XPeng (XPEV) Q1 2026 Earnings Transcript

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Date

Thursday, May 28, 2026 at 7 a.m. ET

Call participants

• Co-Founder, Chairman, and CEO — Xiaopeng He
• Vice Chairman and President — Brian Gu
• Vice President — Charles Zhang
• Vice President of Finance and Accounting — Jiaming Wu
• Director of Investor Relations — Alex Xie

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Takeaways

• Total revenues -- RMB 13.03 billion, down 17.6% year over year and down 41.4% quarter over quarter, primarily attributable to lower vehicle deliveries.
• Vehicle sales revenue -- RMB 11 billion, a decrease of 23.5% year over year and 42.3% quarter over quarter, driven by reduced unit sales.
• Services and others revenue -- RMB 2.03 billion, up 41.2% year over year but down 36.1% sequentially; quarter decline attributed to reduced technical R&D services after milestone catch-up and the absence of carbon credit trading revenue.
• Gross margin -- 20.6%, an increase from 15.6% a year earlier and a slight decrease from 21.3% in the previous quarter.
• Vehicle margin -- 12.1%, up from 10.5% year over year but lower than 13% in the previous quarter due to increased chip and battery costs.
• R&D expenses -- RMB 2.91 billion, rising 46.8% year over year and 1.1% quarter over quarter, reflecting development costs for new vehicle models and AI-related technologies.
• SG&A expenses -- RMB 1.88 billion, down 3.2% year over year and 32.5% quarter over quarter, largely due to reduced franchise store commissions.
• Operating loss -- RMB 1.87 billion, compared to RMB 1.04 billion year over year and RMB 40 million quarter over quarter, reflecting higher core expenses amid lower revenue.
• Net loss -- RMB 1.78 billion, a wider deficit than RMB 660 million year over year and decreased from net profit of RMB 380 million quarter over quarter.
• Cash position -- RMB 42.09 billion as of March 31, 2026, providing substantial liquidity.
• Vehicle deliveries -- 62,680 units, described by He as achieved "amid broad market volatility in China's domestic new energy vehicle market."
• Q2 2026 guidance: Deliveries -- Expected between 100,000 and 106,000 units, representing a targeted sequential increase of 59.5% to 69.1%.
• Q2 2026 guidance: Revenue -- Forecasted at RMB 19.6 billion to RMB 20.8 billion, up 50.4% to 59.6% quarter over quarter.
• GX model launch and orders -- GX SUV launched May 20; CEO He Xiaopeng said, "the performance of GX is above our expectation," noting over 80% of initial firm orders priced above RMB 350,000 reflect strong premium demand.
• Model mix -- Mona M3 has held the position as China's top-selling A-class pure electric sedan for 19 consecutive months.
• International revenue outlook -- Management guided that starting in Q2 2026, international revenue is expected to account for more than 20% of total revenue.
• Overseas deliveries -- Monthly international deliveries exceeded 6,000 units for the first time in April, with a target for sustained 10,000+ units per month in Q4 2026.
• Production localization -- Three localized production bases overseas now active; majority of European sales expected to be locally manufactured, according to Gu.
• Regulatory progress -- RBLA 2.0 being tested in Europe, with anticipated regulatory approval in multiple countries next year.
• Humanoid robot commercialization -- He Xiaopeng stated, "We are targeting to achieve mass production of RM by year-end with this initial trial commercial deployment in expense rooms, followed by commercial customer deliveries in China and overseas next year."

Summary

XPeng (NYSE:XPEV) reported a sharp sequential decline in revenue and profit metrics, attributing these declines primarily to lower vehicle deliveries and reduced technical services revenue, while simultaneously increasing R&D spending for new vehicle and AI product launches. Management emphasized execution on its physical AI strategy, highlighted by the mass launch of advanced GX SUV models and confirmation of rapid expansion into robotaxi and humanoid robot commercialization, with guidance for notable sequential growth in Q2 deliveries and revenues. International expansion is accelerating, with overseas deliveries driving a substantial and growing share of revenue, and new localized production facilities supporting long-term profitability and regulatory compliance objectives.

• The company stated guidance for both delivery volume and revenue implies a material rebound from a weak first quarter.
• Management indicated that the product mix is shifting toward higher-margin, premium vehicles such as the GX, which is already seeing demand skewed strongly toward its top-end variants.
• Gross margin guidance for the next quarter suggests resilience, as cost headwinds from memory and battery components are expected to be offset by higher volumes and an improving mix.
• CEO He articulated a plan for recurring AI/software revenue streams to become significant contributors as advanced physical AI applications scale, particularly in B2B and overseas markets.
• Expansion in overseas markets is expected to account for roughly half of revenue and profit “in the coming 5 years,” and international vehicle sales “generates significant better gross profit as well as net profit contribution” than domestic sales, per Gu.
• Software licensing and technology commercialization are prioritized, with deliveries of the Turing SoC to Volkswagen at scale beginning in Q2.

