Operator: Hello, ladies and gentlemen. Thank you for standing by for NIO Inc. Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Mr. Rui Chen, AVP and Head of IR, Corporate Finance and Strategic Investment of the company. Please go ahead, Rui.

Rui Chen: Good morning, and good evening, everyone. Welcome to NIO's Second Quarter 2026 Earnings Conference Call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website. On today's call, we have Mr. William Li, Founder, Chairman of the Board and Chief Executive Officer; and Ms. Stanley Qu, Chief Financial Officer. Before we continue, please be kindly reminded that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from views expressed today. Further information regarding risks and uncertainties is included in certain filings of the company with the U.S. Securities and Exchange Commission, the Stock Exchange of Hong Kong Limited and the Singapore Exchange Securities Trading Limited. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that NIO's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to NIO's press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. With that, I will now turn the call over to our CEO, Mr. William Li. William, please go ahead.

Bin Li: [Interpreted] Hello, everyone, and thank you for joining NIO Inc.'s 2026 Q2 Earnings Call. In Q2, the company delivered a total of 107,658 smart EVs, achieving year-over-year growth of 49.4%. In Q2, the NIO, ONVO and FIREFLY brands all achieved year-over-year and quarter-over-quarter growth in both sales volume and average transaction price. More specifically, the NIO brand delivered 60,945 vehicles, leading China's passenger vehicle market with transaction prices above RMB 350,000 across all powertrain types. The ONVO brand delivered 29,124 vehicles, demonstrating strong growth momentum. And the FIREFLY brand delivered 17,589 vehicles, maintaining its leadership in the high-end compact car market. In July and August, the company delivered 35,534 (sic) [ 35,934 ] and 35,836 vehicles, respectively. In Q3, the total deliveries are expected to range between 108,000 and 111,000 units. On the financial side, in Q2, the company's gross margin stood at 18.4%, driven by continued strong performance from the higher-margin products and ongoing cost optimization despite pressure from sharply rising raw material and chip costs. The vehicle gross margin remained solid at 18.5%. The gross margin of other sales was 17%, with services and community-related businesses continuing to contribute to profitability. In Q2, the company continued to generate non-GAAP operating profit as well as positive operating cash flow and free cash flow, further increasing its cash reserves to RMB 56.7 billion. This helped strengthen the company's business fundamentals while laying solid groundwork for its long-term sustainable development. Now turning to our products, R&D and operations. For the NIO brand, on July 9, the flagship SUV [ ES9 ] launched and began deliveries of the 5-seat version, catering to more diverse user needs and scenarios with its 5-seat layout and spacious interior. The ES8 has maintained strong momentum since launch and achieved the 140,000 units delivery milestone in just 335 days, leading China's passenger vehicle segment in the RMB 400,000 price range and the large SUV segment. In the Net Promoter Score survey by Land Roads, the NIO ES8 achieved the highest NPS among BEVs, ranking first in both sales volume and product reputation. In the meantime, the flagship executive SUV ES9, which began deliveries in late May, has started winning over users from traditional luxury fuel-powered SUVs, leading in sales volume among passenger vehicles with transactional prices above RMB 500,000 in June and July. The continued strong performance of NIO brand flagship models has further strengthened its leading position in the premium BEV market. For the ONVO brand, the L90 surpassed 60,000 deliveries within its first year since launch, ranking #1 among the large battery electric SUVs priced around RMB 300,000. The L80 continued to see steady deliveries, winning broad recognitions with its exceptional cargo space and scenario-based functionality. In Q2, leveraging the outstanding product strength of the L90 and L80, the ONVO brand became the sales leader among large SUVs priced below RMB 300,000. In addition, the upgraded L60 better meets the needs of its target users, further strengthening ONVO's sales momentum. The FIREFLY brand has been #1 in market share among high-end compact cars for 15 consecutive months, maintaining its leadership in the segment. Its precise product positioning and unique brand identity continue to win the hearts of target users. In terms of smart driving, on June 18, the latest version of NIO WorldModel was rolled out to over 700,000 NIO and ONVO users. As the second major release this year, the new version further leveraged the world model architecture and closed-loop reinforcement learning, delivering significant enhancements in functionality and user experience. User adoption has continued to grow. Since the upgrade, NIO users' mileage with urban NOP has increased by 92.8%. The upgrade also covered all ONVO users whose mileage with urban NOA increased by 127.8% following the upgrade. Powered by leading model algorithms, systematic architecture and strong engineering capabilities, NIO is the industry's first car company to develop and roll out smart driving systems in parallel across general purpose and proprietary chip platforms with a common software branch and synchronized releases. Users across different technology platforms and brands can enjoy a continuously evolving industry-leading smart driving experience throughout the vehicle life cycle. On the sales and service front, so far, the company has 165 NIO Houses, 376 NIO Spaces, 441 ONVO stores as well as 420 service centers and 93 delivery centers. In J.D. Power's 2026 Customer Service Index study for NEVs, the NIO brand ranked #1 among both premium brands and Chinese brands, maintaining its top position since the rankings were first introduced. Our high-quality services have earned widespread recognition from both the industry and users. In terms of the power network, at present, the company has 4,123 power swap stations and 30,294 power chargers and destination chargers worldwide. On August 7, NIO's 4000th power swap station went live, marking the launch of its first fifth-generation station. The fifth generation can support battery swaps for all models of NIO, ONVO and FIREFLY, covering a wide range of vehicle sizes from compact cars to full-size SUVs. With significantly enhanced operational and service efficiency, the fifth generation station is able to provide enhanced external services and support open operations. Leveraging standardized power operations at scale, the company is also exploring value-added businesses such as electricity trading, further unlocking the commercial value of battery swapping. On July 23, NIO was named by TIME Magazine as one of the world's most sustainable companies of 2026, becoming the only Chinese automaker on the list. We will continue to advance our BEV road map, shaping a more sustainable and brighter future with our users. As China's automotive market enters a new phase of competition, the landscape is undergoing several important changes. First, with the rapid growth of BEV penetration, BEVs have become a mainstream powertrain in the market. Second, the industry is moving from a period of brand ambiguity towards greater brand clarity with brand becoming an increasingly important factor in consumers' purchasing decisions. Third, the final round of competition is shifting from product-level competition to competition in comprehensive system capabilities. For years, we have remained committed to the premium BEV strategy and have been building our system capabilities. This puts us well aligned with the industry's evolution and positions us for a new phase of high-quality growth. We are confident in achieving our operating targets. Thank you for your support. With that, I will now turn the call over to Stanley for Q2 financial details. Over to you, Stanley.

