In April and May last year, Zeekr delivered 16,089 and 18,610 vehicles, respectively, bringing the total deliveries to over 250,000 units. With the increased production capacity of the new Zeekr 001 and Zeekr 007 models, we are confident in continuously boosting our delivery numbers and accelerating towards our annual goal of 230,000 deliveries.
Product Launches:
At the end of February, the new Zeekr 001 was launched, featuring over 1,000 upgrades: the entire series now supports 800 volts, includes the most advanced 8295 platform, the highest number of speakers, and lidar. After the initial production ramp-up in the first month, the new Zeekr 001 consistently delivered over 10,000 units per month in April and May, becoming the best-selling pure electric vehicle model. On April 19, we launched the ultra-luxurious flagship MPV Zeekr 009 Radiance and began the first deliveries on May 24, making it the world’s only four-seat MPV with lidar. At the Beijing Auto Show in April, we globally premiered the Zeekr Mix, the first family travel product based on the Haohan-M architecture, designed for future travel needs. The Zeekr Mix is positioned as the future home and is the largest five-seat model in its class. The Zeekr 007 began deliveries on January 1 this year, and in April, we launched the enhanced rear-wheel-drive version. The full-speed Zeekr 007 at the Zhejiang International Circuit has become the fastest electric car under 500,000 yuan. In the second half of this year, we will officially launch the Zeekr Mix and unveil a new mid-to-large pure electric SUV, expanding the Zeekr product lineup to six models. We will add two new models in the second half of this year, ranging from compact SUVs to mid-to-large MPVs, with benchmark products in each market segment.
Intelligent Evolution:
Zeekr adheres to a dual approach of independent research and co-creation for its intelligent development, advancing in three dimensions: intelligent driving, intelligent driving, and intelligent cockpit.
• Intelligent Driving:
For instance, the new Zeekr 001, with technologies like CCD electronic damping, bidirectional air glide, and intelligent magic carpet, provides a premium driving experience.
• Intelligent Driving:
We focus on high-frequency scenarios such as highway navigation and train users, reinforcing our industry leadership. On May 15, we launched the OS 601 version for the Zeekr 007, introducing the industry’s first automated parking feature for mechanical parking spaces.
• Intelligent Cockpit:
Zeekr embraces an open development philosophy, continuously exploring with the AI large model interaction ecosystem based on powerful computing. The Zeekr 009 Radiance achieved the global first launch of the 95-chip computing platform.
Energy Replenishment Ecosystem:
Zeekr leads the industry in creating a comprehensive 800-volt ultra-fast charging solution, including 800-volt vehicles, batteries, and interconnected networks. Zeekr has the most mass-produced 800-volt models globally, including the new Zeekr 001, Zeekr 001F2, Zeekr 009 Radiance, Zeekr 007, and Zeekr Mix. In April, we launched the world’s first 800-kilowatt V3 enhancement station, equipped with eight industry-leading V3 supercharging piles, with each pile capable of 800 kilowatts. The new Zeekr 001 demonstrated an ultra-fast charge from 10% to 80% in just 11 minutes and 28 seconds. As of the end of May, Zeekr had built 1,076 charging stations (including dedicated stations) and launched 487 supercharging stations, with over 2,600 supercharging piles. The 800-volt ultra-fast charging piles account for the industry’s highest proportion. Zeekr’s APP charging map integrates high-quality third-party charging networks, covering over 340 cities. We are accelerating the “thousand stations, ten thousand piles” plan, aiming for 1,000 supercharging stations by 2024 and over 10,000 supercharging piles by 2026. By the end of May, Zeekr had opened 39 stores globally, including 380 in China, with 64 integrated service experience centers.
Channel Services:
We focus on enhancing diversified channel construction in third- and fourth-tier cities to strengthen our presence in various markets.
