Hesai Group (HSAI) Earnings Call Transcript & Summary

Hello, ladies and gentlemen, thank you for standing by for the Fourth Quarter and Full Year 2022 Earnings Conference Call for Hesai Group. [Operator Instructions] Please note that today's conference call is being recorded. I will now turn the call over to the first speaker today, Rachel Yang, Vice President of Operations for the company. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining Hesai Group's Fourth Quarter and Full Year 2022 Earnings Conference Call. Our earnings press release [ distributed ] earlier today via newswire services, and is posted in the Investor Relations section of our website at investor.hesaitech.com, along with the webcast access to today's call. On today's call, we have our CEO, David Li and our global CFO, Louis Hsieh. David and Louis will each provide prepared remarks and will conclude the call with a Q&A section. I'd like to remind everyone that our earnings call and investor materials contain forward-looking statements, which are subject to future events and uncertainties. Our actual results may differ materially from those forward-looking statements. All forward-looking statements should be considered in conjunction with the cautionary statement in our earnings release and the risk factors included in our filings with SEC. Finally, this call also includes certain non-GAAP financial measures. You should carefully consider the comparable GAAP measures. Reconciliation of non-GAAP and GAAP measures is included in our earnings release. I would now like to turn the call over to our CEO, David Li. Please go ahead.

Thank you, Rachel, and welcome, everyone, to Hesai's first earnings conference call as a public company. I'd like to first express my gratitude to our investors, partners, dedicated employees and everyone who contributed to our successful IPO on February 9. During our IPO, Hesai sold 10 million ADRs at USD 19 per share. And the [ underwriters ] partially exercised their over element option, raising approximately $192.4 million, listing on the NASDAQ marks a milestone in Hesai's growth. We're excited to begin life as a public company and to deliver long-term value to shareholders, employees and other stakeholders. Now moving on to our operating results for the fourth quarter and 2022. We continued our strong growth momentum in fourth quarter. In September, the first company in the world to deliver more than 10,000 LiDAR units in a month. Total shipments during the fourth quarter reached 47,515 units, among which ADAS LiDAR shipments accounted for 91%. Note, in December, we shipped more than 20,000 LiDAR units. These achievements are ground baking in the industry. In the fourth quarter, our new ADAS LiDAR products continue to win new customers, including, firstly, the largest EV maker in China; secondly, the largest OEM; and thirdly, electric technology company Rox, followed in January by Seres, a leading China-based EV OEM. These were followed by a design win with Didi's autonomous driving business. Additionally, in February 2023, the company secured a LiDAR design win for AT128 with Li auto on its new battery electric vehicle platform. Our successful Q4 have a successful 2022. During the year, we proved that our mass production capabilities empower us to capitalize the [ route ] ADAS and Autonomous Mobility. Our total shipment in 2022 reached more than 80,000 LiDAR units and accumulated a surpassed 100,000 ship units. That represents an explosive 337% CAGR since 2020, significantly outpacing the global LiDAR market. In fact, our LiDAR deliveries and [ net ] revenues for 2022 were higher than the cumulative LiDAR unit deliveries and the revenues of all 8 of our U.S. public listed peers combined in 2022. Notably, we shipped more than 2x the number of automotive LiDAR units than our 8 U.S. listed peers combined. The backdrop of our success is our people. In 2022, we grew our talent force to more than 1,000, most of whom are on the RV actual engineering team, a scale significantly higher than our peers. Our success is further defined by our innovative customers and partners, in-house manufacturing capabilities and breakthrough LiDAR technologies. In ADAS market, we're working with many market-leading OEM partners, including Li Auto, [ Changan ] Automobile, Lotus, JiDU, HiPhi, Rox in Autonomous Mobility market where we are dominant. Our customer base includes some of the most prominent global players, including world's leading robot technician technology company in the U.S. Our customers also include Aurora, PONY.ai, WeRide and Neolix. In the robotics market, we provide product to the largest player in China, Meituan alongside global players such Nuro and others. Our commitment to building superior products which was to optimize performance, quality and cost is a key to a win in both the ADAS and the Autonomous Mobility markets. We believe advanced in-house manufacturing capabilities are critical for developing LiDAR products like ours, but utilize fast advancing technologies. We complete R&D advances is application specific integrated circuit, also known as ASIC to drive semiconductor performance with in-house manufacturing capabilities to design, iterate and bring the best-in-class products to our top customers. Our integrated in-house model enables fast development and proprietary know-how to reinforce each other, establishing a virtuous cycle and a formidable competitive advantage. Model also helped us to optimize cost, deliver higher performance solutions and make our supply chain safer. Through this model and our talented R&D and manufacturing engineering teams, topping approximately 700 staff. We've developed our FT120, a solid-state blind spot LiDAR sensor with no moving parts inside designed for ADAS series production vehicles. We plan to launch the FT120 later this year. In addition to FT120, during the course of the year, we expect to announce several really exciting industry-leading LiDAR products, but you have to stay tuned for those future release announcements. We're proud that Hesai has become the most commercially successful LiDAR company in the world. To date, we signed 11 OEMs, 6 of which will be in mass production and all 11 by 2024. We're presently in discussion with several other leading Chinese and global OEMs, which we expect to add in 2023 and look forward to sharing more information with you in due course. Moving forward, we'll continue to build partners and relationships with OEMs and autonomous technology companies, perfect core LiDAR technologies and manufacturing capabilities. Our growth has just begun and our path is clear. We're optimistic about the future trajectory. With that, I'd now like to turn the call over to Louis, who will share about our financial performance for Q4 2022 and our outlook for the rest of the 2023. Louis, please go ahead.