Stanley Qu: Thank you, William. Let's now review our key financial results for the second quarter of 2026. Our total revenues reached RMB 32.1 billion, up 69.1% year-over-year, at 25.9% quarter-over-quarter. Vehicle sales were RMB 29.1 billion, up 80.1% year-over-year and 27.5% quarter-over-quarter. The year-over-year growth was mainly due to the increased deliveries and a higher average selling price driven by a more favorable product mix. The quarter-over-quarter increase was driven by higher deliveries. Other sales were RMB 3.1 billion, up 7.2% year-over-year and 12% quarter-over-quarter. The year-over-year growth was driven by increased sales of parts, accessories and aftersales vehicle services, partially offset by decreased sales of used cars and technical research and development services. The quarter-over-quarter increase was due to increase in revenues from used car sales and parts, accessories and aftersales vehicle services sales. Looking at margins, vehicle margin was 18.5% compared with 10.3% in Q2 last year and 18.8% last quarter. The year-over-year improvement was driven by a more favorable product mix, while quarter-over-quarter vehicle margin remained stable. Overall gross margin was 18.4% versus 10% in Q2 last year and 19% last quarter. The year-over-year increase was mainly due to the increased vehicle margin and the quarter-over-quarter slight decrease was mainly due to gross margins from vehicle sales, provision of power solutions and sales of parts, accessories and aftersales vehicle services. Turning to OpEx. R&D expenses were RMB 2.1 billion, decreased 28.7% year-over-year and increased 13.8% quarter-over-quarter. The year-over-year decrease was mainly driven by lower personnel costs in R&D functions due to organizational optimization, reduced design and development costs from different development stages and improved operational efficiency. The quarter-over-quarter increase was mainly due to the incremental design and development costs for new products and technologies as well as the increased personnel costs in research and development functions. SG&A expenses were RMB 4.4 billion, increased 11.6% year-over-year and 22.5% quarter-over-quarter. The year-over-year increase was mainly driven by increase in sales and marketing activities associated with new product launches, while the quarter-over-quarter increase also reflected increased sales and marketing activities associated with new product launches as well as higher personnel and related costs for marketing functions and share-based compensation for general corporate functions. Loss from operations was RMB 0.3 billion, down 92.9% year-over-year and up 12.4% quarter-over-quarter. Excluding share-based compensation expenses, adjusted profit from operations was RMB 0.2 billion. Net loss was RMB 0.5 billion, showing a decrease of 89.4% year-over-year and an increase of 59% quarter-over-quarter. Excluding share-based compensation expenses, adjusted net profit was RMB 26.1 million. Furthermore, our positive operating cash flow grew substantially, and we achieved positive free cash flow. Our cash position strengthened further with RMB 56.7 billion in total cash and cash equivalents, restricted cash, short-term investments and long-term time deposits. That wraps up our prepared remarks. For more information and the details of our unaudited second quarter financial results, please refer to our earnings press release. Now I will turn the call over to the operator to start our Q&A session. Operator?

