Good day, ladies and gentlemen. Thank you for standing by, and welcome to the EHang Q3 2024 earnings conference call. Please note that the management's prepared remarks and the subsequent Q&A session will be primarily conducted in Chinese, and the corresponding simultaneous or consecutive interpretation can be accessed on the English line. As a reminder, all translations are for convenience purposes only. In any case of any discrepancy, the management's statement in the original language will prevail. To listen to the original remarks by the management, please join the Chinese line. Additionally, both the Chinese and English lines are open for questions, and today's call is being recorded. I will now turn the call over to Anne Ji, EHang's Senior Director of Investor Relations. Ms. Anne, please proceed.
Hello everyone. Thank you all for joining us on today's conference call to discuss the company's financial results for Q3 of 2024. The earnings release is available on the company's IR website. Please note the conference call is being recorded, and the audio replay will be posted on the company's IR website. On the call today, we have Mr. Huazhi Hu, our Founder, Chairman, and Chief Executive Officer, Mr. Zhao Wang, Chief Operating Officer, and Mr. Conor Yang, Chief Financial Officer and Director of the Board. Before we continue, please note that today's discussion will contain forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, forward-looking statements involving current risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today.
Further information regarding this and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Also, please note that all numbers presented are in RMB and are for Q3 of 2024, unless stated otherwise. With that, let me now turn it over to our CEO, Mr. Huazhi Hu. Please go ahead, Mr. Hu.
Okay. Hello everyone. Thank you very much for joining EHang's earnings call. Since Q3 of this year, our order deliveries and financial performance hit a record high again. We have also made exciting progress in multiple aspects, such as the air operator certificate application and certification review, the development of low-altitude economy, R&D of next-generation technology and products, as well as the expansion of overseas markets. All of these achievements underscore EHang's commitment and capabilities in accelerating our pace towards commercial urban air mobility operations. We have become the world's first eVTOL company to obtain the three airworthiness certificates for pilotless aircraft, demonstrating we have the capabilities for mass production and deliveries. In July, the Civil Aviation Administration of China officially accepted the OC application submitted by Guangdong EHang General Aviation and Hefei Heyi Aviation.
This is the world's first OC project for pilotless passenger-carrying aircraft, signifying that the first related operational standards are about to be established, which will provide safety assurance for the commercial operations of EH216-S in China. Currently, the OC review is progressing well, and the first OC is expected to be issued by the end of this year. Simultaneously, we are actively assisting our customers and partners in Shenzhen, Guangzhou, Wuxi, Zhuhai, and Wencheng, Wenzhou in preparing their OC applications as well, with the aim to speed up the commercial operations of EH216-S nationwide and promote the development of low-altitude economy demonstration zones across more cities. Since Q3, China's central and local governments have enhanced their support for the low-altitude economy industry, further highlighting its strategic role as an emerging economic growth engine.
China's National Development and Reform Commission plans to establish a dedicated bureau for low-altitude economy, which will better coordinate resources across different segments for fostering the industry development. In November, the Ministry of Industry and Information Technology convened another plenary meeting of the leadership group for low-altitude industry development, emphasizing the strategic importance of the industry's high-quality development and outlining key tasks for advancing pilotless, electric, and intelligent low-altitude equipment. As a global leading UAM technology company, EHang actively aligns with national policies. Our products and development philosophy resonate closely with the government's advocacy for innovation in low-altitude equipment. Under the broad and in-depth policy support, the domestic demand for pilotless aerial vehicles in China continues to grow. In Q3, our deliveries and revenues reached a record high again. We delivered 63 units of EH216-S, and our quarterly revenues reached RMB 128 million.
This demonstrates the robust market demand and strong customer recognition of EH216-S. Of course, our focus extends beyond aircraft deliveries. Our top priority is to ensure operational safety as we accelerate the establishment of a comprehensive operational support system focusing on both sales and operations, as well as enhancing the low-altitude ecosystem. We have achieved significant operational progress in the following three aspects: firstly, on infrastructure. With strong support from the Hefei Municipal Government, the second UAM hub, Ascend, was officially established in Luogang Park in Hefei. This hub is tailor-made for the EH216 pilotless passenger aircraft, and it also serves as a UAM hub model for pilotless passenger aircraft operations.
