Pony AI Inc. ($PONY)

Hello, ladies and gentlemen. Thank you for standing by, and welcome to Pony AI Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. and a webcast replay will be available on the company's Investor Relations website at ir.pony.ai under the News and Events section. I will now turn the call over to your host, George Shao, Head of Capital Markets and Investor Relations at Pony AI. Please go ahead, George.

Thank you, operator, and hello, everyone. We appreciate you joining us today for Pony AI's Fourth Quarter and Full Year 2025 Earnings Call. Earlier today, we issued a press release with our financial and operating results which is available on our Investor Relations website and an earnings presentation, which we will refer to during the conference call can also be accessed and downloaded on our IR website. Joining me today on the call are Dr. James Peng, Chairman of the Board and CEO; Dr. Tiancheng Lou, CTO and Dr. Leo Wang, CFO of the company. They will provide the prepared remarks followed by the Q&A session. Before we begin, please refer to the safe harbor statement in our earnings release. which applies to this call as we will be making forward-looking statements. Please also note that we will discuss non-GAAP measures today, which are more accelerated explained and reconciled to the most comparable measures reported under the GAAP in our earnings release available on our Investor Relations website and filings with the SEC and the Hong Kong Stock Exchange. I will now hand over to our Chairman and CEO, Dr. James Peng. Please go ahead.

