Prepared remarks
Good day, ladies and gentlemen. Thank you for standing by and welcome to EHang's Fourth Quarter and Fiscal Year of 2024 Earnings Conference Call. Please note that the management’s prepared remarks and the subsequent Q&A session will be primarily conducted in Chinese. The corresponding simultaneous or consecutive interpretation can be accessed on the English line. As a reminder, all translations are for convenient purposes only. In any case of any discrepancy, the management statement in the original language will prevail. To listen to the original remarks by the management, please join the Chinese line. Additionally, both the Chinese and English lines are open for questions, and today's call is being recorded. Now I will turn the call over to Anne Ji, EHang's Senior Director of Investor Relations. Ms. Anne, please proceed.
Hello everyone. Thank you all for joining us on today's conference call to discuss the company's financial results for the fourth quarter and fiscal year of 2024. The earnings release is available on the company's IR website. Please note the conference call is being recorded and the audio replay will be posted on the company's IR website. On the call today, we have Mr. Huazhi Hu, our Founder, Chairman and Chief Executive Officer; Mr. Zhao Wang, Chief Operating Officer; and Mr. Conor Yang, Chief Financial Officer. Before we continue, please note that today's discussion will contain forward-looking statements may pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding this and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Also, please note that all numbers presented are in RMB and are for the fourth quarter of 2024 unless stated otherwise. With that, let me now turn the call over to our CEO Mr. Huazhi Hu. Please go ahead Mr. Hu.
Hello everyone, and thank you for joining our earnings call. Q4 and full-year 2024 marked another record-breaking period for EHang. We continue to grow significantly, beating our guidance and setting new record high quarterly and annual deliveries and revenues. In Q4, we delivered 78 units of the EH216 series product, generating revenues of RMB164 million, representing an increase of 239.1% year-over-year. For the full-year, we delivered 216 units with a total revenue reaching RMB456 million, marking a 288.5% year-over-year increase. More importantly, 2024 was a breakthrough year as we achieved positive adjusted net income and positive operating cash flow for the first year, a significant milestone in EHang’s decade-long journey. With this, EHang also became the first eVTOL company in the global urban air mobility industry to achieve non-GAAP profitability, further solidifying our leadership.
At China's 2025 two sessions, the low-altitude economy took center stage as a strategic emerging industry and a key driver of new quality productivity. For the second consecutive year, it was included in the Government Work Report, which explicitly calls for large-scale demonstration projects to advance new technologies, new products, and new applications to promote the sector's safe and healthy development. Additionally, China's NDRC, National Development and Reform Commission, established a dedicated low-altitude economy development department in December 2024. Meanwhile, the local governments in over 50 cities across China have introduced their localized development plans for the sector. These government initiatives further highlight China's long-term national strategy and strong commitment to developing the low-altitude economy. If 2024 was the year of planning for low-altitude development, 2025 will be the year of its implementation.
Since obtaining the three airworthiness certificates, we have been accelerating the commercial deliveries and operational deployment of the EH216-S. Our customers have already established over 20 eVTOL operational demonstration sites and e-ports across 16 cities in China, including Hefei, Guangzhou, Shenzhen, Shanghai, Wuxi, Taiyuan and Wenzhou. This year our top priority is to launch operational demonstration projects in key cities to enable the public to experience the eVTOL flights firsthand. To this end, we have been actively driving the operator certification process for a pilot-less passenger carrying eVTOL aircraft. Currently, the Civil Aviation Administration of China has completed document and on-site inspections for the first two applicants accepted. They are EHang General Aviation, our wholly-owned subsidiary, specializing in UAM operation services, and Heyi Aviation, our joint venture in Hefei.
