Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Niu Technologies third quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now, I will turn the call over to Mr. Jason Yang, Investor Relations Manager of Niu Technologies. Mr. Yang, please go ahead.
Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss Niu Technologies results for third quarter 2020. The earnings press release, corporate presentation, and financial spreadsheets have been posted on the Niu investor relations website. This call is being webcast from the company's IR website, and the replay of the call will be available soon. Please note today's discussion will contain forward-looking statements made under the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks, uncertainties, assumptions, and other factors. The company's actual results may materially differ from those expressed today. Full information regarding the risk factors is included in the company's public filings with the Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required by law.
Our earnings press release and this call include discussion of certain non-GAAP financial measures. The press release contains a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results. On the call with me today are our CEO, Dr. Yan Li, and our CFO, Mr. Hardy Zhang. Now, let me turn the call over to Yan.
Thanks, Jason. Thanks, everyone, for joining us on the call today. We have had a strong growth in Q3 with our total sales volume reaching 251,000 units, a 67.9% year-over-year increase. The sales volume in the China market reached 245,000 units, a 70% year-over-year increase. Whereas the volume in the international market reached 5,600 units, a 6.3% year-over-year increase. In the first three quarters, our sales volume reached 451,000 units, an increase of 43% compared with last year. Our strong growth in China was driven both by the market factor and our operation performance in the new product rollout, marketing, and channel expansions. First, let me quickly comment on the overall market landscape in China. The overall electric bicycle market has increased by 30% to 22 million units in the first nine months, according to the Ministry of Industry and Information Technology.
This increase was driven by three factors. First, the post-COVID-19 sentiment led to a high demand of individual mobility devices as more people find electric bicycle a more convenient, safer means for their daily commute. Second, with the adoption of 2019 China electric bicycle standard, more cities started to regulate this industry with license plates, removal of uncompliant products, and such created a safer environment for the users. Lastly, with the lithium-ion battery costs continue to decline, the electric bicycle with portable lithium-ion batteries become more affordable. It was estimated that 20%-30% of electric bicycles this year are lithium, versus 10%-15% in 2019. Amid the fast growth of electric bicycle market, and in particular, the lithium-ion-based ones, we also accelerate our effort in new product rollout marketing and channel expansions.
As we mentioned in the last earning call, we introduced the M2 model in Q2 and the MQis model in July. Both M2 and MQis inherited the family design of our signature M product, viewed as a full-cover electric bicycle. In Q3, M2 and MQis series accounted for 18% of our total sales volume. Meanwhile, we also enriched the Gova series family with our G0, G2, and upgraded G3 series. G0, an entry-level product, was launched at the JD June 18 campaign. With G0, G1, G2, G3, the Gova series now serves the full range of customers' needs from electric bicycle to electric motorcycles in China, with prices starting at RMB 2,299. The entire Gova series sales accounted for 37% of our total sales volume in Q3. Now, the successful launch of M and G series continues to demonstrate our strong capability in product design and rollout.
Furthermore, with G series entry price at RMB 2,299, it allowed us to cover the mid-end consumer segment and open up more markets in the lower tier cities, which accounted for more than 70% of electric bicycle market. Supported by the newly introduced product, we continue to expand our footprint through our store expansions and the new market entries. In Q3, we increased our dedicated branded store to 1,266 stores, an increase close to 200 stores as compared with Q2. This quarterly new store add was an all-time high, as we significantly increased our effort in retail expansion. Despite the fast increase of number of stores, our per store sales also increased by 40%-50% in Q3 year-over-year compared with the same time last year.
This demonstrates the healthiness of our retail operation, as older retail stores enjoyed a sales growth and were highly profitable. This is also a good indicator for future retail expansion. We are accelerating new store openings in Q4 this year, as well as in 2021. Furthermore, with the GOVA series, we were not only able to consolidate our leadership position in top-tier cities, but also able to build a good retail presence in the lower-tier cities. To support retail expansion, we also scale up our marketing activities in Q3. On the mass media front, we kicked off a Back to the Street, This is New campaign and partnered with the hottest online competition show called Street Dance of China in Q3.