Thank you, George. Hello, everyone. Thank you for joining our earnings call. 2025 is an amazing year for us. This was actually defined by multiple remarkable milestones. First, our top line growth significantly accelerated. Looking at Q4 last year, our Robotaxi revenues surged by 160% year-over-year and fair charging revenues, sky rocketed by over 500%. And Second, since our Gen 7 Robotaxi's [ reveal ] last April, we moved straight into mass production and commercial deployment. Our fleet has now surpassed 1,400 units. Third, we are expanding our footprint, launching services in new cities in both China and globally. This has massively broadened our reach. In fact, we've now crossed the 1 million user mark in China alone. Fourth, we've proven our business model actually works. We achieved new breakeven in both Guangzhou and Shenzhen, and we will replicate this success into more markets. Looking ahead at 2026, it will definitely be a year of hyper growth for Pony. We are writing a perfect wave of industry momentum built on five pillars fully driverless technology, policy support, mass production, large-scale operation and ecosystem maturity. Last year, we used China's Tier 1 cities as a strategic blueprint to deploy Gen 7 Robotaxis. From official [ reveal ] to mass production, regulatory validation and rigorous testing, we achieved commercially fully driverless operations within just 6 months. Last quarter, we set our Robotaxi fleet target to over 3,000 units for this year, boosted by the financial fire powder from our successful Hong Kong IPO and also with the Toyota bZ4X Gen 7 model already in SOP. We now have greater visibility and are confident in actually even exceeding this target. Our excellent virtual driver is the key to support this confidence, proven mastery of highly complex urban scenarios and a superior safety record have earned deep trust from the policy makers and the partners driving rapid user adoption. This directly translates into positive UE. Since we hit the UE breakeven in Shenzhen last month, growth momentum continues with this March, we are seeing peak daily revenues of RMB 394 per vehicle and daily orders at 25 per vehicle. We will certainly replicate this success globally. By year-end, we plan to deploy Robotaxis in over 20 global cities. As a go-to partner, we have forged strategic alliance with industry leaders like Tencent and Uber. Together, we will propel global expansion, powering accelerated top line growth and more than tripling our Robotaxi revenues for 2026. Let me elaborate how we will drive this type of growth. We are executing dual-engine strategy. That means we are all in on both China and the global markets. Our proven business model in China gives us a solid foundation to replicate the success internationally. And we are already seeing great results that provisions us for our next growth phase. In China, we have earned a clear leadership across Tier 1 cities scaling further and pushing deeper into busy downtown areas. Take Shenzhen for example, our Robotaxis satisfied surgeon demand in traffic hubs such as [ Nansen and Bauan ] during Chinese New Year. The paid orders in the first 2 months this year alone have already surpassed that of the whole year 2025 in Shenzhen. We also entered university town in Guangzhou, the business campus zone in Southern China. This sets the stage for more launches in multiple cities across the Greater Bay Area. In March, we also entered [ Hangzhou and Changsha ] to driving top Tier 2 cities. This is just a start, and we will have more cities to follow soon. Now turning to overseas markets. Our presence in Europe, the Middle East, East Asia and Southeast Asia now covers a population of 100 million. We're aiming for nearly half of our 20 [ CD ] target to come from overseas by the end of this year. Recently, we teamed up with Uber and Verne, which is a [indiscernible] [ MAC ] group company to enter Croatia working together to launch Europe's first commercial fair charging Robotaxi service. In the Middle East, we rolled out our first fair charging service with Mowasalat Karwa in Doha, and we are gaining up for fully driverless operations after the approval later this month in Dubai, UAE. In Singapore, we have launched public reveal of autonomous driving services with ComfortDelGro. We are confident overseas revenues will grow rapidly in 2026. Ecosystem maturity is a critical pillar in executing our dual-engine strategy. Our successful business model makes us a go-to partner partners are now actually lining up to join our joint deployment model. Essentially, it's a model that they will fund vehicles and we can share success together. This will empower us to achieve fleet acceleration, reduce cost and capital efficiency. We have got a robust pipeline of new partners ready to jump on board. Toyota is the first to adopt our joint deployment model. Their [indiscernible] bZ4X Gen 7 Robotaxi will account for a significant portion of our 3,000 vehicle target in 2026, and we have already secured 1,000 units. As a long-standing strategic partner, our collaboration with Toyota extends far beyond just manufacturing. Together, we will commercially deploy Robotaxi to drive market penetration. By leveraging our OEM partners, mature supply chain and extensive after sales service networks, our enhanced partnership with both Beijing Auto and Guangzhou Auto further reduced our vehicle cost. In addition, we will jointly deploy Robotaxi vehicles into more overseas markets. To reach a broader user base, we also partnered with Tencent by integrating with WeChat Mobility, unlocking access to hundreds of millions of users to call our Robotaxi services. We are also deepening strategic partnerships with On-time mobility in Guangzhou and ATBB in Beijing to accelerate adoption of our joint deployment model. Overseas, our global partnership with Uber enables us to access users across multiple continents, starting from Europe. Our regional alliance strengthened our market penetration with partnerships established with ride hailing platform both and also auto manufacturers, Stellantis. Now let me turn to Robotruck. Over the past few years, we've made huge technological leaps by using our proven L4 tech stack. It has been translating into commercial breakthroughs. We are now covering major logistic routes connecting industrial hubs, ports and consumption centers across China. To seize the opportunity, we introduced our Gen 4 Robotruck trucks in 2025, reducing the ADK BOM cost by 70%. We target mass production of Gen 4 Robotruck and deploy them this year. In 2025, we have deployed fully drive Robotrucks at the [ Jiangmen ] port in Guangdong province and tested the [ 1+N ] driverless [ platoning ] in extreme weather conditions in the Northwest China. With this proven pack, we will deploy Robotrucks in more ports and mine haulage scenarios. Lastly, our licensing and applications business delivered a robust growth. Last year, Autonomous Domain Controllers, the ADC sales actually reached sixfold to the level of 2024. We have also expanding our application scenarios to low-speed deliveries, global sweepers, logistics and human noise robotics. Strong customer demand and growing market recognition of our technology will continue to drive growth. In summary, we have hit a major inflection point. As we validated business model through 2025 achievements such as fleet expansion, new [ CD ] launches and breakeven. 2026 is posed as a year of hyper growth. We are super confident to triple our Robotaxi revenues, roll fleet to over 3,000 vehicles and deploy Robotaxis in more than 20 global cities. Powered by our dual-engine strategy, we are speeding towards autonomous mobility everywhere. I firmly believe every effort we make today, we are not only reshape the future of human mobility, but also drive a revolution in transportation. This will be a revolution where safety, efficiency and accessibility redefine how the world connects, commutes and lives. With that, I'll hand it over to our CTO, Dr. Tiancheng Lou, who will go over our technology strategies. Tiancheng, please go ahead.

