Xiaopeng He: [Foreign Language] [interrupted] Hello everyone, I am pleased to share that XPeng experienced impressive growth in our delivery volume quarter-by-quarter in 2023, which exceeded 60,000 in Q4, up 171% year-over-year, thanks to our proactive change to business strategy and organizational structure, as well as the new product launches. In total, we delivered over 140,000 units in 2023. Our efforts to focus on platform-based R&D, technology-driven cost reduction, and operational efficiency improvement have begun to yield positive results. In Q4, our gross margin improved to 6.2% with a vehicle margin expansion of 10 percentage points compared to the previous quarter. Our company achieved a positive free cash flow of more than RMB6 billion for the second half of 2023 and achieved for the first time positive full-year operating cash flow.

As of the end of 2023, we had over RMB45 billion in cash, which puts us in a strong financial position to deliver high quality and rapid growth in a highly competitive environment. I believe this is just the beginning of the change, and I look forward to bringing more improvements and positive results in our capabilities and operations in 2024. In 2024, we will be celebrating the 10th anniversary of our founding. And it will also be the first year filled with intense competition in the Chinese automobile industry. Since the first quarter of the year, there has been an industry-wide price war, which has been growing increasingly fierce. Against this backdrop, several EV startups have been forced to wind down their operations, and certain renowned technology companies have terminated their investment in auto business.

These dynamics suggest that the race for smart EVs for the larger wave of growth and intensified price competition, we have adjusted our strategies in a number of fields. We enhanced our organization and efficiency in an all-around manner. We made significant improvement in the quality of our operations and fully closed-loop customer experience. We built comprehensive competitiveness in products, technologies, and supply chain to support our planned larger scale. We upgraded our sales and service capabilities in China and overseas markets. We made full scenario ADAS and autonomous driving more accessible and affordable. And we accelerated our global expansion. To put it differently, we are long-term oriented and never plan for the future based on the assumption of short-term or growth at small scale.

As I formulated our strategies and tactics for the knockout ground of EV competition, I am excited about the strategic opportunities underway. We have completed the framework of our organizational adjustment, which starts to deliver positive results. We are about to embark on a strong product cycle and launch more than 10 new vehicle models over the next three years. Together with the corresponding left-hand drive and right-hand drive models for the international market, as well as facelift versions, there will be nearly 30 projects SOP in the next three years. Thanks to our strong capabilities to leverage modules and platform and higher efficiency in R&D, incremental R&D expenses for these projects is limited. We are leveraging artificial intelligence to drive our autonomous driving technology forward, which enables us to lower cost and deploy extraordinary experiences in more vehicle models with a new business model.

Lastly, international expansion opens new avenues for our growth. The upcoming competition isn't solely focused on gaining a larger market share in the short term, it is also about demonstrating the auto makers capacity to maintain its leadership position by achieving high quality and efficient growth, showcasing expertise in smart technology, expanding globally, and creating competitive advantages through innovative products and business models. From my perspective, in order to capitalize on the strategic opportunities from smart technology and global markets, XPeng must continue to make innovative breakthroughs and address any organizational shortcomings. In my view, in the past, we were neither very -- we never really showed very obvious shortcomings or advantages, but going forward, we will need to address these shortcomings definitely.

By 2024, we are looking to take our marketing strategy to the next level by creating a new and potent marketing team. We will upgrade our marketing strategies to leverage advantages of mobile Internet platforms for the automobile sector. In the past, automobile marketing was primarily dominated by PGC on centralized platforms. Now we will focus more on decentralize social media platforms and make full use of the UGC from a broad base of customers. For example, we launched a campaign during the Chinese New Year to call for videos sharing of adults experienced by XPeng customers. Over 20,000 customers participated in the event, spreading the reputation of XPeng ADAS from Tier 1 cities to 100 of cities across the nation. In the past months, customer interest grew by over 100% in key social platforms.

Through marketing innovation, we should not only achieve a substantial increase in word-of-mouth in sales leads, but also continuously strengthen XPeng's brand recognition as a leader in autonomous driving technology. As part of our 2024 sales growth strategy, we need to expand and transform our sales channel network. In 2023, we accomplished a series of upgrades and optimizations to our sales channels, which included closing over 130 low performing stores and adding over 160 strong franchise partners through our Jupiter Project. Even if these impacts -- these closing down of the stores and the reorganization actions that we have taken had some impact on our Q4 last year and Q1 this year of sales. And we believe that these changes not only improved our sales channel capabilities, but also will help us expand our presence in the 14 new low tier cities.

In 2024, while we cultivate our new stores, we will continue to broaden our sales network coverage and accelerate channel expansion in lower tier markets, such as in the 5th and the 6th cities. Our objective is to increase the number of sales at stores to 600 by the third quarter of 2024. Our sales network will continue to grow following the launch of our new brand product. Starting in the second quarter of this year, as our new sales stores are gradually open for business, we will roll out an innovative franchise model. We are asking our franchise partners to take inventory, which is equivalent to their sales in half a month. We expect the new model will significantly speed up deliveries and incentivize the franchisees to drive more sales.

We'll use our systems and monitoring mechanism to manage inventory closely and ensure consistency in customer experience, no matter where they are. This will also allow us to overcome issues in the traditional franchise's sales model. We have brought together our smart technologies, powertrain and vehicle platforms onto a comprehensive intelligent platform to ensure maximum compatibility across the various models. By adopting a platform based R&D approach and economies of scale, we can reduce costs in the supply chain and manufacturing processes, which can accelerate our goal of achieving over 25% cost reduction. Additionally, this approach significantly improves the technology iteration efficiency. From a product planning perspective, both Fengying and I will continue to drive product innovation as we believe that it is the best way to maximize value creation.

We understand that the differentiation factor brought by innovative products is a far greater advantage than any competitive advantage among homogeneous products could ever be. For example, with the X9, we have created a new category that suits both four and seven seater vehicles which appeals to customers who are looking for MPVs and large SUVs. X9 became the best-selling model of BEV with three -- with three rows of seats in just the first two months of delivery. We expect that the delivery of X9 in March and April will continue to increase significantly month-on-month. Furthermore, we are officially launching a new brand targeting the RMB100,000 to RMB150,000 price range during the Beijing Auto Show next month. The market of the RMB100,000 to RMB150,000 price range has huge market potential, but it is extremely difficult to provide great products with all around competitiveness, including high level ADAS in this price range and even more difficult to achieve a probability at the same time.

It takes comprehensive capabilities at scale to realize this goal. Many of our peers are also exploring this price range, but still none can provide excellent ADAS experience at this range. After 10 years of preparation, today we are finally ready. Our new brand is committed to building the first AI powered smart car for the young generation. This brand will be a new species of innovation. The first vehicle model under this new brand will officially launch and commence deliveries in the third quarter. We are confident that it will be the most striking and sought after A Class BEV model in this segment. Furthermore, we will introduce multiple models on this platform in China and overseas markets in the coming future. In addition to this new brand, the second half of this year, we will deliver a new XPeng branded model, bringing the number of new products that we launched this year to three and will unveil more new products.

We all know that the last decade was the decade of new energy and the next decade would be the decade of smart technology. AI powered smart EV technology and architecture are no longer just a mid to long term goal. At XPeng, we have already begun the process of AI defined cars that are centered on autonomous driving. The vast differentiation edges stemming from AI R&D capabilities and AI product experiences will determine how quickly the transition from traditional ICE to smart EVs occurs and shape the auto industry's long term competitive landscape. This presents a tremendous opportunity for us. That is why we have been increasing our long term investment in AI and recruited a number of top talents for AI with international vision. In the Q2 of this year, we will achieve the mass production of AI enabled ADAS with large model capabilities.

This will be the first mass produced automotive artificial intelligence and automotive cognitive engine in the China Automobile Industry, making our software smarter. Furthermore, we are firmly committed to promoting equity and inclusion in the advanced autonomous driving. We will continue to lead the innovation of autonomous driving technology, making it affordable and accessible to a much broader customer base and enter into the international markets. We will continue to expand our scale and strengthen our technology leadership as well as accelerate the commercialization of our industry leading technologies. Earlier this year, we introduced the XNGP ADAS to all our products users across 200 of cities nationwide. XNGP ADAS enables intelligent driving on urban roads.

In February, XNGP's monthly active user penetration rate reached an impressive 83%. We are proud to be the industry leader in terms of active user scale, user experience and mileage penetration rate. During the Chinese New Year travel rush, XNGP helped our car owners drive over 7 billion kilometers. The average daily utilization rate of XNGP on highways and in urban areas reached 67% and 49%, respectively. To take our XNGP assisted driving experience to the next level, we have set a challenging goal for ourselves. We want to benchmark our XNGP assisted driving experience in core cities, such as Beijing, Shanghai, Guangzhou and Shenzhen against the [indiscernible] and robotaxi experienced in San Francisco. As our ADAS approaches the inflection point of experience, significant cost reduction will emerge as another key driver to accelerate its further penetration.

We plan to employ innovative technology solutions to reduce XNGP related hardware costs by 50%, starting with the new model to be launched in the second half of this year. Our aim is to significantly boost our smart EV's competitiveness in terms of cost, accelerating the widespread adoption of advanced smart technologies. We have ambitious plans to expand our business globally by taking advantage of the increasing adoption of electric vehicle in international markets, and we plan to significantly accelerate the expansion of overseas business in 2024. In the second half of 2023, we launched the G9 into the Northern European market, and we were thrilled to receive a tremendous response. Within just two months of its launch in Norway, Denmark, the XPeng G9 became the best-selling mid to large BEV SUV in this category, which clearly shows that our smart EVs with advanced technology offer exceptional value to customers worldwide.

In the second quarter of 2024, we plan to introduce an international left hand drive G6 model, which will be followed by the right hand drive version in the second half of the year. We believe that the G6 will be even more successful than the G9 in terms of global sales potential and will become a best seller worldwide. To expand our sales channels, we will concentrate on collaborating with high quality dealers to efficiently enter key global markets, including Western Europe, Middle East, Southeast Asia and Commonwealth Nations. We have achieved significant milestones in our strategic cooperation with the Volkswagen Group. Recently, we entered into a master agreement with them for platform and software strategic technical collaboration, and the joint sourcing program has also been launched.

We are happy to see that strategic synergies have started to materialize. By 2024, we expect revenue generated from platform and software services to become a meaningful and ongoing contributor to our financial results, especially to gross margin. We have created an innovative business model in the automotive industry, generating excellent returns on our R&D investment in electrification, intelligent driving and AI technology. XPeng and Volkswagen have formed a long term strategic alliance with complementary strength and mutual benefits. Going forward, we will work together to unleash greater strategic synergies and address industry shifts and challenges. We have proactively started a new round of transformation to strengthen our competitiveness since the fourth quarter of 2023.

We focus more on marketing on short video platforms, while cutting inefficient marketing spending on sales leads. We phased out a number of underperforming sales stores, and we adapt our supply chain and production to an intensive product launch cycle for a large number of models. We faced intensified competition and the above mentioned adjustments in marketing and sales channel in the first quarter. Taking challenges both internally and externally into consideration, we now expect our total vehicle deliveries to be between 21,000 and 22,500 units in the first quarter of 2024, up 15.2% to 23.4% year-over-year. We expect our first quarter revenue to be between RMB5.8 billion and RMB6.2 billion, up 43.8% to 53.7% year-over-year. Although there would be challenges due to transformation in the near term, I have seen the initial positive results in March.

I believe that the positive effects of these changes will be evident starting from the second quarter and second half of the year. We expect the growth in deliveries in second quarter of 2024 will increase significantly on both quarter-on-quarter and year-on-year terms. Thank you, everyone. With that, I will now turn the call over to our VP of Finance, Mr. James Wu, to discuss our financial performance for the fourth quarter of 2023.

James Wu: Thank you, Xiaopeng. Now let me provide a brief overview of our financial results for the fourth quarter of 2023. I'll reference RMB only in my discussion today unless otherwise stated. Our total revenues were RMB13.05 billion for the fourth quarter of 2023, an increase of 153.9% year-over-year and an increase of 53% quarter-over-quarter. Revenues from vehicle sales were RMB12.23 billion for the fourth quarter of 2023, representing an increase of 162.3% year-over-year and an increase of 55.9% quarter-over-quarter. The year-over-year and quarter-over-quarter increases were mainly attributable to the accelerating sales growth of the G6 and G9 in the fourth quarter of 2023. Gross margin was 6.2% for the fourth quarter of 2023 compared with 8.7% for the same period of 2022 and negative 2.7% for the third quarter of 2023.

Vehicle margin was 4.1% for the fourth quarter of 2023 compared with 5.7% for the same period of 2022 and negative 6.1% for the third quarter of 2023. The year-over-year decrease was explained by: first, the inventory provisions and losses on purchase commitments as a result of upgrades of existing models with a negative impact of 1.9 percentage points; and secondly, increased sales promotions and the expiry of new energy vehicle subsidies, offset partially by cost reduction and improvements in product mix. The quarter-over-quarter increase was primarily attributable to the cost reduction and better product mix. R&D expenses were RMB1.31 billion for the fourth quarter of 2023, representing an increase of 6.3% year-over-year and an increase of 0.1% quarter-over-quarter.

The year-over-year increase was mainly in line with the development timing and progress of new vehicle programs. SG&A expenses were RMB1.94 billion for the fourth quarter of 2023, representing an increase of 10.3% year-over-year and an increase of 14.4% quarter-over-quarter. The year-over-year and quarter-over-quarter increases were primarily attributable to the higher commissions paid to the franchise stores, driven by higher sales volume. Furthermore, the quarter-over-quarter increase was also due to higher marketing, promotional and advertising expenses to support vehicle sales. As a result of the foregoing, loss from operations was RMB2.05 billion for the fourth quarter of 2023 compared with RMB2.52 billion for the same period of 2022 and RMB3.16 billion for the third quarter of 2023.

Fair value gain on derivative liability was RMB0.56 billion for the fourth quarter of 2023. This is due to our share purchase agreement with Volkswagen Group entered in Q3. Until the transaction closes, the fluctuations in the fair value of the forward share purchase agreement were measured through profit or loss, resulting in a noncash gain of RMB0.56 billion in this quarter. On December 6, 2023, the transaction was successfully completed. Net loss was RMB1.35 billion for the fourth quarter of 2023 compared with RMB2.36 billion for the same period of 2022 and RMB3.89 billion for the third quarter of 2023. On the cash front, we've achieved an important milestone of operating cash flow positive for the full year of 2023. This, together with the strategic investment from Volkswagen helped bolster our liquidity.

As of December 31, 2023, our cash had -- our company had cash and cash equivalents, restricted cash, short term investments and time deposits in total of RMB45.70 billion. This will be a strong foundation to support our growth strategy in the years to come. To be mindful of the length of our earnings call, I would encourage listeners to refer to our earnings press release for more details on our fourth quarter and full year 2023 financial results. This concludes our prepared remarks. We'll now open the call to questions. Operator, please go ahead.

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