Both are now awaiting the final approval. We look forward to the early issuance of the two operator certificates, marking the beginning of the commercial eVTOL operation era. Looking ahead, we expect more operators to apply for the operator certificates, paving the way for broader commercial flight service of the EH216-S in the future. 2025 marks a pivotal year for AI technology innovation in China globally. This year's government work report reaffirms the nation's commitment to the AI Plus initiative, emphasizing the exploration of AI applications across various industries, including the low altitude economy. As a pioneer in pilotless, eVTOL, EHang continues deepening our AI Plus strategy. Leveraging our core technologies, including safety redundancy, autonomous flight, and fleet management, along with an intelligent system platform that integrates AI across the whole eVTOL lifecycle to drive intelligent upgrades and innovative practices in commercial operations.
This includes further optimizing our key technologies and capabilities such as intelligent flight control algorithms, autonomic detection, flight road planning, command and control, human-machine interaction, scenario simulation, and the UAV cloud system. Beyond enhancing our aircraft, AI is set to expedite the construction and enhancement of the digital infrastructure for air mobility. EHang will collaborate with multiple Chinese universities, colleges, and relevant government departments and commercial conglomerates to advance the integration and innovative integration of digital technologies such as 5G, 6G satellite communication sensor technologies, and high-precision navigation with the low-altitude aviation industry. Together, we aim to build a smart, low-altitude ecosystem interconnecting air traffic infrastructure, flight corridors, communication and navigation systems, airspace management, and operational services.
This will establish a secure, efficient, and intelligent digital foundation to support commercial operations for EHang and our customers. On the product front, we continue to advance our multi-rotor eVTOL series through strategic collaborations with leading upstream companies, including INX, Greater Bay Technology, and Empower. Together, we are developing and customizing the next-generation high-energy solid-state lithium batteries, fast-charging batteries, and electric motors. We have achieved great progress in simple design, prototyping, and testing. We conducted the industry's first eVTOL test of light powered by solid-state lithium batteries, delivering an impressive endurance of over 48 minutes. We are thrilled about this major technological breakthrough, which reinforces our confidence in the next phase of overall performance enhancements. For our upgraded lift and cruise model VT-35, its prototype is in its final assembly and testing.
We plan to complete the full functionality test flights as soon as possible and initiate the airworthiness certification process. It will be unveiled soon. For the flying car that targets the mass consumer market, we formed a cross-industry strategic partnership with China Automobile to actively design and discuss new product solutions to explore innovative approaches to future personal transportation. Over the past decade, EHang has pioneered numerous industry firsts, and we firmly believe the next 10 years will witness the rise of the low altitude economy, disruptive development of AI technologies, and transformative development in unmanned aviation. As the saying goes, a journey of a thousand miles begins with the first step. As EHang enters its next decade in 2025, we remain steadfast in our commitment to advancing technological innovation, industry standards, operational demonstration, and ecosystem development of pilotless eVTOLs. We aim to lead the transformation of urban air mobility while promoting the safe, healthy, and sustainable development of the industry. Next, I'll turn the call over to our COO, Mr. Wang. Thank you.
Hello, everyone. This is Wang Zhao. We closed 2024 with record high deliveries and revenues, exceeding our performance guidance. This success is driven by strong market demand and growing customer orders. In particular, our EH216-S autonomous messenger, eVTOL, has received a 30-unit order from Shandong province, a 30-unit order from Zhejiang province, along with an initial five-unit order and an indicative order of another 45 units from Sunriver, with the result of 78 units delivered in Q4 and RMB164 million revenues. The total annual deliveries reached 216 units, with total revenues of RMB456 million. To meet the continuously growing order demands, we are focusing on enhancing production efficiency, scaling production capability, and planning capacity expansion. Guided by our manufacture-to-order principle, we are establishing our regional and networked production-based layout in South China, East China, and North China.