Thank you, David. First, I want to thank everyone for attending Hesai's inaugural earnings call as a public company. In its operating figures, our commercial success is evident in our financial performance. To be mindful of the length of our earnings call today, I encourage listeners to refer to the earnings press release for the 2022 and full year results for further details. Clearly, Hesai had a stellar 2022 as we extended our market leadership in LiDAR solutions, both for Autonomous Mobility and now for ADAS. Today, I will just go over the highlights of our Q4 and full year 2022 as I'd like to spend the bulk of our time together talking about our future. We achieved record net revenues of RMB 409.2 million, equivalent to USD 59.3 million for the fourth quarter of 2022, representing an increase of 56.6% from the same period of 2021 and an increase of 22.6% from the third quarter of 2022. Gross margin was 30% for the fourth quarter of 2022 compared to 52.4% for the same period of 2021 and [indiscernible] for the third quarter of 2022. Net revenues were RMB 1.203 billion, equal to USD 174.4 million for the full year of 2022, representing an increase of 66.9% from the previous year. Gross margin was 39.2% for the full year of 2022 compared with 53% for the prior year. Many of you have asked about our gross margin profile as we enter the nascent, but rapidly growing ADAS market. 2023 is a transition year for Hesai, as we migrate from traditionally higher-margin Autonomous Mobility [products], a Pandar, XT and QT to the exploding but relative structurally lower margins ADAS sales of AT and FT. To give you an understanding of the difference, our average ASP for Autonomous Mobility has been over USD 5,000, with approximately 50% gross margins. Compared to that for ADAS, where the ASP is expected to be around USD 500 [Audio Gap] digit to low double-digit gross margins by year-end. In 2022, our ADAS AT sales accounted for about 25%, USD 46 million, but expected to income account for 40% to 45% of revenue in 2023 with an expected more than 3x increase from the 62,000 units in 2022. The bulk of the ADAS shipments will be in second half of 2023 as we expect to be SOP with all -- at least OEM partners by Q3 2023. It will take some time for us to gain economies of scale in manufacturing efficiency and utilization, material procurement and labor intensity to reach our long-term target of 25% to 30% gross margin in ADAS for AT and this project. Against this very strong demand and order backlog -- backdrop, entering the first half of 2023, we are going to expand our manufacturing footprint with investment in 2 plants and to get both operational by Q3 of this year. Let me give you more color about this capacity expansion. First, we are excited to confirm that our new in-house manufacturing facility, Maxwell, a state-of-the-art comprehensive innovation design center, manufacturing and testing complex in Shanghai, covering over 600,000 square feet will come online in Q2 of this year. Maxwell will expand our manufacturing 1 million units in terms of annual shipments and will equip us with a full-range testing capability. Second, in late Q2 or Q3, we plan to open and start another AT production line in our 300,000 square foot new manufacturing facility in Hangzhou, which will also eventually have capacity for over 1 million units annually and be highly automated. Along with our 2 smaller production facilities, which currently manufacture Pandar, QT, XT and one line for AT128, our current capacity will exceed 2 million units on an annual basis by year-end. The combined effects of product mix with ADAS increasing in revenue mix from approximately 25% to 45% of revenue and the opening of 2 large production facilities which will take time to reach optimal scale efficiencies and utilization will put downward pressure on blended gross margin percentage in 2023, but rebound somewhat in 2024. Long-term target for blended gross margin remains at 33% to 35% for Hesai. Now I'd like to turn to our business outlook. For the first quarter of 2023, the company expects net revenue to be between RMB 390 million, USD 56.5 million and RMB 410 million, USD 59.4 million, representing a year-over-year increase of approximately 57% to 65%. The above outlook is based on the current market conditions and reflects the company's preliminary estimates of market and operating agents and customer demand, which all are subject to change. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