Industry glossary

• BLA (XPeng’s Assisted Smart Driving): XPeng’s proprietary advanced driver-assistance system, integrated with AI for enhanced autonomous capabilities.
• Robotaxi: Autonomous taxi service operating without human drivers, leveraging L4-level automation.
• SoC (System-on-Chip): Integrated chipset combining multiple processing components critical for in-vehicle computing and AI applications.
• L4 (Level 4 Autonomous Driving): Specifies a level of automation where the vehicle can perform all driving tasks under defined conditions without human intervention.
• Mona M3: XPeng's flagship A-class electric sedan, recognized for sustained leadership in its segment.

Full Conference Call Transcript

Alex Xie: Thank you. Hello, everyone, and welcome to XPeng's First Quarter 2026 Earnings Conference Call. Our financial and operating results were issued by Newswire services earlier today and available online. You can also view the earnings press release by visiting the IR section of our website at ir.iapen.com. Participants on today's call from our management will include Co-Founder, Chairman and CEO, Mr. Hao Pang; Vice Chairman and President, Dr. Brian Gu; Vice President, Mr. Charles Zhang; Vice President of Finance and Accounting, Mr. James Wu; and myself. Management will begin with prepared remarks, and the call will conclude with a Q&A session. A webcast replay of this call will be available on the IR section of our website.

Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the news expected day. Certain information regarding these and other risks and uncertainties is included in the relevant public filings of the company as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law.

Please also note that Xpeng's earnings press release and this conference call includes the disclosure of unaudited GAAP financials and as well as unaudited non-GAAP financial measures. XPeng's earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. I will now turn the call over to our Co-Founder, Chairman and CEO, Mr. Xiaopeng He. Please go ahead.

He Xiaopeng: [Interpreted] Hello, everyone. In the first quarter of 2026, we formally changed our official Chinese name from Xplan Motor to Xen Group. -- reflecting Xin's transformation from a smart TV company to a physical AI company. With Indian Group ecosystem, our Smart TV business will drive rapid growth consistently contributing substantial profitability and robust cash flow. Today, fiscal AI applications stand on the cusp of transform from mass production deployment, explosive Grove scale. -- we have proven that scaling law holds true in both autonomous driving and robotics making the path to breaking technological ceilings through accelerated R&D investment and deniable clear.

That is why at this pivotal moment, we choose to be firmly on fiscal AI with increase in R&D on AI. And I believe Cisco applications represent 1 of the most significant global strategic opportunities of the next decade. This year, I'll lead the team to bring robotaxis and human robots into mass production while also building the commercial ecosystem around them. Our goal is to turn our leadership in physical AI technologies, including our next-gen intelligent assisted driving systems into a powerful new engine for revenue and profit growth and ultimately create substantial commercial value. In the first quarter, amid broad market volatility in China's domestic new energy vehicle market, we delivered a total of 62,680 vehicles.

Even in a market downturn, our focus extends beyond scale. We also placed greater emphasis on balancing delivery volume with operating quality, maintaining a long-term perspective. I'm very confident that deliveries will grow substantially quarter-over-quarter in each of the remaining quarters this year. And I expect Q2 deliveries to reach between 100,000 and 106,000 units reflecting quarter-over-quarter growth of over 60%. Starting with the GX, we plan to launch and begin deliveries of all new SUV models within the next 6 months. These models have been defined and designed from day 1 as global vehicles. I believe XPeng is entering the strongest delivery growth trajectory in our history.

In April 2026, we launched the 2026 XPeng LAM03, including a new MAX version powered by our during AI SoC and an ultra SV version supporting BLA. This also marks the completion of the Turing AI SoC upgrade across our entire model lineup. Through our 4 in-house R&D capabilities from a C to a Life we have made advanced computing power and technology more accessible. As a result, more than 85% of Mona M3's customers chose the MAX or Ultra SE versions.

The Mona M3 has remained China's top-selling A-class pure electric sedan for 19 consecutive months. with its leading technology and stylish design rarely seen in the A-class segment, Mona has become the broad -- the brand of choice for young users. We're confident that the mono lineup will continue to achieve sustained success not only in China but also in overseas markets. On May 20, we launched the GX, a flagship model built for the L4 era.

It is also China's first preinstalled, mass-produced global taxi model with full hardware redundancy, representing a new starting point for us to continuously expand our share in the SUV market. among the initial firm orders from -- for the GX, but the ultra flagship train priced above RMB 350,000 accounted for over 80% and making the GX 1 of the most so after products in the premium luxury vehicle market. The GX gives us luxury is defined not only by its decide, but more importantly, by its leading technology and ultimate safety standards setting a new benchmark for tech defined luxury.

