Zhejiang Leapmotor Technology Co., Ltd. ($9863)

Hello, everyone. Welcome to Leapmotor Full Year 2025 Earnings Conference Call. Together with us, we have CFO of Leapmotor, Mr. Li TengFei; Joint President of the company, Mr. Wu Qiang; as well as Mr. Shen Ke, Board Secretary. First, may I invite Mr. Shen Ke, Board Secretary to read the disclaimer statement.

Thank you, moderator. Good evening, everyone. I'm Shen Ke, Board Secretary of Leapmotor. The earnings conference call may contain forward-looking statements, including, but not limited to, statements regarding the company's future financial condition, strategies, objectives, metrics and future development conditions in which the company participates or may participate. These statements are based on the company's existing and future business development strategies and assumptions regarding the company's future business environment. They inevitably involve known or unknown risks and uncertainties. These factors, the company cannot foresee or control may cause the company's actual performance and the performance of the industry to differ from the future performance expressed or implied in the forward-looking statements. Therefore, we caution you not to place undue reliance on the forward-looking statements discussed in this conference call. These statements reflect only the opinions held by the company's management as of the date of this conference call, and the company has no obligation to update or revise any statements made in this conference call in light of new conditions, future events or other circumstances. The forward-looking events discussed in this conference may also fail to occur due to various uncertainties. The above disclaimer applies to all forward-looking statements mentioned in this conference call. Other than that, shareholders and potential investors are hereby reminded that none of the contents obtained -- contained in this earnings conference call constitutes any investment advice nor does it form the basis or foundation for any contract commitment or investment condition. Shareholders and potential investors are requested to act with caution when buying or selling the company's shares. Thank you. Now may I invite Mr. Li TengFei to share with us the earnings results in 2025.

