Q4 2020 NIU Technologies Earnings Call Mar 8, 2021 (Thomson StreetEvents) — Edited Transcript of NIU Technologies earnings conference call or presentation Monday, March 8, 2021 at 1:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Hardy Peng Zhang Niu Technologies – CFO & Compliance Officer * Jason Yang Niu Technologies – IR Manager * Yan Li Niu Technologies – Chairman, CEO & COO ================================================================================ Conference Call Participants ================================================================================ * Alexander Eugene Potter Piper Sandler & Co., Research Division – MD & Senior Research Analyst * Jing Chang China International Capital Corporation Limited, Research Division – Analyst * Shenghao Yu Needham & Company, LLC, Research Division – Senior Analyst * Yixuan Ma UBS Investment Bank, Research Division – Associate ================================================================================ Presentation ——————————————————————————– Operator  ——————————————————————————– Good day, ladies and gentlemen. Thank you for standing by, and welcome to Niu Technologies Fourth Quarter 2020 Earnings Conference Call. (Operator Instructions) As a reminder, we are recording today’s call. (Operator Instructions) Now I will turn the call over to Mr. Jason Yang, Investor Relations Manager of Niu Technologies. Mr. Yang, please go ahead. ——————————————————————————– Jason Yang, Niu Technologies – IR Manager  ——————————————————————————– Thank you, operator. Hello, everyone. Welcome to today’s conference call to discuss Niu Technologies’ results for the fourth quarter 2020. The earnings press release, corporate presentation and the financial spreadsheet have been posted on Niu’s Investor Relations website. This call is being webcast from the company’s IR website, and a replay of the call will be available soon. Please note, today’s discussion will contain forward-looking statements based under the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve the risks, uncertainties, assumptions and other factors the company’s actual results may be materially different from those expressed today. Further information regarding the risk factors is included in the company’s public filings with the Securities and the Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required by law. Our earnings press release and this call include discussions of certain non-GAAP financial measures. The press release contains a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results. On the call with me today are our CEO, Dr. Yan Li; and our CFO, Mr. Hardy Zhang. Now let me turn the call over to Yan. ——————————————————————————– Yan Li, Niu Technologies – Chairman, CEO & COO  ——————————————————————————– Thanks, Jason, and thanks, everyone, for joining us on this call today. So in Q4, we saw a strong growth of the domestic China market and a strong signals for the overseas market recovery from COVID-19. We have had a substantial growth in Q4 with total sales volume reaching 150,000 units or 41.6% year-over-year increase. The sales volume in the China market reached 137,000, a 35% year-over-year increase, where the volume in the international market rose by nearly 3x to more than 12,000 units, a 197.1% year-over-year increase. Despite the challenges that COVID-19 had on the market economic condition globally, our 2020 annual year sales volume (inaudible) 600,000 units, an increase of 42.8% compared to 2019. The sales volume in the China market [eclipsed] by 570,000 units, a 45.8% year-over-year increase, whereas the volume in the international market reached over 29,000 units, a slightly increase from 2019 despite the challenges that COVID-19 lockdown had on key markets around the world. Despite the initial impact of COVID-19 in Q1 2020, we have realized a rapid growth last year. This result is well in line with our aggressive growth strategy makes Niu 2.0 set for 2020 and beyond. Under our Niu 2.0 strategy, we’re rapidly expanding our product portfolio to meet the specific of different market segments of the urban commuter customers by leveraging our unique design and advanced technology. In addition to expanding our product range, we are committed to expanding the reach of a retail sales network. This will mean expansion to more cities while simultaneously create a more dense sales network in existing cities. The year 2020 was the first year we put our Niu 2.0 strategy into play, and we have achieved significant results in both product portfolio and the sales network expansion. In 2020, we introduced 4 new products to the China electric bicycle market segment the MQ, the [MS] and TQ, G0, all affordably priced between RMB 2,499 to RMB 5,799 approximately $375 to $900 at today’s exchange rate. These 4 new electric bicycle products have been a hit in each of their respective target markets accounting for 41.2% of our 2020 sales. These 4 products cover the 2 major design style or simple naked e-bicycle and a fully covered e-bicycle with the riding range from 40 kilometers to 90 kilometer on single charge. We see multiple consumer segments mobility needs at affordable price. Now for the electrical motorcycle market, we have expanded upon our signature MQi and NQi plus products. So we rolled out a G3 series in 2020 for the new market especially in China while introducing the NQi GT our international customers. The upgraded G3 is a bigger in size with fastest speeds reaching from 40 kilometers to 60 kilometers per hour and the price ranging from RMB 4,599 to RMB 6,799, a good complement to our electric motorcycle offerings. For the Europe and Americas market, we launched a new product called MQi GT, inherent to this design styles of our award winning M series. And combined with our GT powertrain technology, MQi GT is the dual battery electric moped with top speed up to 70 kilometers per hour and the range of 110 kilometers on a single charge, priced at EUR 3,399. Besides scooter and motorcycle products, we continue to enrich our accessory portfolios. In 2020, we expanded our accessory lines by over 150 new products, with more than 1.6 million customers globally, we have a strong customer base to sell into. The 47.6% growth in accessory and spare part sales in 2020 for the China market last year, is indicator that we are on the right track to further tap into this revenue stream. Now supported by the new products launches in the third quarters in 2020, we accelerated our sales network expansion in Q4. In Q4, we added 350 branded stores that reached a total count of 1616 stores in China, setting the quarterly record in-store expansion. For the entire year, we added 566 stores, much more than the last 3 years despite the COVID-19 impact in the first 2 quarters. Not only we were able to add more stores, we also strengthened our footprint in more lower-tier cities around China. We now have 66 cities in China that have 5 or more new branded stores, a 30%-plus from 2019. Now for international market in 2020, we have increased our market coverage to 46 countries from 38 in 2019. We added an additional 90 flagship stores and the premium stores across the globe. Outside China, we now have 116 flagship and premium stores as compared to 26 at the end of 2019 despite the COVID-19 situation. Keep in mind that we continue to sell products to a network of more than 1,000 dealers outside China. The expansion of our new flagship and premium overseas stores will be of great benefit to future retail growth as we expand the product range to meet mobility needs and trends of those regions. Now in addition to the channel expansion in the international market, we also made significant strides in our B2B division, especially sales to support the scooter sharing operators. Most notably is the contract we signed with Lime in Q4 2020, the largest mobility share operator globally. We’re now running sole solution provider for the multi sharing. Globally, now we support 19 share operators in Europe and Americas, with our total number of vehicles in service doubling in 2020. In many market shared scooters play a key role in introducing the electric mobility to a wider range of customers, a key first step in helping us redefine urban mobility globally. To support our Niu 2.0 growth strategy of aggressively entering urban mobility market, we also expanded our branding and marketing activities. Starting in 2020, we invested advertising in mainstream online TV series and popular shows in China, which accumulated over 2.5 billion views online/off-line during the airing of those programs. We continue to invest our effort in Niu social media channels like Douyin and Kuaishou as well. With our Douyin and Kuaishou quarterly views reaching 15 million and 20 million, respectively. This represents a 10x increase over 2019. In overseas market in Q4, specifically, we have upped our effort in social media with close to 1.3 million interactions on Instagram and Facebook. Particularly Bella Hadid, the top American supermodel was spotted riding a new scooter in New York City with friends in September 2020, which was featured in Vogue media as well. We also continue to invest in co-branding cooperating and marketing activities. In Q4, we launched an MS Electric bicycle Gundam limited edition. For your reference, Gundam is incredibly popular Japanese cartoon series. In a few short days after the launch of the project, we amassed more than 50 million unique views across the variety of social channels. Now our enthusiastic users have also created many interesting stories in 2020. We had a Niu (inaudible) from Shanghai who spent a 261 days driving along the entire border of China amassing more than 30,000 kilometers. In the U.S., we have one of our overseas [unique users] making a video of extreme sky diving riding out of back of plane on a new moped. And the customers in [Bali] decided to modify our traffic panels with traditional Balinese (inaudible) panels highlighting how and EV and ecology can promote sustainable mobility. And a quick fun fact for you, as of this morning, our users around China have now amassed more than 7.8 billion kilometers of riding distance. Now each of those kilometers is a testament to the important role we play in the daily life of our users who depend on us to get work, do work and go out for a casual cruise. Both branding and marketing effort has significantly increased our brand awareness. Niu is being voted as the Most Valuable Brand in Urban Mobility in China by [Manager] a leading financial magazine in China. As we wrap up a successful year 2020, we are very optimistic for 2021. Our addressable market in China, the lithium-ion-based electric bicycle and motorbike market will continue enjoying rapid growth that can be directly attributed to a handful of key factors and events. First of all, the overall electric 2-wheeler market is expected to grow by double digits, simply because the old acid battery scooters will need to be retired due to the expiration of the temporary licenses granted back in 2018 and 2019. Starting this year, this will create additional demand of more than 2 million units every year over the next 3 or 4 years. Secondly, the downward pressure on the cost of lithium-ion batteries will help to further increase the penetration of lithium-ion battery powered e-bikes than e-motorcycles. Just in the last past 2 years, we have observed this trend. In 2019, the lithium battery powered e-bikes and e-motorcycles accounted for less than 10% of the total market in China. And by end of 2020, it’s already in its high teens. So in summary, we see the rising tide of market for the lithium battery-powered e-bicycles and then e-motorcycles, fueled by the regulatory compliance, combined with the lower cost of the lithium battery hardware as the incredible opportunity in China that we view are poised to capture significant growth from. Now excited with this market potential, we launched a year of new campaign during the Chinese New Year this year, which happened to be the Year of Ox, or year of Niu in Chinese. Our multiple platforms, and we generate more than 300 million views. Both efforts in branding and marketing have acted as a catalyst in driving our Q1 sales in 2021. For the international market, the COVID-19 situation has accelerated the individual urban mobility demand despite the short-term impact on the retail operations in 2020. Besides electric motorcycles, we observed significant market growth in many individual urban mobility sectors like [power-assisted] bicycles, kick scooters and other form factors. As part of our Niu 2.0 growth strategy, we have diversified our product portfolios into those fast-growing markets with our first power-assisted bicycles, the Aero EB-01 will be shipped in the first half of this year. And we are developing more products in those categories for immediate release to capture the market growth across all segments. In addition, we also observed a return of growth in shared mobility market starting from the second half of 2020, again, driven by the demand for individual mobility. We are well positioned to capture the growth in this market in 2021 with more offerings to our sharing operators. Now our overall product investment, we have tens plus new products in R&D pipeline for the domestic China market, Europe and American market and Asian market. This product will cover a wide range of urban mobility categories from micro mobility to urban mobility. In a few short weeks from now in April, we will post our [third] global product launch event, where we will be a handful of new products that will be ready for purchase in the first half of 2021 for both the China and overseas market. Overall, we expect our total sales volume for the [annual] year of 2021 to surpass 1 million units. Aided by the suitable product offerings, our sales network expansion will also be accelerated. In April this year, we expect to celebrate our opening of our 2,000 branded stores in China. And we target to further accelerate the opening of our stores throughout the rest of 2021. The international market, with the ease of COVID-19 situation, we also expect to accelerate our flagship and premium store openings. Now with this, let me turn to Hardy to talk about financials. ——————————————————————————– Hardy Peng Zhang, Niu Technologies – CFO & Compliance Officer  ——————————————————————————– Thank you, Yan, and hello, everyone. Our press release contains all the figures and the comparisons you need, we’ve also uploaded in excel format figures to our IR website for easy reference. As I review our financial performance, we are referring to the fourth quarter figures unless I say otherwise, and that all monetary figures RMB unless otherwise noted. Our Q4 sales volume reached 150,000 units, increased by 42% year-over-year. China sales volume increased by 35% as a result of retail sales network expansion, new products launched in Q2, Q3 and also strong online sales. In the fourth quarter, our online sales volume increased by 3x compared with Q4 2019, driven by the successful sales during the and Double 11 shopping festival. Our 35% growth rate in China is higher than the general market growth. According to [RMIT] the China electric bicycle market grew by around 17% in the fourth quarter. We delivered a higher growth. For the international markets, our Q4 sales volume was 13,000 units, a significant increase compared with the 4,000 units in Q4 2019. The sales volume is higher than our initial expectation, mainly due to the additional orders we managed to get from sharing operators in the overseas market. With regards to product mix, M-Series accounted for 20% of total sales volume due to strong overseas sales. M-Series accounted for 25% due to M2 and [MS] new product launch. U series accounted for 25%, GOVA series accounted for 30%. Almost 30% from GOVA series 20% is from the (inaudible) product G0 model. The high percentage of G0 sales volume [lessens] our ASP when comparing with Q4 2019. However, when comparing with Q3, the percentage of volume from G0 decreased by 7%. And as a result, our ASP for China’s scooter sales improved by 11%. The total revenues increased by 25% to RMB 672 million, above the guidance we provided earlier, mainly due to the higher overseas sales to sharing operators, as I mentioned above. Our revenue increase was driven by sales volume growth of 42%, partially offset by decreased revenue per scooter or ASP of 11.5%. There are a few reasons for the ASP decrease. First, the sales of low-priced model G0 reduced our ASP. As a result, the China scooters ASP decreased by 16%. Second, the lower spare part sales to overseas market led to the decrease of ASP for accessories, spare parts and services by 23%. Third, the high proportion of scooter revenue from overseas market partially offset the 2 negative factors mentioned above. In total, the ASP decreased by 11.5% in the fourth quarter. On quarter-over-quarter basis, our ASP, however, improved by 25%, mainly due to change in product mix. Gross margin was 25.2%, 0.9 percentage points lower than this time last year, but 4.3 percentage points higher than Q3. The lower growth gross margin compared with last year was mainly caused by sales volume rebate to distributors in China. In the fourth quarter 2019, China sales volume grew by only 16%, and many China distributors did not meet the sales volume target. Therefore, we give low percentage rebates to the distributors. In Q4 2020, most of the China distributors met the sales volume target, and they received a regular rebate. When compared with Q3 2020, our gross margin improved by 4.3 percentage points, mainly due to 2 reasons. First, favorable change in revenue mix being the higher percentage of revenue from overseas market and also a higher percentage of revenue from accessories, spare parts and services, where our gross margins are higher than average. Second, improved gross margin from China [into the sales] as a result of continued cost savings. Despite the sales of low-margin G3, [G0] to model, our China e-scooter sales gross margin has improved to a higher percentage than that of 2019, while there were no sales G0 of models. Our total [operating expense] including share-based compensation, were RMB 110 million, increased by RMB 23 million or 27% year-over-year. The increase was only caused by higher sales and marketing spend of RMB 10 million for retail sales network expansion and rebranding and the marketing activities. As a percent of revenue, our sales and marketing expense, excluding share-based compensation, was 8.6% lower than 8.8% in Q4 2019. R&D expenses increased by RMB 10 million mainly for staff cost and design expense because we have more products in R&D headline, many of which will be launched in the second quarter of this year. Our share-based compensation expense RMB 10.4 million, similar to the amount in Q3. Compared with Q4 last year, it has an increase of RMB 2.6 million due to the new (inaudible) to employees. Our income tax expense was around RMB 14 million, RMB 13 million higher than the same period last year. The higher income tax had a significant impact on our net income. Some of our subsidiaries have used up the cumulative loss and therefore began to pay corporate income tax. Our long-term income tax rate is estimated to be about 20%. For year 2021, our average tax rate is estimated to be around 15% because we can still use some cumulative loss from one of our entities in China. Our GAAP net income was RMB 58 million and adjusted net income was RMB 69 million, so that’s slightly higher than Q4 2019. The adjusted net income margin was 10.2%, 2.6 percentage points lower than Q4 2019, mainly because of lower gross margin of 0.9% and a higher income tax expense. The income tax expense as a percent of revenue was 2%, 1.9% higher than this time last year. If you compare adjusted net income before tax between Q4 2019 and 2020, an increase of around RMB 69 million to RMB 82 million, a year-over-year growth of 19%. Turning to our balance sheet and cash flow. We ended the quarter with RMB 1.1 billion in cash, term deposit and short-term investments. Our operating cash flow was negative RMB 163 million, mainly due to reduction in payables of RMB 190 million as a result of seasonality. On a full year basis, our operating cash flow with a positive RMB 460 million. Our Q4 capital expenditure was around RMB 41 million, mainly related to capacity expansion of RMB 21 million, new store building of RMB 30 million and R&D spending of RMB 7 million. On a full year basis, our capital expenditure was around RMB 150 million. Now let’s turn to guidance. We expect the first quarter revenues to be in the range of RMB 420 million to RMB 478 million, an increase of 80% to 105% year-over-year. With that, let’s now open the call for any questions that you may have for us. Operator, please go ahead. ================================================================================ Questions and Answers ——————————————————————————– Operator  ——————————————————————————– (Operator Instructions) Your first question comes from the line of Vincent Yu from Needham & Company. ——————————————————————————– Shenghao Yu, Needham & Company, LLC, Research Division – Senior Analyst  ——————————————————————————– Congrats on the strong year. I have 3 questions. First question is can the management share with us news plan for off-line store opening this year, 2021, how has the store opening process gone so far given strong consumer and distributor interest? My second question is about the unit sharing operators. Can we — can you talk about how many units sharing operators contributed in 2020? And how big opportunity this mobile — mobility sharing platforms customer represent in terms of any unit sales in 2021? My third question is about gross margin outlook. Can management shed some light on the gross margin outlook for 2021? How much cost savings can we expect to be generated from [BOM] and the battery pack respectively? ——————————————————————————– Yan Li, Niu Technologies – Chairman, CEO & COO  ——————————————————————————– So thanks for the question. So let me a quickly talk — basically cover the first question for openings. So we actually we — I think with our diversified product portfolio, really starting on Q4 last year and even starting Q1 this year, we do see an acceleration of new store openings. And as I mentioned in Q4 last year, we’re able to open more than 300 stores. So actually, in Q1 this year, if you recall that by end of Q4 last year, we had about 1,615 stores. Now we expect to have our 2,000 store open basically in early April. That means despite the Chinese New Year break, we’re able to open another close — not 400, but 380-something stores within the 3 months. So that’s actually a tremendous growth. And we actually — we don’t expect to slow down. I think with more products coming out, especially with new products coming out in April, we expect to open more stores for — in Q2, Q3 and Q4 this year. So I think right now, we have about 1,600 store But end of last year, we had 1,600 stores. I think there is no minimum we can add 1,000 or even more than 1000, 1,200 to 1,300 stores this year. ——————————————————————————– Hardy Peng Zhang, Niu Technologies – CFO & Compliance Officer  ——————————————————————————– And for your second question about the home many units we sold to sharing operators during 2020. During 2020, we sold around 8,500 units to sharing operators at account for close to 30% of our total sales in overseas market. And normally, the contribution from sharing operators account for 20% to 30% of our total overseas sales volume. We also expect a similar percentage in year 2021. And for your third question about the gross margin outlook. First of all, what we can share with you is during 2020 the cost savings contributed to 4% to 5% of the margin expansion during 2020. However, during 2020, because we launched the low margin G0 model that had a negative impact on our gross margin. But we are able to offset that with cost savings in most of our 2021, we expect a similar percentage of cost savings in all the parts also in And because of that, we expect the gross margin will be more or less stable, similar to what we see during 2020. For the product mix, as already mentioned by Yan, in 2021, we may launch further products — new products in the price range similar to what we have for G0. And therefore, that product launch which we have a negative active impact on the overall margin. But we are also confident that we can use the cost savings to offset all negative impact and to keep our markets stable. So this is answer to you second and the third question. ——————————————————————————– Operator  ——————————————————————————– Your next question comes from Alex Potter from Piper Sandler. ——————————————————————————– Alexander Eugene Potter, Piper Sandler & Co., Research Division – MD & Senior Research Analyst  ——————————————————————————– So my first question is regarding guidance. The full year scooter delivery guidance of around 1 million units. That was good. That looks around what we had expected. But the Q1 revenue guidance is a little bit weaker than what we thought. So it implies sort of a pocket. And I know there’s seasonality to consider here, but it seems like the Q1 sequential downtick in revenue versus Q4 is a little bit bigger than we had expected. So is there anything to call out there? Or is this just normal seasonality? ——————————————————————————– Hardy Peng Zhang, Niu Technologies – CFO & Compliance Officer  ——————————————————————————– I think the first part is the normal seasonality because normally in Q1, we have the Chinese New Year — with Chinese New Year, the factory will be shut down also the logistics the company do not provide any further services. this year, during Chinese New Year, there’s also some control from the local government because of the COVID-19. Therefore, there’s more impact from that. So with that we also want to give the guidance. We’re also keep it conservative on the overseas sales volume mainly because we see the continued challenge for us to book a container to ship to the overseas market. If we take out all this impact, if we’re purely looking for the order book, we see very strong sales volume growth for the first quarter. So in summary, it’s more because of seasonality, but we try to be prudent considering the short-term impact on COVID-19 or some challenges to oversee shipping. ——————————————————————————– Alexander Eugene Potter, Piper Sandler & Co., Research Division – MD & Senior Research Analyst  ——————————————————————————– Okay. Got that makes sense. I also had a question on, I guess, the prices for international scooters. I can appreciate the gross margin in the quarter was really good. There was some mix underlying that, good cost control. But if you just look at the price of a scooter that you sell in international markets versus Q4, the price has come down. Is there anything specific driving that? ——————————————————————————– Hardy Peng Zhang, Niu Technologies – CFO & Compliance Officer  ——————————————————————————– Not really, not really. I mean it’s purely because of the 2 things. I think 1 thing is because the overseas market, we are studying models, (inaudible) so it really depends on how much model in different segments or distributor order from us. In Q4 last year, we have some of the orders for M-Series. M-Series has a slightly lower sales price compared with N-Series that explain the reasons. Secondly, some of the — our sharing operators wanted book — place orders. The only order the only body part of the scooter instead of ordering the entire scooter, and they place separate orders for the spare parts, et cetera, for the battery. That also lowered our ASP. But for us, it’s all quite normal. So this is the first reason. The second reason is because of the depreciation of U.S. dollar against RMB because in the overseas market, we’re priced our products in U.S. dollars. With weakening of U.S. dollar against RMB, we do see some impact of the average ASP. But this is the 2 reasons for slightly lower international market. ——————————————————————————– Alexander Eugene Potter, Piper Sandler & Co., Research Division – MD & Senior Research Analyst  ——————————————————————————– Okay. Great. That’s super helpful. Then maybe the last question I had was on supply chain. There’s been obviously, a lot of commentary around semiconductor impact on various supply chains, but also in the electric passenger vehicle market, there’s been a lot of commentary regarding bottlenecks in the battery supply chain, potential delays, production delays that are impacting people’s ability to ramp production. Have you seen any of those supply chain impacts, either with regard to semiconductors or with regard to batteries? ——————————————————————————– Yan Li, Niu Technologies – Chairman, CEO & COO  ——————————————————————————– I think that’s a good question. We actually, in the last few weeks, we actually observed a little bit more stringent supply chain in terms of — actually, in both situations, in terms of in the chipset because there are some ships that we’re using in our central controllers. So that has impacted us a little bit. And as well as see a temporary shortage in the batteries. For us, we have secured some supply chain at the beginning of the year, so that helps us to really to cope with the situation. And we basically (inaudible) will see a temporary glitch about 1 week or no longer than 2 weeks of (inaudible). But that has — we were able to actually able to handle the situation so far. ——————————————————————————– Operator  ——————————————————————————– Your next question comes from Jing Chang from CICC. ——————————————————————————– Jing Chang, China International Capital Corporation Limited, Research Division – Analyst  ——————————————————————————– Congrats on your beating guidance of fourth quarter results. I have 3 questions. So first is so can you give us more color on the new products to be launched in April and such as the price range? And how to distinguish them with all the product series? And the second one is — so news or rumors that we are producing or prepared to produce new energy vehicles. So how do we think about our business expansion, such as go to the (inaudible) or other products? And also, my last question is referred to — you’re talking about GOVA and same price (inaudible) price and models. So as we open more stores, and maybe more exposure to lower tiered cities and more customers, will we consider to separate GOVA and Niu brands to different channels. That’s my 3 questions. ——————————————————————————– Yan Li, Niu Technologies – Chairman, CEO & COO  ——————————————————————————– So thanks for the questions. I’ll address them, and then I’ll have a Hardy to comment as well. So first on the new product launch in April, we’re very happy to actually attend the launch event. So you actually can see the product in person and actually see the product — actually experience product well. So we actually have multiple products to be launched in April, covering actually multiple categories. The categories are high-end electric bicycles, high end, also the, let me call it the mid end electric bicycle market in China as well as covering the electric motorcycles in China as well as some of the new categories like the power-assisted and in the overseas market. So it’s actually a wider range of products that we’re going to launch in spring, what we call it global spring new product launch, which is going to happen in our — in Changzhou and — that’s where — actually, by that time, our — we have a Phase 2 of the factories. We have completed — with our new factory that we completed Phase I. And the Phase 2 of factory will be almost ready in April, not completely, I believe, but it’s still (inaudible) and that helps to increase the production capacity as well. So I think that was into the new product launch in April. In terms of the rumors on the car side, I think you were talking about recently, there were, I think, there are news reporting, not news reporting like from social media side, it’s actually a lot of our new users, actually, I think, keeping the industrial designer and he did a concept design of [if] new design electric car what the electric car, a small electric car would look like. So he posted it on social blogs and then got picked up. We actually — we thought he was talented. So to be honest, our industrial — our IT team actually try to reach out the users and try to see whether his talent is whether we can use his talent on our 2-wheeler designs. We didn’t really — but he just while he didn’t use our logo, so there is a little bit, what we call the probably a brand or a patent infringement, but we thought we would let it go, but we cleared out in our own Weibo saying, hey, this is — it’s purely out of passion of one of our users. Now the lastly on the GOVA series, I think on this note, even though I think we have multiple product under the GOVA series. But having said that, I think the GOVA series still represents the (inaudible) design — industrial design, internal product quality, it’s basically as good as the L-Series, M-Series U-Series. So I think in the midterm, we still put it — we still like to have our GOVA series under the new brand because I think it actually represents what new brand representing, which is technology, freedom and style. So we’ll be — we’re coming out more products under the GOVA series as well this year. And that will help us to actually bring our product to more — a wider range of consumer segments. ——————————————————————————– Hardy Peng Zhang, Niu Technologies – CFO & Compliance Officer  ——————————————————————————– Just to supplement the new product launch, for the — in terms of price range, the new products to be launched, we’ll have products in the similar price range at — like G0, but we are also going to launch premium products with sales price similar to a MS. So we will have a few offerings to our customers. And also for the new product launch, we are also going to target different customer segments. For example, one of our product — new products will more target towards females. With that, it will help us to further expand our customer base and also help us increase our sales volume in 2021. So that’s the answer to your 3 questions. ——————————————————————————– Jing Chang, China International Capital Corporation Limited, Research Division – Analyst  ——————————————————————————– And a quick follow-up question. So I know that Mr. (inaudible) our large shareholder, he has his own company to produce Niu energy vehicle, it’s also — is there any potential opportunity for us to — like potential cooperation between Niu and his own brand? ——————————————————————————– Yan Li, Niu Technologies – Chairman, CEO & COO  ——————————————————————————– Yes, I think nothing I’m aware of. In terms of NIU, I think our mission was really find and made price better. So we’re purely focused on urban mobility. I think mainly the 2 areas. We have a product which is not launched yet, but that’s a similar product under the motorcycle market. I think this is where we are good at in terms of our coverage individual mobilities. ——————————————————————————– Operator  ——————————————————————————– Our next question comes from Alice Ma from UBS. ——————————————————————————– Yixuan Ma, UBS Investment Bank, Research Division – Associate  ——————————————————————————– I have 3 questions. The first one is that could you give us more elaboration on — due to the new regulation in China, how do you think the segmentation between the e-motorcycle and e-bike after the 3 years of transition period? As you have just mentioned, I think most of your incoming products in China are mainly e-bike segment. So can we understand that in the future, after the transition period your focus in Chinese market will mostly be the e-bike market, while in the overseas market will mainly be the e-motorcycle? ——————————————————————————– Yan Li, Niu Technologies – Chairman, CEO & COO  ——————————————————————————– Okay. Yes. Thanks for the question. I think, first of all, I think the — from the new regulation, there’s a clear separation on the e-bike versus e-motorcycle. Basically, the e-bike has to be under the e-bike regulation where for a total weight has been less than 55 kilos. The restriction on the size of the bike as well as the speed. I think according to some data, basically, last year, roughly about 22 million or 23 million units were e-bike, where the rest of 10-plus million units or what they call the e-motorcycles or light e-motorcycles. So I think that — as we’re seeing that whether that percentage will increase, but it really — I think it really depends on the city by city regulations on motorcycles because some places where when they actually put a restriction on motorcycles, then you’re going to see the e-bike percentage will increase. Now from our point of view, from a Niu point of view, we actually have products in both markets. On e-bike markets, we have our multiple products from our M2, MS, Niu class U1 US and our GOVA G2, G1, G0. So I think it’s like 8 product lines into e-bikes. And for the e motorcycle as well, we have our N1, M-plus, G3, and we have more product coming out for the motorcycle market. So I don’t think we’re — it’s not like we’re going to focus on one versus the other. I think for both markets, I think we had an advantage in terms of design. We have advantage in terms of technology that I think we’re actually able to gain market share in both markets. The good thing on the trend of both markets is the trend of — acid to lithium-ion batteries. You actually see that [climb], both on the e-bike is very obvious because for the e-bike to be less than 55 kilos, most likely, you would need to use the lithium-ion battery powered scooters. So we see a lithium-ion batteries start to put out a percentage in terms of penetration. Now for e-motorcycles, traditionally, it’s most of that asset. We’re the first one doing the lithium-ion batteries. And people actually start enjoying the support of our lithium-ion batteries because it is easier to charge and take the battery out. So we’re actually seeing a — also seeing a basically increase into more lithium-ion battery penetration in the e-motorcycle market. So — and Niu being the first smart electric lithium-ion battery scooters, both on the e-bike and e-motorcycle, so I think we have advantage in terms of capturing the market growth on the lithium-ion-based e-bike and e-motorcycle market. ——————————————————————————– Yixuan Ma, UBS Investment Bank, Research Division – Associate  ——————————————————————————– Okay. Very clear. And my second question is about the market segmentation among the main or high-end scooters via the lower end market, what do you think is the respective percentage market share? ——————————————————————————– Yan Li, Niu Technologies – Chairman, CEO & COO  ——————————————————————————– I think it’s difficult to talk about sort of percentage. I don’t have the sort of a percentage at hand. But I can give you a rough price range basically in terms of retail price, we’re seeing anywhere, the cheapest ones can go as low as RMB 1,500 to the expensive one, which we own most of the market shares up to like RMB 8,000-ish, right. So I think that’s what I’ll give you a sense, but now if you look at the market average price, I think Hardy — maybe I think market average price probably resale-wise RMB 2,500-ish, right? The market average price, about RMB 2,500 to RMB 2,600-ish, less than RMB 3,000, like RMB 2500 to RMB 2,700-ish. So I think that’s sort of the market average price. Now the interesting thing is actually our — if you look at our product offerings, our cheapest one is actually at RMB 2,200, RMB 2300-ish. So it means our chip in — it is right below the market average. So most of our product offerings are sort of in the mid — starting at the mid-end of the market. Where as the traditional — the other competitors, the players, they have more cheaper products. ——————————————————————————– Hardy Peng Zhang, Niu Technologies – CFO & Compliance Officer  ——————————————————————————– And just to supplement that, even though there is no official data about different — with the market size and the different segments. The other way I think about it, the sales volume in Tier 1, Tier 2 cities. The people in Tier 1, Tier 2 cities have high disposal income. They also have a higher (inaudible) needs to pay, they tend to buy more expensive, more premium products. In China, in the Tier 1, Tier 2 cities, the sales volume each year around 6 million to 7 million, accounts for 22% to 25% of the total market. So that’s kind of a proxy you can think about how large the premium segment is for the overall market. ——————————————————————————– Yixuan Ma, UBS Investment Bank, Research Division – Associate  ——————————————————————————– Okay. Very clear. And my last question is about could you elaborate more on like how you’ll leverage the data you have gathered already from the ECUs car tool, like do you use app to support opening new stores? Or do you use that to more like design the products or so? ——————————————————————————– Yan Li, Niu Technologies – Chairman, CEO & COO  ——————————————————————————– So we actually use data in 3 dimensions. Well, first of all, all the data, even though we collect the data, but all the data is being used anonymously in the sense that we use data as collectively as a group. Now, we do observe the data to calculate — to analyze user behaviors that help us to want either design new products or provide an upgrade for the existing products. Most of our scooters actually support over-the-air upgrades or the OTA, where basically every 3 months or 6 months, there is actually new software that can be actually download the upgrade to your scooters such that actually will make your driving experience a little bit better in terms of acceleration, smoother, all that stuff. So a lot of those actually are being — those upgrades are being done by observing the user behaviors, understand how we can actually fine-tune the controller, fine-tune the software such that it will improve the product experience. So that’s on the existing product. On the new product, obviously, we look at how — for example, interestingly, we observed that less than 30% of our users actually drive more than 20-kilometer kilometers a day. So that help us to understand — help us understand what the typical battery, basically battery capacity we need to provide for our users. Such that, on one hand, it can provide a ease of — he or she can drive 3 days or 4 days of without being charged. At the same time, we don’t want to overload the user with a huge — huge batteries, which will add up the cost as well as make the battery heavier. So those are sort of the consumer insight we can use to for product — new product development. The second part is actually what do we have it’s called a heat map because we have the users geo information, so we know where the use drive the scooters, where they use the parked the scooters. So we actually have the heat map that we see and that actually helps us to open — to find a store location, to open stores. Because most of our retail stores are not just for retail, they’re also for after-sale services. So you can easily think that there will be areas where we observe there are tens of users but without a single store. So that means we need to open a couple of stores in those regions that will actually provide adequate customer service to the users. So that we do that as well. So those are sort of more interesting things we use with the data. So I think the more interesting fact is actually — those data are being accumulated. So far, we have about 7.8 billion kilometer riding distance. And then on a daily basis, there’s more and more knowledge being accumulated into our data servers and such that it’s — let me put this way, it’s analysts, basically, the more you look at more analyze, then you — there’s more interesting facts you can find out to analyzing data actually provide a better services or better products to our users. ——————————————————————————– Operator  ——————————————————————————– Our next question comes from (inaudible). ——————————————————————————– Unidentified Analyst,  ——————————————————————————– Congratulations on prosperity in New Year. And my first question is what’s the main innovation direction of our follow-up new offerings, considering that their competition confidence becomes more and more fierce, especially in the high end markets? ——————————————————————————– Yan Li, Niu Technologies – Chairman, CEO & COO  ——————————————————————————– Sorry, repeat the question. So I didn’t catch it. You’re talking about our competitive advantage of our new product offerings? ——————————————————————————– Unidentified Analyst,  ——————————————————————————– Yes. And I mean what is our — the most highlight of our follow-up offerings compared to other competitors? ——————————————————————————– Yan Li, Niu Technologies – Chairman, CEO & COO  ——————————————————————————– I see. I guess like — I guess how do I describe — I guess you have to see the product, to be honest. It’s very difficult to describe what are the those highlights. Because every year, we do those new product launches, we keep it very secret and when people actually observe the new products, there is also [wow] factors involved. This is actually really cool. So you actually have to see the product. But let me just give you sort of a very vague answer will be — so we have multiple product coming out in April, and the products are designed to address different customer segments. Because I think more and more in this industry would understood that different customer segments actually — different consumers, the different customer segments actually have different needs for the urban mobility. Some of them actually would require longer driving distance. And some of them actually would require bigger space in terms of — especially if they need to take their kids to school. And also male or female may have a different view in terms of what’s being called a beautiful scooter. So I think in the past, when we start new, it’s always we start on M1 is basically sort of one form factor for the entire market. But as we are starting to actually covering the wider range of consumer base, we actually realized we need to design multiple products with different products to actually attuned for the multiple customers segments taste. I think that’s probably sort of the main highlight. Besides there’s new, there are new — what we call smart functionality in upgraded scooters. There are also a new powertrain technology in the scooters, such that will make the scooter drive faster, longer mileage based on the same battery. Those are sort of the technology upgrades. But if you take one highlight, you’re going to see multiple design styles, multiple form factors that actually attune for different customer needs. ——————————————————————————– Unidentified Analyst,  ——————————————————————————– Very helpful. And my last question is that how do we utilize over tremendous user data? And may we have any way to explore and new functions in futures by utilizing our Niu user data? ——————————————————————————– Yan Li, Niu Technologies – Chairman, CEO & COO  ——————————————————————————– So I think, as I mentioned earlier, so basically — currently, we’re using data in 3 ways, right? We’re using data to analyze the customer behaviors to help us to design better products. Basically new product destination — new product design to better suit our customer needs. That’s one. Second, we’re actually using data to fine-tune our softwares — software, our controllers, our ECU such that for the existing customers, without buying a new product based on the upgrade software, over the air, they actually kind of experience — they will have an upgraded or improved riding experience. And lastly, we’re also using data to — in terms of retail expansions open stores as well as sales and after-sales service stores in the locations where what we call the white spot, where we have users, but we don’t have service station. And the one more thing to add is actually the data we also use for — sometimes for targeted advertising because really analyzing what our users’ profile, analyzing what with our users behavior we have a better understanding of our potential users, and that will help us to targeted advertising. So those are sort of the 4 use is really describing our main business. Now in terms of monetizing on existing data, we haven’t done that. I think the only part we are seeing is actually for the users to continue enjoying this, what we call smart connectivities. There’s annual fee of, I think, like RMB 30, RMB 38 or RMB 50 annual fee we charge on the user willing to support on the sort of on the data reconnectivities. ——————————————————————————– Operator  ——————————————————————————– I see no more questions in the queue. Let me turn the call back to Mr. Li for closing remarks. ——————————————————————————– Yan Li, Niu Technologies – Chairman, CEO & COO  ——————————————————————————– All right. Thank you, operator, and thank you all for participating in today’s call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Thank you. ——————————————————————————– Operator  ——————————————————————————– Thank you all again. This concludes the call. You may now disconnect.