Thank you, James. Hello, everyone. This is Tiancheng. Looking back at our journey in 2025, that was a landmark year. We improved the commercial viability of to mobility, achieving positive unit economics in Guangdong and Shenzhen. Today, our fleet has surpassed 1,400 a large growth throughout the year. Robotaxi is the first of few application of physical AI validated by real-world operations and user adoption. Over four native tech architecture built down years of R&D has earned the trust of policymakers and establish first-mover advantage to capture multiyear growth. As highlighted in the previous quarter, word models are now the widely recognized a path a domain where we hold a firm leading position with ponied model. But technology is only the foundation. The key to success is who can deliver reliable drives Robotaxi service at scale. I will walk you through how our technology drove commercial result in 2025 across three dimensions: scale, efficiency and user tiers. First, scale. Through strong execution on production, we surpassed over 2025 fleet target, and this momentum to listen to reach over 3,000 units by the end of 2026. Since middle 2025, we began for the mass production of 2 Gen 7 models with Guangzhou Auto and Beijing Auto, both now ramping up to full capacity. In February this year, the bZ4X Gen 7 Robotaxi codeveloped with Toyota roof the production line. The strong realization of overall contriving stack enables us to efficiently adapt across different vehicle platforms. This multi-OEM network enables rapid scaling, while strengthening local partnership and broadening of Robotaxi vehicle offerings. This scale is backed by a comprehensive [ ODD ] that validates our technology's ability to generalize our cross diversity of urban environment. Today, our fully dropped fleet 2/47 in many cities across the group. Serving the public during peak rush hours and severe weather conditions. Achieving this requires regular engineering validation and a breadth of over fleet deployment and ODD reflects the majority and the robustness of our autonomous driving stack. Overseas expansion further validates its generalization capability. In Croatia, we are operating across a large area in the center [indiscernible], the Capital's urban core handling complex urban traffic rather than limited low-complexity rocks, such ability to deploy in demand environment from day 1 demonstrates both the robustness of our technology and the commercial potential of our global expansion. This gives us strong confidence in reach of the target of more than 20 cities worldwide. Second, efficiency. We will establish a clear cost advantage, driving a twofold improvement on hardware, over optimized design in Gen 7 Robotaxi effectively lower [ BOM ] cost through adopting more cost-effective components. Our operation over city record creates significant leverage, dramatically reduced insurance fees and improving remotes efficiency of this enable us to scale with positive unit economics. Beyond that, [ overtech ] is building a powerful operation mode. We have developed a highly generalized AI driving capability to build a comprehensive and scalable operational workflows. This deep know-how makes us to the go-to partners across the mobility ecosystem. It perfectly positions us to execute our joint development model allowing us to scale fleet much faster with better capital efficiency. The third, user tiers. [indiscernible] enables Robotaxi to serve consistently in high-value, high-difficulty scenarios...

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Yes, I will continue with the third factor use shares. So our technology enabled Robotaxi to serve consistently in high-value, high-difficulty scenarios exactly in high-frequency rideshare hotspots where demand peak and users are willing to pay a premium. This differentiates our service supports our price strategy and drive improvement. For example in Shenzhen, over 24/7 [indiscernible] Robotaxi covers high-traffic urban zooms such as [ Nanshan ] hi-tech area to fulfill daily community needs. During rushovers, or AI virtual driver navigates not only major main load but also narrow street where commuters actually need to pick up and drop up, providing convenient product coverage that truly address real-world community needs. In Beijing, during a heavy snowstorm in the early March, getting a ride become a major pain point for users, such as long waiting time and limited availability. Despite the extreme conditions, snow-covered sensors reduced visibility and unpredictable road conditions, all demanding significant high driving capabilities. Our Robotaxi fleet continued our operations throughout the snowstorm, capturing substantial order volume growth during that period. Beyond handling extreme conditions, we have significant full riding comfort. Over Gen 7 Robotaxi deliver smoother acceleration, breaking and cornering significantly reducing motion sickness, a pain point that user came about most. This underscores the fundamental point technology leadership is not just an engineering milestone, it is the core engine of our commercial success. Outstanding user shares earns user preference and repeat usage organically without rely on discount. Beyond our Robotaxi business, or proving L4 technology enable us to capture commercial opportunities across the broader automotive industry. Over platform standardization enables 80% of the tax stack share between Robotruck and Robotaxi. We have achieved two full scenario or whether several operational capabilities. Over operations now span from complex highway segment to unique scenarios like port logistics with accumulated managing exceeding 60 million kilometers. We also unlock synergy for the license application segment through leveraging our advanced autonomous driving domain controller design, capitalizing on the rapid growth trend in low-speed delivery robust reapers, logistics and robotics. We effectively fulfill our customer demand on [indiscernible]. Looking ahead to 2026, we will increase our investment in R&D and AI talent to assess our competitive position. Specifically, we are focused on advancing our PonyWorld model to further strengthen our auto-driving capabilities, reducing bond costs through continued hardware, software optimization and improving operational efficiency to lower per vehicle operating costs. This improvements are designed to fuel faster commercialization, expanding our robotic operations to more than 20 cities globally by year-end and delivering faster revenue growth. We will over triple Robotaxi revenues in 2025. As we demonstrated already, technology leadership directly drives commercial performance, and this investment will further widen our advantage. This concludes my prepared remarks. I will now pass the call over to our CFO, Dr. Leo Wang, for a closer look at our financial results. Leo, please go ahead.

