管理層發言
Good day, ladies and gentlemen. Thank you for standing by and welcome to EHang's Third Quarter 2024 Earnings Conference Call. Please note that the management’s prepared remarks and the subsequent Q&A session will be primarily conducted in Chinese. 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. I will now 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 third quarter 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 and the Director of the Board. Before we continue, please note that today's discussion will contain forward-looking statements, which may be 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 third 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.
Okay, hello everyone. Thank you very much for joining EHang’s earnings call. Since the third quarter of this year, our order deliveries and financial performance have hit a record high again. We have also made exciting progress in multiple aspects such as the Air Operator Certificate Application and Certification Review, the development of low-altitude ecosystems, R&D of next-generation technology and products, as well as the expansion of overseas markets. All of these achievements underscore EHang’s commitment and capabilities in accelerating our pace towards commercial urban air mobility operations. We have become the world's first eVTOL company to obtain the three airworthiness certificates for pilotless aircraft, demonstrating we have the capabilities for mass production and deliveries. In July, the Civil Aviation Administration of China officially accepted the OC application submitted by Guangdong EHang General Aviation and Hefei Heyi Aviation.
This is the world's first OC project for pilotless passenger carrying aircraft, signifying that the first operational standards are about to be established, which will provide safety assurance for the commercial operations of EH216-S in China. Currently, the OC review is progressing well, and the first OC is expected to be issued by the end of this year. Simultaneously, we are actively assisting our customers and partners in Shenzhen, Guangzhou, Wuxi, Zhuhai, and Wencheng, Wenzhou in preparing their OC applications as well, with the aim to speed up the commercial operations of EH216-S nationwide and promote the development of low-altitude economy demonstration zones across more cities. Since Q3, China's central and local governments have enhanced their support for the low-altitude economy industry, further highlighting its strategic role as an emerging economic growth engine. China's National Development and Reform Commission plans to establish a dedicated bureau for low-altitude economy, which will better coordinate resources across different segments for fostering industry development.
In November, the Ministry of Industry and Information Technology convened another plenary meeting of the leadership group for low-altitude industry development, emphasizing the strategic importance of the industry's high-quality development and outlining key tasks for advancing pilotless, electric, and intelligent low-altitude equipment. As a global leading UAM technology company, EHang actively aligns with national policies. Our product and development philosophy resonate closely with the government's advocacy for innovation in low-altitude equipment. Under broad and in-depth policy support, the domestic demand for pilotless aerial vehicles in China continues to grow. In Q3, our deliveries and revenues reached a record high again. We delivered 63 units of EH216-S and our quarterly revenues reached RMB128 million. This demonstrates the robust market demand and strong customer recognition of EH216-S. Of course, our focus extends beyond aircraft deliveries.
Our top priority is to ensure operational safety as we are accelerating the establishment of a comprehensive operational support system focusing on both sales and operations, as well as enhancing the low-altitude ecosystem. We have achieved significant operational progress in the following three aspects. Firstly, on infrastructure. With strong support from the Hefei municipal government, the second UAM hub, ASCEND, was officially established in Luogang Park in Hefei. This hub is tailor-made for the EH216 pilotless passenger aircraft, and it also serves as a UAM hub model for pilotless passenger aircraft operations. Secondly, on talent training. We have formed a strategic partnership with the Civil Aviation Flight University of China to jointly carry out the training of talents related to operations, maintenance, and management of EHang’s pilotless aircraft and to establish a standardized system.
Thirdly, we are building an after-sales maintenance and repair system to support the upcoming extensive operational work. We believe that in a future of a flourishing low-altitude economy, only truly competitive products can attract a sustained market interest. EHang will continue to increase our R&D investment to maintain our leadership. We will focus on the enhancement of EH216-S performance and the commercialization of a long-range product on the following aspects. Regarding EH216-S performance enhancements, we have entered into a strategic partnership with Enpower, a pioneer in new energy vehicle power systems to co-develop electric motors and motor controllers tailored for EHang’s eVTOL. This new solution features an integration of lighter weight and higher power density. Meanwhile, we have strategically invested in Inx and achieved a significant breakthrough in the joint development of a high-energy solid-state battery technology.
With this solid-state battery, our EH216-S completed a continuous flight test exceeding 48 minutes, significantly improving the flight endurance by 90%. Next year, we aim to improve the flight endurance even further to 60 minutes. This milestone achievement is critical in broadening the application and operational scope for our eVTOL products. Moving on to the development of our long-range product. Building on the VT-30 prototype, we have conducted commercial design and upgrades for our lift and cruise eVTOL model to VT-35. This long-range product complements our existing product portfolio by targeting application scenarios like inner city, cross-bay, and mountainous routes, extending beyond the EH216-S intercity UAM coverage. With the two categories of EH216 series and VT-35, we will achieve broader coverage for low-altitude flights. In the overseas markets, in Q3 we have conducted demo flights in Brazil, Japan, and Thailand, extending our footprint to 18 countries across the globe.