In South China, our Phase 1 Yunfu production base currently has an annual capacity of 300 units. This year, we plan to expand Phase 2 with 24,000 square meters of new production lines, while upgrading automation and efficiency. By 2025, the Yunfu production base is expected to reach double size and a total annual capacity of 1,000 units. It will also produce a large number of aviation materials and components for our customers. In East China, with Hefei as our regional headquarters, we are further deepening strategic cooperation with Hefei government, partnering with the advanced and new energy vehicle manufacturers JAC Group and Hefei Guoxian Holdings to build an advanced, generalized, and automated eVTOL manufacturing base. Additionally, we are collaborating with the Weihai High-Tech Zone in Shandong province to establish a pilotless passenger eVTOL R&D and manufacturing base there, creating an all-around collaboration system, integrated production, sales, and operations.
In North China, we have entered a partnership with the Beijing Fangshan district government to establish a national headquarters for low-altitude emergency rescue equipment. The headquarters features a 72,000 square meter factory, a training center of over 100,000 square meters, and a training and exercise base of hundreds of acres. Leveraging EHang’s current flight platform and autonomous flying technologies, we plan to vigorously develop R&D production and operations in the fire emergency rescue sector, providing support for life safety with autonomous flying vehicles. This year's two sessions promoted large-scale application demonstration actions and the safe and healthy development of the low-altitude economy, which are deeply in line with EHang’s development strategy. We fully endorse this principle. Safety is the top priority of the sector. From the eVTOL design to the flight and operational system, EHang has implemented comprehensive safeguards for commercial operations.
EHang has integrated the full redundancy philosophy from the IT sector into the design of our pilotless passenger eVTOLs and has passed rigorous airworthiness testing and certification. The three major electrical systems within the aircraft all have sufficient redundancy with backups, eliminating single-point failures. As the low-altitude economy approaches a critical phase of mass adoption, the industry requires a suite of scientific comprehensive, rigorous, and safety-oriented operational framework for eVTOLs. During the operator certification review process, EHang worked closely with government agencies, regulators, academic institutions, and industry associations to advance the establishment and improvement of relevant standards and regulations. To strengthen safety operations, we have internally optimized our organizational structure to establish a comprehensive safety operational system and team.
From product sales, customer service, personnel training, aviation material sales, maintenance and repair, and software systems, to landing path design, route planning, and integrated operational services, we are building a full cycle value chain encompassing hardware services and operations to provide customers with one-stop solutions. Looking ahead, our revenue streams will become more diversified. This year, EHang remains committed to the safety-first principle while focusing on low-altitude tourism as the key entry point in urban air mobility, with a large-scale goal to expand our UAM operational network in pioneer cities to demonstrate the low-altitude economy and then systematically scale operations from point-to-point connections to a fully integrated network. For example, our second UAM hub at Luogang Park in Hefei, the eVTOL operations center at Longhua Airport in Shanghai’s Xuhui Riverside, and the first automated vertiport at the UAM center in Luohu, Shenzhen.
These flagship projects serve as typical models. Over the next three years, we will work with partners such as China Construction Group, China Communications Construction Company, and other infrastructure construction units, local governments, and major commercial partners to jointly develop more than 100 urban air mobility terminals and more than 100 low-altitude cultural tourism terminals in national 5A-level scenic areas across China. We aim to build a city-level low-altitude economy flight service system and carry out integrated business cooperation that combines culture and tourism, transportation, emergency response, and logistics. In 2025, based on EHang’s current mature flight platform and autonomous flying technologies, we will not only vigorously develop passenger business but also develop non-passenger business. The fire emergency rescue sector has already been established in the capital Beijing.
Besides, EHang is committed to developing low-energy, long-endurance logistics UAV products, which will greatly promote the development of low-cost, high-efficiency aerial logistics transportation. We aim to realize applications in inter-provincial, inter-city, and cross-border logistics scenarios. Currently, we have started exploration and layout in Beijing, Guangdong, Guangxi, and Hainan. Overseas, we are expanding our presence in Asia, Europe, and South America to continuously advance our market development, flight scenarios, and regulatory approvals. In Q4 last year, we conducted three consecutive days of EH216-S passenger-carrying flights in central Bangkok, Thailand, and planned to launch commercial trial operations this year within the sandbox areas designated by the Thai Civil Aviation Authority. In Japan, we completed a new four-city flight tour, expanding our flight footprint across 16 cities and showcasing multiple use cases, including aerial sightseeing, inter-island transportation, aerial logistics, and emergency services.