Thank you, Tiancheng, and hello, everyone. This is Leo. I will focus on year-over-year comparison for the fourth quarter unless otherwise noted. For full year 2025 and fourth quarter detailed financials, please refer to our earnings release. 2025 marked an inaugural year of large-scale commercialization for our Robotaxi operations. Robotaxi segment continues to act as core growth engine for the group, delivering exceptional top line growth. In the fourth quarter, Robotaxi revenue surged 168% and to USD 6.7 million. For full year 2025, Robotaxi revenues reached USD 16.6 million, growing more than doubled at 129%. This remarkable acceleration was primarily driven by our fare charging service, which we saw Q4 fare charging revenue skyrocketed by 501% with a full year growth rate of nearly 400%. More importantly, within just 4 months of Gen 7 Robotaxi launch, we are thrilled to see consecutive UE trend positive in both Guangzhou and Shenzhen, two most valuable cities in China. This milestone was built on to unique pillars that are exceptionally difficult to replicate from others. First, our clear cost advantages in both vehicle and the Robotaxi operations. Second, our exceptional AI driving capabilities, being capable of navigating highly complex urban environments 24/7, we deliver a consistent, reliable and high-quality service, which helped us to capture the robust user demand. With the foundation of positive UE and as vehicle density improves, we are seeing a clear network effect, improving fleet density shortens wait time, boost utilization rates and drives the number of orders per vehicle. This in turn enhances overall passenger experience and further stimulate ride hailing demands. Specifically, year-to-date of 2026, our users have nearly tripled year-over-year and reached 1 million. In February, we successfully delivered unique economic positive in Shenzhen with an impressive average daily orders of 23 and RMB 338 average daily net revenue on a per vehicle basis. As a matter of fact, this strong upward trend is continuing right now. In March, we hit a new daily peak of RMB 394 net revenue and 25 orders per vehicle. More excitingly, our paid orders in the first 2 months of 2026 in Shenzhen, have already surpassed the entire order volume for the full year of 2025. Looking ahead, we remain highly confident in the growth trajectory of our Robotaxi business. As James mentioned, our 2-engine strategy will drive rapid expansion into more than 20 cities in China and overseas. We are confident that our Robotaxi revenues will at least triple this year. Simultaneously, we are enhancing our revenue quality by adding high-margin recurring revenue streams through Robotaxi joint deployment with our partners such as on-time mobility. This model will lower the CapEx requirement on initial fleet deployment from our end and can also give us leverage to expand faster and more efficiently into new regions. From a technology perspective, as Tiancheng mentioned, our advanced AI driver capability directly empower a premium user experience, providing safe, reliable, smooth and efficient rights for passengers. This superior experience strengthens our pricing power and deepens user mind share, which can further boost top line growth. On the cost side, we have proactively secured procurements for critical vehicle components and hardware, including high demand memory modules. Therefore, we expect the minimal impact from supply chain pricing fluctuation. Meanwhile, with greater fleet scale continues a reiteration and the deepening OEMs collaboration. We have high confidence in continuously reducing our vehicle bond cost and further improving operation efficiency. Together, the high gross margin profile of the Robotaxi segment is fundamentally elevating our revenue quality and actively contributing to the group's future profitability. Now let's move on to Robotruck. By leveraging our proven Robotaxi stack. Our next-gen robot truck achieved a 70% cost reduction. Furthermore, our transition to EV trucks also will continue to drive down per kilometer operating cost. Looking ahead to 2026, our shared expertise in Robotaxi will accelerate our Robotruck mass production, enabling us to begin deployment within 2026. As we aggressively deepen our route coverage across major logistic corridors and expanding into more scenarios such as dedicated lines and port operations. We expect to see accelerated growth in revenues beginning in the second half of this year. With lower structural costs, continuous tech breakthroughs towards driverless operation we are perfectly positioned to capture the free markets immerse value. Thirdly, our licensing and application also delivered impressive growth in 2025. We are seeing strong client demand from our Auto Domain Controller, ADC product, which the ADC volume grew to 6x of the level of 2024. Looking ahead, we are seeing a solid order pipeline from existing customers and are actively expanding into new use cases. On the overall profitability front, we achieved a historical financial milestone in the fourth quarter by achieving a first ever quarterly GAAP level net profit. This historical revert to profitability was primarily driven by the gains from our strategic equity investments, which strengthens our broader ecosystem positioning and unlock business synergies. In 2025, our expense were slightly widened. This was a deliberate front-loaded investment to accelerate Gen 7 mass production, expanding into new cities and strengthening our tech stack. Such investments are already starting to drive strong top line growth. In the area of AI, we anticipate continuous investments into AI technology and the talent to help us secure a long-term competitive edge. Beyond the technology benefits, our joint deployment model will also be a powerful lever for CapEx efficiency. By collaborating with partners to share the initial investment, we are able to scale our fleet rapidly while maintaining a lean balance sheet. Looking ahead, we expect the revenue growth to outpace the growth of operating expenses as we capitalize our fleet scale and capture the virtual cycle of positive UE. Finally, we closed the year with a highly robust balance sheet with substantial cash reserves of over USD 1.5 billion, following our successful Hong Kong IPO. This solid capital position gives us the firepower to invest decisively into R&D, SG&A and go-to-market capabilities. We are confident that the stepped-up investment will accelerate our pace on large-scale commercialization and deliver faster revenue growth in 2026. Looking ahead, we are crystal clear on our strategic priorities, tripling our Robotaxi revenue. expanding our fleet target to over 3,000 vehicles and deploying Robotaxis to more than 20 cities globally by 2026. We have ample dry powder to support these initiatives, and we will drive progress through our dual engine growth strategy. Combined with our joint fleet deployment model, that optimize capital efficiency, we are well positioned to accelerate these targets and turn our operational momentum into sustained profitable and long-term growth for our shareholders. I will now turn the call over to the operator to begin our Q&A session. Thank you.