Global Expansion:
By the end of May, Zeekr had entered over 20 countries and regions, including the Netherlands, Sweden, Thailand, UAE, and Saudi Arabia. Zeekr 001 and Zeekr X have begun deliveries in Europe, with right-hand drive models of Zeekr 009 and Zeekr X expected to start sales in Singapore and Hong Kong in the third quarter. We aim to enter 6-8 luxury car markets in Europe and expand in Southeast Asia, the Middle East, Latin America, and Australia by year-end.
Q1 2024 Financial Summary:
• Total revenue: 14.7368 billion RMB (approx. 2.041 billion USD), a 71% increase YoY but a 9.9% decrease QoQ.
• Automotive sales revenue: 8.1741 billion RMB (1.132 billion USD), a 73% increase YoY but a 22.8% decrease QoQ due to seasonal effects and product mix changes.
• Battery and component sales revenue: 6.2185 billion RMB (875.1 million USD), an 82% increase YoY and a 56.5% increase QoQ due to increased sales of battery packs and electric drivetrains.
• R&D service revenue: 244.1 million RMB (33.8 million USD), a 14.2% decrease YoY and an 85.9% decrease QoQ due to reduced sales of research services.
• Gross profit margin: Increased from 7.9% in Q1 2023 to 11.8% in Q1 2024 but lower than 14.2% in Q4 2023, attributed to improved vehicle profit margins.
• Automotive sales profit margin: 14% in Q1 2024, up from 10.1% in Q1 2023 but down from 15.3% in Q4 2023, reflecting new model launches and product structure changes.
• Operating expenses: 1.9253 billion RMB (266.6 million USD) in Q1 2024, slightly up YoY but significantly down QoQ due to increased employee compensation and development costs.
• Net loss: 2.0221 billion RMB (290.1 million USD), an 18% improvement YoY and a 31.2% improvement QoQ.
• Cash and cash equivalents: 3.7911 billion RMB (525.1 million USD) as of March 31, 2024.
Q&A:
Q: Given recent signs of potential order momentum slowdown after continuous delivery increases in the first five months, what sales policies will you implement in the second half of the year to maintain or achieve the monthly average target of 23,000 units?
A: Last December, we launched the 007 model and started deliveries on January 1. The new 001 model was launched on February 27 and began deliveries on March 1. These new models significantly boosted our order momentum. In the coming months, we plan to launch more models, including the 009 brand version announced on April 19 and recently started deliveries. Additionally, we announced these model combinations at the Beijing Auto Show. Over the next few months, we will continue to roll out all-new 001 models and begin deliveries. This mid-to-large SUV will be a key contributor to our sales in the second half of this year and next year. Regarding new products, we believe we have a very strong product lineup to maintain momentum. Besides these product launches, our sales strategy includes a strong focus on international expansion. We have been actively signing dealers and recently expanded our business to Mexico and other regions. By the end of the year, we aim to have dealerships in 58 countries and regions, which will help boost our international sales figures. These strategies are part of our commitment to maintaining strong sales momentum and achieving the annual average monthly target of 23,000 units. Zeekr is also accelerating its channel construction in third- and fourth-tier markets, and we believe market penetration will significantly help our sales.
Q: Regarding sales and R&D expenses, first, how many stores do you plan to add this year, and what is your expectation for sustainable R&D spending levels in the medium to long term to maintain our technological competitiveness in the industry, especially considering the increasing investment in software development?
A: By the end of 2023, we had established 342 customer touchpoints, including centers, spaces, eco-houses, residential and delivery centers. Our goal for 2024 is to increase this number to over 520, focusing on third- and fourth-tier cities while enhancing the efficiency of existing locations. Last year, our R&D expenditure was approximately 8 billion RMB, and we plan to increase it this year. The additional funds will support software development, including advancements in ADAS and smart cockpit technologies. We expect to invest about 10 billion RMB in R&D this year, focusing on efficient new vehicle and software development.
Q: Given the growing demand for PHEVs in China, has Zeekr considered expanding its product lineup to include PHEVs or other types of powertrains, and how does Zeekr plan to differentiate its EVs from competitors, especially within the Geely Group?