Operator: [Operator Instructions] Your first question comes from Bin Wang with Deutsche Bank.

Bin Wang: My question is about the order flow sustainability about your ES8 and ES9 SUV. We noticed that in the premium SUV market, some of your peers' competitor although [indiscernible] on a few -- several months. So can you explain why is that and how NIO differentiates in facing the competition in the high-end premium SUV market?

Bin Li: [Interpreted] Thank you for the question. Regarding NIO's flagship models, including the ES8 and ES9, they will continue to see strong demand. For the ES8 in August, we delivered around 10,099 units. And in 11 months, we have delivered more than 140,000 ES8s. And in September, it's going to witness its next milestone of 150,000 deliveries, which means that in less than one year since its launch, it has already surpassed 150,000 unit delivery. So the demand for the models are pretty strong. And as previously, we've talked about how the products are quickly iterated and introduced in the Chinese automotive market, where for a new model in the market, it's normally difficult. We're having difficulty to lost its popularity and attention by the market. But for the ES8, it may be the first model that is breaking away from this market trend. And regarding our flagship executive SUV ES9, it also sees strong demand since its launch, especially for the Horizon Edition and the Signature Edition. Right now, for users placing an order, they will need to wait for 3 months or nearly 4 months to pick up a new car. And if we look at the sales number of the ES9 in August and July, I think July, we were still consuming some preorders. But if we are making a comparison between the incremental orders in July and August, we actually have seen a growth from July to August. So we are also confident in the continuous popularity and also demand for the ES9. And also one thing worth noting is that around 3/4 of the ES9 users are actually from nonexisting NIO users, from users outside of the NIO user community. This also shows that ES9 has successfully reached out to a broader user base. And there are several reasons for the popularity and the demand for the ES9. The first is the technology innovation. On the ES9, we have introduced or debuted several dozens of industry first or industry-leading technologies and tech innovation is still so far a very important competitiveness and also differentiation of our products. And secondly, the product definition has precisely catered to the needs of the users in the premium segment, especially users buying the car for their business needs and also for their family occasions, where our cars have catered to both their emotional as well as functional needs. And our users also speak highly of the product experience. And the third is the holistic and one-of-a-kind experience enabled by our charging and swapping network as well as our aftersales services, which are actually a systematic capability difficult to replicate by the competitors. According to the Land Roads recent study on the aftermarket satisfaction on the new energy vehicles, we've been topping the list for 3 times consecutively. And also in J.D. Power's recent research in terms of the post-market satisfaction on the new energy vehicles, we are also ranking the first for several years in a row. So for the premium segment, such experience centering on the services and post-market services are also very important. And the fourth one is, as also previously talked about, the entire automotive market is now shifting from a period of brand ambiguity to a period of brand clarity, where users' purchasing decisions was previously largely based on the specifications of a product, and now their decision is mostly driven by the brand. And in that case, NIO has also established a pretty solid foothold and a clear brand awareness in the premium battery electric vehicle market. Among many users, they naturally believe that if they are going to choose a car to replace their existing Mercedes, BMW and Audi and NIO will be their natural choice. And if they are looking for a premium BEV model, then NIO is also their go-to car. Among our existing NIO users, we've also studied their purchasing decision, where we find that the brand reputation and awareness is already accounted for more than 30% of their purchasing decision. This has further proven our solid foothold in the premium BEV market. And if we further look at the numbers by the insurance associations, in Q2, the average selling price of the NIO brand was RMB 406,000, far higher than the prices of Mercedes, BMW and Audi and ranking the first among all the mainstream premium brands. And in July, the average selling price of the NIO brand was over RMB 430,000. And we believe that the scarcity of such premiumness of our brands as well as the competitiveness of our brands across all 3 brands will also become a long-term foundation for our competitiveness going into the future.

