Hello, ladies and gentlemen. Thank you for standing by for the Second Quarter 2021 Earnings Conference Call for XPeng Incorporated. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Ziling Ma, Director of Investor Relations of the company.
Please go ahead, Mr. Ma.
Thank you. Hello, everyone, and welcome to XPeng's Q2 2021 earnings conference call. Our financial and operating results were issued by newsfire services earlier today and are available online. You can also view the earnings press release by visiting the IR session of our Web at ir.xiaofeng.com. Participants on today's call will include our Co Founder, Chairman and CEO, Mr.
He Xiaofeng by Chairman and President, Doctor. Brian Gu Vice President of Finance, Mr. Dennis Lu Managing Director of Chef Chee, Mr. Chao Zhang and myself. Before we continue, please note that today's discussion will contain forward looking statements made under Safe Harbor provisions of the U.
S. 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 these expressed today. Further information regarding these and other risks and uncertainties This includes the irrelevant public filings of the company as filed 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 a 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. Thank you for joining Xpeng's 2nd quarter 2021 earnings conference call. In the Q2 of 2021, Xpeng's vehicle deliveries reached 17,398, another quarterly high record high, representing a 4 39% increase year over year. For the 6 months period ended June 30, 2021, XPeng delivered 30,738 vehicles, surpassing the total number of vehicles delivered for the full year of 2020. And in July, our monthly deliveries exceeded 8,000 units, setting a new monthly record with an all time high order backlog.
With the rapid growth in deliveries, our 2nd quarter profitability further improved and our gross margin reached 11.9%. Our record delivery growth was driven by consumers' increasing demand for smart EVs and our leadership position in smart electric vehicle products and our fast product iterations. In the Q2, the attach rate of XPILOT 3.0 software reached 25%. Among the nearly 35,000 P7s that has been delivered. As of the end of June 2021, close to 8,000 units were eclipsed with XPILOT 3.0.
Also in June, our highway NGP mileage penetration rate exceeded 60% and NGP assisted our customers in driving for around 1 45,000,000 kilometers. The average monthly usage rate of NGP exceeded 65%. This is a clear demonstration of customers' increasing adoption and reliance on our advanced driver assistance system. With the rollout of XPILOT 3.5 earlier next year and afterwards XPILOT 4.0, our future advanced Driver assistance system built on our next generation hardware platform will be able to empower a broader range of end to end Drivers driving scenarios, including those not covered by HD Maps. As a result, customers demand and reliance on Advanced driver assistance system will continue to increase.
As we advance in developing cutting edge technologies, Safety will always remain our top priority. We have an unwavering commitment to enhancing driver safety education and providing hardware redundancy and software iteration to ensure our customers can safely use our advanced driver assistance system. To illustrate, Xpeng is the 1st EV maker to implement a driver safety proficiency test for customers before they can activate our advanced driver assistance system. In addition, we are also the 1st in the industry starting from our P5 model that equipped LIGER technology to be adopted in some of the configurations to increase redundancy of perception Our strategic focus on advancing fast product iteration allows us to further expand our addressable market. In the Q2, we began sales and deliveries of lithium iron phosphate or LFP battery powered G3s and P7s.
And their deliveries comprise more than 20% of total deliveries for each model. These new With the growing supply of LFP cells, we're confident will be increasing proportion of LSP models among our deliveries in the future. Moreover, the strong market To our recently launched G3i, the new mid cycle phased in version of the G3 exceeded our expectations. The production separation and switching of G3i is expected to have impact on G3 and G3i's production and delivery for a few weeks. We plan to start deliveries at the end of August and will increase delivery scale in the next quarter.
In July, we announced configuration details and the price range for our 3rd production model, the P5, and its market reception has been overwhelmingly positive. We expect to officially launch the P5 and unveil its MSRP in mid September and begin its deliveries in October. With P7, we have already demonstrated the unique driving experience brought by our Full stack in house algorithm for advanced driver assistance system that is capable of handling complex driving scenarios in China. Now with P5, we are bringing to our users a driving experience that will enable them to utilize advanced driver assistance systems in urban driving scenarios with the ability to switch between different driving scenarios smoothly. I believe This is only the start of XBANK's journey to accentuate the development of our leading advanced driver assistance technologies.