A: Zeekr is currently focused
on high-end battery electric vehicles (BEVs) and believes there is significant untapped market potential and customer demand in this segment. Competitors in similar high-end categories, such as BMW’s CCS models, continue to achieve considerable sales, indicating growth opportunities in high-end BEVs. Within the Geely Group, we have access to a range of powertrain technologies and expertise, providing us with a strategic advantage. However, our priority at this stage is to consolidate and strengthen our position in the BEV market. Before exploring other powertrain options, we aim to establish clear and differentiated leadership in this field. This focus ensures we maintain a distinct and competitive product proposition in the market.
Q: Zeekr’s mid-size SUV will be launched at the end of this year. What are management’s expectations for sales and profit margins compared to existing models like the 001 and 007? How will Zeekr’s SUV distinguish itself from competitors’ models, such as Tesla’s Model Y and other local brands, in the highly competitive Chinese SUV market?
A: Management has high expectations for the new mid-size SUV, leveraging the reputation and performance established by models like the 001 and 007. Our goal is to attract a broader user base with this SUV, as it is in a highly competitive segment. Despite the fierce market competition, we differentiate our products through unique selling points demonstrated by previous models, such as superior vehicle safety, handling, driving range, and proprietary EV technology. Additionally, we continue to invest heavily in technological advancements, particularly in smart cockpit systems and ADAS, using our internally developed solutions. These investments enhance our vehicles’ intelligence and smart features, making them more attractive to consumers who prioritize advanced automotive technology. Compared to competitors, including renowned brands like Tesla, our new SUV will incorporate features tailored to Chinese consumer preferences, which may differ significantly from international tastes. This customized approach, combined with our strong performance in safety and technology, distinguishes us in a competitive market. Supplementing this, the upcoming luxury mid-size SUV, with a length of around 5 meters, targets a substantial and growing market segment. We believe its launch will positively impact Zeekr’s sales and profit margins. Additionally, the Zeekr Mix is a highly disruptive and innovative product, representing another masterpiece in category innovation, highlighting Zeekr’s commitment to technological and category innovation to win market competition.
Q: Given the new tariff rates being formulated by the EU, what will be your business focus as you expand into more EU countries? Will you prioritize local market profitability or focus on increasing market share?
A: While Europe is part of our global expansion plan, our primary focus for significant expansion this year is Latin America, Southeast Asia, and the Middle East. European market development may take more time to scale up significantly. Regarding our product offerings in Europe, we believe models like the 001 and Zeekr X are well-suited to meet local consumer needs and preferences. These models are tailored to European tastes, providing us with a competitive edge. For instance, the 001, a crossover shooting brake, is very popular in countries like Germany and Scandinavia. Finally, supported by the flexible business model of the JD Group’s global manufacturing operations, we can adapt and respond effectively to different markets. We have manufacturing capabilities not only in China but also in Southeast Asia, Western Europe, and the United States. This flexibility helps us optimize operations and adjust our strategy to balance profitability and market share expansion as needed. Our goal is to maintain a balance to support sustainable growth across all markets.
Q: Given the constraints of being a publicly listed company, could you provide some guidance on sales, general and administrative expenses relative to overall sales revenue? Also, considering your asset-light model, what are your expectations for capital expenditures?
A: As a publicly listed company, I am limited in the specific guidance I can provide. However, I can share that our guidance for sales, general, and administrative expenses is around 10 billion USD, reflecting our strict discipline in managing these costs as a percentage of our overall sales revenue. Given our revenue scale, this ratio is expected to be more favorable than most (though not all) of our competitors. Regarding capital expenditures, our business operates on an asset-light model, meaning we do not own the facilities that manufacture our vehicles. This approach allows us to maintain good control over capital expenditures. Last year, our capital expenditures were around 1.9 billion USD GMV, and we expect this year’s figure to be similar or slightly higher.