This campaign was a coordinated effort of advertising in the online show with more than 200 million views, interaction with all social media channels like Douyin, Kuaishou, WeChat, and Weibo, and offline advertising in subways and buses. It generated a total of 800 million brand exposures and continued to enhance our brand image as a cool lifestyle brand. We also continue to build our brand image with co-branding efforts. This time, we worked with Gundam, a popular Japanese cartoon in China, and rolled out a Gundam special edition based on our MS product. This co-branding has received quite a bit of market hype with close to 50 million views of new Gundam content across multiple channels. Now, let me turn over to the overseas market. Our overseas market reached 5,600 units, a small growth of 6.3% year-over-year.
In fact, we had about another 1,000 orders in Q3 not able to ship in time due to the scarcity of international shipping. Even with all this delayed 1,000 orders, this demonstrates a swing back to normality in the overseas market as our Q2 sales overseas were actually down by 62% year-over-year. This is only the start as most of the people in our core demographics are working from home. As more individuals go back to work, we will continue to see growth across our markets for individual mobility. In Q3, we also increased our flagship and premium stores to 114 from 91 in Q2. Year-to-date, we have added 88 flagship premium stores, with now more than 40% of our sales from branded flagships and premium stores.
Similar to the China market, we will continue to expand our retail footprint with branded flagship and premium stores for Q4 and 2021. Along with our retail expansion, we have also upped our effort in social media with close to 800,000 interactions on Instagram and Facebook. Now, while we are watching closely the COVID-19 situation globally, we're quite confident that our international sales will return to healthy growth in Q4 this year. Now I will turn the call over to Hardy to discuss our financial results. Hardy?
Thank you, Yan, and hello, everyone. Our press release contains all the figures and comparisons you need. We have also uploaded the Excel format of figures to our IR website for easy reference. As I review our financial performance, we are referring to the third quarter figures unless stated otherwise. That all monetary figures are in RMB unless otherwise noted. Our Q3 sales volume reached 251,000 units, increased by 68% year-over-year. China sales volume increased by 70% as a result of retail sales network expansion and new product launch. International sales volume increased by 6%, lower than our expectation, mainly due to the rebound of COVID-19 and the difficulty to book containers for international shipping. We expect some of these challenges to continue into the fourth quarter. We are currently working on different initiatives in order to deliver continued growth from international markets.
Regarding product mix, as we launched a few new products, the mix changed accordingly. N-Series accounted for 12% of total volume. M-Series accounted for 23%. U-Series accounted for 28%, and the Gova series accounted for 37%. Out of the 37% from the Gova series, 27% is from the mid-end product G0 model, and the remaining 10% from G2 and other Gova models. The high percentage of G0 sales volume had a negative impact on our Q3 ASP and gross margin. Total revenues increased by 37% to CNY 894 million, in line with the guidance we provided earlier. The increase was driven by higher sales volume growth of 68%, partially offset by decreased revenue per scooter or ASP of 19%. There are a few key drivers for the ASP decline. First, sales of low-price model G0 negatively affected ASP by around 11%.
Second, the change in product mix in other models, especially lower percentage of sales from the high-priced N-Series products, negatively affect ASP by around 4%. Third, the sales and promotion with direct discounts to end customers affected our margin by around 1%. The remaining 3% decrease is mainly due to relatively slower growth in spare part sales from overseas sharing operators due to the impact from COVID-19. We expect some of these drivers to continue into the fourth quarter. Therefore, the ASP when comparing with Q4 last year is expected to decrease by a similar percentage. Gross margin was 20.9%, 1.3 percentage points lower than this time last year. The lower gross margin was mainly due to a few factors.