[Operator Instructions] Your first question comes from Olivia Zhu from Goldman Sachs.

David and Louis, congrats on the economy side performance. This is Olivia Zhu from Goldman. May I have 2 questions. The first one is about ownership. We noticed that Hesai have made a breakthrough in the partnership expansion and product nomination, including BYD, Seres and the Li Auto's pure EV platform. On the auto side, the company has recently launched the L version L7, L8. Just wondering would it cannibalize the high-end volume that impact the lighter installation on the 2 models? And in addition, is there any more information can be shared on the supply relationship of 2 BYD and Seres. For example, the timeline which car models and the estimated volume. That's my first question.

This is David Li. Thank you for the question. Let me maybe address the Li Auto one first because it's one of our largest clients. So you're right, that the LiDARs are the standard configuration for the L9 and then they are optional for the L8 and L7. And for both additions, they have the AD MAX, which is the one with LiDAR and AD Pro, which is the one without LiDAR. But having said that, the L7 and L8 are larger volume products. So -- and the take rate is actually pretty decent, even today. And that's why we're able to come up with our projections for the rest of the year based on the take rate of the L7, L8 and L9 and all the LiDARs that from all our clients. And also, one interesting note is that, if you watch very carefully of the Li Auto L7 release, they actually mentioned that now by end of the year, we're going to have more urban NOA navigation of autopilot functions when it's with LiDAR, which means that the version with LiDAR will be much more valuable in terms of its ability to provide advanced driving functions. And that was actually a very big boost on the take rate of the MAX version of the L7. So which is extremely encouraging to know that even L7 is technically considered a more affordable version, you would assume that people wouldn't have a higher take rate for the one that consideration with LiDAR turned out that it's not entirely true. People still like it. People still buy that with a more expensive configuration because they really look forward to the driving function that will be available down the road. Also on top of it, I want to point out the fact that when you buy a smart EV today, you pay the price today, but you're not getting the full function yet. Most of -- a lot of the functions, especially on the autonomous driving side are being released via OTA, over the air, to you over time, which means that technically, you pay the money already, but the value will go up over time, which is a good signal for us because that's why we believe over time, more and more people will be buying into the function as the value go up. That's why long term, we're very optimistic on that. And now do you want me to comment on the Seres and BYD, right? It's confirmed that we started working with them, with some of the models. Unfortunately, we don't -- I don't have more information about the more models that we're in discussion with them and some of them have not come to the decisions yet. But what I could say is that because both Seres and BYD, is not on their entire fleet yet. There are quite a few exciting design wins that could come out later this year or even some of them are very soon. So we look forward to it, and we'll keep you updated on that.

Olivia, this is Louis. For Seres, we do expect to ship this year. BYD is more likely, the volume will be next year when their models come out. Did that answer your question?