In February this year, EH216-S completed Europe's first autonomous eVTOL flight in an urban environment in Benidorm, Spain, setting a precedent for future urban air mobility deployment in Europe. Most recently, we conducted our first flight in Mexico, further expanding our global footprint to the 19th country. To date, our cumulative flight record has surpassed 64,000 flights. As we move into 2025, we will continue to execute our global market strategy of deepening domestic business while expanding globally. We'll remain focused on both sales and operations, further diversifying our revenue streams. Amidst China's trillion-level low-altitude economy and the huge market potential for aerial sightseeing across nearly 15,000 Class A and above tourist attractions and nearly 700 cities for urban air mobility, we remain optimistic about the strong demand for our eVTOL product and operational services.
Confident in our long-term growth prospects, we expect total revenue for 2025 to reach RMB900 million, representing an approximately 97% increase year-over-year. Now, I'll turn the call over to our CFO, Conor, for the financial performance. Thank you.
Hello, everyone. This is Conor. Before I go into details, please note that all numbers presented are in RMB, unless otherwise stated. Detailed analysis is contained in our earnings press release, which is available on our IR site. I will now highlight some of the key points here. I am pleased to report that we closed 2024 on a strong note, surpassing expectations for both Q4 and the full year. In Q4, we achieved record revenues of RMB164.3 million, representing an impressive 190% year-over-year growth. For 2024, our total revenues reached an all-time high of RMB456.2 million, up a substantial 289% year-over-year. This outstanding performance was primarily driven by strong eVTOL market demand, along with our well-coordinated and impactful strategic initiatives in key areas including OC certification, production scaling, and commercial readiness. On deliveries, we set a new quarterly record with 78 units of the EH216 delivered in Q4, marking a 239% year-over-year increase and a 24% sequential growth.
For 2024, total deliveries of the EH216 series reached 216 units, up 315% from 52 units in 2023. Our gross margin for Q4 was 60.7%, slightly down from 64.7% in the same period of 2023 and on par with Q3. For full-year 2024, the annual gross margin was 61.4%, a slight decrease from 64.1% in 2023. The decreases in gross margin were primarily due to changes in the revenue mix and higher unit costs for the EH216-S. Despite these modest declines, our gross margin remained high at 60%, highlighting our competitive edge and pricing power in the eVTOL sector. Turning to the operating expenses, in Q4 adjusted operating expenses, which is defined as operating expenses excluding share-based compensation, were RMB78.2 million, up 22% year-over-year from RMB64.2 million, but down 10% from Q3. The sequential decline reflects cost control and efficiency optimization, while the year-over-year increase was mainly due to the expansion of sales channels, higher employee compensation, and investments in new eVTOL models.
In addition, we continue to actively invest in the development and iteration of new eVTOL models and technologies since we obtained the three airworthiness certificates. For 2024, adjusted operating expenses were RMB290.1 million, up 28.2% from RMB226.3 million in 2023. Strong top-line growth and cost efficiency contributed to a solid improvement in non-GAAP profitability. Adjusted operating income for Q4 was RMB27.9 million, a significant improvement from the adjusted operating loss of RMB24.9 million in Q4 2023 and up 208.2% from Q3. In Q4, we realized the third consecutive quarter of adjusted net income for RMB36.4 million, a sharp improvement from the adjusted net loss of RMB22.1 million in Q4 2023 and up 132.3% from Q3. For 2024, we achieved the first-ever annual adjusted net income of RMB43.1 million, a significant improvement from the adjusted net loss of RMB139 million in 2023, marking our entry into a new phase of sustainable and accelerating profitability.