We are also making strides in overseas airworthiness certification for the EH216-S. In September, EH216-S was granted an experimental flight authorization certificate from Brazil's National Civil Aviation Agency, and we plan to conduct more in-depth test flights in Brazil to facilitate local airworthiness certification. The Civil Aviation Authority of Thailand also plans to open flight tests for certified e-VTOLs in multiple areas of Thailand. We're planning to expand our flight range in Thailand with the aim to launch commercial flight operations in some regions of Phuket and Samui by 2025. Reflecting on our progress over the past decade, EHang has launched the world's first pilotless passenger aircraft EH-1A4 in the United States, becoming a pioneer of the global urban air mobility industry. We have driven and pioneered breakthroughs in pilotless aerial vehicle technology and airworthiness certification.
With the launch of operational hubs such as the Hefei UAM hub and others, EHang’s long-held dream of urban air mobility will truly come to fruition. Moving forward, we will steadily advance ensuring safety as our top priority to achieve sustainable industry development. We also strive to create greater value for our shareholders, partners, and society. Next, I'll turn the call over to our COO, Mr. Wang, to elaborate more on our Q3 operational performance. Thank you.
Thank you, Mr. Hu, and hello, everyone. Let me first provide an overview of our product delivery status for the third quarter. In Q3, we received repeat orders from existing customers as well as new customers. Specifically, we completed the deliveries of 40 units to the Shanxi client in the third quarter, reaching a total of 50 unit deliveries to this client. We also delivered 3 units to our Wencheng client in Wenzhou, Zhejiang province in the third quarter, reaching a total of 30 units delivered. Additionally, we delivered 5 units to each of Shenzhen Boling and Hefei Heyi customers for their repeat orders in the third quarter to be deployed in their expanded sites at the UAM operation Center in Luohu District, Shenzhen, and the newly established UAM hub at Luogang Park in Hefei. Furthermore, we also secured new orders and completed deliveries for clients in Fujian, Chongqing, Tianjin, Guizhou, Shaanxi and Shandong this quarter.
In summary, we delivered a total of 63 units of the EH216-S series in the third quarter. Currently, our domestic order book is more than 1,000 units. As an aircraft manufacturer, EHang is not only responsible for the production and sales of the aircraft, we are also providing customers with maintenance, repair, and related consulting services. Due to the special nature of the aircraft, we are also assisting our customers from various regions in preparing for their operational certification applications, striving to obtain approvals from the CAAC as soon as possible. Before that, we are also assisting customers with services including operational site design, route planning, and business process planning. For those operational companies that have submitted their OC applications and are under regulatory review, we provide full technical support to assist them in safety improvements to meet the operational safety requirements of the CAAC.
Our company's focus moving forward will be to place greater emphasis on service quality. We aim to proceed steadily and diligently, serving our customers well, building a robust UAM operational system, and improving talent training mechanisms. This will enable our customers to operate their aircraft continuously and stably, achieve commercial returns, and also lay a solid foundation for the company's long-term development. In terms of personnel training, with the aim to assist our clients in better operating and maintaining the aircraft, we have trained a total of 47 operators and 22 maintenance personnel for our customers. Regarding infrastructure construction, we have signed strategic cooperation agreements with several infrastructure service providers. These partners will take the initiative to undertake the construction of low-altitude infrastructure such as takeoff and landing platforms and hangars in some cities.
We will use these infrastructure facilities through cooperation or leasing agreements. Since the second quarter, we have visited numerous domestic production bases for new energy vehicles and new energy batteries. Additionally, in October, we visited some European manufacturing facilities specializing in safety aviation components. We are currently in discussions with some of these factories about potential cooperation. Our goal is to integrate various production facilities and management expertise to provide ideas and solutions for the integration and upgrade of our production lines and manufacturing techniques in order to improve quality and reduce costs. Currently, all of our delivered aircraft are produced in our sole production facility in Yunfu. Starting from Q4, we will strengthen industrial cooperation and plan to expand our industrial layout in Anhui, Shanxi, Guangxi and Beijing through joint ventures and contract manufacturing.
For instance, in Hefei, Anhui, where our East China headquarters is located, we are collaborating with the local government to establish the EHang Aerial Vehicle Manufacturing Industrial Park and have already completed the site selection for the first phase of the factory and flight test area. In North China, leveraging our cooperation with Xishan tourism, we plan to establish a low-altitude economy industrial park and a North China delivery center in Taiyuan. In the capital of Beijing, we are actively exploring cooperation on R&D and testing, manufacturing, education and training and demonstration applications in areas like emergency response, firefighting, and rescue missions. We have already begun environmental research work. As for our existing Yunfu factory, we'll start technical upgrades to the production line and flight test area in the fourth quarter. By 2025, with the commissioning of new factories, our overall aircraft production capacity and component supply will continue to expand.