[Operator Instructions] The first question today comes from Ming-Hsun Lee with Bank of America.

This is Ming from Bank of America, and thank you for giving me the opportunity to ask a question. So my only question is that since you already have a target over 3,000 Robotaxi fleet by the end of 2026. Can you share your production ramp-up and the deployment plan. Now that you have achieved the UE breakeven in Shenzhen and Guangzhou, how do you think about the future UE trajectory? .

This is James. I'll take this one. So in my opinion, I think the hitting the UE breakeven is a huge win for the whole industry, not just for us, improves that our technology actually works in the real world. It also shows that Robotaxi is not just feasible but profitable at scale. Right after the UE breakeven in Guangzhou, we did it again in Shenzhen. This shows that our model is actually replicable and we achieved this breakeven by focusing on service value, not discounting. What we have seen is that in the regular front -- regulatory front, currently, we do see there's a policy tailwind to support the whole industry. In China, there's coordinated efforts between the central and the local governments to bring Robotaxi services to many cities. And in our existing markets of the Tier 1 cities, I also have seen their small licenses were issued to facilitate a larger fleet. Globally, many countries learn from the progress of -- in China and the U.S. to clear the policy hurdles and come up with regulations to support accelerated deployment. So the regulatory momentum gives us confidence to actually to replicate our current success in many more markets, both globally and in China. Therefore, to capture the market, two things we are focusing this year. One is ramping up production and the other is launching Robotaxis in many more markets. On the fleet ramp-up over the last 2 months, we've been focusing on producing the Toyota bZ4x. And then we're also continuously producing more vehicles with Beijing Auto and Guangzhou Auto, with all three vehicles, we're confident we'll hit over 3,000 units by the year-end. Then on the fleet expansion, we're pushing deeper into the downtown hubs. And secondly, we are also expanding into new cities such as Hangzhou, [indiscernible] and many cities across the Greater Bay Area. Thirdly, in terms of UE, since the fares in China is relatively low compared with many of the global markets. And in China, we already delivered positive UE and we're continuing improving the UE. We expect better earnings in our existing markets and definitely a lot better margins overseas. We plan to expand this year into 20 cities, which can give us a very strong first-mover advantage. Our joint deployment model will also lower our CapEx expenditures, which can help us to accelerate the fleet growth and at least triple our Robotaxi revenues this year. With this, get back to the operator.

The next question comes from [ Tim Shau ] with Morgan Stanley.

This is Tim from Morgan Stanley. I just have a follow-up question about pointing the latest operational footprint based on the dual engine strategy that James just mentioned. So regarding Pony's expansion strategy to enter over 20 cities this year. Could you share details about which CDs you plan to enter? And what's the split between China and the overseas market? And separately, with geopolitical tensions as grading in millions, are you seeing any challenges or headwinds to your operation? That's my question.