Secondly, on talent training, we have formed a strategic partnership with the Civil Aviation Flight University of China to jointly carry out the training of talents related to operations, maintenance, and management of EHang's pilotless aircraft, and to establish a standardized system. Thirdly, we are building an after-sales maintenance and repair system to support the upcoming extensive operational work. We believe that in a future of a flourishing low-altitude economy, only truly competitive products can attract a sustained market interest. EHang will continue to increase our R&D investment to maintain our leadership. We will focus on the enhancement of EH216-S performance and the commercialization of long-range products on the following aspects. Regarding EH216-S performance enhancements, we have entered into a strategic partnership with Enpower, a pioneer in new energy vehicle power systems, to co-develop electric motors and motor controllers tailored for EHang's eVTOL.
This new solution features an integration of lighter weight and higher power density. Meanwhile, we have strategically invested in Inx and achieved a significant breakthrough in the joint development of a high-energy solid-state battery technology. With this solid-state battery, our EH216-S completed a continuous flight test exceeding 48 minutes, significantly improving the flight endurance by 90%. Next year, we aim to improve the flight endurance even further to 60 minutes. This milestone achievement is critical in broadening the application and operational scope for our eVTOL products. Moving on to the development of our long-range product. Building on the VT-30 prototype, we have conducted commercial design and upgrades for our lift-and-cruise eVTOL model to VT-35. This long-range product complements our existing product portfolio by targeting application scenarios like inter-city, cross-bay, and cross-mountain routes, extending beyond the EH216-S's intra-city UAM coverage.
With the two categories of EH216 series and VT-35, we will achieve full scenario coverage for low-altitude flights. In the overseas markets, in Q3, we have conducted demo flights in Brazil, Japan, and Thailand, extending our footprints to 18 countries across the globe. We're also making strides in overseas airworthiness certification for the EH216-S. In September, EH216-S was granted an experimental flight authorization certificate from Brazil's National Civil Aviation Agency, and we plan to conduct more in-depth test flights in Brazil to facilitate the local airworthiness certification. The Civil Aviation Authority of Thailand also plans to open flight tests for certified eVTOLs in multiple areas of Thailand. We're planning to expand our flight range in Thailand, with the aim to launch commercial flight operations in some regions of Phuket and Chiang Mai by 2025.
Reflecting on our progress over the past decade, EHang has launched the world's first pilotless passenger aircraft, EH184, in the United States, becoming a pioneer of the global urban air mobility industry. We have driven and pioneered breakthroughs in pilotless aerial vehicle technology and airworthiness certification. With the launch of operational hubs such as the Hefei UAM hub and others, EHang's long-held dream of urban air mobility will truly come to fruition. Moving forward, we will steadily advance, ensuring safety as the top priority to achieve sustainable industry development. We also strive to create greater value for our shareholders, partners, and the society. Next, I'll turn the call over to our COO, Mr. Wang, to elaborate more on our Q3 operational performance. Thank you. Thank you, Mr. Hu, and hello everyone. Let me first provide an overview of our product delivery status for Q3.
In Q3, we received repeat orders from existing customers as well as new customers. Specifically, we completed the deliveries of 40 units to the Shanxi client in Q3, reaching a total of 50 unit deliveries to this client. We also delivered three units to our Wencheng client in Wenzhou, Zhejiang Province, in Q3, reaching a total of 30 units delivered. Additionally, we delivered five units to each of Shenzhen Boling and Hefei Heyi customers for their repeat orders in Q3 to be deployed in their expanded site at the UAM operations center in Luohu District, Shenzhen, and the newly established UAM hub at Luogang Park in Hefei. Furthermore, we also secured new orders and completed deliveries for clients in Fujian, Chongqing, Tianjin, Guizhou, Shanxi, and Zhuhai this quarter. In summary, we delivered a total of 63 units of the EH216-S series in Q3.
Currently, our domestic order book is more than 1,000 units. As an aircraft manufacturer, EHang is not only responsible for the production and sales of the aircraft. We're also providing customers with maintenance, repair, and related consulting services. Due to the special nature of the aircraft, we're also assisting our customers from various regions in preparing for their operational certification applications, striving to obtain approvals from the CAAC as soon as possible. Before that, we're also assisting customers with services including operational site design, route planning, and business process planning. For those operation companies that have submitted their OC applications and are under regulatory review, we provide full technical support to assist them in safety improvements to meet the safety operation requirements of the CAAC. Our company's focus moving forward will be to place greater emphasis on service quality.
We aim to proceed steadily and diligently, serving our customers well, building a robust UAM operational system, and improving talent training mechanisms. This will enable our customers to operate their aircraft continuously and stably, achieve commercial returns, and also lay a solid foundation for the company's long-term development. In terms of personnel training, with the aim to assist our clients in better operating and maintaining the aircraft, we have trained a total of 47 operators and 22 maintenance personnel for our customers. Regarding infrastructure construction, we have signed strategic cooperation agreements with several infrastructure service providers. These partners will take the initiative to undertake the construction of low-altitude infrastructure, such as takeoff and landing platforms and hangars in some cities. We will use these infrastructure facilities through cooperation or leasing agreements. Since Q2, we have visited numerous domestic production bases for new energy vehicles and new energy batteries.
Additionally, in October, we visited some European manufacturing facilities specializing in safety aviation components. We are currently in discussions with some of these factories about potential cooperation. Our goal is to integrate various production facilities and management expertise to provide ideas and solutions for the integration and upgrade of our production lines and manufacturing technique in order to improve quality and reduce costs. Currently, all of our delivered aircraft are produced in our sole production facility in Yunfu. Starting from Q4, we will strengthen industrial cooperation and plan to expand our industrial layout in Anhui, Shanxi, Guangxi, and Beijing through joint ventures and contract manufacturing. For instance, in Hefei, Anhui, where our East China headquarters is located, we're collaborating with the local government to establish the EHang Aerial Vehicle Manufacturing Industrial Park and have already completed the site selection for the first phase of the factory and flight test area.
In North China, leveraging our cooperation with Xishan Tourism, we plan to establish a low-altitude economy industrial park and a North China delivery center in Taiyuan. In the capital, Beijing, we are actively exploring cooperation on the R&D and testing, manufacturing, education and training, and demonstration applications in areas like emergency response, firefighting, and rescue missions, and we have already begun environmental research work. As for our existing Yunfu factory, we'll start technical upgrades to the production line and flight test area in Q4. By 2025, with the commissioning of new factories, our overall aircraft production capacity and component supply will continue to expand. Since Q3, we have visited a number of overseas customers, investors, partners, and media.
Additionally, we have actively participated in various domestic and international industry exhibitions, including the China International Aviation and Aerospace Exhibition, the China International Import Expo, Droni taly in Bologna, and Smart City Expo World Congress, GITEX Global, and the Thailand Drone Expo, among others. These activities have further enhanced EHang's international reputation and allowed us to connect with a large number of potential customers. In China, we have also actively participated in activities and conferences organized by various ministries and commissions, such as the Ministry of Industry and Information Technology, the National Development and Reform Commission, and the CAAC, including the Low Altitude Economy Innovation and Development Conference, the China International Small and Medium Enterprises Fair, and the Urban Air Mobility Forum.
Through these conferences and forums, EHang has actively communicated its thoughts on the development of the low-altitude economy and future operational strategies, resonating with attendees and earning recognition from many industry experts. EHang has been invited to almost every low-altitude economy-related conference and forum, with expectations to bring our aircraft for display or flight demonstrations. Our international reputation has also significantly improved. Since Q3, we have obtained special flight permits in Brazil and Thailand and have carried out demo flights. To date, the EH216 series has completed flights in 18 countries. Looking forward, EHang will continue to promote and lead to the commercialization of the low-altitude economy while expanding our industry footprint. We will stay committed to our dual focus on sales and operations, fueled by innovation and collaboration, as we support the sustainable growth and commercialization of this emerging industry.
Now, I'll hand it over to our Chief Financial Officer, Conor, to walk you through the financial performance for Q3. Thank you.
Thank you, Mr. Wang. Hello everyone. This is Conor. Before I dive into the details, please note that all numbers presented are in RMB and are for Q3 of 2024, unless otherwise stated. Detailed analyses are available in our earnings press release on our IR website. I will now highlight some key points. In Q3, our efforts have once again delivered robust results. We exceeded our revenue guidance by 4%, recorded adjusted net income for the second quarter in a row, and maintained positive operating cash flow for the fourth consecutive quarter. We're also making steady progress on the OC front as we gear up for upcoming commercial operations.
Turning to the specifics for Q3, our total revenues were RMB 128.1 million, representing a 347.8% year-over-year increase and a 25.6% increase from the prior quarter. This is primarily driven by the higher sales volume of EH216 series products. In this period, we delivered 63 units of EH216 series products, achieving a new record high for quarterly deliveries, compared to 13 units in Q3 2023 and 49 units in Q2 2024. Q3 gross margin was 61.2%, compared to 64.6% in Q3 2023 and 62.4% in Q2 this year. Despite the modest decrease, our gross margin remained high, reflecting our competitive advantage in the eVTOL sector. Adjusted operating expenses, which exclude share-based compensation, were RMB 86.9 million, a 60.9% increase from RMB 54 million in Q3 2023 and up 23.1% from RMB 70.6 million in Q2.
The increase was mainly due to expanded sales-related expenses, higher employee compensation, expansion of sales channels, and increased investments in various eVTOL models. Q3 adjusted operating income was RMB nine million, compared to an adjusted operating loss of RMB 34.2 million in Q3 2023 and an adjusted operating loss of RMB 4.7 million in Q4. We recorded adjusted net income for the second consecutive period in Q3 2024, reaching RMB 15.7 million. This marks a significant improvement from an adjusted net loss of RMB 31.3 million in Q3 last year and also an impressive increase over the RMB 1.2 million achieved in Q4. Furthermore, we continue generating positive operating cash flow for the fourth consecutive quarter. At the end of Q3, our cash balance, including cash, cash equivalents, short-term deposits, restricted short-term deposits, and short-term investment balances, was RMB 1,077.6 million.
On top of that, last week, we announced an over $22 million PIPE investment from strategic investors, including Enpower and a strategic institutional investor from the Middle East. This strategic investment brings our total year-to-date financing to nearly $100 million, enhancing our financial position for our next phase of development and growth. The financing proceeds will be used to advance our next-generation eVTOL technology and products, scale production capacity, expand our team, establish new headquarters and operating sites, and support the general corporate activities. As we move into Q4, with the OC certification process nearly complete and final approval within reach, we are focusing on fine-tuning our commercialization model to enhance our customers' needs to achieve safe and stable operations as quickly as possible. This is expected to further boost market demand for our pilotless eVTOL aircraft, driving steady growth in both orders and sales.
At the same time, ongoing improvements in low altitude policies and increased government support for the low altitude economy are adding even more momentum to the market. Given these trends, we are expecting our revenue in Q4 is RMB 135 million, representing a year-on-year increase of 138.5%. The total revenue for the full-year of 2024 is expected to reach RMB 427 million, with a year-on-year increase of 263.5%. That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up your handset before asking your question. We'll just pause momentarily to allow any questioners to register. Your first question comes from Cindy Huang from Morgan Stanley. Please go ahead.
Hi, and thanks for taking my question, and congratulations on remarkable 3Q results. My first question is regarding solid-state batteries. Could management share more details on battery development with Inx, and what's the key hurdle for solid-state batteries to commercialize now, and when do we expect to mass-produce it?
Thank you for the question. I am Wang Zhao . On your first question, our joint battery development with Inx began early on. Developing a new battery, especially one requiring significant technological breakthrough like a solid-state battery, is a complex process. It involves not only increasing battery capacity density but also enhancing cycle life, maintainability, and safety features, requiring significant R&D resources to perfect a new battery technology for mass production and commercialization. Currently, many companies are investing in the development of solid-state batteries, and it typically takes about 2 to 4 years for these technologies to mature and reach mass production.
[Foreign language]
With support from the Hefei International Advanced Technology Application Promotion Center, we have collaborated with Inx Energy to develop our batteries, combining our strengths with impressive progress. We have significantly increased the EH216-S's flight endurance to 48 minutes and 10 seconds, and this is just the beginning. We expect to further extend this to 60 minutes sometime next year. Additionally, the energy density of this battery has increased from 250 Wh/kg to 480 Wh/kg, and the temperature rise during the entire flight has been reduced from 60 degrees Celsius to 18 degrees Celsius.
[Foreign language]
But I should let you know that currently these solid-state batteries are only in small batch testing, and its costs are twice that of existing batteries. But of course, the energy density has been doubled. I think the production costs will gradually decrease as we mass-produce them. Our goal is to achieve certification and mass production of these solid-state batteries for the EH216-S sometime by the end of 2025. Next question, please.
Thank you for the answer. And my second question is regarding the progress of operator certificates. As we enter into more in-depth review phase, can we expect that EHang still can receive OC by the end of this year?
[Foreign language]. Well, in response to your second question, you should know that, yeah, of course, the progress of OC application is closely watched by the industry. However, there are no readily available standards that we can refer to for the OC review. Therefore, it requires improvements and innovations on the current regulations.
Therefore, the OC approval process is also a process of setting up standards.
[Foreign language]
And most of the work on the OC review has been completed. And also, based on the feedback from the Civil Aviation Administration of China, we have recently submitted necessary adjustments, and we're still waiting for further feedback from them. Our company has been quick to respond and also make adjustments. So our goal is to meet the safety operational requirements of the Civil Aviation Administration as soon as possible.
[Foreign language].
If all goes well, the first OC is expected to be issued within this year. However, we also hope everyone understands that this is a process of certifying operational safety, which requires a lot of rigorous work and responsibility to the passengers. So please stay tuned for further updates. Thank you. Next question, please. Thank you.
Your next question comes from Laura Li at Deutsche Bank. Please go ahead.
Hi, thank you for taking my question. So my first question is about production. So I think last quarter we talked about there will be additional 1,000 units per year capacity by next year. So does that include the capacity from the third-party manufacturer or partners, as you mentioned today, or it's mainly on the Yunfu factory? Also, is there any update on the CapEx of this and next year?
[Foreign language]
[Foreign language]
First on your CapEx question. So this year, our CapEx is around $15 million, and it will be $20 million for the next year. And with your question on the production ramp-up, so we will start technical upgrades to our existing and only factory in Yunfu, Guangdong Province, in Q4.
Meanwhile, we will also prioritize constructing new factories in Guangzhou, Hefei, and Guangxi. These new factories may involve joint ventures. We may bring in new partners in the manufacturing industry to leverage their experience and management models with our products for better aircraft production and delivery. Next question, please.
Okay, gotcha. Just a quick follow-up. So think about the technical upgrades in Yunfu factory in Q4. Will that cause any kind of downtime or influence the delivery cadence for this year or no?
[Foreign language]
[Foreign language]
I expect the impact or disruption to the production and delivery would be minimum. We actually have considered the potential impact of this technical upgrade on the deliveries from Q2 all the way to Q3. However, we want to mitigate and minimize the impact as we upgrade the capacity.
However, we believe the short-term disruption, if there were any, to the production actually may be offset by the increased production later on. Meanwhile, we are also considering scheduling the construction of other facilities. So with the synergies between these upgrades as well as additional production facilities, we might be able to minimize the impact and ensure future smooth deliveries.
Okay, gotcha. Yeah, thank you for the color.
[Foreign language]. Next question, please.
Thank you. Your next question comes from Jayden Zhao at UBS. Please go ahead.
Thanks for taking my question. My question is regarding that since the battery prices are lowering and our scale is growing up, when are we expecting our break-even to be? At what kind of scale or at what kind of time period?
[Foreign language]
[Foreign language].
Yes, you can see that in the third quarter we have a.
Sorry, I was, sorry Conor , I was on mute. Would you like to go further instead?
Please go ahead.
Apologies, I was on mute. Yes, so as we ramp up production, the price of battery as well as the key components will definitely come down. That's the trend. However, you should know that we are constantly iterating these models and also introducing new features. This will potentially push up some of the costs of these aircraft, but our gross profit margin is at a healthy level. Let me point you that we have achieved a positive adjusted net profit for the past quarter, and we'll definitely see a faster growth in our revenue than our expense. So in other words, we are having better operational efficiency and a stronger capacity of stronger profitability.
Thank you for the color. My second question is regarding our supply chain strategy.
What kind of investment and research and development strategy are we adopting in the electric motor and the solid-state battery?
[Foreign language]
[Foreign language]
Thank you for the question. I'll take this one. So let me start by saying that in this emerging UAM industry, so air taxis are set to play a critical role in the future low-altitude economy. And for us, the key is to enhance the EH216-S based on its airworthiness certification. And we'll continually upgrade the core components and key technologies to maintain our product and technological leadership. And based on this strategy, we have chosen and focused on over 10 core areas, including batteries, motor, propellers, AI, composite materials, and communication technologies. And through collaborative development, strategic investments, as well as joint venture, so we maintain active communication and cooperation with these top-level suppliers in this industry chain.
We are constantly exploring new patents and also new technological directions. So perhaps in the future, we might even offer some key components that we developed to our peers in the industry to actually push forward innovation in this sector.
[Foreign language]
And for example, recently we completed a 48-minute endurance flight test on the EH216-S using high-energy solid-state lithium batteries developed with Inx. This marks a significant breakthrough in the technology in this industry. We aim to extend this to 60 minutes in the future. Additionally, we are developing a new generation of power systems to improve efficiency. On the product side, other than the EH216 series, the VT-35 will also be a strong complement to our current product lineup.
Thanks for taking my question.
Next question, please.
Thank you. Your next question comes from Gareth Zhao at Tianfeng Securities. Please go ahead.
Okay.
Thank you for taking my question. So I have two questions. The first one is regarding the gross margin. So we saw there's a slight decline in the gross margin in this quarter. So how does the company view the potential for cost reduction in the future? Thank you.
[Foreign language]
[Foreign language]
In the third quarter, we are very delighted to see some repeat orders from our existing customers. However, we actually sell them based on last year's contract prices. Therefore, it slightly affected our average selling price and therefore caused a minor decrease in our gross margin. But it remains still at over 60%. So the impact is minimal.
[Foreign language]
On the cost side, as we scale up production, we expect some cost reductions due to economies of scale.
At the same time, we will continue to enhance the performance of core components like motors and batteries, which could increase costs to some extent. These factors will likely balance each other out. So we anticipate maintaining a gross margin of around 60% in the future. That's my answer.
Okay. Thank you. So my second question is regarding the eVTOL progress. So could you provide more insights about the progress of eVTOL certification in overseas markets? Thank you.
[Foreign language]
[Foreign language]
EHang has conducted flights in 18 countries worldwide and has engaged with various national aviation regulators across the world. We understand that countries take a cautious approach to certifying new types of aircraft. And also in these areas, they lack experience and certification systems.
Therefore, for us, while we were advancing our overseas certification process through bilateral airworthiness channels with the Civil Aviation Administration of China, we are also actively exploring some pilot programs abroad to get our eVTOL operational internationally as soon as possible.
