy cut, and another one is cost drop on battery side, expecting battery cost to come down. Secondly, can you share with us the number of shipment and the production? In the third quarter, production was 4,200 and the shipment was 3,200. Is there any bottleneck that we should be aware? Thanks.
Okay. The bottleneck is really, there is not bottleneck other than just getting our logistics system set up correctly, as this is new to us. Also, as you know, in China, most of the registration systems have a waiting list, so it takes time to get through the registration of the license plates. The factory is running relatively smoothly. During the Golden Week holidays, we didn't close it, but basically didn't produce cars, but used it to revamp our line so they can produce both ES8s and ES6s, and also can custom-make just specific orders for customers. What was your earlier question, Nick? I'm sorry. I forgot the first one.
Gross margin.
The gross margin subsidy, we don't know. They'll be set at the end of this year.
Okay.
So
Of course, the subsidy in the next year will decrease as the government is still asking for opinions. We think this is not going to affect our gross margin that much because the sales price includes the subsidy, and this will not affect us that much. This will affect the money paid from the users.
Nick, your earlier question about cost down is, I think we expect some reduction in the cost of the battery and also in the BOM as we get the volume order. Nick and team are working very hard to get 5%-10% reduction on the cost of the vehicle production side. Okay?
Okay. Thank you.
Also on a fixed cost side, because we're going to have the bigger volume next year, apparently the fixed cost amortization piece as part of the GM going to become improved as well.
Yes. Okay.
Thank you.
Thank you.
Thank you, Nick.
Our next-
Thank you.
Thank you.
Thank you. Our next question is from the line of Fei Fang of Goldman Sachs. Please ask your question.
Hi, Louis, Nick, William. Congrats on the results. You mentioned that you have modified production line to accommodate ES6 to be launched at year-end. Can you maybe talk a little bit more about the roadmap for launching the new model? Do you also try to build a backlog as well, and also what will be the key marketing strategy? I have a follow-up question. Thanks.
William.
The ES6 has already gone offline this May in the pilot production line of our Nanjing advanced manufacturing center. Our plan right now is to do the official launch of the ES6 at the middle of December. The whole company is now preparing for this launch event. The model of the ES6 will also be made to order, and our plan is we will start the delivery of ES6 next year, probably around June and July.
That's great. Thanks, William. If possible at all, it would be very helpful to give us a sense of how you would expect gross margin to progress over time for ES6. For example, what's the break-even volume for gross margin for this smaller model? Is it similar to ES8, or it will be easier for you to turn profitable at a gross margin level?
I think the quick answer for that is pretty similar to ES8. I think on a per unit basis, because of a little bit attractive lower price point, on a per unit basis, the contribution margin a little bit lower. This can be well offset by much larger volume provided by ES6, which basically means the fixed cost amortization going to be less. We anticipate in similar level of that of ES8.
另外我想补充的是，ES8和ES6很多零部件都是通用的，而且都是基于同样的一些供应链的合作伙伴。这样的话，其实ES6的量和ES8的量，很多零部件加到一起，量都会上来，这样对于我们提高两辆车的毛利率都是有好处的。
I'd like to mention another point that is ES8 and ES6 share the components at a large extent. We also use many supply chain partners for the ES6 and ES8 at the same time. It means that the ES8 and the ES6 volume will significantly improve the gross margin of both of the models.
That's great. Thanks very much.
Thank you.
Thank you.
Thank you. Our next question is from the line of Vincent Ha of Deutsche Bank. Please ask your question.
Hi, good evening, William, Louis and Nick. Really congratulations on the decent set of results for the first quarter after listing. I have two questions. Let me ask the first question first. Earlier Louis mentioned that we currently have 12 NIO Houses and also 36 service centers already on the ground. Just want to get a quick summary or target of how many NIO Houses or service centers and other kinds of network that we plan to achieve by the end of this year and probably by the end of next year. What would that be implying to the operating expense trend, which is the SG&A trend going forward? That's my first question.