This is James again. I'll take this one. Strategically, we're definitely using our success in China as a blueprint for our global expansion because our technology and the business model are proven, we can replicate quickly broadly in the global markets. In fact, we expect nearly half of the 20 cities we're targeting in this year to be overseas, spending in Asia, Europe and the Middle East. In terms of go-to-market strategy, we are teaming up with industry leaders to improve our joint deployment model, which can greatly reduce our CapEx expenditure. This helps us scale efficiently, while at the same time, building a strong local networks. We are already launched in [indiscernible], Doha, Dubai and Singapore, partnering with global giants like Uber, [ Boat ] and [ Stellantis ]. One example is the -- together with the Uber and [ Verne ], we actually have launched the first commercial Robotaxi services in Europe. Looking ahead, we're certainly exploring more European cities and also doubling down in Asia, such as South Korea and Singapore. Regarding the last point of your question on our efforts in the Middle East First and foremost, risk rating remains to be our high priority. So far, we haven't seen any material impact to our business from the current geopolitical tensions. We are still charging along with our efforts in the GCC region. We expect to roll out fare charging services with Mowasalat in Doha, Qatar, and we are getting ready for fully driverless operations in Dubai after approval later this month. I'll get back to the operator.

The next question comes from Leo You with CLSA.

My question is on technology. So road model and autonomous driving fact are now operating in multiple cities across different countries. So could you please tell us more how does the technology generalize new environments where the conditions would be very different from China? And what role does the growth model play in accelerating your expansion plan?

This is Tiancheng. I will take this one. First and foremost, the key insight is that driving is about the interaction and negotiation with the agent around it. There is no difference whether you're in Guangzhou in Shenzhen or in [indiscernible], differently to the country is essentially a different combination of similar scenarios. What varies is the probability distribution, not the fundamental nature of the challenges. Some example [indiscernible] are reckless [indiscernible] without checking mirrors for [indiscernible] in the road. This corner cases occur everywhere. Our technology has been already validated in the most demanding conditions, operating at scale across all peak hours, all weather in dense urban courts in China major cities. This means that when we enter a city like [indiscernible], we are not starting from scratch. We are now deploying a system that has already mattered a superset of the scenarios that we encounter. This is why we can operate directly in that [indiscernible] urban [indiscernible], which carries significant commercial value. Regarding the second part of your question, over [indiscernible] model plays an important role in accelerating this process. It enable us to model the interaction and the negotiation dynamics between our vehicle and surrounding agents and to generate large-scale simulator scenarios that reflect the specific traffic patterns of our new market. By reinforcement learning within this stimulating environment over system continuously improve, it's driving policy, allowing us to validate and fine-tune efficiency without leading to collect massive amounts of data in a new city. The enablers for reaching 20 cities are clear. Our market OEM network provide locally suitable vehicle platforms. Our operational playbook from remote system to fleet management is highly standardized and reputable. Our technologies brought ODD coverage means we can operate in compact urban environment, not just limited low difficult rocks. Together, this gives us strong confidence in achieving our target of deploying Robotaxi services in more than 20 cities worldwide by year-end 2026. With that, back to operator.

Next question comes from Xinyu Fang with UBS.

Congrats to the solid results. My question is about the drilling deployment model. For vehicles only plan to add this year. Can you elaborate a bit more on how you will apply the deployment model? And how should we think about the benefit of this model for the company and our value chain partners.

Yes. This is Leo. I'll take this question. So as you can see that we have hit a critical milestone of UE breakeven in Guangzhou and Shenzhen. After that, we've been seeing a lineup of partners in the whole ecosystem that wants to join the Robotaxi market, and we are there go to choice. So in this joint deployment model, our partner fund the vehicle CapEx and start tapping into the whole Robotaxi value chain. For example, ground operation vehicle maintenance and charging. We consider this is a win-win situation for both of us. Our partner gets growing revenue from deployed vehicle, and we essentially are in the asset-light model to expand our fleet rapidly. In this year, we expect nearly half of our new vehicles are coming through this model and which is led by Toyota. Not only we improve our capital efficiency in this -- in our expansion through this model, but also it will create an additional revenue stream through recurring rent income from the form of revenue sharing or AI driver license fee. So this revenue stream, combined with our self-owned fleet fair charging revenues will help us to achieve more than triple revenue -- Robotaxi revenue in 2026. And beyond the current lineup of our partners such as total on-time mobility and ATBB, we actually expect even more partner will jump on board this year. And I will get back to the operator.