First, the sales promotion and discounts we offered to end customers affected margin by 0.7%. Because we offer the sales discounts to end customers, we are able to save on marketing and sales spend. As a percentage of revenue, our sales and marketing spend reduced by 3%. Second, we disposed of discontinued products. The disposal price was below cost and hence negatively affect our margin by around 0.9%. Third, higher sales volumes from mid-end product G0, which has lower gross margin. The impact is around 4%. However, we are able to offset such negative impacts from G0 by cost savings on battery packs and various components. Overall speaking, the margin for the products are relatively stable compared with both last quarter and the last year.
The decline in gross margin in Q3 was mainly caused by sales discounts and a disposal with total impact 1.6%, which are both specific to this quarter. Our total operating expense, excluding share-based compensation, was CNY 97 million, increased by CNY 16 million or 20% year-over-year. The increase was mainly caused by the higher R&D expense of CNY 10 million for staff cost and design expense. Higher G&A expense of CNY 14 million mainly related to foreign exchange loss, tax and surcharge, and professional fees. Sales and marketing expense, however, decreased by CNY 8 million. As I mentioned earlier, we offered a sales discount to end consumers, which affected our revenue and margin by 0.7%. We were then able to reduce our marketing expenditures. As a percentage of revenue, the sales and marketing expense, excluding share-based compensation, was 5.4% compared with 8.5% in Q3 last year.
Our government grants were RMB 1.1 million in this quarter, significantly lower than the RMB 12.6 million in Q3 last year. The company is eligible for additional government grants. We have applied for RMB 10 million government grants. The payment from government was delayed. We will book government grants into our income statement only after we receive it in cash. Our share-based compensation expense was RMB 10.6 million, almost the same as what we had in the second quarter. Compared with Q3 last year, it is an increase of RMB 4.5 million due to the new grants to employees in earlier quarters. Our GAAP net income was RMB 18 million and adjusted net income was RMB 91 million, an increase of 25% year-over-year. The adjusted net income margin was 10.1%, one percentage point lower than Q3 last year. The 1% decrease was caused by a few factors.
Our gross margin was 1.3% lower. It was offset by higher operating leverage, which is 1.6%. We had a lower government grant, which negatively affected our net margin by 1.8%. If we exclude negative impact from government grants, our adjusted net income margin has actually improved against the last year. Turning to our balance sheet and cash flow. We ended the quarter with RMB 1.3 billion in cash, term deposits, and short-term investments, an improvement of CNY 300 million compared with last quarter. Our operating cash flow was around CNY 300 million because of improved profitability, reduced account receivables, reduced inventory, and increased account payables. Our CapEx was around CNY 30 million, mainly related to new store openings in China and international markets, additional machinery, and R&D spending. We had a healthy balance sheet and a very strong cash flow in the third quarter. Let's turn to guidance.
We expect fourth quarter revenues to be in the range of RMB 555 million- RMB 615 million, an increase of 5% to 15% year-over-year. We expect continued sales volume growth from both China and overseas markets. The ASP will decrease year-over-year due to the change in product mix, similar to what we saw in the second and third quarter. In addition, in Q4 last year, we had strong sales in accessories and spare parts to sharing operators from overseas markets. We do not expect such high sales in this quarter. Throughout this year, our orders from sharing operators has reduced significantly as a result of COVID-19. The revenue and ASP for sharing operators are usually much higher than other orders because they order not only scooters but also manufacture spare parts. In the fourth quarter, we will continue expanding our retail sales network in China.
We expect to open more new stores at faster speed than what we did in Q3. We are also working on the construction of our new manufacturing facility in Changzhou. This will better prepare us for continued growth in 2021. Our overseas market began to recover. We had a very strong order book for Q4, which is a good sign for demand recovery. With that, let's now open the call for any questions that you may have for us. Operator, please go ahead.