Yes, right. That's very helpful. My next question is about the implication of the recent EV pricing cut. We noticed that year-to-date Tesla has revise price in China, a lot of other EV makers have to revise the pricing as well. Given the diminishing government subsidies, it is likely that the car makers margin will get squeezed. Just wondering that the pricing pressure has passed through the LiDAR suppliers now? And what's Hesai's response strategy towards the EV pricing cut?

Yes. We are observing that now also already. What I'd like to point out is that if you look at the pricing cuts phenomenon, it's really on the more affordable part of the spectrum of the market. If you think about it, the nature of LiDAR, it's at least now, and the penetration is mostly on the more premium part of the market, especially if you think look at the Li Auto, I don't think they have sold anything that's below RMB 300,000. And it's at least from what we receive and observed that it is much less impacted, if at all, by the pricing cut. And we do expect a lot of competition on the below RMB 200,000 level for the cars, but those are also not our typical choices sure -- cars when they want to buy LiDAR. If you're buying a car, that's like costing you RMB 150,000, you probably don't really care about LiDARs today, right? You want the LiDARs data and all the big screens and all that today, the batteries, right? It only becomes a much more serious interest when you're paying for, I would say, at least RMB 200,000 -- ideally RMB 250,000, and that's the range where people started to look for things that's beyond battery and infotainment system, and that's where LiDAR became a symbol of intelligent driving.

I think, Olivia, for us, as David said, we're basically more in the higher end of each of these lines. So we probably won't see as much impact from price reduction at the lower end of their pipelines. But for us, all 6 OEMs shipping this year, the majority will come in, in Q3 and Q4. They will be in cars above RMB 250,000. So they're less impacted by price cut competition. And then the bulk of the volume will be in '24, right, where we expect volume to at least double or triple from 2023 levels. And that's when we'll, I guess, see if the price increases will affect the demand.

Your next question comes from Tim Hsiao from Morgan Stanley.

Congratulations on the solid results. I've got 2 questions. So first one, I think, David already touched on some conversations about the consumers on the LiDAR reduction. But based on your recent conversation with car makers, is there a chance -- any change to your thoughts about adoption [indiscernible] of LiDAR during the mounting pricing pressure and competition? Will there be any risk of near-term downgrading of [indiscernible] or of the upcoming models with lower adoption of LiDAR? Or actually the car makers have been getting more aggressive to upgrade us back with more LiDAR adoptions to differentiate themselves? So could you share a little bit about what the feedback on the car makers lately.

Can you repeat it?

Yes. Tim, is your question about in our conversations with carmakers, are they more or less inclined to use LiDAR for the next year? Is that sort of what you're getting at?

Yes, yes. Because I think on the car makers, they might consider to be more cost conscious and might lower the back or lower the adoption rate of LiDAR, but probably our customers might be more even more less than considering to adopt LiDAR. So what's the feedback of your major customers [indiscernible].

I think this goes in line with Olivia's question is that our LiDAR are typically on the premium models, so it's less likely that they will cut this because it is a marketing play, right? So if you have LiDAR and your competitor doesn't have LiDAR, it's actually a big selling point. In addition, these models are coming out in '24. So what they don't want to do is their new generation models be seen as really standard models with no differentiation. So, so far, as far as I know, we have not seen carmakers in our 11 OEMs, they say they're going to cut LiDAR out of any models or reduce the effect of LiDAR in those models. Those models are on track. The one thing that may happen is if there's a delay in the SOP of some of these models in '24, because several of these carmakers, these are brand-new models. So there is some delay risk on that side. But I haven't seen anywhere they actually cut the LiDAR out. Have you, David?

Correct. Yes.

Does that answer your question, Tim?

Yes. Great. My second question is about the manufacturing -- my second question is about the manufacturing capability because I think this year's important milestone would be the launch of our new plan, Maxwell. So could you please share with us the current progress of our new plan. Is it still on track to kick start the mass production in the midyear and older ramp-up so far we are on track to lead our targets?

Okay. We have Sun Kai, one of our other cofounders here and Chief Scientist. He can answer the question, when will Maxwell be operational?