As there no effort to work with our supplying team partners to ramp up GX production capacity and deliver vehicles to customers sooner. The 3 new models launching in the second half of this year will all be equipped with during SoC power BLA 2.0, featuring 1 vehicle deal energy capabilities and will be launched for global markets with deliveries of the GX and the upcoming 3 new models ramping up, I'm confident that XPeng Group's quarterly delivery volume will grow significantly quarter-over-quarter. The success of the a key step in elevating the clan group brands.

In the second half of this year, we'll build in will build on this momentum by launching a series of technology products at high price points, including humanoid robots and flying costs further strengthening our brand equity and profitability. In 2026, we're accelerating international expansion on the back of a growing lineup of high-quality technology-led products and deepening localized operations. The 7 uses overseas delivery launch in April pushed our monthly international deliveries above 6,000 units for the first time. Stocking in Q2, international revenue is expected to exceed 20% of total revenue.

In the second half of this year, we plan to introduce 4 models for global markets, starting with the GX every upcoming XPeng model will be built as a global vehicle. Our target is to achieve sustained monthly overseas deliveries of over 10,000 units in the fourth quarter and to more than double full year overseas deliveries. Starting this year by embedding international market net and certification requirements early in the vehicle deployment process, we will significantly shorten the time gap between domestic and overseas launches and accelerate our overseas sales -- overseas sales momentum.

Our goal is to be recognized as a company committed to long-term localized operations in every market we operate in, building stronger ties with customers and partners across each region. To that end, we have established 3 localized production bases overseas since last year, and our Munich R&D center has become our fastest-growing research hub. In April, ADAS mileage penetration on VLA 2.0 equip exon vehicles surpassed 50% for the first time, signaling that advanced intelligence driving is becoming a cool, you must have features we use it.

2.0 with its generational in intelligent driving has become a key reason customers choose a pen, creating a strong and lasting user mine channels in the market. the success of VLA 201st person also reinforces our belief that scaling data and model parameters can drive meaningful breakthroughs in real-world AI capabilities. strengthening our conviction in the scaling law for fiscal AI. We're set to accelerate our investment in scaling up with the upcoming release scheduled for Q3 this year will substantially elevate our up limit of our model performance, further widening our lead in the industry.

LA 2.0 features a high capability ceiling operates with our HD Map offers exceptional ability to generalize, enabling rapid deployment across overseas markets. while supporting pre-store mass-produce robotaxis at scale. Our goal is to become the understated #1 in the domestic market and take a critical step towards true global leadership in L4 autonomous driving, including robotaxis . I'm pleased to see the accelerated rollout of the unlet DCAS regulatory framework with Europe our most important international market now beginning to open certification pathways for high-level ADAS.

RBLA 2.0 is currently being tested in Europe, and we hope to receive regulatory approval in multiple countries next year allowing us to deliver the technology to overseas customers and became the global generalization of our BLA 2.0. Our recent research shows that global users demand for assisted smart driving system, BLA and full scenario multilingual conversational system, DLM, are far stronger than we had anticipated. In the second half of 2026, XPeng will lead and accelerate the intelligent transformation of China's automotive exports. In the process, I see substantial commercial opportunities emerging on both the B2B and B2C fund.

The GX 4 full redundancy hardware and software are decoupled from the vehicle platform, making them deployable across our entire lineup, including the mono series. I believe our robotaxi offering has a clear edge over incumbent global taxi companies in terms of ability to generalize cost efficiency and scalability. These advantages position us to build a multi-stakeholder ecosystem where operating partners and expand work together to create and share commercial value. . Following the overseas rollout of VLA 2.0 will also actively pursue bringing XPeng's cost-effective global test evolutions to overseas and domestic markets. The software and hardware development for our mass production human robot is progressing smoothly, and it's about to enter the ETG software hardware integration stage.

The mass production version of Ron will be built to automotive-grade safety and reliability standards. And many of our existing automotive supply chain partners have also become a component partners or suppliers for Aram. We have also recently completed development of our proprietary next-generation dexterous and which is significantly more agile and substantially lowering costs. We have built in multidimensional data system to train iron rain and sellable models with our training data and scaling rapidly and outcomes improving significantly.

XPeng is the only robotics company in China with full set in-house R&D to tabulate of both hot and software spanning SoCs to fiscal AI foundation models, data generation to pre-training and post-train joints to the store's hands and next-generation motion control to FDA and BL . Through deep in-house software and hardware R&D and cross-domain innovation, Ron will deliver a more refined design, higher quality and more comprehensive capabilities. I look forward to showcasing the next-generation arm in the third quarter, featuring most lingual communication, human like full bot motion and gradually autonomous execution of professional tasks. .