[Foreign language]
For instance, in September, Brazil's aviation authority granted our EH216-S an experimental flight permit, allowing us to conduct flight tests and trials extensively in Brazil. So this would help us to gather data for future TC certification. And also moving to Thailand, we are actively exploring a sandbox pilot model with the Thai aviation authority. We are aiming to begin commercial flight operations in some selected regions next year. Thank you. Next question, please.
Thank you. Your next question comes from Ling Liu at Guosen Securities. Please go ahead.
[Foreign language]
[Foreign language]
Congratulations on the strong results. We noticed the recent announcement of the Hefei Hub completion.
Could management share some insights on the future operational plans in Hefei?
[Foreign language]
Thank you for the question. This is Wang Zhao. I'll take your question. The Hefei Hub is a major operational site built to OC standards, complementing existing sites to pilot various air transportation operations. The Hefei municipal government has announced plans to build over 30 eVTOL takeoff and landing points in Hefei over the next three years. The operational plan is quite extensive in its size, with existing size integrated with operations at Luogang Park. So it will serve as an air transport hub. Once operational qualifications are obtained, ticketed operations will start very soon. Next question, please.
Thank you. Your next question comes from Yiming Wang at China Renaissance. Please go ahead.
[Foreign language]. My question is on the capacity ramp-up following the technical upgrades.
How much do you think it is going to help increasing our capacity, and how much help or assistance is going to lend to our delivery to our existing orders? Thank you.
[Foreign language]
Current production capacity is being enhanced through means of supply chain optimization and improved worker skills as well as efficiency. However, the factory requires a technical upgrade to further increase capacity. Additionally, if we were to increase the capacity significantly, that means we need to build out new factories. It looks like the demand for our aircraft has exceeded our expectations, so we are in the process of selecting new sites and designing new factories.
[Foreign language]
Existing orders are right now being delivered at a stable pace. The testing of aircraft is relatively time-consuming and complex, so the current focus is on maintaining stability and thorough testing to ensure aircraft safety.
Additionally, other infrastructures such as takeoff and landing points, operational centers, and training for operators and maintenance personnel also require time. So once the new factories and test sites are operational next year, the infrastructure for operational centers in various locations is mature, and delivery speed will pick up. Next question, please.
Thank you. Your next question comes from Rongzhen Yang at CITIC Securities. Please go ahead.
[Foreign language]
I got two questions. One is regarding the future CapEx investment expectations in the solid-state battery, and the other one is what forms of collaboration we are taking in this collaboration in the solid-state battery if new property rights were generated on this solid-state battery. So how are we going to split the ownership of it? So that's my first question.
[Foreign language]
As early as July last year, we proactively participated in the strategic investment in Inx Energy.
Over the past year, both technical teams have continued to collaborate on research and development with very good coordination and responsiveness, allowing us to achieve phased goals in a relatively short time.
[Foreign language]
The technical breakthrough is also supported by the Hefei municipal government. Last October, we reached a cooperation agreement with the Hefei municipal government, continuously implementing low-altitude projects in Hefei to promote the development of the local low-altitude economy. The Hefei government is also very supportive of these technical breakthroughs. And under the incubation of the National Innovation Center , we and Inx have successfully completed the solid-state battery R&D breakthrough and installed it on the EH216-S and have successfully test-flew it.
[Foreign language]
We'll continue to increase our R&D investment in fast charging and solid-state batteries.
These expenses are primarily recorded as R&D costs and not included in the capital expenditures. And also, we are doing contract manufacturing, so there aren't any CapEx included for the production of these batteries.
[Foreign language]
And also, the intellectual property for the core technologies and components will be jointly owned by EHang and our partners. [Foreign language]. Thank you. And that's the end of the Q&A session.
Thank you. Yes, that concludes the question and answer session. I'd like to hand the call back to Ms. Anne for closing remarks.
Okay. Thank you, Operator, and thank you all for joining today's conference call. If you have any further questions, please contact our IR team by email or participate in our following investor events through the calendar information provided on our company's IR website. We appreciate your interest and look forward to our next earnings call. Thank you.
[Foreign language]
Thank you all again. You may now disconnect.