Okay. So for the [indiscernible] will be finished Q2 this year, probably the middle or late Q2, and we will have some automatic line by the end of this year, that's the plan for the Maxwell.

And then for Hangzhou, Tim, that will come after Maxwell, and we expect to have 1 or 2 operational lines in Hangzhou. These will be for new redesigns. So the existing AT128, we have one line already in Shanghai that's producing. But in order to -- as we said in the earnings release, our goal this year is to work on the gross margin profile since ADAS typically has a lower gross margin profile. So we have a redesign of the AT coming out, and we don't want to put it in the same manufacturing line as the current AT. So the Hangzhou plant will be most likely the current plant is a used one line for the new AT redesign that will be much lower cost, and that will improve the gross margin profile. So that's why we opened 2 manufacturing. We don't want to cross the 2 production lines. We're in one and then one is manufacturing a later model the same one. So we will -- plus we believe we will use that capacity up by '24, '25. So we're just getting the factories ready ahead of the expected demand, which we think is a prudent thing to do.

Your next question comes from Bin Wang from Credit Suisse.

[Foreign Language] My question is about the ADAS client from global automaker because we competitor on out from Toyota. Is there any chance this year, we can get a single client from the global automaker [indiscernible] Toyota. That's number one question. Number two is about the margin. I remember 4 last year, it's about 30% gross margin. Can you provide a breakdown between ADAS and LiDAR [indiscernible] And what's your outlook for first quarter 2023, and 3-year for the 2 beta products?

David will take the first question. And I'll take the second question.

Yes. So I guess I'll take the -- should I be doing this in English or Chinese?

English.

Okay, cool. Question is about the global side of the business. And it is hard for me to directly comment to competitors because it's their right to disclose things, but I want to point out that in our definition, when we say a global deal, we consider only from the global programs, right? And when he's talking about the localization of some of the joint venture car models and all that, we actually have some of them, but for us, it's a China deal. For global, truly global, it has to be sourced from the car models that are shipping globally, which are typically the European/Americans. So we are in late-stage discussions with multiple, including Europe and American that will come out in Q3 and Q4 as the final results this year or in the either RFI or RFQ phase of them. So we are very optimistic about it. So the reasons I think we explained in the past, I'll quickly repeat them. One is that this round of sourcing from the global OEMs that are really focused on the practicality of the ability to deliver. And in the past, lot of the global peers have not demonstrated the possibility to deliver volume products as ADAS. As you can imagine, this is one of the most critical ability for any automotive vendors to do, and we've illustrated that. We shipped more than 80,000 units in total and I think what was the official number for the ADAS sensors that close to...

62,000.

60,000 ADAS sensors, and that's one of the numbers that OEM really care about today because they want to make sure you have the ability to deliver and the evidence you can use is past shipment and now we have it. And the other one is actually cost. And historically, for the first round out of the sourcing from a few years ago from the global players, they were the smaller volume vehicles for that, and it's probably okay. It's at a relatively higher price. Now most of them are being much more serious about rolling those configurations into more affordable price range large-volume vehicles and in which price becomes a much more critical issue. And for us, with our ability and the history of developing in-house ASICs and in-house manufacturing, we have the possibility to do low-cost ADAS sensor at a reasonable margin. That's what they care about. That's why we have very high confidence that at least some of those deals will come to us, and hopefully, we'll be announcing that soon.