We are targeting to achieve mass production of RM by year-end with this initial trial commercial deployment in expense rooms, followed by commercial customer deliveries in China and overseas next year. I believe that 1 Humana robots reach mass production, the data flywheel will drive technology iteration and sell growth at a pace back to outstrip what we saw in EVs. Starting next year, revenues from humanoid robot hardware and AI models are expected to emerge as a key driver for revenue and growth -- the growth of XPeng Group. XPeng is now fully committed to advancing the mass production and global expansion of 3 fiscal AI applications, the LA 2.0, robotaxi and human or robots.

We firmly believe these 3 areas present enormous potential in terms of both commercial scale and investment returns. Looking at our road map, the B2B market will be the first to take off, while international markets will generate greater commercial returns than domestic markets backed by the deep experience we've gained through our partnership with Volkswagen, along with a business model are proven through mass production, XPeng is well positioned to execute this next phase of growth. We are making the large-scale commercialization of fiscal AI, a company-wide strategic priority and will move decisively towards large-scale deployment .

For the second quarter of 2026, we expect deliveries of 100,000 to 106,000 units, up 59.5% to 69.1% quarter-over-quarter with revenue of RMB 19.6 billion to RMB 20.8 billion, up 50.4% to 59.6% quarter-over-quarter. Having past the seasonal draw, we are entering a period of strong growth driven by 4 new models, increasing production capacity and expanding international business. . In the third and fourth quarters, we'll continuously strive for higher sales target. And currently, our operational quality will improve significantly. Our supplier payment terms remain at an industry-leading level gross margins demonstrate strong resilience against cost pressures and economies of scale in our EV business continues to strengthen.

I expect that the XPeng Group to build an entirely new business model anchored by our absolute leadership in fiscal AI technology with scale and network CapEx. Both XPeng vehicles robotaxis and humanoids will become highly differentiated fiscal AI agents. Moving forward, both the hardware sales scale and recurring AI model revenue are poised for high-speed expansion, unlocking immense returns on our AI R&D capital. Thank you, everyone. With that, I'll now turn the call over to our VP of Finance, James, who will walk you through our financial performance for the first quarter of 2026 .

Jiaming Wu: Thank you, Xiaopeng. Now let me provide a brief overview of our financial results for the first quarter of 2026. I'll reference RMB only in my discussion today, unless otherwise stated. Our total revenues were RMB 13.03 billion for the first quarter of 2026, a decrease of 17.6% year-over-year and a decrease of 41.4% quarter-over-quarter. Revenues from vehicle sales were $11 billion for the first quarter of 2026, a decrease of 23.5% year-over-year and a decrease of 42.3% quarter-over-quarter. . The year-over-year and quarter-over-quarter decreases were mainly attributable to lower vehicle deliveries. Revenues from services and others were $2.03 billion, for the first quarter of 2026, representing an increase of 41.2% year-over-year and a decrease of 36.1% quarter-over-quarter.

The year-over-year increase was primarily attributable due to increased revenues from technical R&D services and parts and accessories sales. The quarter-over-quarter decrease was primarily due to the reduction of technical R&D services revenues following a significant milestone catch-up in the prior quarter as well as no revenue contribution from carbon credit trading in the current quarter. Gross margin was 20.6% for the first quarter of 2026 compared with 15.6% for the same period of 2025 and 21.3% for the fourth quarter of 2025. The Vehicle margin was 12.1% for the first quarter of 2026 compared with 10.5% for the same period of 2025 and 13% for the fourth quarter of 2025.

The year-over-year increase was primarily attributable to the cost reduction and improvement in product mix of malls. The quarter-over-quarter decrease was due to higher unit vehicle costs resulting from increased memory chip and battery-related costs. R&D expenses were RMB 2.91 billion for the first quarter of 2026, representing an increase of 46.8% year-over-year and an increase of 1.1% quarter-over-quarter. The year-over-year increase was mainly due to higher expenses related to the development of new vehicle models and AI-related technologies as the company expanded its product portfolio to support the future growth. SG&A expenses were $1.88 billion for the first quarter of 2026, representing a decrease of 3.2% year-over-year and a decrease of 32.5% quarter-over-quarter.

The year-over-year and quarter-over-quarter decreases were primarily due to the lower commission to the franchise stores. As a result of the foregoing loss from operations was RMB 1.87 billion for the first quarter of 2026 compared with RMB 1.04 billion year-over-year and RMB 0.04 billion quarter-over-quarter. Net loss was RMB 1.78 billion for the first quarter of 2026 compared with net loss of RMB 0.66 billion year-over-year and net profit of RMB 0.38 billion quarter-over-quarter. As of March 31, 2026, our cash position was CNY 42.09 billion. To be mindful of the length of our earnings call, I would encourage listeners to refer to our earnings press release for more details on first quarter 2026 financial results.