Dear investors, I'm Li TengFei from Leapmotor. Now may I share with you some of the information from our 2025 earnings. First, for our business highlights. In 2025, our vehicle sales ranks top among all EV startup in China. Our total delivery is 596,905, up by 103%. So for 2 consecutive years, our delivery has doubled, and we're the only startup EV companies that has monthly sales exceeding 70,000. And then in terms of export, we also top all the BEV start-ups. Our total exports has exceeded 100,000 units. In 2025, we managed to break even and be profitable and the net profit is RMB 540 million. In 2025, our GP margin is 14.5%, 6.1% higher than the 2024, 8.4%. In Q4 2025, our GP margin is 15%, creating a new quarterly record. In 2025, our total cash is RMB 37.8 billion, up by RMB 13.2 billion, up by 50.9%. In 2025, our revenue is exceeding RMB 64 billion and up by 101% -- 101.3%. The yearly GP margin is 14.5%, up by 6.1% versus the 8.4% GP margin, creating a new high. In 2025 Q4, the GP margin is 15% of the company, creating a new quarterly high. In 2025, we also managed a very good financial performance. Our RMB, we managed to break even and become profitable. So in 2025, our GP margin based on the equity assets has also increased, up by RMB 3.4 billion. And the cash flow from operations exceeds the RMB 12 billion, up by RMB 4.15 billion versus 2024. Our own cash flow is RMB 7.8 billion, up by RMB 1.5 billion versus the RMB 6.3 billion. Our cash and cash equivalents in '25 has a balance of RMB 37.88 billion. In terms of sales, our yearly sales is 596,955 units and versus '24, it's up by 103%. And for 2 consecutive years, our sales volume managed to double. And we're the only EV start-up in China that managed to do so. By the end of December 31, our total delivery has exceeded RMB 1.2 million. And for our C10, for 18 months, the total sales has exceeded 200,000 units. And then for this mid and large SUV, our net recommendation rate ranks top. And by the end of February, for our B-series, the total sales volume approached 200,000 units. Lafa5 after 3 months launched to the market, the total sales volume exceeded 20,000. And then B10, 11 months after hitting the market, the total sales volume exceeded 100,000 units. In terms of products, we have launched 3 new B-series models while for C platform, we also had major facelift for A10 and D19 and D99 has also been launched, and they are going to provide more options for our customers. And this is also providing the foundations for us to reach the 2026 targets. And our LEAP 3.5 technology architecture created the B-series. They have a very strong technology strength and also followed the international design standard, quality standard and production quality so that these smart technologies are becoming more popular. B10 was launched in April 10, 2025 based on the LEAP 3.5 architecture with the latest Qualcomm ADAS chips and also smart cockpit chips, end-to-end large models, together with OS 4.0 operation system. These are highly luxury configurations, creating a new benchmark. This has helped to generate more young customers. And after 1 month launch to the market, it has won 18 awards becoming the new star in the market. It is also the first model that has been awarded by its excellent design and green design, together with numerous other awards also in France and in London. LEAP B10 launched in July 24, 2025, it is regarded as the high-end smart vehicles for younger generations. For 4 consecutive months, it has managed to exceed the 10,000 sales unit. And for B10, also awarded numerous times, including the China Association Automotive Association Awards. Leapmotor Lafa5 launched on November 27, 2025, initiating a new chapter for Leapmotor. It focused on lifestyle demonstrating the very, very strong personal statement. And it also fits the trend of design, providing new options for metropolitan youth. Lafa5 positioning is high-end sports coupe and also excels in its smart technology. In 2026, Q2 is going to enter global market. LEAP D platform, we have the flagship D19. The Global Premier was held in October 16 in Shanghai, creating a new flagship for us. As the first car with our D models, it has concentrated all the technology breakthroughs we have made in the past years. For D19, it's aesthetic designs and safety features, and it becomes a new benchmark for the RMB 300,000 price range. The first MPV, D99 launched in December 28, together with the 10 years anniversary of Leapmotor, D99 is another luxury model demonstrating the strength of our D platform, providing comfort, smart technology, battery technology and all the luxury experience. It has very good competitiveness, becoming a new choice in the market. This is going to provide new options, not only for individual users, but also family users. We will continue to enable our models on this platform, making sure that these flag models is more accessible. For A Series, the first A10 was launched in November 21, 2025 in Quanto Auto Show. It will hit the market in March 26 in 2026. As a long range SUV, A10 is going to further democratize the new technologies. The range is 500 kilometers together with our 8295 smart chips as well as the advanced technology solutions, providing new choices for family users covering all use cases. In terms of R&D, in 2025, March 10, we published LEAP 3.5 technology architecture. We use a Qualcomm chip combining the new technology so that they can be controlled by one domain controller. This is highly centralized domain control technology so that we can connect all the key technologies like chassis, batteries and thermal management, providing the better user experience. In 2025, LEAP's brand new products as well as our facelift models are all using LEAP 3.5 technologies. So in 2025, in October, we have launched our D platform -- new technology platform. The EREV models using large batteries, the pure electric range is 500 kilometers and another highlight is we launched 115 kV cell, 3 battery system together with the new thermal management modules. And third highlight is the double 8797 chips, providing the tops of 1,280 together with smart cockpit and then using LMC 2.0 chassis system, providing better stability and better drive -- turn radius. In terms of safety, we have 2G Par rigidity, providing not only the comfort, but also safety. Lafa genuine leather and also zero gravity seats, this is the first time that we use this technology in production cars, providing new comfort experience for the customers. Our end-to-end ADAS system is also being implemented. Our city NOA was launched in 2025, covering our B-series and C-series. In February 2026, our city NOA is also used in B, C-series providing better experience. In Q2, we're going to launch our NOA function that covers all the cities in China. By the end of 2026, we expected to finish our smart driving foundation models. And on top of that, we can use large models becoming an industry leader in this regard as well. In 2025, our electric drive has also made major breakthroughs -- compressors and has managed to be mass produced, become a leader and new benchmarks. Our drive technology has made 3 breakthroughs. Number one is we have torque vectoring technologies, and it has been road tested in the extreme cold conditions and the response time is 0.5 milliseconds. And second highlight is, first, in the industry, new generation, hybrid electric drive system. And thirdly is the fully hybrid transmission technology, and this has entered the validation phase. This is going to further enhance our technology development, paving the way for future leadership. In 2025, our battery business continue to develop. We focus on sustainability and high-quality development. Number one, battery chassis integration has developed ahead of our schedule and being recognized by the officials. And secondly, we are using this faster charging and solid-phase battery technology as well as lightweight technologies. These are industry-leading technologies, ensuring that we still -- we can become industry leaders. And thirdly, we got SGS certification for our -- as well as TOAs joint recognition for our safety grade. Together with the recognition of our development process, in terms of sales channels, at the end of 2025, our sales and service network has covered 259 cities increased by 31 cities versus last year. We have 950 sales stores and 256 service stores. In 2025, we also launched our investment seed project, encouraging new investors to us. In 2025, our seed investors has served 205 stores. Our single store output improved by 85.1% versus last year, improving efficiency of our channels. At the same time, we're going to further improve users' purchasing experience. We will have a new presentation and image of our stores to improve brand image. And then in 2025, covering the life cycle of the customers, we focused on customer satisfaction and refined our business. Our key metrics has improved, including our potential customer management and the whole journey management. We have increased our order number by over 100%. And the satisfaction -- customer satisfaction focus on placing orders and configuration as well as customer service aftersales, providing all-around services. And then for the delivery process, our delivery has grown by 103.1% among all the EV start-ups, we are a leader in this regard. In terms of service, we implement our service philosophy focusing on enhancing our service capabilities. In '25, our NPS 46 increased by 74% month-on-month. While for spare parts management, we implemented digital technology, improving our service capability, optimizing our spare parts inventories, the fulfillment rate for spare parts also improved. As for user experience, while the repair and maintenance service has been further enhanced in efficiency, we also launched our full service commitment, ensuring that our after-sales service can be easily booked and delivered. By doing so, we can really provide more ease of mind for our users. In terms of capital and strategic partners by March 26, [indiscernible] has announced and approved our private placement applications by August, we fulfilled this placement. The total finance amount is RMB 2.6 billion. We have newly added 70 million shares. And then we are also becoming the constituent shares in Hang Seng. This indicates our capability and it is recognized by the capital market, improving our brand impact. On March 3, FAW Group signed a strategic agreement with Leapmotor. In the future, we're going to utilize our expertise in R&D and have a joint development for new energy passenger vehicles. The first model has been implemented. We are progressing this project by December 28. We also signed agreement with FAW and FAW is going to invest in Leapmotor paving the way for further foundation. In January 1, 2026, with Jinhua Jinyi Hi-Tech company, we also signed the subscription agreement. They are going to invest RMB 3 billion in us. This is going to enhance our industry cooperation in that region. In 2025, our export volume ranks first. The total export is 67,051 units. And by the end of '25, we have already achieved 100,000 export volume. Q4 2025, we ranked second in terms of export for passenger cars. By the end of 2025, Leapmotor International has business in Middle East, South America, et cetera, established altogether 900 sales and service outlets. Over 800 in Europe, Asia Pacific 50, South America over 30. On November 4, 2025, we launched C10 in that market. Right now, our store number in Brazil has exceeded 30. November 21, C10 and B10 also launched in the auto show entering the South America market. January 1, 2026, our SUV A10 was debuted in Brussels Auto Show. This meets the needs of European customers being highly recognized by the European media. Right now, our project in Spain has been initiated, B10 and B05 will be the focus. By September '26, the production will be commissioned. And by June, by 2027, another model will be commissioned. We have finalized the location for the factory. It is expected that we're going to start the production of battery packs in June next year. We are also working closely with the Stellantis Group, trying to diversify our partnership. Some projects has been in the closing phase of the negotiation. In 2025, based on our high-quality product, by utilizing the channel capability of Stellantis, after establishing Leapmotor International, we managed to be profitable, generating returns to the company. While for ESG, Leapmotor focused highly on ESG and integrate that into our daily operation. For the third consecutive year, we were rated MSCI and ESG as the highest grade. At the same time, for the international leading rating industries, we become silver from the red and our rating has entered the top 15% from the top 35%, meaning that our ESG governance capability has entered a new high. At the same time, we focus on green manufacturing and we were approved as a green factory by the state government. In the future, we will continue to explore the possibilities of green and sustainable manufacturing providing more returns to our shareholders and other stakeholders. Thank you.

Thank you. Now we are going to have the question-and-answer sessions. [Operator Instructions] Investors with the phone 0464, please introduce yourself before popping the question.

I'm with CICC. I have 2 questions. These questions investors are following very closely. Number one, we noticed that the price markup pressure is there. For instance, raw material, have you analyzed the raw material price changes? And how can that pass on to our GP margin in the future? So that's my first question. And the second question, we see that in 2025, the revenue from service and other areas are RMB 2.72 billion. Can you break down the mix of this revenue? And how sustainable are those revenues?

Now for the first question, raw materials and the price markups impact on our cost. We did notice that the price increase in raw materials, including those basic materials and lithium carbonate as well as the memory price change. From company perspective, in order to address all these problems, we will improve our cost control. From cost control perspective, we will further enhance our in-house development and in-house production rate. We're expanding that over the years. For instance, in 2025, for the battery solutions, motors. We produce our own compressor and power source as well as thermal management systems. And then for each part, we are also exploring vertically to further enhance our in-house development and manufacturing. While for seats, bumpers, these high value-added parts were -- we also managed to develop and manufacture in-house in 2025. So I think what we're doing is to further optimize our cost control this is our countermeasure in facing the raw material price change. We also believe that these price change cyclic in the past years of development, there are several rounds and cycles of raw material price change. There are fluctuations over time. But we believe that the overall price increase for raw materials will not last forever. It's going to be cyclic. So based on the 2 factors, I would say the raw material price change and not having a huge impact on our GP margin. We believe that in 2026 through our cost control, we can offset the price change from a raw material perspective. And it is not going to cause any huge impact on our business revenue. That's addressing your first question. And then the second question, can you repeat the question?

Yes. Service and other sales revenue that RMB 2.72 billion. Can we have breakdown of the mix of the revenue?

I'll focus on the major contributors. This RMB 2.72 billion includes carbon credit revenue in overseas market. It also includes some revenues and license fees together with our partners. It also includes our export-related revenues. For instance, the international shipping premium revenue. So these are the major areas of revenue. And you also asked about how sustainable can this revenue be? Well, for carbon credit revenue, international shipping, business revenue, now for these overseas related business, with our increased export volume in -- especially European market, we believe that the revenue in this area is also going to increase year-on-year. But of course, carbon credit this year, each vehicle versus 2025, dropped slightly, but our overall sales volume increased by a larger margin. So carbon credit revenue, we believe, versus '25 will continue to grow. You also asked about some project on license and the license fee. In my introduction, I talk about our project with Stellantis. These projects has reached very critical moments for negotiation. And both sides are working very hard to collaborate on more than one project. And then with our domestic partner, FAW Group in China for our first model, which went on very smoothly. And on top of that, we are discussing future cooperation possibilities. And all this has been fully agreed and recognized by both managements. We think that within this year, our domestic and international partners will continue to work with us, and we can expect some very good news contributing continuously to our business revenue. No other questions.

Next, investor with phone #4530.

I am Ming. Two questions from my side. First question is the overseas business. Because in your instruction, you talk about B10 and B05, which will be commissioned for production very soon. And then you also have set your overseas sales volume. According to your estimates, what is the mix of export from China and localization production what are the mix? And then based on this situation, together with the geopolitical tensions and oil price volatility so the transportation cost will also change. How can you better manage the transportation costs for the export? And you also talk about the future production of battery pack. Do you have any plan to purchase sales locally in the future?

As you were saying, our localization project in Spain, B10 will be commissioned in October 2026. This is the only model with localized production in Europe. So it will only account for 1/4 of the total B10 sales volume. Only 1/4 will be localization production and other B10 sales will be exported to European market and to overseas market actually. In order to cope with the geopolitical changes from company strategic perspective, we believe that localization is the definite direction for global expansion of Chinese EV companies. We have been actively planning in European market, not only in Spain, not only 1 production facility in other continents, we're also planning on the production facilities. As for the transportation cost, logistics cost, because of the geopolitical conflicts, I think the biggest bottleneck is transportation capacity. We're not seeing the obvious impact on the cost of transportation, but we're looking at the situation development very, very closely. How long it will last? What kind of changes it will generate on the macro? So the increase of transportation cost will be on the whole automotive industry not just impacting us. And the next part of the question is cell purchase. In Spain, our mass production is C2C battery pack. It's an assembly factory. The early-stage cell will be purchased from China. But we're actively planning on working with our peers in the industry, especially sales suppliers very actively. We want -- we're planning on localized the purchase of cells as well. Cell companies are also expanding globally, so including also into European market. And we know that in Europe, there will be some new regulations being launched very soon. So our plan is closely related to all these factors. How those manufacturers are expanding globally and what kind of new regulations will be facing? But with that being said, localization is the future trend for us in terms of strategy. Whenever there are opportunities, we are going to accelerate localization of cell purchase.

Another quick question. This year, European market will still be dominated by export from China market. The tariff is shouldered by the joint venture company. Any models for your export business can apply for the minimum price -- cell price so that you can be exempt from the increase the tariff.

For tariffs, our export business is through Leapmotor International. Well, as for your question, for Leapmotor or Leapmotor International or Stellantis Group, we are following European regulation framework very closely. We're trying to understand and analyze all these new policies and regulations. Once these regulations will benefit our sales in Europe, we will spend no efforts in filing for the benefit. We have a very strong partner in Europe. We believe that as compared with Chinese companies, they know better about European regulations. They have better intelligence access. They have very strong expertise. So that is why we're working closely with our partner to look very closely and following very closely at the development of the regulations. As long as we can see a shred of opportunity that our model fits the requirements, we will definitely go for that.

Next question 9915.

I'm [ Zhang Jueying ] from Haitong. Follow-up question for the cost change. Any impact on our Q1 results or in Q2? That's the first question. The second question is the GP margin. Mr. Li, what is the GP margin in Q4 last year? And for Q1 this year, because of the seasonalities and the price changes, what is your estimates of Q1's GP margin? And third question, for Q4, the sales expense was higher than the previous quarters. Why? And what is the guidance for this year's sales expense?

The first question. In fact, I have covered this in the introduction from raw material price change and it's passing on to the OEMs, it takes some time. It doesn't happen immediately, because there are different, say, players throughout the industry chain. It takes time. And secondly, the impact. I -- as I was saying, starting last year, actually, we have always been focusing on cost optimization. We will have further measures for cost control. We believe that the raw material price markup will not impact on our GP margin, at least for the first half of the year, no major impact. While for Q4 GP margin, Q4, 15% GP margin and the vehicle margin is around 12% and other GP margin is 3%. So that's the breakdown. As for Q1's estimates for GP margin, we know for Q1, the overall sales volume dropped dramatically versus Q4 last year, that means the GP margin will also drop. And thirdly, for sales expense, Q4 last year, Q4 is a high season for our sales, and that is why we invested a lot of resources to ensure that we can fulfill our Q4 sales target, ensuring that our market share and sales volume hit the targets. In 2026, our total marketing input will be higher than '25. Because on one hand, our total sales volume is increasing and our brand is developing, however, sales expense for each vehicle will go down versus 2025.

6132?

I'm with CITIC, I'm Wu Pingyue. My question is that by the end of your overseas 2025, as you mentioned, you have 900 sales outlets in overseas market. So next year, as you expected, the export will continue to grow. What about your sales network next year in overseas market?

Sales channel in other markets. As you have seen, in Europe, we have over 800 stores. In 2026 in Europe, we will continue to expand our channel in Europe, especially in the European countries where we have fewer stores. Other than that, in '26 in South America, including Asia Pacific, our store count will increase very fast. As I introduced in October 2025, we have officially entered the South American market. Our sales in South America has been going very smoothly. The products are very well received and highly recognized by the consumers. In 2026, therefore, South American market will be a very important focus for Leapmotor and Leapmotor International. So our market share and our network will be expanded. In Asia Pacific, in 2026, we will summarize our experience in 2025 and remediate existing problems so that we can further refine our network in Asia Pacific. Our channel number will be further enhanced in 2026 in Asia Pacific as well.

Cell phone 7490, please raise your question.

Hello, Mr. Li. I have 2 questions. First, concerning the sales target this year for domestic and overseas market, because a lot of concern for market demand this year. So what is your target this year? And the second question, for South American market, what are the key countries? And what are the models that will be our focus for this year?

First, for sales target, we have guidance last year our annual sales target is 1 million units, including 100,000 to 150,000 sales in overseas market. So we believe that throughout the year, the passenger car market in China as compared with 2025, will have no major fluctuation. It will be similar to 2025. With the market being similar we think that new energy vehicle penetration will continue to grow compared with the previous year. Therefore, for our trend in domestic market in 2026, we believe we are actually optimistic. We're not as pessimistic as some other peers because we believe that from a demand perspective, January and February, the demand tend to be weaker, but I think we believe this is just a different cycle for the demand. January and February's weak demand will be released in later months over the year. We are confident to achieve our sales target this year. We are not planning to revise that target. And secondly, as per your South American market right now, we focus on Brazil, Chile, Argentina, Ecuador and Colombia. We will take a step at a time. Brazil is the largest market in South America, and it's going to be our top priority. As for models, C10, B10 have already hit market in South America. In Sao Paulo Auto Show, we also brought our models to the auto show, including some other models we're working on right now. We are working with the South American team from Stellantis to communicate thoroughly so that we can introduce the models that suits the needs of South American market.

7074, please ask your questions.

Congratulations on the excellent performance. I'm [ Lou Ling ]. Two questions here. First question is, for these 4 new models this year, what is the time table for their launch A10 followed by which models? The first question. And secondly, now previously, in an interview, Mr. Zhu mentioned that in the future, innovation will be centering around use cases or scenarios. So how do we understand this scenario here or use cases in Mr. Zhu's interview?

For our 2026 four model launch, the first one is A10 will be launched in 10 days, March 26th, it will hit market by then. Right now, the demo cars, the test drive models have already arrived to the dealers. So please go and take a look. And the second model will be D-series D19, the first model. It will be launched at the end of April. The third model is A05. A05 and D99 will hit the market at a similar time line around June -- second half of the June or the middle of the June or the beginning of July. Those models will hit market. So that's the timetable. And secondly, you talk about innovation centering around use cases or scenarios because this has to do with the new product development of the company. So right now, it's highly confidential. That is why I am not in a position to elaborate on this question.

Another quick question. Any guidance for the profit this year?

From a company perspective, in 2025, we have already given the capital markets the guidance of 2025 net profit of RMB 5 billion. We're not changing the target this year.

9518, next investor.

I'm [indiscernible] Quasi Auto. I have one question. For the smart technology because earlier, you mentioned your smart technology deployment. Are you going to develop in-house or work with a technology vendor?

Well, for smart driving, I'm not going to repeat the progress, but we believe that this year's Smart Driving will be a very important year for Leapmotor's technology breakthrough. According to our strategy, from H2 '24 throughout 2025, we have been increasing our investment in Smart Driving including on human resources, technology and capital investment. We have increased this input tremendously. And we have made very rapid progress. Well, I have introduced the progress earlier in the introduction. This year, we will also invite investors to experience the latest products of our Smart Driving technology. This year, we hope that by the end of 2026, Leapmotor's Smart Driving can be truly recognized by the market, and we want to be recognized as a Tier 1 brand in this area. Now as for how we do it? Full stack in-house development for Smart Driving technology is our strategic direction. This is our unwavering commitment. We won't change that. In the R&D process indeed, we are communicating with the partners, but this is not going to change our in-house development direction for full stack technology.

0521, next investor, please.

Hello. I'm [ Wang Zihao ] from Changjiang Auto. Two questions from my side. Number one, for overseas market, any new guidance for the profit in overseas market because this year, you mentioned you're going to step up your efforts in South America and Asia Pacific. What about profit in those markets? And oil price is increasing in European market recently. So a lot of voices are saying that with the increased oil price, new energy vehicle will penetrate even faster in European market. Have you changed -- feel this change? And secondly, is R&D expense. Last year is RMB 4 billion R&D expense. This year, any changes? Any plans on that?

First question for profit in overseas market. Last year, I have said on many occasions that we actually have agreed with our partner. Both sides agreed that when Leapmotor is going global, for the first 2 to -- 3 to 4 years is investment period. So shareholders from both sides will continue to invest in the development. So that means for the upfront 3 to 4 years, there will be more support from shareholders, especially to Leapmotor International for rapid development and for faster access to global market. In 2026, Leapmotor International was established for the second full year. From the time horizon perspective, it's also a third year. That means we will continue to provide tremendous support to Leapmotor International so that we can grab more market share in Europe, South America and Asia Pacific market. Therefore, for 2026, overseas market, we are not giving any target for profitability. We still want to increase the sales volume in overseas market. Well, as for the new energy vehicle penetration in European market, well, it depends on the international macro environment. If the currency situation lasts only for a short time frame or it may last longer, the result will be different. I think the impact on oil demand is not just caused by the Middle East wars, but also by the Russian-Ukraine war. So all this is having a huge impact on the supply of oil and gas in European market. Well, if the current situation continues, the supply of oil and gas in European market continue to deteriorate and the price continues to go up I would say this is going to accelerate the increase of new energy models in European market, but it all depends on the change of international geopolitical landscape. I think even without the war, the new energy vehicle growth is faster than expectation from many experts. So that is why our sales performance in Europe has been very good, and we're recognized by European consumers. And R&D expense compared with '25, we plan to increase our R&D expense in 2026. This is because of our investments in new technology and new model development, we will accelerate that. And secondly, we will have new talent joining us. So R&D expense will have an obvious increase versus '25.

No other questions. We will have the final 2 questions. 1909, next investor, please.

Hello, I'm from [ Dongu Automobile ]. First is parts export. Any current progress? Because you mentioned that in 2026, there will be sales revenue from parts export. Any progress on that? And second question. For Q4 2024, non-vehicle revenue, how much is that?

First question for parts export, as I said last year, with mass production of our models, a lot of the projects will be commissioned by the second half of 2026. So in '26, we will have export revenue, but not in large scale. It's revenue for export will be within RMB 1 billion. The major growth will occur in 2027. Secondly, I think you asked about the revenue of carbon credit. Yes. In 2025, the carbon credit revenue -- let me share with you some figures. The revenue is around RMB 1 billion in 2025.

7820, next investor, please.

I'm [indiscernible] from Jefferies. I have 2 questions here. Number one, what is the inventory level right now? Just now you talk about the sales target remain unchanged. So given the new launches, the 4 series have been revised versus previous announcement. So does that change anything or change the inventory level?

Can you repeat the question?

First is the inventory level, how many months is your inventory level?

Inventory level at the outlets. In December 2025, we are trying to reduce the inventory level. In '25, our sales volume is 596,000 units, however, we didn't exceed 600,000 sales volume as estimates by some institutions. Well, for Q1 2026, we believe that the market condition is -- will not be good enough. So that is why starting '25, we want to lower the inventory level. Well, January and February 2026, this trend did happen according to our expectation. We will continue to reduce the dealers' inventory. Right now, according to our standard judging from the past 8 weeks of sales volume, our total inventory level is 1.5 to 2 months. Well, because when there are fluctuations in sales volume in January and February, the way we look at the inventory level is not objective enough. We're trying to revise that. We're estimating our March sales performance and April sales performance so that we can dynamically optimize the dealers' inventory. According to our March sales estimates, our network inventory is around 1 month and even less than 1 month. From Leapmotor's perspective, dealers' inventory level is included in our sales management. It is a very important priority of our work. We believe the dealers' inventory level will have a huge impact on our total sales volume. So we will never ask the dealers to overstock. We want to control the inventories together with them. But then on the other hand, we cannot have overly low inventory level because it will affect our delivery speed. So we want to have a balance. According to the usual months, our inventory level is around 0.8 to 1.2 months. In 2025, for the majority of the months, we did manage to achieve that. However, if there are drastic changes in sales volume, the overall inventory level may seem to go up, but it takes some time for everything to ease off and to offset with each other. So we believe that our current inventory level is still a very virtuous level.

The second part of my question is actually the product mix. With the new launch in A, B, C and D series, among this 101 million sales volume, what is the breakdown between these different series?

We want to increase our overall performance versus 2025. So 600,000 sales volume, we want 400,000 sales volume coming from the new models. So new and old models will be 60% and 40% in the total mix. This is just a general estimate. We may have more detailed assessment based on the market situation.

Another question is you're working with FAW for some new models. It will be mass produced second half of the year. So what is Leapmotor's responsibility? And what is the estimated revenue?

Our first model with FAW will be produced in Q3 this year, Leapmotor is responsible for R&D of the model as well as manufacturing of the model because it's going to be sold in overseas market. As for the revenue generated, it depends on the sales of the car. In Q3, around September, it will be produced, however, there is a cycle for the sales. It all depends on the launch of the model, which will be at the end of 2026. Therefore, its impact on '26 revenue may not be that obvious.

Thank you, management from Leapmotor, and thank you all for the investors. We look forward for our next conference call. If you have any other questions, please reach out to the IR of Leapmotor. That's the end of today's conference call. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]