Thank you, David. Great questions, Wang Bin. On the gross margin side, in 2022, our gross margin for the Autonomous Mobility side was over 50%. On the ADAS side, it was less than 5% because we were just ramping AT. It only -- was only for several months. So remember, the production line of the AT128 that's currently in effect, has capacity for 300,000 units a year. We only manufactured 60,000 and delivered in 2022. This year, for Q1 and Q2, utilization rate will not be quite as high. By Q3, Q4, it will ramp up. So we expect to ship at least 200,000 AT plus FT units this year. So it will get better with the gross margin profile. So for this year, on AT, it will go up from under 5%. By the end of this year, we expect the gross margin to be in the low single digits to high to low double -- I mean sort of high single digits to low double digits, so probably 9% to 13% as we exit this year. The long-term gross margin we expect for AT should be around 30% to -- a little bit over 35% as we redesign the model and as we go to mass production. Remember, in '24, we have 11 OEMs shipping in AT. So the volumes will be just that we can get the higher gross margins. On the Autonomous Mobility side for 2023, this year, we are going -- we are undergoing in Q2 and Q3 a price reduction on the outblended basis for Pandar. So the ASP last year was about 13,000 for Autonomous Mobility products. This year, we expect that number to be around 9,000. So because of the price cut, it will put some downward pressure on the gross margin profile for probably Q2 and Q3 of this year. So Q1 should be okay. But Q2, Q3, it will have some negative impact. And so I want to also say is that we are addressing this as well. So we will have a lower cost Pandar model coming out in the second half of this year that will significantly reduce our production costs, and we'll still be able to maintain our margin at around 50% for this product at scale. So that will mean by end of the next year the margin will bounce back. So as you asked earlier, our long-term gross margin target remains unchanged at 35%, where we have Autonomous Mobility in between 45% and 50% and ADAS at probably 27% to 33% with a target of 30% or so. That blended number should come out of 35%. So nothing has changed on the long-term perspective. But on the transition for this year, the first half will be slower. It's always a seasonal slower time for us, Q1, Q2. In Q3, Q4, the margins will begin to ramp up again. Does that answer your question, Wang Bin?

[indiscernible] follow. I think quite decent time frame that third quarter, fourth quarter. Can I assume possibility to secure the 90% very likely. [indiscernible] with you?

I didn't hear that, repeat. Repeat.

I mean you already gave the timing for a third quarter number fourth quarter to potentially have a conclusive client. So that's why can I assume that the possibility to announce a global ADAS customers around 90% is very high?

Richard Chase Global ADAS announcement in the first half.

You mean first half of this year, Wang Bin?

No, no, no. I mean, it's yes or no. Whether this year, you announced a client from global auto maker, the possibility is, to ratio [indiscernible]

Yes, we have -- for the year time. We have actually multiple European and at least one American major design decisions coming out by Q3 and Q4. So the chance of getting more than one -- at least one is very high.

But then also, Wang Bin, I will remind our investors that the adoption for China is actually much more rapid than the U.S., right? We have 11 Chinese OEMs. The volume in China will be 4x or 5x the volume for the U.S. in the next -- and Europe in the next 2 or 3 years. So we went after the -- where the market is, and the market is China today. So we went after and we have 11 -- we have a dominant share in China already. On the global side, the game is just beginning in '23, for the volume production in '26, '27. So we are fighting and we are in the game, but the results won't come out until second half of this year.

And also the actual shipment. We're only

Starting '26 and '27.

Yes, as early as '26.

Yes. So for the next 2 years, it's more important to focus on our China deliveries because that's where the revenue driver is and that's where the know-how and the production will come from, and that's where the margin will come from. So that's why you can see the reason is we completely dominate our global peers is because they have no volume in production. So we're larger than all 8 combined because we are winning China where -- that's where the ball game is. You can only play where there's a game. And the game for North America and Europe really won't be -- you can just start scoring in '26 and '27.

[Operator Instructions] Your question comes from Paul Gong from UBS.

I have 2 questions. The first one is you mentioned that the mechanical LiDAR has more than 50% gross margin, was ADAS LiDAR has some 5% gross margin in 2022. So from the revenue of the Q4, is that true to -- is that fair to assume the revenue mix or revenue split is roughly like 50-50 between the robotaxi LiDAR and ADAS LiDAR? Is that our estimates of the revenue split?

For Q4, that's pretty close. For the whole year, ADAS was 25% and Autonomous Mobility was the other 75%. So going forward for [indiscernible] which is now '23, ADAS should be 40% to 45% of revenue in this year. But as I said earlier, the bulk of the units will come in Q3 and Q4 as new models are released. So that's a seasonal factor of our business, is the Q3, Q4 typically are much larger quarter than Q1, Q2. So Q1, the reason the gross margin will be better is because there are more Autonomous Mobility shipments in Q1.