This concludes our prepared remarks. We'll now open the call to questions. Operator, please go ahead.

Operator: [Operator Instructions] Your first question comes from Tim Hsiao with Morgan Stanley. .

Tim Hsiao: [Foreign Language] My first question is about GX because we noticed the new model has been selling very well since its launch on May '20s. Could management share the current order book, your steady-state sales volume target and how we should think about the vehicle gross margin.

He Xiaopeng: [Interpreted] Thank you for the question. Now honestly, the performance of GX is above our expectation. It's been performing really well. We also observed some interesting data regarding the sales numbers of GX as well. Currently, if you look at the BB flagship version right now, the lead time has the past 30 weeks, even under the expectation of converting more to the auto version, it's still growing very, very fast. On the other hand, our flagship model with initial orders over 80% of the total orders, continue to grow in the mix as well. We also observed something very interesting.

For example, the MAX version is right now less than 5% of the mix, which is a little bit lower than our expectation. And the extended range version initially actually was performing less popular than our BE button the Vila is approaching the level of BEV popularity, especially with our increased promotion and a marketing competes in the western and northern part of China, which is very, very promising. We definitely have had hopes for GX for it to be 1 of the top-selling vehicle more, it would be above RUB 300,000 the price range market for N high-end luxury set.

And to be honest, we are working very closely with our supply chain partners to support the capacity ramp up, and we definitely won our top quality products to come with top quality service and aftersales services as well to support this sustainable GX deliveries. Our priority right now, not only is about the deliveries of the product, but also the sustainability with GX being a flection model of Xpeng Group -- now being a fraction model, obviously, the GP margin of GX is quite good. As I mentioned earlier, with the media, this GX only 1 SKU under the GX series is performing with a lower GP margin than our expectation.

But the majority of SKUs of GX is actually having a higher than expectation kind of deep margin performance. I also would like to add that starting in this new year, all of our new vehicles when it comes to their configuration and also their pricing it will be under the consideration of their commercial value. The commercial consideration will be 1 of our key priorities starting this year. And the second thing is that we are looking for long-term sustainable sales performance. rather than having a big beginning and subsequent diminishing cells.

So we're looking for a better quality in terms of plot management and the modular management quality of the whole supply chain system to secure our supply and also production capacity ramp up to support our vehicle delivery. So starting with GX we are expecting to achieve a better balance between commercial value and also sales as well as long-term stable sales. Thank you.

Tim Hsiao: [Foreign Language] My second question is about robo taxi. Could you please update us on your domestic operations and overseas expansion plans. Has the recent regulatory tightening in China had any adverse impact to the progress? And how do you view the impact of that to be Vobotaxi business to the group to see passenger vehicle sales? That's my second question.

He Xiaopeng: [Interpreted] Thank you for the question. And thank you for mentioning the recent tightening of the autonomous vehicle regulation in China. However, it hasn't placed any adversity to our rhythm of development yet. Because from our perspective, after 2028, we're going to expect a huge commercial opportunity for robotaxi. And right now, we are doing step by step to prepare for the opportunity, both in and out of China -- and so our current plan is that we are going to do a lot of deployment and trial within China as well as the international market with BLA 2.0. We are confident that we can achieve success.

In China, we are going to conduct, and we are actually in the midst of conducting rapid research and development retaining our current vehicle models. And in 2027, we're going to launch an economy car model to demonstrate and validate how to start the robotaxi business model in this area in China. And we are sure that we have the capability to achieve a high-level success -- and we want to clarify that with XPeng, first of all, we want to focus on the products, and we can take a commission from working with our operational partners. We are not going to directly involve ourselves in the operation.

Hence, we expect to have many, many domestic and international partners in the operation for robotaxi. And the second thing is that we are going to work not only in China but also globally. We believe that global robotaxi has lots and lots of commercial potential and value to tap into. Now regarding the second question that you asked about the impact of our B2B business to the B2C business. Let me just add a few of our thoughts.

First of all, we believe that the current testing and R&D and experimentation actually on robotaxi has a positive impact on our B2C side of the business because our BLA model is going to offer all kinds of intelligent driving assistance strategies, for example, the speed mode, for example, the less human intervention mode, et cetera, that we can borrow from robotaxi. And our belief that for the future, the market is going to diverse and actually transition into a period where policies and regulations and market situation is going to be more open with the B2B side versus B2C side being a different market segment. So that is our expectation for the future.

Operator: Your next question comes from Y.C. Lai with JPMorgan.

Y.C. Lai: [Foreign Language] My first question is about the VA 2.0 and medium and long-term strategy, including production road map and VTA. And I wonder if Chairman can also share with us the major change and advantage that we can anticipate from here.