Certainly. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, you may press star one on your telephone and wait for your name to be announced. To cancel your request, you may press the pound or hash key. Once again, to ask a question, please press star one on your telephone. We do have a first question from the line of Roger Duan. Please go ahead.
Hi, management. Thank you for taking my question. I have three questions. First, there are several international countries in which we have local dealerships, have reentered a lockdown. Can management share the magnitude of negative impact we can expect from these international markets for 4Q and potentially first quarter 2021? My second question is somewhat tied to the first one. How should we think about the ASP will trend for 4Q in 2021, given international markets continue to experience pressure, and the lower price G series products continue to grow as a percentage of units sold? My third question is with regard to the competition. Can management share any insights on how we're thinking about competitions with industry leaders? In the past, we have largely avoided competing directly with them by offering products in different price categories. It has somewhat changed after our launch of G series .
What is our strategy to continue to take market share from these legacy scooter makers? Thank you.
All right. Thank you. I think those are great questions. I'll try to cover the end. I'll try to cover question one, three, and then I'll have Hardy to cover two on the basic ASP front. I think on the international market, yes, I think our Q2 was our worst case, where we actually see a decline of 60+% in Q2 because a lot of stores closed. In April, May-ish, all the stores are closed, and then that give little confidence to our distributors in term of ordering. You have to keep in mind, the Q2 sales, the quarterly sales we see on the international, usually that's actually the time we ship the product. In term of retail, it's basically like a quarter after. Now, what happened in Q2 is most of store are closed, and that forced our distributors to actually not order anything.
That's why we start seeing a huge decline. As in starting in May, stores start to open, and then that gave distributors big confidence. We're seeing uptick orders in Q3. That's why we're seeing up to about 6%, but in reality, I think we should have seen more because we had 1,000 order of scooters not able to outdoor, because there's really a scarcity of international shipping with containers. We are actually quite confident with our Q4. From order book point of view, actually, a lot of orders are coming in. We expect a really healthy growth for Q4. The issue is actually is booking the international shipping containers. This international shipping, actually, the containers at this point seems to be a scarce resource as a lot of ports in Europe, there are not enough people working on the ports.
From order perspective, we're actually seeing a huge order tick-up in Q4 for the international market. I think this is on the 2C side. Now, a little bit on the 2B side. On the 2B side, we're not seeing a great year this year. By 2B, most our orders are for the sharing operators. Sharing operators this year haven't really been doing well this year because, with the COVID-19 situation, with people working from home, you're not seeing a tick-up in the sharing operators, as opposed to last year, where we see a lot of sharing operators order of scooters, both from U.S. and from Europe. We are seeing some this year, but the order has been slow. On this one, we're hoping that with Q4 and then next, basically Q1 in 2021, where the orders from sharing operators will come in.
I think we're already seeing a recovery, like for example, Revel from the U.S. They're already seeing recovery in term of the riderships in the U.S. I think for the 2B side, we're seeing probably little bit Q4, but most likely Q1, Q2 next year, where we're going to see quite a bit uptick on international markets. Lastly is actually where we are, as we put on press release, we are basically starting a pre-sales marketing campaign for the Indonesian market. This will be sort of our official entry to the Indonesian market. The actual sales or the revenue, we won't see that revenue in this year because the pre-sales will happen in December, but most order fulfillment will be in February and March-ish. That actually will add a healthy growth in Q1 2021, and potentially the entire 2021.
Basically, this mark as our first step to enter the Indonesia market of Southeast Asia, the major country in Southeast Asia. Hopefully that address your question number one. Lastly, I'll address question number three, I'll give to Hardy to add on to question number two. Yes, with competitions, with the Gova series, we are entering into the mid-end market segment, or mid to high. It's more or less mid to high market segment, where the traditional players, like other brands, have presence in that market. So far, we have seen that our Gova series has been able to achieve quite promising results. With the entry price at RMB2,299, we have priced product range from RMB2,299 up to RMB4,000. The Gova series in Q3 actually accounts for about 37% of our sales.
It basically demonstrated that we are able to compete with traditional brands in that market range. It used to be we were the only ones sitting on the high end, but now we've come to the mid end with a mid-end product, still with a good-looking design and also a great riding experience in terms of the product experience. We are able to gain market share from the traditional players. This really marks the beginning of this journey, where you look at Q3, we added about 200 stores. Even with an additional 200 store adds, our per-store sales actually went up by 40%. This is particularly because with this mid-end product, the stores are able to use this product to gain market share from competitors.
This also allows us to open more stores in our stronger cities, like tier one cities, tier two cities, where we're able to approach, basically target the mid-end market consumers in that cities, as well as allow us to open more stores in the lower tier cities, where we used to have little presence or zero presence. With that, I think that's where we actually have more confidence looking at we're going to accelerate the store opening efforts. 200 store openings in one quarter has marked an all-time high, but I think that's the historical all-time high, and we'll continue to beat our record in terms of store openings. I'll pass to Hardy to address the pricing part.
Yes. For the ASP, as you already see in the third quarter numbers, the ASP in the third quarter was down by 19% year-over-year. In the fourth quarter, in short, we expect the ASP compared with Q4 last year, will decline at a similar percentage. However, we encourage you to look at the ASP by product segment. The ASP for China scooter sales, ASP for international market, and then ASP for accessory and spare parts. If you break them down, then they tell you a different story. For the ASP for China market, if you look at the third quarter, the price was down by around 18%. Of that 18%, around 13% was affected by a higher percentage of sales coming from G0. Last year, there was no mid-end product G0. This year, G0 takes around 27% of total sales volume. That affects China ASP by around 13%.
The remaining 5% came from the changing product mix from other models. Especially, we have a lower sales in the NQi series product. If you look at this trend in China going forward, the G0 model will continue to be there. However, we do expect in the other models, we will see some improvement. Therefore, the ASP for the China market, if you compare year-over-year, will have some improvement in the fourth quarter. We look at ASP for international market. If you look at the year-over-year change, actually, in this quarter, our ASP for international market increased by 27%, a quite significant improvement, mainly because there's more sales volume, therefore, a big change in the ASP. For the international market, our ASP is relatively stable. It's always anywhere between around RMB 9,000- RMB 10,000. For international market, we do see quite a relatively stable pricing.
Lastly, on the ASP for accessory and spare part services. This one for the China market, the price was relatively stable. For the overseas market, it was significantly affected by how much spare parts we can sell to the sharing operators. As mentioned in the call, this year, we do not have as much orders from sharing operators in Q3 and expected in Q4. We do see some pressure for the ASP going down. For next year, with the recovery from the international market, we do begin to see some of the new orders coming in for both the sharing operators and also for both the sharing scooters and also for the sharing spare parts. For this part, we do see pressure in the Q4, but next year we do see some potential for improvement.
In short, I think if you compare year-over-year in the fourth quarter, the ASP will decline a similar percentage. If you compare quarter-to-quarter, we do expect the fourth quarter ASP will improve compared with the third quarter. If you look at next year, that is the Q3 and Q4, ASP will be quite stable for us to estimate how much we will have for the select year. This answers your second question.
Thank you so much. Very clear.
Thank you. We have our next question coming from the line of Alex Potter from Piper Sandler. Please go ahead.
Great. Thank you, guys. I guess my first question is regarding capacity in Changzhou. You mentioned you're still in the process of expanding the capacity there. I guess what's the update? How much is left to spend in terms of CapEx, and what is your annual capacity now versus what it will be next year?
Yes. Alex, let me address your question. Currently, our design capacity is around 1 million units, and the new factory has another 1 million capacity, and we plan to bring the new capacity on board sometime during the second quarter next year. From the second quarter, the peak season starts. The total CapEx for this new capacity will be anywhere between RMB 100 million- RMB 120 million, including the land. We started construction in October, and it may take us around 5-6 months to complete the full construction. I hope this answered your question.
Okay. Yes. Thanks very much. Was wondering if you could talk a little bit about the promotions and some of the price discounting you talked about also in the quarter, which was an impact on gross margin and ASP. What products were you promoting specifically? What promotions were you running, and how long do you expect to keep doing that?
Yes, I think a very good question. For Q3, we have a different format of promotion this year compared with both early years and also from last quarter. We give cash coupon to our end customers, then they can use this cash coupon to deduct the sales price. Therefore, we spend around RMB 8 million for this promotion. This is a direct deduction from our revenue and also our gross margin. We have this kind of promotion mainly because this Q3, because of the COVID-19, people are more sensitive for price. Therefore, we believe give a direct discount to end consumers is better than we spend money in different ways. However, from Q4 this year, we have no such promotion plan. Therefore, we more attribute to this kind of promotion as one kind of one-off promotion in the third quarter.
Okay. Was this specific for any certain types of products, or was it broad?
No, it's broad. Basically, the end consumer go to the store and they pick the model they like, then they go through a lottery system. Everyone will win, will get something. Someone get CNY 100 cash coupon and a direct deduction for their sales price. Someone can get up to CNY 700 cash coupon, which can be deduct directly from the sales price.
Okay.
It's cross the model.
Okay. The last question from me is on the regulatory change. Can you remind us when exactly the new regulation will be in force? It sounds like you do think that you're getting some demand, because I know people are obviously going to be forced by the new regulation to replace their scooters. Do you think that people are doing that now? When do you expect the most of that demand to materialize?
I think, Alex, it depends on city by city. First of all, the new regulation, basically, the temporary new regulation was announced in 2018. It start to be in force on April 15th, 2019, different city actually give different year. For example, city of Beijing, they gave temporary license plate in 2018, as they said, basically, the temporary license plate, you can use the scooter for three years, which essentially means some of the scooters will be out of street by end of 2021 or I think early 2022. Which we would expect to see, what they call the replacement on compliant temporary license scooters actually starting next year. I think that's also an indicator. I think this is actually a driver for us to quickly add more stores in those cities or in highly regulated cities.
The good thing for us is actually our market share and our presence is actually much stronger in the highly regulated cities, because most of the highly regulated cities are the tier one, tier two cities. Where in the tier three, tier four cities, I think the regulation is still being enforced some places very loosely, where you won't see this uptake into model replacement yet.
Okay, great. Thanks very much, guys.
Thank you. We have our next question coming from the line of Bin Wang from Credit Suisse. Please go ahead.
Okay. Thank you. I actually also got three one. The first one is about a very top-down angle about overall market, because if you see the number from MIIT in the number three quarter, the overall production in China increased by 61% year-over-year. For you actually outperform, yes. If you really excluding the G series, actually in the high-end, it's only around 11% growth. Can I make sure the conclusion is that in the high-end market, actually is much slowing down and means the key driver cannot have that conclusion? Meanwhile, actually, because regulation is coming, regulation really does have some impact on high-end and the low-end simply people don't care. How to elaborate, if understand the different segment have a quite big difference growth? That's number one. Number two is about the guidance.
Can you explain why the October number is so bad and why the huge rebound in the growth in November and December? Based on your guidance in the revenue, we can roughly get a number, say, 150,000 at a guess. It means November, December have more than 50% growth. Can you elaborate whether my calculation is correct or not about November, December growth? If it was correct, why the reason have such high growth after a big dip in October? Meanwhile, what's the guidance for next year, 2021, based on the November and December momentum? The second one. Third one is about new products and new store, because if you see in the past one year, you have been launched quite a few showcase called MRI and RRI, but it doesn't seem these new products really bring any volume.
Kind of number 1, when will be next volume products, and why these new products didn't really bring in volume? How would you think about your new product plan for the coming years? Meanwhile, what's your store guidance for next year? Or maybe end of this year and next year? Thank you.
I think your first question is about the volume you raised. I think if you look at the information published by the Ministry of Industry and Information Technology, their Q3 electric bicycle volume growth is anywhere between 40%-50%, depends on which market you are talking about. Our growth certainly is much higher. We are growing about 70%. You are also correct that the G0 is the key driver for us to grow in China, and our high-end, the N, M, and U series, has a growth around 11%. I think one of the key reasons is that after the new regulation was informed, the new regulation set the top speed, also gave some weight limit to the electric bicycles. Therefore, a lot of the functions, also including driver engine, including other functions, we were not able to add to these electric bicycles.
Because of that, then certainly customers do not want to pay high price for the extremely high-priced models. I think that's one of the key reasons why the high-priced models have slower growth rates compared with the low-end models in the electric bicycle category. And for your second question about the sales volume in October, November, and December, I think that you have been roughly okay. I think in October, as we already mentioned in our earning release, it partly is because of the operational disruption in our factory because in September, we used to have a full usage of our installation of our factory because of the huge demand in the third quarter. Therefore, we have to make some maintenance to our machineries, to our factories, and make sure we have a safe environment to produce for, to prepare for November and December.
Of that reason, some of the sales volume shift to November and also December. This is one reason that's why you see the higher volume in November and December. Second reason, as we already mentioned, we continue to open new stores in China as we already see there's more places for us to open new stores as we launch the G0 model, median model. We have accelerated our opening process. This will also help us to increase our sales volume in both November and December. These are a few drivers to continue the sales volume growth in November and December. For next year's guidance, we will only give it early next year. We won't mention it during this call. In terms of new product launch, I think I will comment a few words, then I will leave to Yan to comment on next year's plan.
For the new products, the TQi, RQi, and also the EUB product we launched earlier this year, they have not entered into mass production yet. They are not the one to drive our volume growth for this year. The reason is the TQi, RQi, and EUB, they are mainly targeted for overseas markets. Their sales price was much higher. This year, because of the COVID-19, the overseas market, for different reasons, we are not able to achieve very high volume growth. We postponed the mass production of some of the models for TQi, RQi, and EUB. For next year, we do plan to launch additional models for the China market, and the new products will launch sometime during the second quarter. We believe some of the new models we launch in China will be hit products and continue to drive our volume growth in China.
For the overseas market, what we are doing is we began to use our Gova series products to enter into the Southeast Asia market, especially Indonesian market. In December, already in December this year, we are going to launch a lot of the Gova motorcycle series models in Indonesian market, and we began to pre-sale in the middle of December. We believe that will help us to drive the volume growth in Southeast Asia market. These are some of the comments on the new product launch and how they can drive our volume growth in next year. I think this is the answer to your question, Bin.
Okay. Thank you.
Thank you. We have our next question from the line of Jing Chang from CICC. Please go ahead.
Thank you for taking my question. Basically, I have two questions. First one is about the store and channel expansion. What's our target next year for store expansion? We see other competitors opening stores at higher speed. I want to know what are our major concerns or difficulties in terms of opening stores. My second question is, we are going to sell e-motorcycles in Indonesia. Can you share some details on our strategy in terms of production? Whether we export or build factories there, and our channels, and also our product compared to the local brand motorcycles, and also maybe a long-term sales target. Thank you.
Thanks. I think great questions. The first one for opening. As I mentioned earlier, in Q3, we were able to add about 200 stores. Keeping in mind, Q3 usually it's been our busy sales quarter, where our distributors are not waiting to open stores. This year, actually, with the effort, we see we actually have a capability to open 200 stores in one quarter. Now we're actually thinking about after that game in Q4, opening more stores than Q3, and we actually have the higher ambition for next year. I guess it really depends on how we wrap up the Q4 this year. We'll have a more relative goal for next year. I think that's basically on the store expansion.