The next question comes from Purdy Ho with Huatai Securities.

Regarding the 1,000 over taxes already contracted with Toyota. How are you trying to deploy these vehicles? And do you expect any future scaling up or strategic initiatives with the Toyota down the road?

This is James. I'll take this one. So in terms of Toyota, I consider is as not just a partner. They've actually been with us since the 2019 as our largest strategic shareholder. The relationship between us goes way beyond just an auto supplier. It's actually a deep strategic long-term collaboration. In terms of the mass production of Robotaxi vehicles, we have jointly launched several Robotaxi models on the Toyota platforms since 2019. And in this year 2026, we are adding 2,000-plus new vehicles and nearly half will be the new Toyota bZ4X Gen 7 vehicles. This model is jointly developed with Toyota Motor company and GEC Toyota. The best production is already live on Toyota's assembly lines. There certainly is a great synergy between us, their manufacturing capability and top line platforms are blend perfectly with our L4 technology and operational know-how. So considering our collaboration besides the jointly developing vehicles, Toyota is also the first partner to adopt our joint deployment model. Funding the fleet to help us scale capital efficiently. This shows their incredible confidence in Pony. And together, we are rolling out commercially starting from China's top-tier cities. With this, I'll get back to the operator.

The next question comes from [ Hu Jian Ding ] with HSBC. .

I've got two. The first question is about competition dynamics. How do you see the other makers getting into the Robotaxi segment? And second question is about the competitive edges. So market narrative is shifting towards more into scaling with more entrants getting in with Pony's most unique leading advantage?

Sure. I'll take the first one, and I'll hand over to Tiancheng for the second part. Certainly, we have seen that there -- especially lately, there are many announcements about new players already entered or plan to enter the Robotaxi business. Those new entrants, including automakers, ride hailing companies, tech giants or even startups. In general, I think these new entrants to the Robotaxi space validates the long-term potential for our industry. And I certainly very much welcome the new players. Essentially, they can make the whole ecosystem to be even larger. But in reality, L4, especially Robotaxi is such a complex systems that requires integrated solution. As I mentioned in my prepared remarks, there are five pillars for the Robotaxi industry, namely technology, policy, mass production, operation and partnerships. These five pillars are so intertwined that simply throwing resources and then will not accelerate the development process. So we -- over the years, we actually have developed a unique advantage on all aspects of the Robotaxi industry. So regarding some of the -- our competitive mode, I'll hand over to Tiancheng to elaborate.

Technically, I do not think the automakers have an advantage in L4 Robotaxi just because they are strong in manufacturing or in L2 systems. The key point is that L2 and L4 are fundamentally different. They are not just 2 point on the same path. L2 as the mouse for intervention increases, the actual rate can increase. Partial automation can create a force sense that the system is almost good enough until it fails in a situation where the human is no longer ready to take over. That is why the L2 part does not naturally lead to L4, especially when you're talking about the driverless fleet at scale. One unique advantage we have at Pony AI is over long-term investment in word model and L4-native virtual driver training approach. The reason this matters that L4 robotics need to be significantly safer than human drivers. And that cannot be achieved by simply imitating equipment driving behavior. To reach that level of safety, the system has to keep improving through large-scale trials and ours in a virtual environment. Which is why award model essential. In other words, the key to train our L4 virtual driver is building a virtual environment with strong enough time capability especially when it comes through interaction between vehicles. That is also why the L4 requires many years of investment in AI, and it does not improve mainly by collecting more real data. The second unique advantage is that we have real robotic fleet operation. And those fleets continuously help us see where the word model is still different from the real world. The hardest part of L4 is not the first 90%. This is the last 1%, the long tail and of rare but critical coronary cases. We handle those cases simply it is not enough to look at on recorded trajectory. What really matters is understanding how other vehicle productions may behave across many different intentions with the AI driver. This exactly why award model is so important. Only award model can give you enough coverage of the full combination space of different intentions in chronic cases. And that kind of coverage is what L4 safety ultimate requires. At the same time, only fully drive this robotic can keep narrowing the gap between the world model and the real world. Real-world Robotaxi operations let us observe and understand actual behavior pattern of vehicles and protection in those scenarios where human driving data and not observe [ induction ] with Robotaxi. This is also aligned with the fact that new players typically can only start with very small fleets. Regulators understand this logic as well. So they are naturally very cautioned about granting permit at early stage. To summary, automated interest space confirms the size of the opportunity for L4 Robotaxi is not something you get by L2. Pony AI's unique advantage comes from two things: award model built for L4 and a real Robotaxi feed that continuously help to improve it. Together, they create a close look that keeps both the model and the product moving forward. So with this, back to the operator.