Moreover, with the P5, we're able to offer our industry leading advanced driver assistance system and smart cockpit technology to the broader family Sedan market with an attractive pricing range from RMB160000 to RMB 230000, further accelerating the EV disruption of the traditional ICE and non intelligent automobile market. Here, I would like to share some of my predictions for the future. First, in China, Vehicles priced between RMB 150,000 and RMB 400,000 will constitute the largest segment in EV market and show the fastest growth rate. Furthermore, the disruptive forces that smart EV brings to traditional mobility in this segment will also be the most vigorous and the swiftest. 2nd, high level or advanced driving assistance system will trigger qualitative changes in users' mobility experience.
1st, as China is poised to take the lead in the development of smart EVs around the world, China's smart EV makers will be in excellent position to expand globally. In order to be able to capitalize on such opportunities, On July 7, XPeng completed our dual primary IPO on the Hong Kong Stock Exchange and raised HKD15.8 billion. Looking ahead, we plan to further increase investment in intelligent technology innovations, branding and marketing, Service facilities across our supercharging, sales channel network and global expansion. Our differentiated products and technological path we chose, along with investments in human capital and global expansion, not only bolster our leading position in the current landscape, but also underscore our long term vision and strategic deployment. Looking forward, in a few years' time, we will accelerate the pace of our new product deployment development.
Starting from 2023, we plan to launch At least 2 or 3 new vehicles met every year supporting XPILOT 3.0 or above. We intend to make these future new models, including hardware, software and services simultaneously available in China and in international markets. We'll also broaden our primary price range in China from between RMB 150,000 and RMB 300,000 to between RMB 150,000 to RMB 400,000 making our cutting edge smart EVs accessible to a broader customer base. As we accelerate our efforts in technology innovations and product designs and development for more new models, we are committed to growing and developing our R and D team. As of the end of Q2 2021, our R and D headcount exceeded 3,000, a nearly 50% increase compared to the beginning of this year.
And by the end of 2021, it will increase to more than 4,500. We also plan to increase the number of engineers dedicated to research and development of autonomous driving technology spanning software, hardware, big data and navigation lab for international markets. We estimate the total number of engineers working in our autonomous driving software, hardware and relative supporting infrastructure teams to exceed 1500 by the end of this year. In this June, the penetration rate of VEVs in China's market has surpassed 10% for the first time. I believe the Chinese smart EV market is navigating through an inflection point for the next level of growth, which arrived earlier than expected.
To tap into this booming opportunity, we will accelerate the construction of our infrastructure facilities, underpinning our long term strategic roadmap and investments. As of the end of June, Xpeng's physical sales network consisted of 200 sales stores across 72 cities in China. On these sales stores, 110 were directly operated by us. To keep pace with our rapid development delivery growth, we plan to lift our guidance of the number of sales stores from 300 to more than 350 stores by the end of 2021. We also continue to rapidly expand our supercharging network.
As of June 30, the number of X branded supercharging station grew to 231, covering 65 cities. Recently, the 1st batch of 11 XPeng branded supercharging stations has been deployed on the Shandong section of the Beijing Shanghai Expressway and the Henan section of the Beijing Hong Kong Macau Expressway. We'll move forward to deploy our supercharging capabilities across the entire Beijing Shanghai, Beijing Guangzhou and Beijing Hong Kong Macau Expressways, further enhancing our ability to serve our customers in long distance driving. We plan to have more than 500 Xpeng branded supercharging stations operational by the end of this year, accelerating the expansion of our charging network across lower tier cities. In terms of our international expansion, as of this June 30, we had explored approximately 500 G3s to Norway.
And in August, we plan to export T7 to the Norwegian market as well. We'll continue our efforts in Norway and other European markets to further strengthen our local operation through sales, delivery and customer service enhancements. Our target is to prepare ourselves for the overseas markets in both left and right hand drive countries within the 3 years' time of 2020 to 2022 and accelerate our penetration into international markets with our upcoming smart EV models equipped with XPILOT 4.0 starting from 2023. Turning to our production. With our G3i and P5 commencing production, our Zhaoqing factory is now able to produce the G3i, P7 and P5 concurrently.
And in August, we added a second production shift at the Zhaoqing factory. With the increase in production output, we expect our monthly delivery volume to potentially reach 15,000 in the 4th quarter. That said, supply chain challenges, particularly those pertaining to chip shortage, remain the biggest production hurdle we are facing. With the support of the Zhaoqing municipal government, in August, we kicked off the Phase 2 expansion of our Zhaoqing factory, which we expect to increase annual design production capacity at the site from 100,000 to 200,000 by the end of the first half of twenty twenty two. Construction for our Guangzhou factory remains on track, and we expect the main structure to be completed in the Q1 next year and mass production to begin in the Q3 2022.
In summary, we'll continue to strive to overcome the various Challenges before us stemming from chip shortage, down structural shortage, COVID-nineteen resurgence in some parts of the world and production transition from G3 to G3i. In the Q3 of 2021, we expect our smart EV deliveries to be between approximately 21,520,500 units and our total revenues to be between approximately of RMB4.8 billion and RMB5 1,000,000,000. I look forward to sharing with you our latest progress on technology innovations on our 3rd XPeng Technology Day on October 24 this year. Thank you, everyone. With that, I will now turn the call over to our VP of Finance, Mr.
Dennis Lu to discuss our financial performance for the Q2 of 2021.
Thank you, Xiaopeng, and hello, everyone. Our outstanding performance in the second quarter Continued to the fact that experts' leadership in China's booming smart EV industry, where we continue to introduce innovative technology, Differentiated products and premium service. Filled with strong delivery performance, our revenues in the second quarter grew 5 37% compared with the same period of 2020. We also witnessed further improvement in our financials. In particular, our gross margin continued the upward trend and reached 11.9% in the 2nd quarter.
Now I would like to walk you through our detailed financial results for the Q2 of 2021. I will reference RMB only in my discussion today unless otherwise stated. Total revenues were RMB3.8 billion for the Q2 of 2021, representing an increase of 5.37 percent from RMB591 1,000,000 for the same period of 2020 and an increase of 28% from RMB2.95 billion for the Q1 of 2021. Revenues from vehicle sales were RMB3.6 billion for the Q2 of 2021, representing an increase of 5.62 percent from RMB541 million for the same period of 2020 and an increase of 28% from RMB2.8 billion for the Q1 of 2021. The year over year increase was mainly due to higher vehicle delivery, especially for the P7.
The quarter over quarter increase was also Revenues from service and others were RMB177 1,000,000 for the Q2 of 2021, representing an increase of 2.56 percent from RMB49.7 million for the same period of 2020 and an increase of 26% from RMB141 1,000,000 for the Q1 of 2021. The year over year and quarter over Quarter increase were mainly due to more income from service parts and accessory sales in our higher accumulated vehicle sales. Gross margin was 11.9% for the Q2 of 2021 compared with a negative 2.7% for the same period a year ago and 11.2% for the Q1 of 2021, respectively. Vehicle margin was 11% for the Q2 of 2021 Compared with negative 5.6 percent for the same period of 2020 10.1 percent for the Q1 of 2021. The improvement was primarily attributable to better product mix and material cost reduction.
Research and development expenses were RMB8 RMB64 1,000,000 for the Q2 of 2021, representing an increase of 170% from RMB390 1,000,000 for the same period 2020 and an increase of 61% from RMB535 1,000,000 for the Q1 of 2021. The year over year and quarter over quarter increase were mainly due to 1, the increase in employee compensation as we did our research and development steps and 2, higher expenses related to the development of vehicles and related software technologies. Selling, general and administrative expenses were RMB1 1,000,000,000 for the Q2 of 2021, representing an increase of 116 percent from RMB477 1,000,000 for the same period of 2020 and an increase of 43% from RMB721 million for the Q1 of 2021. The year over year and quarter over quarter increase were mainly due to: 1, higher marketing, promotional and advertising expenses to Sales and 2, the expansion of sales network and associated personnel costs and commission for the franchised store sales. Loss from operations was RMB1.4 billion for the Q2 of 2021 compared with RMB779 1,000,000
for
the same period of 2020 and RMB904 million for the Q1 of 2021. Excluding share based compensation expense, Non GAAP loss from operations was RMB1.3 billion for the Q2 of 2021 compared with RMB779 1,000,000 for the same period of 2020 and RMB814 1,000,000 for the Q1 of 2021. Net loss was RMB1.2 billion for the Q2 compared with RMB146 for the same period a year ago and RMB787 1,000,000 for the Q1 of 2021. Excluding share based compensation expense and fair value change on derivative liabilities related to the redemption rate of the applicable shares, The non GAAP adjusted net loss was RMB1.1 billion for the Q2 of 2021 compared with RMB770 1,000,000 for the same period of 2020 and RMB696 1,000,000 for the Q1 of 2021. Net loss attributable to ordinary shareholders of XPeng Inc.
Was RMB1.2 billion for the 2nd quarter compared with RMB1.1 billion for the same period 2020 and compared with RMB787 1,000,000 for the Q1 of 2021. Excluding share based compensation expense, the fair value change on derivative liabilities Related to the redemption value of the preferred shares and accretion on the preferred shares to redemption value, The non GAAP net loss attributable to ordinary shareholders of Xpeng Inc. Was RMB1.1 billion for the Q2 of 2021 compared with RMB769 million for the same period of 2020 and RMB696 million for the Q1 of 2021. Basic and diluted net loss per ADS was RMB1.5 For the Q2 of 2021, the non GAAP basic and diluted net loss per ADS was RMB1.38 38 for the Q2 of 2021. Each ADS represents 2 Class A ordinary shares.
Turning back to the balance sheet. As of June 30, 2021, our company had cash and cash equivalents, restricted cash, Short term deposits, short term investment and long term deposits in total of RMB32.9 billion, which is clearly a Hong Kong IPO per seat of RMB13 1,000,000,000 compared with RMB35.3 as of December 31, 2020. With that, now I would like to turn the call to Sidney Ma.
To be mindful of the lines of our earnings call for our Q2 financial results, I would encourage listeners to refer to our earnings press release for further detail. This concludes our prepared remarks. We will now open the call to the questions. Operator, please go ahead.
Your first question comes from Tim Shao with Morgan Stanley. Your line is open.
Thanks for taking my questions and congratulations on a great result. I've got two questions. The first question is about the component supply. I think the new trading chip shortage now is well anticipated. But should we concern about similar supply crisis into Next year, especially XPeng will need to secure the key component supply for 4 models in total It's more than likely a doubling.
So I just want to know that how could XPeng will cope with such challenge into next year? We are the company considering investing or forming strategic alliances with some parts makers like for cheaper batteries Actually, I'm sure we can get sufficient supply. My second question is about the demand of P5.
This emergency happening in 'nineteen where we faced a serious lockdown. And if it so happened that one of your Tier So for the first kind of challenge, which is the core components or shortage, We can do several things to prepare for. For example, the first one is we can make orders way ahead of time so that we can better prepare for chip shortage. The second thing is we can work with some top tier suppliers in terms of chipset production and development. We can work with them in several ways.
1st of all, we can find collaboration deals. Also, we can invest in some of those core suppliers. And also, we can work with local governments in terms of bulk purchasing or preordering of the chipsets or chips that we need. Basically, chip shortage is a big challenge faced by the whole industry. But as a company, a very company equipped with leading technology of its kind, Xpeng actually has a very, very favorable position to play in this value chain because a lot of the chip suppliers consider us as their VIPs, thanks to our fast development and fast iteration of our models.
And also, we are We are very flexible in a sense that we don't have large delivery backlog yet. So that allow us to be really flexible in selecting different Byers, in order to fulfill our chip demands, we also can look to the overseas market for more chip supply. So in regards to your second question, which is about the market demand of P5, if you To compare it with P7, I would say that actually we see an even stronger demand compared to P7 of the same developmental stage. And also, we are able to actually better plan ahead for the pre ordering of P5. And right now, the pre order has started since 2 months ago.
And every month, we are seeing the demand come in more and more as expected. That allow us to actually deliver what we guarantee by 4Q
this year.
So in order to fulfill the core components or core parts demand for P5, we actually have prepared for this since
And your next question comes from Bin Wang with Credit Suisse. Your line is open.
Okay. Actually, I got three questions. Number 1 is about new products. And actually, I don't know the number 5 and number 6 products given your competitors actually has So basically detail about the number 5, number 6 products. And second question is about the margin because it seems that if you're excluding the The Q on Q in the Q2 actually increased around 2.7% according to my calculation.
Can you break down the driver for this 2.7% gross margin increase? In meanwhile, what's your guidance for the second half of this year about the gross margin change? And last question is about it's linked to the second question about software attach rate and product attach rate take rate in the Q1, Q2 and
Hey, Bin, it's Brian. Let me just address your first question. Obviously, we can't detail the 5th or the 6th product at the moment. But what we can share with you is that We are intending to develop a new platform for the Phase III product. That platform we aim to be probably the largest in terms of the quantity addressable market.
So, it will be a platform that is targeted in the mid to high end, which that we're starting right now. At the same time, I think around the same time We will be also rolling out a high end product in the same year that will probably be above the current price range, increasing to over 400,000 or even above. So that's another product that we aim to launch in that 2023 timeframe. So you can see that in addition to the G3, the P7 7 and P5, we will have a new platform that will have both the right hand and left hand driving capability targeted both domestic and international market will be a very large volume driver. At the same time, we'll be launching a product that will be especially higher than our current high end 400,000 and above.
So let me turn to Dennis to talk about the margins.
Yes. Bin, you're right. If we take out the software margin impact, we had about 2.3 Percentage point margin improvement quarter over quarter. Among that, around 1.1 to 1.2 was driven by better product mix. In the Q2, we had more P7 in our total sales.
In the Q1, our P7 accounted for about 60% of the total sales, but in the Q2, the P7 increased to about As we mentioned in the previous earnings call, we have reached the battery cost negotiation Starting from the Q1, but in the Q1, we also had some inventory which we purchased in Q4 last year. So The cost reduction impact for the Q1 was not 100%, but in the Q2, we basically We have 100% usage for the lower battery cost. So that accounted for about 1.1 to 1.2 percentage points in So this is a big part of the margin improvement by the causal factors.
Yes, Bing, Charles here. To address your third question regarding the software tax rate. In Q2, our software tax rate From around 20% last quarter to around 25% this quarter. And we believe the increase in software attach rate was mainly driven by the high utilization rate and also the overwhelmingly positive feedback from our customers. For example, in June, our The NGP utilization rate exceeded 65% and also the NGP managed penetration rate in June also exceeded 60%.
And looking forward, I think starting from Q4 and we will start to recognize the Revenue from the XPathode 3.0 from the on the on the our P5. Thank you.
How about guidance? Second half guidance. Thank you.
And your next question comes from Nick live with JPMorgan. Your line is open.
Yes. Hi, thanks. It's Nick on JPMorgan. Thank you for taking my question. Yes, 2 simple questions.
First is related to financial and second is related to the policy guideline. On the financial, yes, you mentioned earlier as of June, we have been roughly nearly RMB33 1,000,000,000 in cash on balance sheet. And can you remind us what our strategy is in that debt of cash? And you mentioned earlier that we are launching 2, 3 new model And also, Brian just mentioned, we are going to launch a new production platform And also sales and marketing expense increased in 2Q. So effect on very strong top line and can you help us understand how should we think about Facility or margin in light of a lot of expansion or investment going forward at both cost level and OpEx level.
That's the first question. And the second question is the Turk government MIT announced recently a policy guideline regarding data control, data
Thank you. This is Brian. Let me just address your first Question regarding our cash reserve and then future use of those cash. Including the Hong Kong IPO rate, Our cash balance actually exceeded RMB14.6 billion at the moment. As we stated in our Hong Kong IPO prospectus, we actually intend to use The proceeds are mostly for R and D as well as sales and marketing expansion.
What I can say at this moment is that We are seeing a tremendous opportunity in China. The acceleration of the market is actually faster than what we expected In the beginning of the year and I think as the leading company in this segment, we want to maintain our leadership by further invest into R and D, infrastructure, sales and marketing, brand building and other sort of related efforts. So you can see that we will increase the investment pace of our business in all these areas. For example, in the area of R and D, we think this year we We will further accelerate the use of R and D funding. We expect the R and D Expenses for the whole year will approach about RMB4 1,000,000,000.
So that will be an increase from the earlier year early in the year. Also in the sales and marketing, I think given that expected launching of our new models in 3rd Q4, we will be also increase The spending on market, sales and marketing infrastructure build out brand as well as other areas and charge and facilities, etcetera. We intend to increase the delivery target for our business. So as Xiaofeng mentioned in the script earlier, in the Q4, we aim to achieve on a monthly delivery a peak number of above 15,000 vehicles per month. So that's actually is the acceleration of current pace of delivery that we've seen.
And based on what we see today in the supply chain and the constraints, we are confident we can hit that level in the Q4. So let me turn now to Dennis. I'll turn now to Xiaopo to talk about the
In regards to your second question regarding data security, we are actually very, very happy to see this new regulation coming out from the Chinese government It's going to be very, very beneficial, not just for the whole industry, but especially for Xiaopo because XPAN has been always very on its data protection and also on its safety safeguarding. Since our inception, we've been investing a lot in the R and D of the data Security and also safety safeguarding, we not only fulfill the requirements and regulation in China, but also in Europe and across the world as well. And in terms of the whole industry development in this regard, we believe that a lot of the OEMs and other competitors out there are focusing on building their advantage on different modules. But really, the challenge lies in the combination of different modules and also how to coordinate different modules to make sure that the whole set of your intelligence or driver assistance system fulfill all of those safety requirements and data security protection requirements. The most challenging part actually comes in the safety, safeguarding and also the manageable module that really requires a full stack in house R and D capabilities, which XPan always possessed.
And also, in terms of the software OTA, which also is an important matrix in regards to your data protection and also safety safeguarding, We are very, very cutting edge in this development as well. For example, we are the first OEM or EV OEM I'm in the industry that actually conduct a driver proficiency test before allowing them to use our driver assistance system. We are also the first Clearly, we see this new regulation as a beneficial news for not just the whole industry, but especially for OEMs such as us that actually possess the in house full set R and D capability. Thank you.
All right. And your next question comes from Ming Lee with Bank of America Securities. Your line is open.
Thank you, Mei Yuansion. So I have two questions. The first question is regarding your international expansion plan. I think yesterday, we just saw a news that you also started to ship P7 to Norway. So in the future, will you continue to adapt The wholesale business model, you will start to open your own brand stores and further retail model.
Besides that, you also mentioned that starting from 2023, all of your models will be able to using the international standard and to ship to worldwide. So in your view, what's the most Difficult and the challenges when you need to localize your component and what kind of components or software is the most difficult to localize? That's my first question. And the second question actually just follow the previous regulation issue. So Actually, I think it's good thing to see a strict regulation and the new regulation actually gives guidance for all the auto company to comply with.
However, I think in the near term, is it possible that OTA become more difficult or The new software and hardware are able to provide level 4 autonomous driving functions, but the regulation probably only allow you to provide Level 3 functions. In this case, how often do you see the profitability on this and then we'll at least narrow down
And your next question comes from Ed
Sorry, let me respond to the question, because we were actually on mute. So on the first question, Ming, you're talking about the international Strategy for sales and marketing. Currently, we actually are aiming to try both in terms of working with distributors locally as well as Opening our direct owned stores. We were actually going to try a hybrid model in Europe. For example, in Norway, we are working with a leading Distributor right now, but also we have plans to open up our own stores in large cities or capital cities in the European So we are experimenting a mixed model.
Obviously, that's something that we will need to decide What is the best model for us? But I think it's currently it's a hybrid model. Your second question is on the OTA and also the data Your second question, I think, is the same question that was asked The question about the renewed regulation, how that impacts our ability to innovate as well as stay ahead. I think as Xiaopo mentioned In the answer earlier, it is obviously we're welcoming the regulatory sort of a framework. And I think as a leading company in this, We will benefit from the higher standard, higher bar for such practice.
So I think for us, we don't see this actually will Slow down our innovation, nor will it actually narrow the gap between us and the followers. We actually think The increased regulatory tension on this area will actually further strengthen the top players and create more barriers for the followers to come.
All right. And your next question comes from Ebison Yu with Deutsche Bank. Your line is open.
Thank you for taking our questions. I have 2. First one, it seems you're making a bigger push And to the premium end going forward, I'm just curious if you could share how you will kind of go about this differently Then the sort of existing models or the more mass market models, will you be kind of implementing better service So will there be some sort of brand differentiation with this kind of premium offering? And second is just about the XPILOT 3.5 pricing. I think in the past, you've talked about as the feature set grows, The price should go up.
So wondering if you could provide any details there.
So to answer your second question first is, we actually intend to have a higher pricing for XPILOT 3.5. It Should be priced at a premium to the current XPILOT 3.0. Obviously, the XPILOT 3.0 will still be available Two vehicles with the hardware. So, in the foreseeable sort of models, we will actually have The current pricing is maintained for the XPILTA 3.0 and slightly premium price for XPILTA 3 point
Now in response to your first question, I think P7 has already Last month, our delivery of P7 actually surpassed that of all the A 4. So that's just a lot about our capability of entering the premium market. In the future, we target the even higher price range at about 400,000 to 500,000 even. So that's by entering those premium markets, We plan to actually offer standardized data driven and technology driven kind of differentiation that set us Our competitors not by offering other kinds of service. In the long run, we expect to see actually a new development coming out from our R and D that actually allow us to really be different from other market offering by 2023 to 2025.
And by that time, you will actually see what I'm talking about. And by that time, you will actually see that we will have something that actually showcase our core R and D capabilities and actually allow us to build an even stronger competitive edge or competitive moat against other competitors in the market. And because this actually involves some Confidential information about our key fire development logic behind allow me to keep it confidential at the moment. And when the time allows, time permitting, I will give you and share with you more information in this regard. Thank you.
And I can actually give you one Some of the flying cars that we are developing and pipeline that we are R and D ing at the moment, we plan to actually target an even more premium market price as So that would be actually one of our flagship products by that time as we enter the premium market.
Thank you.
And your next question comes from Paul Gong with UBS. Your line is open.
Yes. Hi. Thanks for taking my question. My first question is regarding your distribution network. I think you mentioned you are going to expand your And also related question on this is, in terms of challenge, do you think there is And the more limitation for the coverage of the network or the efficiency of the network, Where do you foresee the further improvements?
My second question is regarding the number of models. It seems that you're going to accelerate the launch of new models from 2023. But I think there is As of right now, on the 4 models despite of a non GAAP record and much higher volume, so we are And with this number of models, what is your main considerations to build up so many models? And would this give much changes to your
So in response to your first question, Definitely by the end of the year, we plan to open 3 50 exhibitor stores and we will have both directly operated at self operated and also partnership stores and the ratio of our directly run stores will increase. And also, since several months ago, we already saw a great improvement on the single store's profitability. Actually, since last year, we already saw that happening across different models that we actually launched and sell. And so Across the board, we see a lot of our stores making profits. And so that is why when we look at the deployment Of new stores, we will look at, 1st of all, the infrastructure of that particular city, meaning that do we whether or not we have the supercharging support in that particular and also how developed the sales network is that support that particular city.
And so actually with those two core components of Structure and all those networks, we see great improvement in our sales performance in a few months' time. And so that is what we are going to actually heavily invest in for the second half of the year to actually further expand our distribution network. Now in response to your second question, I would like to talk about 2 things. The first thing is XBANG will Still continues to focus on high quality products, which means that all of the models that we are in, we expect them to achieve the number 1 or number 2 of its Market share of this kind, for example, P7 has already achieved number 2 in terms of sales in class B sedan and G3 is ranked number 1 or number 2 in the market of its kind. In the future going forward, when we have more models in our And when we launch more models, we begin we are going to adopt a different store distribution or showcase strategy.
So we are going to actually look at the local market and local cities and analyze the market a month In selecting which models to showcase in the showroom and in the stores. And in some of our flagship stores where we have more space, we will We'll be able to showcase the whole selection of our models. Thank you.
Thank you once again for joining us today. If you have further questions, please feel free to contact Xtang's Investor Relations through the contact information provided on our website of the TPG Investor Relations. Thank you.
Thank you, everyone. Thank you. Thank you all. Bye.