He Xiaopeng: [Interpreted] Thank you. I believe that within this year of 2026, XPeng's VLA or VLA plus VRM capability is going to have 2 key milestones or experience 2 key development phases. The first phase will actually happen in Q3, August this year. During this period of time, VLA is going to have our second version, which will appear as smarter, more comm and also have better generalization capability with less MDI or human takeover or intervention penetration. Whereas in the past, with our VLA 1.0 version, it mainly focused on the basic capabilities of safety, engineering and also basic experience. We didn't -- or we were not able to increase the feeling of the capability significantly.

However, by August and Q3 this year, we're expecting a lot significant performance improvement on that front. On the other hand, with the combination of VLA and VM, we're expecting not just ADAS capability, but also language communication capability and something that approach the capability of the so-called Butler like kind of experience in. And so we are going to achieve gradual implementation through the OTA or 3 OTA releases in August this year and also at the end of this year. I think that with gradual R&D development, we will be able to achieve L4 capability with L4 software capability on an L2 hardware in the future.

And by that time, we expect to see tremendous changes in terms of the business model in all shape or form of the whole business. This is something that we are in the work. We are not going to discuss the detail about it today.

Y.C. Lai: [Foreign Language] My second question is related to Robot in terms of cost advantage compared with our competitors. And in 2027, plans to export Robot overseas market. Can we also share more about that long-term strategy?

He Xiaopeng: [Interpreted] Thank you. We actually encounter all kinds of differences during the mass production of tumor robots between the structure of a robot versus an EV, especially when it comes to different aspects of consideration. Currently, there's a lot of areas where we need to address when it comes to the mass production of humanoid robot. For example, the safety, hardware of humanoid robots are quite different from cars and currently do not concurrently consider the safety and security of the simulation and also human robots and how men across all kinds of scenarios, -- at the same time, the vast majority of the existing products out there do not consider reliability, stability and maintainability of the robots as well.

If you look at the level of structure production of the human art robot. A lot of data is actually consumer product grade versus our expectation of being car grade and production quality. At the same time, a lot of our competitors do not consider the supply chain, the capability development when Premion robots achieved a certain level of mass production, how do you secure supply chain capability and safety -- at the same time, if you deploy you as you see, you ship in the human online they to so locally or are they on the cloud? Is there on the cloud, if we consider privacy, safety and security, et cetera, et cetera.

That's why since the beginning of last year 2025, we have already started a series of overall of our design and also preparation of humanoid robots, having the full stack hardware and software capability of whole robot allow us to actually have a more comprehensive capability preparation for human neurorobot to release its potential and converging value in the future.

So I would say that for now acceptable batteries all other parts of humanoid robot that we produce our in-house full-stack self-developed -- so in the future, for sure, we believe that we can come up with a more scalable and economical solution to gain our robot, However, today, the cost structure of human robot is actually very similar to that of a car. And the second point that I would like to make is about the overseas market.

I think just like EV, all of our models developed and how these are considered as global vehicles and our robots are considered as global robots as well. potentially, if you look at the overseas market, there's actually a bigger commercial value to replace human workers with humanoid robot there's lots of commercial perpetual to tap into globally speaking. At the same time, when you look at the regulatory side of things in terms of the hardware, in software and also data privacy, we also have prepared sufficiently in our humanoid robot design as well.

When you look at our current BLA portage, -- we're looking at 200 million uses per hour that are for the BLA models after of the cloud. And if you were to consume everything or do the completion on the cloud, looking at the consumption of data of 100 gigabytes per hour, which is enormous. And so we have to start from day 1 how we incorporate that kind of data consumption or model usage in our iminorobots that are may be defined or locally deployment as well. And so the entire system for our luminal robots has been decided for the global market since day 1.

And we expect to actually see more potential progresses internationally as our domestic R&D system continue to evolve or going forward. Thank you.

Operator: Your next question comes from Tina Houl with Goldman Sachs.

Tina Hou: [Foreign Language] So my first question is regarding our robotaxi business. So wondering what is our plan in terms of into more cities outside Guangzhou and the timing of that? Also accordingly, what has been the progress of our licensing approval. .

He Xiaopeng: [Interpreted] Thank you, Tina, for your question. Our robo taxi deployment for exploration and experimentation on now is limited only in Guangzhou, where we already got the license of. Our plan for robotaxi is that we are going to test the water here in Guangzhou and after we successfully developed the technology, the product and the business model here in Guangzhou, we then can and our business partnership in the whole of China and also outside of China, and we expect to work with multiple partners for their own localized operations.

And since we made the announcement, right now, we have received a lot of inquiries and lots of interest both in and out of China from our potential business partners. And so they are keeping a close eye on our future progress in the upcoming year. And I believe that after 2027, when we were able to launch our new economy to model for robotaxes we -- after we are able to announce maybe a better total solutions for robotaxi future, we believe that we can actually increase our commercialization capability for robotaxi in and out of China in the future.

Tina Hou: [Foreign Language] My second question is regarding our second quarter gross margin. So on the 1 hand, we have higher volume as well as better model mix with GX. On the other hand, we have some headwind from higher raw material and some component costs. So just wondering what would be the guidance for vehicle gross margin as well as the company planted gross margin?

Jiaming Wu: Yes. Tina, this is James. Yes. So as you can see, first of all, in the first quarter, our total gross profit is pretty close to the prior quarter Q4 of last year. So in that, we did see some level of cost increase, as mentioned in the earlier script, around the membership cost increase as well as the battery raw material cost. That is partially included in Q1, and we continue to expect that to be included in the following quarters in the year. You did mention that we have launched the GX, the Fuse SUV in the second quarter, and we will start to deliver that in the following quarters as well.

The GX gross profit is the highest in our portfolio. So from a product mix perspective, we'll start to see a better mix in Q2 as well as in the second half of the year. So all of that considered, we expect the Q2 total gross margin to be around the same level as Q1. So hopefully, that answers your question.

Operator: Your next question comes from Ming-Hsun Lee with Bank of America. .

Ming-Hsun Lee: [Foreign Language] So management, could you elaborate more about your long-term overseas markets growth driver, especially for your overseas production profitability versus your export business model. .

He Xiaopeng: [Interpreted] First of all, since you asked your question, I'm going to address the first 1 first. Regarding our overseas market expansion or development. First of all, it's 1 of our most important 4 strategies. And in the coming 5 years, we expect to have maybe 50% of our revenue and profit coming from the overseas markets. And as we approach into the second half of the year with the launch of our 4 new models are coming, we believe that we are going to be able to tap into the overseas market even more following 2027 and 2028 because in the past, we mainly had 2 models serving the international market.

And when it comes to our EV future and also robotic future, we have always considered overseas market as 1 important component or an important market for us. When it comes to our capability development, it doesn't matter if it's hardware, software or distribution channels, outservicing network, including localized charting capabilities, super charging capabilities as well as our profitability consideration, overseas has always been in the road map of development and with our dedicated and committed R&D spending taking many, many years ago. We believe that we are well poised to tapping to the overseas market development future especially in the coming few years.

Gui Hongdi: So yes, I mean, let me just add here. First of all, if you look at the international sales volume contribution, -- in the latest month, I think we already see it represents close to 20% of our volume. As you saw in last year, international sales is roughly 10% of our global volumes. You can see a significant increase in terms of the proportion that international sales is now represented in our global sales. . Second point is on the profitability of our international vehicle sales is significantly better, even with obviously some of the tariff issues were faced some of the cost increases we saw this year.

Still, I think that the international business generates significant better gross profit as well as net profit contribution to our bottom line. And also you probably saw that the new models that mentioned for the global markets has yet to be launched. So we anticipate that momentum will carry out throughout the year. So I think the contribution at the 30% levels will be consistent throughout the year because, obviously, China, we saw significant growth expectations as well. And then in terms of really dealing with sort of tariffs and other challenges. We are increasing our investment locally.

I'm actually currently in our partner in Austria right now to make sure that we have capacity to tackle the expected growth for our Europe as well as global markets. So I think it is going to be, I would say, very exciting contributor to our overall momentum as well as profitability.

Operator: Your next question comes from Ping Le Wu with Citic Securities. .

Ping Le Wu: [Foreign Language] And my first question is regarding the over production. And we've seen significant progress on export overseas production localization this year. And could you share more color on what percentage of cost for overseas market will be to produce local plans in this year and next year? And does the localization rate vary materially by region -- thank you.

Gui Hongdi: Yes. So this is Brian. Let me address that question again. On the localization production, -- right now, we have 2 plants in Southeast Asia, in Indonesia and Malaysia, mostly addressing local demand. And also, we have the partnership with Magna in Austria, where we manufacture vehicles for the European market. All 3 of these manufacturing layout will see increased capacity this year as well as the new models being produced in those local markets. . I would say that for the Southeastern Asian countries, it's mostly for the local market. And obviously, Austria is for Europe. So I would say the Austrian sort of operation will be very important capacity contributing to our European sales.

I expect the majority of our European sales will have local manufacturing sort of this production. And else where I think we don't have manufacturing facilities yet. So I think it will continue to maintain the current business model. But I think as we increase our volume as well as market share in some of these large markets. We are actively looking at ways to increase our production capacity as well as localization sort of efforts to make sure we satisfy the localization content rules as we move into a more deepened local production model.

Ping Le Wu: [Foreign Language] And my second question is about humanoid robot. And management team just mentioned that Expanse for mass production of similar report by year-end and store development in first quarter 2027. And a few specific examples of what functions the robot will perform in sports retail store and also in the clients client application. And additionally, could you elaborate on what the specific application scenario, can we see in the external corporate customers and what's our pricing strategy.