And the other quick point I want to make on the gross margin side is that it's true that last year, the ADAS gross margin wasn't as we like to be. But remember that this is the first time we're shipping a larger volume ADAS, right? And then if you compare that number to all the peers, that still not crazy bad considering most of the people are having really minus gross margin.

And Paul, I'll give you a stat as you understand how fast we are working on the cost side. The average COGS for AT in 2022 was USD 700. The average COGS today is under USD 500. Okay. So as the ASPs come down because we have a contract, the cost is also coming down commensurately, if not faster, but there is a transition period, right. It's another quarter or 2 to ramp up the new production line in Hangzhou for the new AT. That has significant price reduction versus the current version that is in Shanghai. And that's why there's a slight lag in the gross margin profile as a new line comes up and then it needs to scale. But I think this is the right decision for us. We invest this year and '24 should be a blockbuster year for us in terms of the deliveries, right? I mean we expect to be delivering 600,000 to 800,000, even maybe close to 1 million units in '24 when our competitors aren't even at 50,000 yet. So we were basically trying to extend our lead and [indiscernible] manufacturing.

Understood. Understood. So just to double check, you said for the full year this year, the ADAS LiDAR is going to contribute roughly 40% to 45%, is that right?

Correct. About RMB 115 million to RMB 120 million. Yes.

Okay. And the long-term margin for the robotaxi LiDAR is 45% to 50% and nontarget for the ADAS LiDAR margin is 25% to 30%, right? These are the right numbers too?

Right. Yes, that's correct. You blend it out ADAS is growing faster, you'll be about 35% target.

Understood. Understood. My second question is regarding the Q1 guidance. I understand right now the ADAS LiDAR is many from the -- I think the Li Auto's guide is somewhere like 10% to 20% quarter-over-quarter of volume growth in Q1 versus Q4 or even though maybe the mix is going to be more towards L8 instead of L9. So that is basically means the Q1 versus Q4, your guidance is also flattish. That basically means flattish in both the ADAS LiDAR as well as the robotaxi LiDAR, is that the right way to understand it?

Yes. To be honest, that's not entirely correct for us. For Q1, because there's nothing something you did in Q4, we had higher pricing for ADAS LiDAR. So we ship more units. So that's why we shipped 20,000 units in December. So Q1, there will be a slight slowdown in ADAS for January, February, as those December units are used up. March will pick up again. So I would expect my current forecast is only about 30,000 ADAS units in Q1. Robotaxi will have a very strong Q1. And that's why you see the guidance where it is. And you say it's flattish over Q4. But you have to remember, Q1 is seasonally our slowest quarter because Chinese New Year. And also it's -- there's usually a lag effect. Q4 is the biggest quarter. Q1 and Q2 are slower. So for us to be flattish over Q4, it is quite an accomplishment. It's over 60% year-over-year growth. And Paul, you've known me for 4 years, 5 years. You know I guide conservatively. It's going to be the first time it could be we will have a record quarter, the biggest quarter of our history.

Understand. So you view that the mix is going to be more skewered towards the robotaxi or LiDAR in Q1 that also means that -- Yes, that also means some margin of would be even better than Q4.

Yes. And that's what I told you earlier. I said that already. But then in Q2, ADAS takes over. And Q2 is when a price reduction in the robotaxi LiDAR takes effect. So Q2 then will have a negative impact on the gross margins because the highest gross margin product is taking a price cut before the new design goes into effect in Q4. So there's a 2-quarter impact on the gross margin from the robotaxi because of a price decrease, whereas the reduced price model -- cost model won't come in until Q4. So that's why I'm letting you guys know ahead of time so you properly model this. it's a short-term blip, but it's important that we don't mislead you.

That's very responsible on and very transparent guidance.

You know me, I tell you it's straight. Good or bad.

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

Okay. Thank you once again for joining us today. If you have further questions, please feel free contact our Investor Relations through the contact information provided [indiscernible] or Financial Communications. Thank you.

Thank you. This concludes today's conference call. You may now disconnect your line. Thank you.