你要几个NIO Houses？
Hi Vincent，我们今年内还会增加一个NIO House，在东莞。这个是在12月份，我们还会增加一个。明年我们当然还会根据整个的销售计划，逐步地去增加NIO House。明年我们预计大概在20到30个之间。我们当然会根据整个的销量情况，我们在明年的Q1去做一个比较周密的一个计划，根据ES6整个的订单情况。我们在这个服务网络方面，前面已经看到，我们已经在170多个城市交付了ES8。我们相信ES6的分布可能还会更加广一些。所以在授权服务中心方面，我们会根据保有量情况，采用最高效的一个方式去部署我们的服务中心。当然，从我们今年整个的服务能力扩展的角度来讲的话，我们对于整个的效率还是非常有信心的。
This year we will have one additional NIO House. This will open around December in Dongguan. Next year we will gradually open more NIO Houses. According to the sales plan, we think currently it will be around 20 to 30 NIO Houses, but we will adjust this plan according to the sales status and the order of the ES6. We will have a detailed plan for the first quarter of the next year. In terms of the service network, just now we mentioned that we have already delivered over ES8 in over 170 cities. We think it's going to be more for the ES6. We have the authorized service centers. We think we will evaluate the existing market and adopt the most effective way to deploy our service network. We are quite confident with this efficiency.
Vincent, to answer the last part of your question, the NIO Houses will cost about a million and a half to set up, because these aren't going to be in Beijing and Shanghai, they'll be in a little bit smaller cities, million and a half to 2 million. That's the cost, and the operating cost will be about a little bit less than that per city.
Okay, understood. The quick second question is, could you also update us on the percentage of customer who is opting for the battery leasing option and also the battery swapping service? Some key question that I keep getting from some investors that they're concerned if the battery swapping option is getting really popular, we may run into a risk of having a big stock of replacement batteries and that could put some pressure on our cash usage. Could you give us an update on that? Thanks.
I answer the easy part. The fact, figures on a percentage of users to take battery leasing is 73% by the end of Q3. I don't have the percentage number for battery swapping, but our estimate is around 6%. Okay.
前面Louis也讲了，我们的「一键加电服务」已经超过1万次了。当然这里面大部分还是通过移动充电车的方式。我们现在在实际的应用来看，有两个数字是比我们想象的不一样的。一个是什么呢？我们现在有超过70%，事实上是77%左右的用户，在家里面能够装充电桩。这个说明我们的用户的整个的平均的收入水平，他们家里面的安装充电桩的状态是非常不错的。应该说这个远远超过我们一开始的预计，这样的话给我们在基础设施投入方面的压力也大大缓解了。
Just like Louis mentioned, we have already got over 10,000 One Click for Power services, most of the power services is delivered by the power truck. In terms of the situation, we are quite unexpected in terms of the home charger installation, because we have a 76% of users who can install the home chargers. This suggests that the average income and the status of the home charging facilities is much better than we expected. This can also help us to reduce the infrastructure investment. This is a holistic solution because we noticed that in some cities, users do not need to use their car right away when the car is out of power. It means that we can use the power trunk or the faster charging facilities to solve the user's issues.
For other highways, we noticed that users would like to have a fast access, they would like to get the cars back very soon. It's quite different from those cities. It means that this will affect Power Swap deployment strategy. In urban area, we do not need to deploy a lot of Power Swap stations, but we would like to deploy more Power Swap stations in the highways. For example, in the Yangtze River Delta and the Pearl River Delta, we would like to deploy more Power Swap stations. This can also help us to control the cost, because in those highways, we just need to rent the 3 parking spaces to build the Power Swap stations, we do not need to do any kind of civil constructions.
We think this can help us to control the cost, we just need to evaluate the growth of our users and the scope of our users to come up with a detailed plan in terms of the Power Swap deployment.
Vincent, we monitor this very closely. As William said, it depends on the demand. As of September 30th, we're in 16 cities with Power Swap, with a little bit over 30 swap stations, but it depends on current need. We were pleasantly surprised that over 70% of the people are installing home chargers, which is the best solution, right?
Yes.
Also, the power trucks are quite heavily used. If that meets their needs, that's fine. We basically want to deliver the best service by monitoring consumer and our users' demand and feedback.
We won't overbill. We want to make sure we meet their charging needs.
Yes.
Okay. Thank you, Vincent.
Okay. Okay. Thank you.
Thank you. Next question is from Paul Gong of UBS to ask a question.
Hi. Good evening, management. I have two questions. The first one is still regarding the orders. Did I recall it right that, at this moment, you have about 5,000 active backlog, after 5,300 of delivery? Does that mean some earlier orders who has paid the RMB 5,000 have actually canceled the order? Is that a right understanding? Also, given right now the order intake rate is roughly 50 to 80 per day, does that mean the intake and the delivery in the next two months is roughly on par to each other? Is that the right understanding?
Yeah. It depends on, obviously, how many people do cancel. You're right, Paul, that some of the original people who put in the RMB 5,000 deposit have canceled because they didn't want to wait so long. As you recall, our ES8 was delayed by several months, some of these orders date back to last December, early January. We do have a number of cancellations. As far as the order backlog, we've delivered over 5,300 cars. The 45,000 production order deposit rate is over 5,500. We're pretty comfortable that we'll be able to deliver between 10,000 and 11,000 cars in the next couple of months. Our facility is producing very well. That's the issue. Every day, we're receiving between 50 and 80 or so new orders for the RMB 5,000 refundable deposit. That one is subject to cancellation, obviously.
We monitor very closely.
If I place an order today, I expect to receive the car within the next two months. Is that the right expectation?
Not currently, because the Founders Edition need to be delivered first, the first 10,000. You can probably get it within three months. Three or four months at most.
Okay.
Okay? Once we clear the Founders Edition, the first 8,000 or 9,000 cars, then we'll begin to speed it up. That's why we put in the new equipment, so we can produce cars as an order-by-order basis in the Hefei plant. It's a made-to-order basis.
Yeah, sure. My second question is regarding the Founders Edition and also the relatively cheaper ones. Do you expect the same margin derived from this Founders Edition and the subsequent models, or do you expect similar profit contribution per unit? How do we think about these different margins?
I think the newer cars, the orders after the Founders Edition should have slightly higher margin because the Founders Editions were given a special, right? They're sold for RMB 448,000, even though they're really equivalent to RMB 548,000 with full options. The other ones are made to order. The ones who pick the options will have slightly higher gross margin.
I think one thing I want to add is that the margin for the base model plus option versus the fully loaded Founders Edition, their margins is quite similar. Obviously, it's a function of the option take rate. Maybe for the base model plus option, there are going to be more users to take our high-end option like NOMI. Maybe that's going to contribute a lot of the margins to our product for sure. I think we'll see as the incoming orders from those new user to order base model plus option come in, we're going to see the data. That's going to become more clear to us.
At this moment, if we expect similar margins for the base plus options as a blended average versus the Founders Edition, that is about the similar margin, that's right?
Similar. I think it may be slightly lower, but again, we need to see the incoming order, and then we can perform a proper analysis, and we will be in a better position to tell.
Sure. Thank you so much. That's quite helpful.
Thank you. Once again, for those who wish to ask a question, please press star one on your telephone and wait for your name to be announced. To cancel the request, it is the pound or hash key. Once again, to ask a question, please press star one. As there are no further questions now, I'd like to turn the call back over to the company for closing remarks.
Thank you once again for joining us today for the conference call. If you have any further questions, please feel free to contact our IR team and also TPG, the company's IR partner. Thank you very much. Thanks.