He Xiaopeng: [Interpreted] Thank you for the question. Our humanoid robots are actually different from the existing or available robots out there because we want to place them in an environment where they can actually interact with humans. So when we consider the business model or the potential application scenario for our humanoid robots, the first responsibility that they can carry could be turbines or assisted shoppers. For example, in our offline stores or dealers we can have with labor we introduced with cars and introduce our products for you. And then there will be our human salesperson that come along and do the tepid with you and find the order seller for the car.

But I think robots can really help with the basic information introduction and do some performance of the product introduction, et cetera, to achieve a high efficiency. In addition to that, once the capability is more sophisticated, we then can open up more opportunities for collaboration with our partners in the ecosystem who may have different kind of barriers, dropped requirements that we can work to place on the service of our humanoid robots and we also can work with the ecosystem partners to generate data for pre-training and post-training to create different models. -- for different human or robots for different scenarios.

For example in the retail space, there's opportunities for them to be Cachia person, for example, or if it is shopper with a more sophisticated level of capabilities. That's our plan. Now when it comes to the commercialization of our humanoid robot, we're still in the discussion phase of it. Even though the bone structure of a human or robot is very similar to that of a car, the ASP, the retail price of open robot is more expensive than a car naturally.

And so the TC margin, in terms of the hardware of a Humana, it will be more superior than that of a cost, we have incorporated multiple corn chips in our inorobot with part top of computing power even though we have that in the hardware, we believe that there's still a lot of commercial value for the software usage in terms of the cloud usage of their humanoid robot computing power. And so with the software commercialization set or the software licensing fee revenue, I think humorous have a better metal than cost. Now on the other hand, if you look at things our potential customers or travel business owners perspective.

If they are small business owners, when they make human decision of buying a human robot. What they prioritize is the payback period, right? And so I think in the overseas market, the payback period can be much shorter than that of what you would achieve in China so it would make more sense economically for overseas business owners by Humana robots. And so we have always been thinking the rationale of how customers use the Humana robots and why they would purchase it and how I think Lumacan add value to them.

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

Yuqian Ding: [Foreign Language] I've got 2 questions. One on the mid- to long-term strategy and second is the financial in the near term. So the first question is we noticed the company changed the name to XPeng Inc, and it's shaping like a physical AI platform company. So can management share a bit of more discussion and a strategic thinking about the business model evolvement into mid- to long run. And how do we compartment, the strategic divisions commercialization time line and how does into the mid- to long term, the revenue structure change? .

He Xiaopeng: [Interpreted] Thank you for the question. This is a broad question, and I'm trying to share with you my brief answer. First of all, right now, our main revenue stream definitely comes from the economy, the discount economy. Basically, it comes from our hardware and comes from our ecosystem. And I think globally speaking, there are a few car manufacturers can actually build a software platform and form the next network effect based on the economies of sales of their hardware. The network effects include both, for example, the software fees, software revenue and the entire of lateral network effect. -- which we actually have the potential to achieve.

Going forward, we believe that the whole entire intelligent agent emergents will produce the so-called and cost effect basically, it's like the interaction between and colony where you have network effects in the decentralized and centralized clusters. What we're trying to say is that these 3 effects is going to have their impact on our business model. And with these 3 effects playing together, interacting together within Xpeng, we are going to actually enhance our competitive mode and so with this system, we actually have a very optimistic expectation for our future business strategy and our value creation.

Let me just add that in the short to medium term, we will prioritize more on the scale of effect of our brand equity and also gross profit. with the scale of globalization and enhanced GP margin, we will be able to have a positive effect on our overall profitability. Also with sufficient profitability, we will be able to support adequate RD investment, which will also bring about new technological competitiveness and converting mode to the company.

Yuqian Ding: [Foreign Language] My second question is about the service revenue. Can management share the trend above this year, especially in terms of the scope. Is that possible? We can expand our partnership from China to outside of China?

Charles Zhang: Then, this is Charles. So I think that we continue to maintain the guidance that the total revenue generated from the technology and services and IP licensing revenue in 2026 is comparable to that of 2025. As you may be also aware of that starting from Q2, we will start the delivery of the Turing SoC to our partner of Volkswagen at scale. And I think that we continue to believe that the monetization of technology commercialization through such tough type of collaboration, it is a very attractive business to us. So I think that given all the proprietary technology we have in-house.

I think that we are quite open mind to such on expanding such commercialization opportunities of our technologies.

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

Gui Hongdi: Okay. So thank you once again for joining us today. If you have further questions, please feel free to contact Xpeng's Investor Relations through the contact information provided on our website or the Pearson Financial Communications. .

Operator: Thank you. This concludes today's conference call. You may now disconnect your lines. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

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