Alongside strong revenue growth and improving profitability, we also maintain a solid liquidity position. As of the end of Q4, our total cash and cash equivalents, restricted short-term deposits, and short-term investments, was RMB1,155 million. This strong cash balance provides us with strategic flexibility to support growth initiatives, invest in innovation, and enhance market competitiveness. Notably, we recorded our fifth consecutive quarter of positive operating cash flow and the first-ever annual positive operating cash flow, amounting to approximately RMB160 million in 2024, demonstrating our ability to generate a sustainable cash flow while scaling operations. Looking ahead to 2025, we are in the final stretch of obtaining operator certificates. We believe that the achievement of this key milestone along with our active progress in eVTOL commercialization readiness, operational deployments, production scaling, technological innovation, and global market expansion will further solidify our industry leadership, creating a strong foundation for accelerated growth and driving us into a new growth cycle. Based on our current progress and market demand, we're expecting total revenue in 2025 of approximately RMB900 million, representing a year-over-year increase of 97%. Thank you.
Questions and answers
Thank you. Now let's open the call for questions. Your first question comes from Ting Song from Goldman Sachs. Please go ahead.
Hi, thank you for taking my question. I have a question regarding production capacity. I know we are expanding our production capacity for Yunfu Phase 2. I’m curious about the additional production capacity we anticipate for the Hefei production facility by the end of 2025 and 2026. If we're aiming for a total production capacity of 1,000 units, what volume are we projecting, and what will the utilization rate look like between 2025 and 2026? Thank you.
I will take this question. For Yunfu Phase 2, the capacity expansion will be completed this year, reaching a total annual capacity of 1,000 units. The production lines for Yunfu Phase 1 and Phase 2 will have specific areas of focus, concentrating on aviation materials, flash components, manufacturing, and aircraft assembly respectively. Additionally, our joint venture with Empower is focused on upgrading the production lines to enhance automation and efficiency in both manufacturing and supply chain management. Regarding Hefei, we plan to establish a joint venture with JAC Motors and Hefei Guoxian Holdings to create a modern low-altitude aircraft manufacturing facility. The local government expects the construction expansion to be completed in 1.5 to 2 years. Furthermore, we have plans for production in Weihai, Shandong province and Fangshan district of Beijing, as previously mentioned. Our capacity expansion adheres to a manufacturing-to-order principle, and we will implement a systematic growth strategy across different regions in China, including South, East, and North China. Different product lines, such as passenger transport, logistics, and emergency response and firefighting, will have specialized management. Thank you.
Thank you. Your next question comes from Cindy Wang from Morgan Stanley. Please go ahead.
Thank you for answering my question. First, congratulations on the strong Q4 results. Could management provide more details on the executive timeline for our OC application? What milestones should we expect regarding the application? My second question is about when we will achieve GAAP profitability with our collaboration initiatives and the construction of various infrastructure and facilities. Can you also provide a rough estimate of CapEx and OpEx for the upcoming quarters this year? Thank you.
Let me address your first question. We are pleased to share that we have completed the acceptance and on-site inspection of these two AC applicants for our Heyi subsidiary. We are now awaiting the final regulatory approval, and we anticipate receiving these OC soon. The inspection itself marks a significant milestone and lays the groundwork for us to transition into commercial operations quickly. I want to highlight that these will be the first unmanned eVTOL OC granted under the new interim regulations for UAV flight management. The certification process is not only establishing but also refining the standards, representing a significant responsibility that will set important precedents for the safe commercial operation of EH216-S and all unmanned passenger-carrying aircraft in China. Thank you.
Okay. This is Conor. I will address your second question. As we have indicated, we have reached non-GAAP profitability in 2024. Regarding our timeline for achieving full-year GAAP profitability, based on our plans and an estimated revenue growth of 97%, equating to RMB900 million in revenue for 2025, we anticipate hitting GAAP profitability quarterly in the second half of 2024. However, full-year GAAP profitability is expected sometime in 2026. As for capital expenditures, our guidance for 2025 is approximately $14 million. This expenditure will support the expansion of our production capacity in Yunfu Phase 2, Weihai, and Heyi, in addition to our planned production site in the Fangshan district of Beijing. We will also allocate some funds for developing models intended for emergency response and logistics. Additionally, there will be investments in the construction of our new headquarters in Guangzhou. We project that operating expenses will increase by 40% year-over-year in 2025. Thank you.
Thank you. Your next question comes from Wei Shen from UBS. Please go ahead.
Good evening, management. I have two questions: one regarding the gross margin outlook and the other about financing plans for 2025.
Our targeted gross margin is around 60%. To achieve this, we will implement two initiatives. First, we plan to invest more resources and introduce additional product lines to diversify our offerings, which will help increase the gross margin. The second initiative will also contribute to this goal, although it may involve a distribution model that could slightly reduce the gross margin. Overall, our aim remains a gross margin of 60%. Last year, we approached $100 million in revenue, and our current cash reserves are over RMB1.1 billion. We anticipate a positive cash flow of about RMB160 million for 2024. This demonstrates our business's sustainability and healthy growth. For this year, we intend to accelerate our market and business expansion, seeking further financing to bolster our capital position. This funding will support the development of new eVTOL technology and products, market expansion, the construction of a new headquarters, the development of production facilities, and team growth, ensuring we have enough resources for our next phase of growth. Thank you.
Thank you. Your next question comes from Laura Lee from Deutsche Bank. Please go ahead.
Hey, thank you for taking that question and congrats on a strong year. My first question is about the air taxi part. We've noticed there are increasing announcements of UAM, either you're building an experience center or development of digital infrastructures. So I'm wondering, is there any rough timeline for the air taxi operation and any notable milestones in between?
Thank you. This is Wang Zhao, and I will address this question. Although air taxi services are our long-term vision and mission, safety is our top priority, which requires a careful and gradual approach. In the coming couple of years, we will initially focus on establishing operations in domestic tourism areas to gather sufficient data before proceeding with air taxi services. The implementation of air taxis is contingent on the necessary ground infrastructure, especially vertiports, as well as various low-altitude digital infrastructures like communication, navigation, surveillance, and air traffic management. Currently, cities throughout China have presented clear and specific plans along with timelines for infrastructure development, anticipating the construction of hundreds of thousands of vertiports and routes over the next three years. As a leader in the industry, EHang is actively engaged in shaping policy and planning infrastructure. Our collaborations with the CCCC and CSCEC, along with various local governments, are helping to create the ecosystem and framework necessary for air taxi operations.
Thank you. Your next question comes from Rongyuan Zhu from Citix. Please go ahead.
Thank you for the presentation and for addressing my question. I have a couple of inquiries regarding your international market. Firstly, what is the current status of our OC certification and the associated orders? Secondly, could you elaborate on our plans for diversifying our revenue streams? Specifically, what kind of revenue growth or mix are we anticipating beyond the manufacturing of these flying vehicles? Any insights or plans regarding this would be appreciated.
I'll take the question. Since the fourth quarter, we have completed flight demonstrations in Japan, Thailand, Spain, Mexico, and several other countries, expanding our flight footprint to 19 countries. Last year, we delivered orders to international markets, including the UAE, Japan, and Dominica. As leaders in pilotless passenger-carrying aircraft, we are actively collaborating with civil aviation authorities around the world through local flight demonstrations and discussions to promote the airworthiness certification for this new aircraft. The CAAC is very supportive of our efforts to apply for international certification, and we are working together to advance the certification of unmanned passenger-carrying aircraft internationally. We are also exploring innovative pilot-first approaches to expedite the global operations of our eVTOLs. Thank you. Regarding your second question about diversifying our revenue streams, EHang employs a dual strategy of operations and sales.