Operator: Your next question comes from Tim Hsiao with Morgan Stanley.

Tim Hsiao: This is Tim from Morgan Stanley. Congrats on the third consecutive profitable quarter. I have 2 questions. The first one is about ONVO because compared to the robust growth of the NIO and the FIREFLY brands, we noticed ONVO's customer conversion and order momentum have been relatively moderate to ramp since launch. So I just want to know that how is the progress in recent adjustment to customer incentive and selling strategies. And looking forward, what further changes would management plan to effectively improve ONVO's order momentum? Yes, that's my first question.

Bin Li: [Interpreted] Thank you for the question. It's true that ONVO is actually in a more competitive market than NIO and FIREFLY, where the level of competition, the intensity level of competition in terms of the number of brands and also the number of models are also much more intense than that of NIO and FIREFLY. But if we look at the ONVO's overarching performance since its launch, especially from its specific segment and market, it has actually done some good progress and achievements. In terms of the -- if we look at the average selling price of the ONVO products, as we all know that the passenger vehicle market in the first half of this year was a bit challenging. And even amid these challenges, ONVO still achieved an average selling price of RMB 240,000, achieving also significant growth year-over-year. And in the first half of this year in the China's automotive market, only 8 brands managed to achieve increase both in their sales volume as well as the average selling price, where ONVO is one of these 8 brands. So in terms of the average selling price, ONVO is even outperforming some traditional luxury brands. So if we perceive ONVO as a premium family-oriented brand, it is actually achieving a pretty good baseline from this brand definition perspective. And in terms of the overall product competitiveness, we also see some good progress and also foundation, especially a good conversion rate from sales leads and opportunities all the way to orders, which means that when users get to know about the brand and products, it's also more possible and likely for them to place an order on the ONVO product. So right now, for the ONVO brand, the challenge is more about its overall brand awareness, where its current brand awareness is maybe comparable with NIO's awareness around 5 to 6 years ago. So right now, our focus is also to enlarge the brand awareness and also the popularity through also different collaborations, offline activities and also engagement with more targeted communities. And the second actions we are taking is to keep rolling out our Sky stores where we can host NIO, ONVO and FIREFLY brands under the same roof. With that, we are able to further expand our sales network and also to really introduce our ONVO brand to more users in the lower-tier cities. And the third action is to also introducing new ONVO products so that we can also reach out to broader family user base. But in the meantime, we will still maintain ONVO's positioning as a premium high-quality family-oriented brand. So we will not be very aggressive in entering into the entry-level segment. We will still strike a balance between the sales volume and also the vehicle gross margin. Right now, in the Chinese automotive market, we actually see a vacancy where there is no such brand that is comparable with the upscale product lines of Toyota or Volkswagen that can serve the needs of the family users. This is where we see the opportunity for ONVO to develop its awareness in that specific segment.

Tim Hsiao: My second question is a quick one. Just want to know that if management can share next year's new model refresh and the key launch milestones for the NIO, ONVO and FIREFLY, 3 brands on the group. Yes, that's it.

Bin Li: [Interpreted] Thank you for the question. For the NIO brand, for next year, we will be introducing new products coming from the 5 and 6 series product lines. I believe that the market is also aware of some of our latest plans. Where for the ONVO brand next year, we are going to introduce a major strategic new product that will also help to enrich our existing product lineup. And for the FIREFLY brand, we will keep this single model strategy, but keep rolling out special editions and also technology upgrade. So for FIREFLY, it's a bit like taking the iPhone approach where it will stay in this same product, but with new additions.

Operator: Your next question comes from Paul Gong with UBS.

Paul Gong: My first question is regarding your vehicle gross margin outlook for the next 2 quarters amid the ongoing cost inflation. We are aware that the memory costs continue to go up. And I just want to listen to your thoughts, how does that impact the vehicle gross margin.

Stanley Qu: [Interpreted] Thank you for the question. It's true that since this year, the cost structure of the automotive industry has been under pressure. And for the company, we've been facing pressure coming from the rising material costs, including memory chips, batteries and also other bulk materials. And if we look at the cost in Q2 as well as the cost in late Q4 last year, the average cost impact or cost increase is around RMB 14,000 per car. And also in Q2, we've taken a series of efforts to stabilize our vehicle margin and under the rising cost pressure. And as previously mentioned, we've been actually using -- taking a very stable pricing strategies for our products. We didn't really lower the price -- lower the price in exchange for the sales volume. And secondly, on the supply side, we've been working with the supply chain to take a series of optimization measures, the efforts as well as commercial negotiations. With all these efforts combined, we managed to stabilize our vehicle margin at 18.5% in Q2. And going into the second quarter, we expect the material cost to continue to increase by another RMB 2,000 to RMB 3,000, but we will also take a series of countermeasures to mitigate this risk. In Q3 and Q4, we hope to still stabilize our vehicle gross margin at the same level as in Q2.

Paul Gong: So my second question is, yes, despite of all this cost pressure, you have done significant improvement in terms of profitability over the past one year. My question is, what gives you management confidence that these improvements are sustainable rather than say cyclical?

Bin Li: [Interpreted] Thank you for the question. To do that we need to take a comprehensive measure towards that. The first is that, as also mentioned by William, the automotive competition in China is now shifting to more brand-driven. And for the NIO brand, our ES9 and ES8 are still seeing pretty stable demand and also with significant market share in their respective segment. These 2 models, they are also making major contribution in our product mix as well as vehicle margin as both of them has over 20% vehicle margin. And this will be our foundation for the overall performance. And the second is to keep rolling out optimizations towards our cost structure by making more accurate product definition and also by working on the cost reduction opportunities together with our supply chain partners. These are the efforts that we've been working on in the past several quarters. And internally, we've been doing all this decoupling and analysis of our R&D and also supply chain capabilities, putting them into the alternate granularity, identifying also opportunities for continuous cost reduction, and we will also keep up this good work. And as mentioned, the Chinese automotive industry has been under cost pressure. But even amid all these challenges, the company has still managed to achieve high-quality growth as shared by Stanley, some of the efforts we've been taking to secure the long-term and sustainable growth of our business. And I'd like to also share some numbers. In the first half of this year, our sales volume increased by 67% year-over-year, where our total revenue increased by 86% year-over-year. That is faster than our volume increase. And in terms of our gross profit, it increased by 282% year-over-year, much faster than the growth of our revenue. And this is amid all the challenges coming from the supply side, the rising raw material costs on the chips and on everything. And as mentioned, also in Q2, the impact on the vehicle is around RMB 14,000 on average, where compared from late last year, where in the second half of this year, such impact will continue to enlarge by another RMB 2,000 to RMB 3,000, which means that in the second half of this year, compared with Q4 last year, our cost structure will be burdened by another RMB 16,000 to RMB 17,000. But even against this backdrop, we still aim to achieve a steady growth in our gross profit. This is also a demonstration of our system capabilities and also competitiveness in terms of our technology, products, supply chain, sales and also brand management.

Paul Gong: Congratulations for the achievement.

Operator: Your next question comes from Nick Lai with JPMorgan.

Y.C. Lai: My first question is financial related. With very strong operating cash flow and free cash flow generation by first half, can management remind us our cash burn, including CapEx and R&D? And what the level of free cash flow can we anticipate by year-end? And with very strong cash position right now, can you remind us where do we plan to invest or spend our cash in terms of CapEx and R&D? That's my first question.

Stanley Qu: [Interpreted] Thank you for the questions. I will answer to your question through several major aspects. The first is regarding CapEx. For this year, we expect our full year CapEx to be relatively flat from last year, roughly RMB 6 billion to RMB 7 billion per year. And such investment is mainly used for basically product research and development as well as the rollout of our sales and service network. Not much investment going into the capacity and also factory side. And the second is that we will continue to roll out and expand our charging and also swapping network. For this year, we still plan to build 1,000 new power swap stations. But different from previous years where in 2024, we've introduced the Power Up Partner plan, where through the plan, we would like to collaborate with different partners for the construction of our charging and swapping infrastructure. And this year, we've made major progress in this plan, where we've been partnered with over 40 state-owned enterprises, platforms and also financial institutions across 25 provinces and cities in China in constructing our charging and swapping infrastructure. And for this year, we expect all the newly built infrastructure will be sponsored or funded by our Power Up partners. And the third is that our Battery-as-a-Service business model is also earning more recognition from also -- more users. This is also helping our battery asset management and the battery asset management company getting stronger support from the financial institutions and also different partners. In the first half of this year for the battery asset management company, we know as we also see some good progress regarding the fundraising across different channels. And in terms of the amount due from the battery asset management company, it is also reduced from over RMB 16 billion earlier this year to less than RMB 15 billion in end of Q2. Considering that we are also enlarging the user base and also the business size of the battery asset management. The increase in the absolute term is also relatively proportionally. So this is also a good sign. With increase in sales volume as well as ongoing efforts in improving our operating performance, we expect that in Q3 and Q4, we can maintain the positive free cash flow as well as operating cash flow. With that, we also believe that in the second half of this year, our cash position will continue to enhance.

Y.C. Lai: My second question is ADAS related. The market is indeed very, very competitive. Every peer offer Autopilot function or features. So I'm wondering from a user standpoint, how do we differentiate ourselves from peers across our product offering from high end to entry level. And at the same time, given high adoption or penetration right now, will we consider different payment options such as pay-as-you-go or subscription option in the future?

Bin Li: [Interpreted] Thank you for the question. This year, people actually start to see the benefits and also the advantage of our overall architecture featuring the NIO WorldModel plus the reinforcement -- closed-loop reinforcement learning and also collective intelligence, especially considering that the actual investment -- computing investment and the computing power we use for the cloud training for the autonomous driving and smart driving functionality is relatively small, achieving such good experience with our latest release, this has also proven the advantages of our technology road map. And also, as mentioned earlier today, on June 18, we actually have pushed our latest NIO WorldModel version to over 700,000 users across different brands and also technology platform. Simultaneously, this has also proven the advances of our technology and architecture. And also, I would like to share some numbers with you. For the Cedar user, that's our third-generation platform equipped with NX9031 smart driving chip, where among these group of users, around 58% of them have been engaging smart driving functionalities for more than half of their trips. And regarding the business model for the smart driving service, well, right now, for the new NIO users and ONVO users, we offer them a 5-year complimentary subscription to our smart driving capabilities and systems. But for the used car users or when they expire on this 5-year complimentary service, they will have to definitely pay for the subscription. For the used car users, they are paying RMB 380 per month for the smart driving subscription, where we now see a penetration rate of around 20% among this used car users. This is also a pretty sizable amount, showing also the competitiveness of our product and experiences. And of course, right now, this is just a small user base. But for the longer term, we believe that this will also be a quite sizable source of revenues for our business. Right now, every year, the revenue from that part of the business is around several thousands of millions of RMB.

Operator: Your next question comes from Ming-Hsun Lee with BofA.

Ming-Hsun Lee: Will, this is Ming. So I also have 2 questions. So first question is related to your fifth-generation battery swap station. With more expansion of your new swap station, and this can accommodate all of your 3 brands. Could you give us more details regarding the CapEx per station and also maintenance cost compared to your previous generation swap station? Besides that, right now, you also open to some other auto OEMs for your battery service. Could you elaborate your pricing strategy and also your unit economy model? Yes. That's my first question.

Bin Li: [Interpreted] Thank you for the question. Regarding the fifth-generation power swap station, we have adopted a flexible design where the station can accommodate all models from NIO, ONVO and FIREFLY. So basically it can be compatible with cars of different dimensions and sizes. And in terms of the cost, we've also achieved continuous improvements on top of the Gen 4, where the -- in terms of the material costs, we've achieved also optimization and reduction in cost. And for per station cost, if we're excluding batteries in the station as well as all the costs related to the high-voltage power supply and energy preparation, if you only look at the station itself, it's around RMB 1.4 million per station. That is around RMB 100,000 cheaper than the fourth generation. And in terms of the operations of the swap stations, we've been also making continuous improvements in terms of the actual people efficiency supporting the operations of all stations. We've also made improvements in terms of the first time through of the power swaps as well as the software features between current performance as well as the performance earlier last year, it's already improved by 50%. Of course, for the fifth generation, as they are new to the field, so we are still ramping up its first time through. But comparing with the previous generations around the same time frame, we already see quite significant improvement in terms of the success rate of our power swaps among the fifth-generation station. Overall speaking, we also believe that the efficiency of fifth generation will be much better than the previous ones. And the third is regarding the partnership and also alliance with other OEMs regarding power swap. Several years ago, we've signed up with several OEMs regarding this power swap alliance, and we still have this ongoing communications and also collaborations on some projects. And in the meantime, as robotaxis is becoming a very popular area where we see power swap station and power swap service in general can be a good infrastructure support for the robotaxi business. So we are also exploring opportunities with our partners from that perspective. In terms of the cooperation framework and also how we charge them on such services, we basically will charge them for the admission fee for the use of our -- for the use and access to our power swap network. But more details are still being discussed and are to be closed when we have the actual project in the implementation. And also for the entire new energy vehicle industry, it has been entering into this new stage where more and more people start to realize the benefits of a power swap and more OEMs are also embracing the idea of swappable vehicles. Where for the NIO power, the advantage is with more partners joining this effort, it can help us to optimize and amortize our operating costs. And by standardizing the battery packs, we can also improve the efficiency as well as optimize the cost structure.

Ming-Hsun Lee: My second question is related to your operating expense. Especially, we noticed that your sales and marketing expense in the second quarter is higher. Is it because you launched more new models during the quarter? Could you give more guidance for your 2026 operating expense?

Stanley Qu: [Interpreted] Thank you for the question. I will still share the information according to 2 types of overall expenses. The first is regarding the R&D expenses. As mentioned, we will basically be staying flat with our R&D expenses. Non-GAAP around RMB 2.5 billion, and we will also make adjustments -- dynamic adjustments according to the actual cadence and the pace of our projects and the business. But for this year, it will be roughly RMB 2.5 billion per quarter in terms of the R&D investment. And in terms of the R&D expenses, maybe some will compare our current expenses with our previous level or with our competitors, where definitely our expenses is relatively low. But we also need to really pay attention to the utilization of such expenses and also the efficiency of our R&D activities. First of all, NIO has been staying committed to the battery electric vehicle road map. With that, we can be more focused on the technologies and the products related to the BEV road map without spreading our efforts across BEV, PHEV or EREV. And secondly is that as we've been rolling out this CBU mechanism internally, with the CBU mechanism, we can also better measure and improve the efficiency of our R&D systems as well as our R&D organizations. So even with a relatively moderate investment into the R&D activities, we can still maintain our leadership and advancements in the technologies and also products. And regarding the SG&A expenses, if we look at the SG&A as a percentage to the sales revenue in the first and the second quarter under the non-GAAP standard, it's around 13% in the first half. And also in the second half, as we see a slight increase in terms of the sales expenses, it's mainly driven by some one-off expenses as we have -- most of our new products for this year were launched in second quarter, including our ES9 and also some facelift models for ONVO. So that one-off impact is roughly RMB 500 million, majorly happened in Q2, where in the second half, we don't expect to have such one-off impact in terms of the sales expenses. So in terms of the second half outlook, in terms of the SG&A expenses as a percentage to the sales revenue, under the non-GAAP standard, we expect it to be around 10% to 11%. This is also a controllable as well as an achievable target for us.

Operator: Your next question comes from Jing Chang with CICC.

Jing Chang: Time is limited. I have only one question. We know that our Senior Vice President, Mr. Ren Shaoqing, has founded an embodied AI start-up company in which we have made a strategic investment. So what are the long-term cooperation potentials between this new company and NIO? And also what long-term value can it bring to our company?

Bin Li: [Interpreted] Thank you for the question. Yes, Mr. Ren Shaoqing, the Head of our Smart Driving Department is, now also starting up a new business regarding physical AI and also embodied intelligence and NIO is supporting his business as a strategic shareholder. But in the meantime, he will still be the head of our Smart Driving department responsible for the overarching technology as well as the long-term tech road map for our products. And we also think that such arrangement is necessary and also meaningful. As right now, NIO is staying focused on our core business. But in the meantime, through this start-up by Mr. Ren, we can also keep tracking of the latest developments in the physical AI and also embodied intelligence without diluting our focus, affecting our P&L. But in the meantime, such start-up can also help to make full use of our resources as well as attracting external strategic shareholders and investors. So we think this is a good arrangement. And also, as we all know that the competition for the AI talent within the arena of physical AI is also quite intense. So through such start-up, we can also better capture the top-notch talent in the industry. And that will also be beneficial to the long-term development of both the start-up as well as for our AI-related business. And for the long term, we believe that we will have a lot of strategic collaborations and projects between NIO and also this AI start-up.

Operator: Your next question comes from Yuqian Ding with HSBC.

Yuqian Ding: So my question is what your volume outlook for this year and maybe sell into fourth quarter...

Rui Chen: I think your voice is breaking. Yuqian, can you repeat your question?

Yuqian Ding: Yes, sure. So...

Rui Chen: We still can't hear you.

Yuqian Ding: Yes. Can you hear me now?

Rui Chen: Yes, much better.

Yuqian Ding: Okay. So I'll just repeat my question is about the volume outlook in fourth quarter and '27, given maybe strong seasonality and the backdrop of new model cycle next year?

Bin Li: [Interpreted] We expect that the passenger vehicle market to be able to recover in Q4 this year. With that, our target for Q4 is achieving an average volume of over 40,000 units per month. And for the mid and long term, with our product lineup as well as our sales and service network coverage, we expect our annual volume growth to be around 40% to 50%, and we will maintain that for the mid and long term.

Operator: As there are no further questions now, I'd like to turn the call back over to the company for closing remarks.

Rui Chen: Thank you again for joining us today. If you have further questions, please feel free to contact our IR team through the contact information on the website. This concludes the conference call. You may now disconnect your lines. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]