More importantly, if you look at the data here, we have the capability to open faster, more, because even with Q3, with 200 store adds, our per store sales still went up by 40%. That means there's actually a lot of room to open new stores at this point. You can either see if we can actually get to 200 or 300 or 400 stores in Q4, and we'll see how that depends on how fast this construction can be finished. That actually will serve the guidance for next year as well on a quarterly basis. Now, with the Indonesian market, I think it's, yes, one, initially, it will be sort of a CKD method because Indonesia has a huge tariff. If you ship the entire product from China, I think the tariff is about 40%, so that will make the pricing not relevant.
We want to actually enter the Indonesian market now. We have a high-end product, we want to enter sort of our mass affordable product level, affordable price range product. Which actually will ensure we're not being viewed as a luxury product, but a more mass daily commute product. Right now, we have basically a manufacturing partner in Indonesia who will help us to assemble the product, even with some of the parts being locally sourced, and that will actually get to a lower tariff, initially less than 8%-10%, because it's mostly on parts. That probably will happen for next year. Later half of next year, we'll see, depending on how the sales volume will go. We might have to actually invest to build a factory in Indonesia. Hopefully that answered your questions.
Thank you. That's all for my questions. Yeah.
Thank you. Once again ladies and gentlemen to ask a question please press star on the telephone. We have our next question coming from the line of Sebastian Van Hellen. Please go ahead.
Hi, good evening. With the upcoming importance of the Gova series, to what extent do you intend to use after sales to protect your margin? Thank you.
I think even with Gova series, I think the after sales will be still conducted by our branded retail stores. From using after sales to protect margin, I think it's a similar method as in with other series. I think the question, if we look at the actual margin of the Gova series, it's actually slightly less than our premium series, but not significantly less. It's probably just a couple of percentage less. Because even though it's actually marked at the lower prices, the battery it's not NCM or NCA batteries. It's actually LFP batteries, which actually is a alternative, but it's actually cheaper than the NCM, NCA batteries. And the lower end of Gova series doesn't have the smart IoT. The smart IoT is add-on.
For people who actually take a series at the basic level, it doesn't have the smart IoT, so that actually helps to reduce the cost and reduce the price set as well. Our app does support a product where the users can actually, with or without IoT, the user can download the app and they actually register the scooter on the app and then be able to receive the same level of after-sale services on the app as well.
Okay, thank you.
Thank you. We have our next question from the line of Paul Gong from UBS. Please go ahead.
Yeah, hi. Thanks for taking my question. Actually, I have only one question. You mentioned the tariff between Indonesia market is 40%. That's why you decide to build a factory over there. In view of the RCEP, how should we foresee that tariff going forward? The local factory, is that still required in your view?
No, I think that's a great question. I think we saw the news as well, but we haven't really got sort of the detailed information yet. If the actual detailed information, basically like motorcycle, electric motorcycle is actually covered by the treaties, then actually that will solve a lot of our issues as well. Let me put it this way. Frankly, we'd rather have everything manufactured in China, where we have a really tight control with our own factories in terms of quality assurance, everything. From management complexity, it's actually much easier to get manufactured in China versus shipping parts to Indonesia and have it locally assembled or manufactured there. We understood why the tariff was there, because a lot of motorcycle brands are locally manufactured there, so there is actually a sort of locally protection there in terms of that industry.
If that opened up where the tariff is being reduced significantly, that actually will change our manufacturing planning. That's one of the reasons right now we decide not to, for example, buy a land or build our own factory in Indonesia. We're simply still watching out to see. By using a more flexible, using a partner as assemble option at this point, because that gives us the flexibility depending on how that whole treaty thing goes.
Okay. Thank you very much. Very helpful. Thank you.
Thank you. Seeing no more questions in the queue, let me turn the call back to Mr. Li for closing remarks.
Right. Thank you, operator, and thank you all for participating on today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Thank you.