We aim to position ourselves as more than just an eVTOL manufacturer. We are building a comprehensive lifecycle value system for our customers, which includes hardware, service, and operations such as product sales, customer service, personnel training, aviation materials, maintenance, software systems, and route planning and operations. As the commercial operations of eVTOLs grow, EHang will pursue more diverse revenue streams, and this year we are intensifying our focus on logistics and firefighting to broaden our revenue sources. Thank you.
Thank you. Your next question comes from Yiming Wang from China Renaissance. Please go ahead.
Thank you for taking my question. I have two questions. First, I'd like an update on new orders. Second, could you elaborate on the collaboration with the JAC production base? What roles will JAC and EHang have in this joint venture? Additionally, what can we expect regarding profit and cost sharing between the two companies? Thank you.
Our domestic demand is very strong, with current intention orders exceeding 1,000 units, along with many more orders being negotiated. We have numerous clients who place orders for multiple units at a time. Furthermore, China has nearly 15,000 top-tier tourism attractions for aerial sightseeing and almost 700 cities that either currently offer or are planning air mobility services. We remain optimistic about the strong demand for our eVTOL products and operational services. Thank you. Regarding your second question, our joint venture with JAC is supported by the Hefei municipal government. We are collaborating with JAC and Hefei-Guoxian Holdings Corporation to establish the eVTOL production base. JAC possesses significant expertise in manufacturing and supply chain management in the automotive sector, while we lead in the development, production, and operations in the eVTOL industry. This partnership will combine our strengths and utilize the advantages of both parties. The specific details of this joint venture are still being discussed, and I apologize for not being able to provide more information at this time. Thank you.
Thank you. Your next question comes from Yu Chen from Guangfu Securities. Please go ahead.
First of all, thank you for taking my question and congratulations on the breakthroughs and strong results achieved in 2024. I have a question on the financials that I would like to double-check with the management. In Q4, we observed a significant quarter-over-quarter increase in management and R&D related expenses. How does management view the trends for these expenses for 2025?
This is Conor. I'll take your question. The company is still expanding, and that's why we're seeing substantial revenue and delivery growth over the past year. We're also expanding our team, which has led to increased expenses. However, expenses as a percentage of revenue have decreased significantly. Looking into this year, we expect sales and R&D expenses to grow, with moderate growth in management expenses. As revenue growth will outpace expense growth, we expect the ratio of SG&A to revenue to continue declining. We are projecting a 97% growth in our revenues, while our operation growth related costs will grow at 40% year-over-year. Thank you.
Thank you. Your next question comes from Ling Liu from Gocheng Securities. Please go ahead.
Thank you, I have two questions. First, regarding the EH216 battery, what type of battery is it and what is the progress on it? Also, what updates do we have on the next generation lithium batteries, including the timeline for anticipated upgrades and improvements in flight endurance? My second question is about the VT-35 product; what is the latest update on that and when do we plan to submit the TCE application? Thank you.
Regarding the battery, we are currently focusing on two areas for development. First, we are collaborating with Greater Bay Technology on fast-charging batteries and are testing samples that could greatly decrease charging time. Additionally, our investment in INX Energy for solid-state batteries is advancing well with strong cooperation and research breakthroughs. We have improved the endurance of the EH216-S flat design and will keep refining its performance while conducting further validations. Our goal is to start mass production and installation by the end of this year. Thank you. Concerning the long haul model VT-35, we are in the final assembly and debugging phase of the prototype. We plan to complete full-function flight testing soon and begin the airworthiness certification process, with a public unveiling coming shortly.
Thank you. Seeing there are no more questions in the queue, let me turn the call back to Ms. Anne for closing remarks.
Thank you operator and thank you all for participating in today's call. If you have further questions, please contact our IR team by email or participate in the following investor events through the calendar information provided on our IR website. We appreciate your interest and look forward to our next earnings call. Thank you.