The next question comes from Joe Yang with Nomura.

I would just like to understand how do management view the impact of media launching the open source model for Smart Driving of L4. [indiscernible] this year also [ GTC ].

This is Tiancheng again. For this question, I think the key is to distinguish between our model and the real product. at open source, our driving model can be a good start point, but not the end product. There is still a very big gap between model and the Robotaxi that is commercially deployed safety proven, government approved and operating scale. Closing that gap is exactly where over care advantage lies. To add Pony, overstrain come from years of full stack in-house development and real L4 deployment at scale, nothing includes not just the software or the model but also the vehicle architecture, sensor redundant design, domain controller, operational system validation and the [ compacialization ] capability need to run our actual Robotaxi service. Yes. For example, sensor consolidation redundant design directly at facilities with manufacturability and BOM cost, OEM partners are also very different from a [ plat-play ] approach, that gives us better system integration, higher reliability and the lower overall system cost. So we view progress from NVIDIA help move the ecosystem forward. At the same time, we believe the real barrier to entry remains very high. And of course, NVIDIA is an important partner of ours on domain controller, and we maintain a strong collaborative relationship. So with this, back to the operator.

The next question comes from Tianyu Lu with Citic Security.

I have a question. How you plan to allocate your Hong Kong appeal proceeds. And given your accelerated development targets, do you expect any onward regions to the 2026 cost and expenditure.

Yes, this is Leo. I'll take this question. As I mentioned earlier, we have ample cash reserve about [ 1.5 in billion ] as of December 31 in 2025, which was driven by our Hong Kong IPO proceeds, which we get proceeds of more than [ 800 million ]. So this definitely secures long-term capital for to fuel multiple year growth. And for us, the 2025 achievement in terms of Gen 7 production deployment and UE breakeven made us a clear industry leader. So looking forward, we look for accelerated top line growth to widen our leading position and also push the whole industry towards the next stage. Hence, we need to strategically increase our investments. We've significantly scaled up the number of Robotaxi operating across China's Tier 1 cities, especially in Shenzhen and Guangzhou. We also recently entered into new cities in China, such as Hangzhou, [ Changsha ] and international in Croatia. And the plan to deploy in more than 20 cities by this year. So in order to support multiple market expansion, we will invest in business development, operation and marketing. And as we scale our Robotaxi deployment, we are expanding our Robotaxi fleet through joint deployment models as well as investment in self-owned vehicles. And we would also recruit AI talent and invest in AI infrastructure to further improve our virtual driver capability. We think this would allow us to consistently meet the public high expectations for safety, reliability and quality to offer a trusted Robotaxi service. James already mentioned that this is a critical period to expand market share, which we think it requires necessary investments to solidify our technological and operational modes. We believe the strategic increase in the investment is a value-driven trade-off to secure long-term market leadership. And we believe with disciplined capital allocation and also the benefits from joint deployment model. It will be paid off with much faster growth city expansion and the fleet size. And I also believe this will also lead the whole industry into a much advanced phase. Let me now get back to the operator.

The next question comes from [ Kai Sha ] with CICC.

I have one question regarding the raw materials inflation as memories. So could you share your view how does the inflation impact your production plan and core tagline?

Yes, this is Leo. Again, I'll take this question. Thank you for asking this important question. As I mentioned in the earlier speech, the impact on both vehicle and ADK BOM cost is very limited. So we think this is -- this resilience is driven by our proactive supply chain strategy and inventory synergy with our ADC domain controller business. Through this approach, we actually have secured our memory supply even before the market went into price inflation and the shortages. So we are very confident that we can fully support this year's Robotaxi production target of over 3,000. And thanks to the supply chain measures and our continuous scaling . We remain on track to achieve a 28% reduction in ADK BOM costs for 2026 compared to 2025 levels. We will carry out an ongoing hardware software optimization, and this will further reduce our overall BOM costs down the road.

There are no further questions at this time. I'd like to now turn the call back over to the company for closing remarks.

Thank you once again for joining the earnings release -- earnings call today. If you have any further questions, please feel free to contact our IR team. We look forward to speaking with you in the next quarter.

This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines.