Good day, and thank you for standing by. Welcome to Niu Technologies Fourth Quarter 2022 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Wendy Zhao, Senior Investor Relations Manager of Niu Technologies. Please go ahead.

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss Niu Technologies results for the fourth quarter of 2022. The earnings press release, corporate presentation and financial spreadsheets have been posted on our Investor Relations website. This call is being webcast from the company's IR website as well, and a replay of the call will be available soon. Please note today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve 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 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 CFO, Ms. Fion Zhou. Now, let me turn the call over to Yan.

Thank you everyone for joining us on the call today. In the fourth quarter of 2022 our total sales volume was 138,279 units, representing a year-over-year decrease of 41.9%. Specifically, sales in the China market drove by 42.5% year-over-year to about 118,000 units and the sales in the overseas market decreased by 38.7% to 20,000 units. Total revenue in Q4 was RMB 612 million, a decrease of 38% year-over-year. This results wrap up the entire financial year for 2022, which has been a year with significant challenges for us. The total sales volume was 831,000 units representing a year-over-year decrease of 19.8%. Total revenue for the entire year was RMB 3.17 billion, a decrease of 14.5%. Now, particularly, our operations in the China markets face headwinds from uncertainties stemming from the COVID resurgence and the increase in lithium-ion battery prices starting in Q2 2022. The total sales in the China market dropped by 28% year-over-year to about 710,000 units. Our total revenue in the China market dropped about 19% to RMB 2.36 billion in 2022. The COVID resurgence not only disrupt the market demand, but also delayed the launch of several key products, due to the month long lockdown in Shanghai where our R&D center is located, we’re unable to release several key products until September in 2022 causing us to miss the peak sales period. Apart from the COVID disruptions, we had also faced headwinds from lithium battery price hikes. The raw material price for the lithium-ion battery experienced a sharp increase for nearly 50% since March 2022, significantly slow down the penetration rate of the lithium-ion battery electric two-wheelers throughout the China market. The price hike had a more significant impact on us since the majority of our e-scooters used lithium-ion batteries. To maintain a healthy gross margin, we had to increase our price by average of 7% to 10% and to optimize our product portfolio towards the premium product started in Q2 of 2022. As a result, except the quarter one of 2022 where we achieved a year-over-year growth, the sales volume for quarter 2, Q3 and the Q4 in 2022 have decreased by 25% to 40% year-over-year due to the lithium price impact. Now, coming to our international market has experienced a significant growth in 2022 with a remarkable 142% year-over-year increase in the unit sales to about 121,000 units, a 51% year-over-year growth in scooter revenue to RMB 493 million. The micro mobility type sectors, specifically the kick scooters, was the main driving force behind the search accounting for more than 100,000 units in sales. However, the electric two-wheeler categories saw a 46% decrease in sales selling a total of 18,000 units in 2022. The drop in the electric two-wheeler sales was mainly due to the shutdown of the share market as most of the share operators did not raise additional capital for expansion. The loss in share market led to a decline in sales of over 11,000 units, which accounted for nearly 70% of total sales drop in the electric two-wheeler market overseas. Now, our overseas market like the China market also faced challenges from the lithium battery price hike that increased the lithium battery price coupled with the rising of euro and the U.S. Dollar exchange rate necessitated us to increase the selling price by an average of 22% in the European market where we sold 70% of our electric two-wheelers previously. The increased selling price had to impact our sales in electric motorcycles in the consumer market, particularly in Europe. Now, as we reflect on the past year, the shift in market dynamics has significant negative impacts on our operations. In China, the surge on lithium-ion battery prices has reversed the lithium ion penetration in the electric bicycle and motorcycle market and they render our entry level products, representing 35% of sales volume in 2021 uncompetitive in this market. In the international market, besides the lithium-ion battery increase, the shutdown of the share market has essentially zeroed one-third of our electric two wheeler sales volume or more than one-half our electric two wheeler revenue. We recognize that both of the shift may not be temporary and that we start to make strategic adjustments to adapt to the change in market conditions in 2022. Those adjustment did take time and resulting in some short-term setbacks in 2022, but it would create a sustainable quality growth in the long run. First, in product development in the China market, we have shifted our R&D focus to premium product lines, i.e. the Niu products and the high-end Gova product lines in 2022. In 2021, we’re mainly focused on entry level product to the mass market taking advantage of a low lithium-ion battery cost. However, although those entry level products contributed a one-time revenue surge. It had a negative impact on gross margin once the lithium-ion battery price increased. Additional customer recognitions suffered due to the short drive range and the brand image as well. In 2022, we pivoted our product development strategy to focus back on premium and mid-end products. We further introduced graphite lead acid battery solutions for our mid-end product lines for both electric bicycles and motorcycles, which allowed us to improve drive range at low cost. Our high-end product lines enabled us to improve our margins to strengthen our brand position and our mid-end product lines enabled us to achieve volume sales and gain recognition from the mass market with product combined design aesthetics, and practically functionality at affordable prices. To highlight our product development achievements so far in 2022, I'd like to mention the long-term revolution on the SQi and the new UQi+ in the high-end market. The SQi is our product debuted in the most high-end electric bicycle market. It boost innovative design and the cutting edge material technologies priced at RMB 9,000 plus. This [indiscernible] motorcycle like SQi was well received by the market with customers waiting for 5 to 6 months for deliveries. The new UQi+ is the newest addition to our all-time most popular U series. The new UQi+ has been enhanced with improved light design, smart controls, riding ergonomics and additional personalization functionalities. The UQi+ has garnered significant attention on social media and generated widespread trends since its launch with nearly 50,000 units ordered in the first month alone. This positive reception is a testament to our brand leadership and the capability in product creation and that we have more exciting products planned for Q2 2023. Now, on the mid-end product line, we introduced the V2and the G6 series in 2022. V2 is the electric bicycle with a simplistic design style, but it was the large form factor. It's about 10% to 30% larger than our popular G2 and F2, which were released in 2020 and 2021. The G6 is a light electric motorcycle designed with upgraded battery capacity, with a range of over 100 kilometer on a single charge with graphite lead-acid batteries. Even though all those products we introduced late in September, which missed the peak season, with the exception of G6, the newly introduced product quickly represent more than 70% sales during the fourth quarter in just three months of the launch. This also helped us -- our ASP to increase by 15% quarter-over-quarter in Q4 2022. This was also probably design our strategic adjustment work by focusing on the premium and mid-end products, we're gradually mitigating the impact of lithium-ion battery cost hikes and start to reclaim the gross margins. Now, fueled by the premium product introduction of SQi, new UQi+, but also pivoted our marketing strategy to be product focused and user centric. This allowed us to get a better ROI on our marketing investment and also help to continue enhancing the brand. Just to list a few example in 2022, the marketing campaign surrounding the launch of our new products of SQi and the UQi+ resulted in a total of 1.4 billion views across all platforms. We also launched a new innovative ambassador program, [a core to] [ph] user centric marketing strategy, I mean, what, 40 plus new users were also influencers to co-create with new and host local events. During the 2022 World Cup, we mobilized our ambassadors for World Cup seeing new Scooter shows. [Indiscernible] Scooter shows, demonstrated Scooters customized and painted those elements from the World Cup. Those demonstrated scooters gain a total of 3.7 million views across China's social media platform in just two weeks. Now, in our international market, our strategy has been diversified product portfolio beyond the electric two-wheelers that expand the geographic regions beyond the main European market for the past two years. This strategy demonstrates early success in 2022 over the growth in the new products and new markets has only partially offset downturns in the electric two-wheeler share market as the upfront investment improving in the new product and new market credit red line in the process. On the product portfolio expansion, we have achieved early success in 2022 in electric kick scooters. We launched the category in the last quarter of 2021 and has since strategically [indiscernible] our kick scooter product mix to enter this category and establish brand awareness in the market, we'll start with the high-end product priced at $800 and $900 and gradually introduced mid and the low-end product with price ranging from $300 to $500. This strategy caused a slow ramp up initially that helped with the brand building in the new entered categories. Niu was awarded the Riders' Choice Award 2023 as the best scooter company presented by a micro mobility award. Our high-end product K3 also received coverage from some of the top tech media outlets such as [Tom's Guide, TechRadar] [ph], and the [indiscernible]. In terms of sales channel, we also took a gradual approach with first launched the kick scooter category, focusing on online channels, like Amazon. Our kick scooter models ranked Number 1, Number 2 on Amazon bestseller list in multiple countries in Europe and North America during 2022 Amazon Prime Day campaigns. Ready with the momentum from the online channels, we started to enter the offline primary sales network like [indiscernible] in Europe and the Best Buy in the U.S. towards the second half of 2022. We believe those approach, though slow at first, due to solid foundation for sustainable growth in 2023 and beyond. Now, on the regional expansion part in the electric two-wheeler sector, we see the opportunity that growth in the market in the Southeast Asian market, mainly in Thailand, Indonesia and Nepal, we continued our effort in expanding the Southeast Asian market as we hope to grow the trend of transition from the traditional gas fuel two-wheelers to electric two-wheelers. In those high-growth Southeast Asian market, we spend a number of stores and working with local partners with a wide range of sales network. In 2022, during the G20 Summit in Bali, Niu product provided electric scooters to be used by Indonesian national police officials to support the local government's effort to green transportation. Now, as a result of those efforts, the electric two-wheeler sales in the Southeast Asia market increased from nearly 60% year-over-year. Lastly, as advocate of sustainable living, we're committed to providing our customers with eco-friendly smart vehicles that help reduce our impact to the environment. 2022 also marked another year of our dedication to promote the development in the entire two-wheeler industry in environmental-friendly direction. We released our first in – ESG report this year. As of today, the cumulative riding data reached 16 billion kilometers, which means reducing 4 billion kilograms of carbon emissions, compared with a few vehicles. To further spread the idea of building green futures through technology, we launched a review, a global sustainability initiative during our Earth Day campaign in 2022. The campaign included a global Earth Day cleanup, which mobilizes new users across four continents to clean up trash in the public areas, including in places like [Bali] [ph] [indiscernible] and Guatemala. Sustainability has been the core at our brand since its inception and we take pride in making positive impact on the journey of sustainability with our users. Now that 2022 is behind us, we are confident to regain growth in 2023 with a strategic adjustment we made in 2022, starting to have a positive impact in Q2 2023. When compared to the pre-price adjustment in Q1 2022 on a year-over-year basis, our Q1 2023 still shows a sign of negative impact due to the price increase and delay product launches and we hope to recover into Q2. Now, with the strategy in product development and branding marketing, and the sales channel expansion in place, we believe we are able to regain growth in 2023 as the whole year for both China and the overseas market. Now, particularly in the China market, we'll drive quality growth with new products in the premium mid-end segment to continue our leadership, product focused on this user-centric marketing to optimize ROI and the retail efficiency improvement to drive the same-store growth in the 3,000-plus franchise stores. On the product side, we have a product plan for a few key products in China, starting with Q2 this year. Those product lines will focus on premium new series, the high-end Gova series, covering from high-performance motorcycles, light motorcycles to premium and mid-end China electric bicycles with powertrain platform from NCM lithium battery, our [FD] [ph] lithium battery to graphite led-acid batteries. We started those product development in 2022, and they will be released on schedule in Q2 2023. Now, driven by the unique and differentiated product propositions, we continue to focus on building Niu as a leading lifestyle brand for urban mobility, and this company may extend beyond just our product. Besides the product [indiscernible] central market strategy, we also plan to expand our co-branding initiatives with brands with similar [philosophy] [ph] in lifestyle. In 2022, we successfully launched collaborations with leading global lifestyle brands such like Razer and Diesel with co-branded product designed with each partner, and we plan to continue success model in [2023] [ph]. Now on the sales channel, we have launched initiatives to focus driving same-store sales improvements that in Q4 2022, which recognize offline stores as a crucial center to [pilot sufficient] [ph] test drive and aftersales services. We are supporting the offline store, [indiscernible] generated from our online. And with this O2O approach, we're able to provide better pre and after-sale experience for our users and to sales number for our retail stores. We have also launched a project to optimize and standardize store layout and the marketing materials for each store to create a consistent, high-quality brand image. Additionally, we have a digitalization program to help the stores showcase their product and platforms, resulting better traffic and potential conversions. Those initiatives will aid over 3,000 stores in achieving health same-store growth. Now, for the international market, we'll remain laser focused with our diversification strategy in both product portfolio and geographic expansions. Those diversification effort in the last two years will start to contribute significantly in growth in both the revenue and the process. First, on the micro-mobility category, it has been a high growth in 2022 with near 7x volume growth in 2022. We'll continue the superfast growth of micro-mobility segment with comprehensive product portfolio building in 2022, and establish a sales channels both on and offline, with the retail partners like Best Buy and the Media Markt. With the comprehensive kick scooter product mix layout in 2022, we also plan to keep refreshing our product offerings in 2023 to enrich the product options for our users. Now besides the kick scooters, we also recently officially launched our first e-bike product, BQi C3 to the U.S. market in March 2023. The BQi C3 is a two-battery e-bike with two lightweight swappable batteries with maximum riding distance of over 90 miles. Now, with the established sales network we built up last year, the BQi C3 will be sold in 100-plus Best Buy stores along with the online channels in the United States and the plan to be [sold within] [ph] Canada in the near future. Now having invested in the micro-mobility market since 2020, we are confident that foundation will lay out in the last three years in both brand building, product portfolio and the channel building will drive the accelerated growth in 2023 and to make substantial contributions in both revenue and profit. Now in the electric two-wheeler categories, we had a setback, due to the shutdown of share operation market in 2022. We expect to be on the fast growth path again in 2023 through product expansion and geographic expansion. On the product side, we plan to do all the hyper performance new products such as quite electric motorcycle, RCi in order to compete in the electric two-wheeler product offerings, capturing the growth demand in Europe. On the geographic expansion in Southeast Asia, to build on the growth we have achieved in 2022, we plan to launch the batter swapping enabled products and solutions by partnering with several key operators in the countries like Indonesia, Thailand. Those trials are already underway, and we expect this will finally open up the Southeast Asian market for us, which hosted more than 20 million [petrol] [ph] motorcycle sales annually. Now, as we are implementing those growth strategies for both China and international market, we expect our total sales volume to grow to 1 million to 1.2 million units in 2023, representing a 20% to 45% growth, compared with 2022. Now, I will turn the call over to our CFO, Fion, to go through our financial results.

Thank you, Yan, and hello, everyone. Please note that our press release contains all the figures and the comparisons you need. And we have also uploaded Excel format figures to our IR website for your easy reference. As I review our financial performance, we are referring to the fourth quarter figures unless I say otherwise, and all the monetary figures are in RMB, if not specified. As Yan just mentioned, we have been facing multiple challenges in 2022. Our total sales volume for the fourth quarter was 138,000 units, decreased by 42%, compared to the same period of last year. Specifically speaking, China market sales volume was 118,000 units, and the overseas market was 20,000 units. In the overseas market, we managed to maintain a decent year-over-year volume growth for kick scooters, up 15% to 17,000 units. For the full-year 2022, the total sales volume was 832,000 units, including 711,000 units from China market and 121,000 units from overseas markets. Although sales volume from China market as a whole decreased by 28% year-over-year and Niu and Gova premium series, together, only dropped by 10%. The overseas market showed strong growth momentum due to the kick scooter sales increasing up to 102,000 units in aggregate and the e-moped sales volume decreased by around 45%, mainly due to the termination of [to be sharing] [ph] orders, as Yan just mentioned. The total revenue in the fourth quarter was RMB 612 million, decreased by 38% compared to the same period last year. To break down the scooter revenues by raging, the scooter revenues from China markets were RMB 447 million, down by 35% since we began to execute a strategy to refocus on the premium and mid-end segments. The Gova entry series only took 5% of the total domestic volume in the fourth quarter. As a result, ASP in China market reached [RMB 378,314] [ph] higher on a year-over-year basis. The overseas scooter revenues, including kick scooters, e-moped and e-motorcycles were RMB 87 million. Blended scooter ASP of the overseas market was RMB 4,300, decreased by one-fourth year-over-year due to a higher sales contribution of kick scooter with lower ASP. However, the kick scooter's ASP year-over-year increased more than 50%; quarter-over-quarter, 10% due to the higher proportion of high-end kick scooters like the K3 Series priced at US$800 to US$900. Accessories, spare parts and services revenue were RMB 79 million, decreased by 31%, due to the battery pack sales reduction from overseas shared mobility operators. For the full-year 2022, our total sales – total revenue decreased by 14.5% to RMB 3.2 billion. The China scooter revenue, as a whole, saw 19% year-over-year decline. However, the mid- to-high-end products only dropped by 6%. And the international scooter revenues increased by 15% to RMB 494 million. The total international revenue, including scooters, accessories, spare parts, and services contributed to 18.5% of the total revenue, due to the fast growth of kick scooters. Let's look at the ASP in 2022. The overall quarter ASP was 3,432 versus 3,134, a 9.5% increase. The domestic scooter ASP 3,322, a 12% increase, among which half is due to the better premium product mix and the rest is due to the price increase. International [branded] [ph] scooter ASP is 4,079 versus 6,597, a decrease compared to the last year since the proportion of kick scooters [went up] [ph] 10x. While both e-motorcycles and ASP and the kick scooter's ASP increased 17% and 13%, respectively. The gross margin for the fourth quarter was 22.5%, a [0.1 ppt] [ph] lower than the same period of last year and [0.4 ppt] [ph] higher than the previous quarter. For the year ended December 31, 2022, the gross margin was 21.1%, compared to 21.9% on an annual basis. The better product mix in the Chinese market brought up gross margin by 1.2 ppt, while the battery cost hikes and the higher sales contribution of kick scooters dragged down the gross margin by [2 ppt] [ph]. Specifically, the gross margin from China markets increased by [1.5 ppt] [ph]. Talking about operating expenses. The fourth quarter OpEx was RMB 196 million, RMB 7 million higher than the same period of last year, while the OpEx amount almost stay at the same level. The OpEx as a percentage of revenue rose from 19% to 32%, mainly due to a lower revenue base. And the selling and marketing expenses were RMB 107 million, RMB 8 million higher year-over-year. Out of that RMB 8 million increase, depreciation and amortization expenses of the new stores were 6 million. The overseas selling expenses increased by RMB 24.5 million as we continue to expand our footprint to fuel growth of kick scooter sales, while domestic promotion expense decreased by 20 million since we took a conservative position under the volatile retail environment. Research and development expenses were RMB 40 million, RMB 5 million lower than the fourth quarter of 2021, mainly due to the decrease in outsourcing professional fees. And G&A expenses were RMB 48 million, RMB 4 million higher year-over-year, mainly caused by an increase of RMB 12 million provision for credit loss, offset by a decrease in financial service fee of RMB 9 million. For the full-year 2022, the OpEx was RMB 775 million, RMB 166 million higher than 2021. And the increase was mainly due to the ongoing 2021 new store depreciation impact increased by RMB 42 million, and the increase in overseas business expansion, RMB 83 million, particularly selling expenses for kick scooters, like online trafficking, warehouse stocking, product insurance, et cetera, and RMB 24 million increased credit loss, RMB 41 million R&D expenses for new scooters and kick scooters rolling out in 2022, offsetting by 24 million decrease from domestic marketing and promotions. The non-GAAP operating expenses, excluding share-based compensation, were RMB 718 million, representing a 22.7% of revenue, compared to 15.2% in 2021. And this quarter, we had an income tax benefit from RMB 21.8 million, compared to RMB 47 million income tax expenses last year for the same period stated in our previous calls. And in the fourth quarter, we had a net loss of RMB 37 million with a net margin of negative 6.1% under the GAAP measure, compared to net income of RMB 47 million with the net margin of 4.8% for the same period of last year. On a full-year basis due to the factors, including lower-than-expected domestic sales, battery cost pressure and increasing overseas business expansion, as mentioned above, we had a net loss of RMB 49 million with the net margin of negative 1.6%, but excluding share-based compensation expenses, we still deliver a positive RMB 8.8 million net income in 2022. And turning to our balance sheet and cash flow. We ended the year with RMB 1.1 billion in cash, restricted cash, term deposits and short-term investments. Our net cash used in operating activities for Q4 was RMB 300 million, mainly due to the reduction in payable to suppliers as a result of seasonality. On full-year basis, the operating cash flow was RMB 126 million outflow, partially due to an increase in kick scooters inventory at international warehouses for quickly responding to incoming orders. Our Q4 CapEx was RMB 43 million. And on a full-year basis, the CapEx was RMB 135 million compared to RMB 286 million, continuing to slow down as our channel strategy in China market shifting from fast store expansion to performance improvements. And now let's turn to guidance. In-light of volatile domestic market and our strategy focused on premium and mid-end markets, we expected the first quarter revenue to be in the range of RMB 403 million to RMB 489 million, representing a decrease of 15% to 30% year-over-year. Please be aware that this outlook is based on information available as of the date and reflects the company's current and preliminary expectations, which is subject to change due to the uncertainties relating to various factors. With that, let's now open the call for any questions that you may have for us. Operator, please go ahead.

Thank you. [Operator Instructions] Our first question comes from the line of [YaTing Chen] [ph] from CICC. Please go ahead. Your line is open.

Hi. I'm [YaTing] [ph] from CICC and I have two questions. The first one is, could you please introduce your plan for channel expansion in 2023? And what is your expectations on selling and marketing ratio in 2023? And how do you feel about the impact of channel expansion on this expenses? This is my first question.

Okay. Maybe I'll address the channel expansion part and also mention the marketing expense. And then I think I'll ask Fion to add a bit more. I think 2023, we look at two parts. On the China market side, I think we take a more moderate approach where we still do expect to expand a little bit, but it's not significantly, like what we did in the last couple of years in 2020 or 2021. I think the focus for China is really to improve the same-store sales. I think that currently, what we have about 3,000 stores is sufficient in terms of absolute store counts, is sufficient to support the China sales growth. But having said that, I think there are optimizations where in the regions – there are regions that I think we still need more stores where we need to expand, and there are some regions that actually we feel like we actually had more stores than we needed, and there may be some optimization to that. Now, on the international part, I think that's where we're going to focus the most, both on the sort of the European market, the U.S. market and the Southeast Asia market. And with the European and U.S. market, those would be channel expansions are more about expand our footprint in the already entered offline channels for the kick scooters and for the e-bikes. For example, with the kick scooter, with Best Buy, we were in about 300 stores. And now we have a shelf display in both 650 stores. So – and in the Southeast Asia, it's actually talking with – working with traditional dealer network to get our scooters into the dealers. I think this is actually on the channel part. I think your question next is about the sales, marketing expense. I think if we look at the overall sales and marketing expense compared year-over-year, I think there's a plan to definitely – the percentage that we spend on sales and marketing [Technical Difficulty] [Multiple Speakers]

Yes, I think I'll take this question from my side. Yes. This is Fion. I'll take the selling and marketing expenses ratio from my side. Actually, in 2022, it's a special year. As a percentage of revenue, selling, and marketing expenses was high up to almost 14% as percentage of revenue, considering that we're shifting the domestic marketing strategy from – only from Q4 and late Q3. While in the meantime, we kept the continuing footstep for the expansion of the kick scooters in 2022. So that we got the results of around 14% selling and marketing expenses. If we look at the marketing and selling expenses as a percentage of revenue in 2021, we only – our ratio was only 9%. And in 2021, we're balancing the expansion in the domestic market retail and also the traditional [e-cycle] [ph] and e-moped business in the international market. So our target, we expect in 2023, the overall selling and marketing expenses ratio will stay at the same level at around 9% to 10% as at the same level in 2021, balancing the international kick scooters continuing expansion and also the domestic new products rolling out in 2023. And with that, I think it is the ideal selling and marketing expenses ratio we expected in this year.

Okay, is very clear. And my second question is, as you've mentioned, you are trying to improve store performance. And could you please share more with it? For example, how will we improve the store performance? And if we decide to decrease the China store, what is the benchmark of its profit? Yes, that's my question.

Can you repeat what is the benchmark of the – sorry, what?

What is the benchmark of your decision to opening one more channel or just [to close it] [ph]?

Right. I think – so let me answer the second one first. I think the second one is actually easy, whether the stores are self-profitable because all our stores are franchise stores. So, in reality, if the stores are profitable, the store owners tend to keep the store open. These stores are not profitable throughout the year, a monthly basis, they may not be profitable. But even for the entire year, it's not profitable, then it's actually difficult to keep the store open. I think that's – so it's – and this will be – we look at city by city, we look at regional basis. Now, in terms of the store sales improvement, I think there are really two things we're looking at. One is, how do we get more traffic to the stores. So this year, we started a little bit last year, but really, this year, is actually what we're planning is actually, as we mentioned, basically providing stores with sales leads generated from online JD and Tmall. So, our sales online, so what we call the O2O method. Basically, the users can make the purchase online and decide to pick-up the scooter at an offline store. Last year, it only represented roughly about less than 10% of our sales. And this year, we're looking to boost that to basically to 20% or 25% of our sales coming from online leads. So that will actually increase the traffic to the stores. I think second is actually a list of initiatives that we're implementing in the stores to help the conversion rate. So, once you increase the traffic, it's about how do you convert the traffic to purchase. Those will be things like optimize the store layout and the product portfolios in the stores because we also recognize different regions, different cities. We have extensive product portfolio, but some product actually sells better in some regions. So, we need to make sure the store optimizes the product portfolios that carries in their store. And there was a clear message and the clear trainings to the store staff, such that when users coming or potential customers come in there is easy to communicate to the customers what to buy. And lastly, I think it's – we also recognized actually accessory sales are a great percentage of the store sales and the store profit. I think with our product, like the UQi, which actually really call for customizations, there’s tons of accessories that can be developed for the particular product such that store can – besides selling the scooters, they can sell additional accessories to make profit. I think that's what are the three things – really the three things we're taking. But having said that, I think there is an underlying theme, which is the product itself has to be attractive and competitive. So, I think this is actually what we feel very confident this year is having the new product online, we have a bunch of new products ready to roll-out in the second quarter or starting our second quarter this year. And we have demonstrated really last quarter – well, fourth quarter, last year, is actually with all the positive news we received from the new product. Once we have the newly defined product out, it helps boost sales and also help improve the store performance. Hopefully that answers the question.

Okay. Thank you very much. That’s all my questions.

Thank you. We'll now move on to our next question. Please standby. Our next question comes from the line of [Xinchi Yin] [ph] from CITIC. Please go ahead. Your line is open.

Hi, Yan and Fion. I’m [indiscernible] from CITIC Securities. And here's – I have two questions. And the first, I wonder about product positioning because last year, you can see our sales growth indeed faced some pressure, but looking at the situation in the past two months, it seems that the resumption of commuting after the epidemic has stimulated the demand of the industry. I would like to know how we will position the focus of our product line in the near future? This is my first question. And second question, I wonder how do we evaluate the impact of upstream change such as lithium-ion battery price reductions, and we could also see some sodium batteries on our product, and also our financial performance, it could be better if you could show your insights, respectively?

Yes. I think – so let me try to address those. Those are great questions. First, on the product positioning. I think our product offerings has always been basically from the premium-end to the mid-end of the market. And I think that has always been the case. Now, it just happened that really, for our – in 2022, the issue with the lithium battery price increase that actually made our entry-level product, which is [indiscernible] series, which roughly priced at the market mid-end level or slightly below the mid-end level, that product and competitive and the gross margin point of view, impossible to make. So, that's actually created pressure on the sales volume on the revenue as well. So heading this into this year, I think, one, we're going to focus on bringing new product in the premium and mid-end market. Second, we really starting – second half of last year, we started to introduce a graphite led-acid battery solutions to offset the lithium battery price increase, but we don't have enough product on the acid – on the graphite led-acid scooter yet. So, we have more product coming out supporting the graphite acid product solutions that can offset the lithium-ion battery price hike that help us to regain the competitiveness in the mid-end market. So, I think that's on the product positioning. The second, we did observe that recently, basically the upstream material for the lithium batteries has – the price has come down. And then we also observed that price coming down has also triggered down to the lithium battery cell, there's a downward pressure on the price. I think having the lithium price coming down will be a significant positive or plus to our sales volume as well and the margin as well because we were – I think, really, we were in a position that majority of our sales were from lithium. So, when the lithium price increased significantly, we got impact the most. But when the lithium price coming down significantly, we will benefit the most. But having said that, I think, so far, our 2023, basically financial outlooks and both our company internal budget, we haven't really taken into consideration of the lithium price coming down yet. And if it did come down, that means we will actually improve our gross margin, as well as that will help us in terms of pricing our product to regain more sales. Hopefully, I've addressed the questions.

Yes. Well, noted and understood. Hopefully – rather looking forward to our back to game. Thank you.

Thank you.

Thank you. We'll now move on to our next question. Our next question comes from the line of Alice Ma from UBS. Please go ahead. Your line is open.

Thanks for taking our questions. I have two questions actually. One is regarding the domestic market and the other one is regarding the overseas market. For the first one, my question is, what is your view towards the growth of premium or mid to premium electric to – market domestically this year? I think that for most of the market consensus, they believe that the overall electric two-wheeler sector will grow by around 20% in terms of volume this year in China. But in terms of the mid to premium markets, do you expect that it will, like achieve a higher-than-average growth, which means that do you think that the consumption power of the consumers actually recovered after the reopening these days? And will the company benefit from this trend? And the other question is about the overseas market. I'm really curious about your specific plans into the expansion into the Indonesia or Thailand market, you mentioned just now. I'm wondering, like how do you view the market potential? And how do you view that your product competitiveness in this market? Thank you.

Yes. So, let me address the first one with the medium – mid-to-premium market one. So, in terms of – I think my view on this one is, kind of like a less optimistic in the sense that I think the medium to premium market, I would imagine it actually would grow slightly slower. I don't think it will grow faster than the market average. It will grow either slower or maybe just on par. The issue being that when you're looking at this entire market growth in China, a lot of consumer demand growth, and a lot are actually through basically industry players doing price competition, which we already observed in Q1 this year, basically major competitors slashing prices on most of our entry-level product around RMB 2,000 or less. So that actually – that price competition and really shooting for basically slashing price to drive the volume, that has always been sort of the case for this industry. So, I think that's actually, to some time, fuel the market growth. So from that point of view, I think the mid-to-premium market, I don't think it will grow faster than average market, but having said that, it's – we still – is still a lot of room for us to gain that market, right? Because if you look at last year, we only did about 700,000 units. And the year before, we actually did about 980,000 units all in the same segment. The drop of about [200-something-thousand] [ph] units because of the lithium price went up, we had to increase our – some of our entry product, and it was the pricing auto market, right? And – but that doesn't mean this mid-to-premium market doesn't exist. I think the market – this market – mid-to-premium market is still exist in terms of at least 8 million units plus. So, for us, basically the mid-end to the premium, premium part like at least like 2 million to 3 million, and mid and at least, I think, 5 million to 6 million units. So for us, only last year's 700,000 units were still small percentage. So, we're less concerned about how fast the overall market grows, but more focused on whether we can have a competitive product. But we know we can have like a great design product, but it has to be price competitive in that market as well. I think that addressed your first question. I think can you repeat on your second question on the Southeast Asia market, which I didn't recall down clearly.

Okay. Thank you. My second question about the entrance of the Indonesia or Thailand market. You mentioned that – I think you mentioned in your introduction that you will leverage the battery swap with the local partners into this market. And I'm wondering like how do you see the market potential in the Southeast Asia market? And how do you view your product advantage for competitiveness? Thank You.

Yes. Thanks. So, I think – so we've been talking about South Asian market for at least for a few years. The entire market was huge. It's about – they do about 20 million – or I think, 18 million to 20 million of petrol scooters or petrol motorcycles for the – on an annual basis, right? I think Indonesia was at least 6 million units and Thailand, Malaysia, everything. And I think in the past, what's happening is that market, there is basically electric moped or electric motorcycles from price point of view, it's too pricey for that consumer market. So, there is – it's difficult to find an entry point. We were able to gain about 60% growth last year. But still, we're talking about small numbers, less than 10,000 units. So, I think there are two – there are different solutions looking into it. One solution is sort of the battery swapping or battery rental solutions where people buying the scooters, but actually rental battery or lease the battery. So the battery cost actually, booking on a monthly fee as opposed to upfront cost. So, we're – so that will help to lower the upfront cost. There are also second speculation on potential government subsidies. I think just to give you an example here, where the Southeast Asian market, kind of like the India market. Indian markets, they're even bigger about 24 million units of petrol motorcycles. Their pricing is very similar in India market and the Southeastern market. But Indian market, with the government subsidies, they had a subsidy is about $250 or $300. The Indian market in the last 3 years was able to grow from, annually, about 100,000 units of electric two-wheelers to about 600,000 units last year, where Southeast Asia market right now, the electric two-wheelers is very minimal. It's less than 100,000, but electric motorcycles. So, we do think that the – if you compare those two markets, we do think the Southeast Asia market, at least have a potential in the next couple of years to grow to the size of India market. And we've been actually planning to see there for multiple years. So, this is actually – we do think in the next couple of years is the market that we're able to capture some of the potential high growth there.

Okay. Very clear. Thank you. And also wish that we have some [break-throughs] [ph] in the following years. Thank you.

Thank you.

Thank you. We'll now move on to our next question. Our next question comes from the line of [Scarlett Kannegieter] [ph] from Credit Suisse. Please go ahead. Your line is open.

Thank you taking my question. I have one question. So, how do you view the competition landscape with some new entrants or potential new entrants, for example, the brands who are trying to transfer from traditional ICE motorcycle makers to the electrified motorcycle field? For example, Hyundai and [indiscernible], they all have launched new products and the price range is from RMB 3,000 to RMB 7,000. I guess there are some price overlap between those products. So, how do you view the difference between new and those products in terms of – with those brands in terms of product or sales channels or some other aspects? Thank you.

Yes. So Scarlet, I think for us, it's – first, China market is still a big market. But I think may say, 40 million units a year, 45 million a year, some markets that's 50 million units a year. It's a huge market, such that I think it's – with more brands are coming in, is still able to account more brands. So, from that perspective, it's actually – it's less a worry from our perspective because even we do about 1 million units in China, it's only like, what, 2% of the market. So it's – we have less concern when more brands come in. I think, it's – but I think the right one would be – or the more related one will be actually either brands actually position their products similar to our product, like a premium brand or those ones, which I think they are buzz last year about Honda coming with leveraging their, like really the not – like, I think, the three models like a Zoomer, I forgot what's the other two models, like well-known petrol models that made it electric. And actually, it did raise actually quite a buzz in the industry. So, we don't take those competition lightly. We think with the Honda's brand, as well as the recognition in this market and especially with sort of the legacy models that people recognize, it will create more competition in the premium market. And in reality, I think, for us will be that just more really a pressure and push us push you to come as with competitive product or with better product. I think – I assume your question is on the China market per se.

Yes. Thank you very much.

Thank you. There are no further questions at this time. So, I'll hand the conference back to you.

All right. So, if there's no questions, thank you, operator, and thank you all for participating on today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Operator?

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.