Since the third quarter, we have visited a number of overseas customers, investors, partners, and media. Additionally, we have actively participated in various domestic and international industry exhibitions, including the China International Aviation and Aerospace Exhibition, the China International Import Expo, Dronitaly in Bologna, and the Smart City Expo World Congress, among others. These activities have further enhanced EHang’s international reputation and allowed us to connect with a large number of potential customers. In China, we have also actively participated in activities and conferences organized by various ministries and commissions, such as the Ministry of Industry and Information Technology, the National Development and Reform Commission, and the CAAC, including the Low Altitude Economy Innovation and Development Conference, the China International Small and Medium Enterprises Fair, and the Urban Air Mobility Forum.
Through these conferences and forums, EHang has actively communicated its thoughts on the development of the low-altitude economy and future operational strategies, resonating with attendees and earning recognition from many industry experts. EHang has been invited to almost every low-altitude economy related conference and forum with expectations to bring our aircraft for display or fly demonstrations. Our international reputation has also significantly improved. Since the third quarter, we have obtained special flight permits in Brazil and Thailand and have carried out demo flights. To-date, the EH216 series has completed flights in 18 countries. Looking forward, EHang will continue to promote and lead the commercialization of the low-altitude economy, while expanding our industry footprint. We will stay committed to our focus on sales and operations, fueled by innovation and collaboration, as we support the sustainable growth and commercialization of this emerging industry. Now I'll hand it over to our Chief Financial Officer, Conor, to walk you through the financial performance for the third quarter. Thank you.
Thank you, Mr. Wang. Hello, everyone. This is Conor. Before I dive into the details, please note that all numbers presented are in RMB and are for the third quarter of 2024 unless otherwise stated. Detailed analysis is available in our earnings press release on our IR website. I will now highlight some key points. In Q3, our efforts have once again delivered robust results. We exceeded our revenue guidance by 4%. Recorded adjusted net income for the second quarter in a row, and maintained positive operating cash flow for the fourth consecutive quarter. We are also making steady progress on the OC front as we gear up for upcoming commercial operations. Turning to the specifics for Q3, our total revenues were RMB128.1 million, resulting in a 347.8% year-over-year increase, and a 25.6% increase from the prior quarter. This was primarily driven by the higher sales volume of EH216 series products.
In this period, we delivered 63 units of EH216 series products, achieving a new record high for quarterly deliveries, compared to 13 units in Q3 2023 and 49 units in Q2 2024. Q3 gross margin was 61.2%, compared to 64.6% in Q3 2023 and 62.4% in the second quarter this year. Despite the modest decrease, our gross margin remained high, reflecting our competitive advantage in the eVTOL sector. Adjusted operating expenses, which exclude share-based compensation, were RMB86.9 million at a 60.9% increase from RMB54 million in Q3, 2023 and up 23.1% from RMB70.6 million in the prior quarter. The increases were mainly due to expanded sales related expenses, higher employee compensation, expansion of sales channels, and increased investments in various eVTOL models. The quarter's adjusted operating income was RMB9 million, compared to an adjusted operating loss of RMB34.2 million in the third quarter of 2023, and an adjusted operating loss of RMB4.7 million in the prior quarter.
We recorded adjusted net income for the second consecutive period in Q3 2024, reaching RMB15.7 million; this marks a significant improvement from an adjusted net loss of RMB31.3 million in Q3 last year and also an impressive increase over the RMB1.2 million achieved in the prior quarter. Furthermore, we continue generating positive operating cash flow for the fourth consecutive quarter. At the end of Q3, our cash balance, including cash, cash equivalents, short-term deposits, restricted short-term deposits, and short-term investment balances was RMB1,077.6 million. On top of that, last week we announced an over $22 million pipe investment from strategic investors, including Enpower and a strategic institutional investor from the Middle East. This strategic investment brings our total year-to-date financing to nearly $100 million, enhancing our financial position for our next phase of development and growth.
The financing process will be used to advance our next generation of digital technology and products, scale production capacity, expand our team, establish new headquarters and operating sites, and support general corporate activities. As we move into the fourth quarter with the OC certification process nearly complete and final approval within reach, we are focusing on fine-tuning our commercialization model to empower our customers to achieve safe and stable operations as quickly as possible. This is expected to further boost market demand for our pilotless eVTOL aircraft, driving steady growth in both orders and sales. At the same time, ongoing improvement in low-altitude policies and increased government support for the low-altitude economy are adding even more momentum to the market. Given these trends, we are expecting our revenue in Q4 to be RMB135 million, representing a year-on-year increase of 138.5%.
The total revenue for the full-year of 2024 is expected to reach RMB427 million, with a year-on-year increase of 263.5%. That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead.
分析師問答
Thank you. Your first question comes from Cindy Wang from Morgan Stanley. Please go ahead.
Hi, thanks for taking my question and congratulations on the remarkable 3Q results. My first question is regarding the solid state battery. Could management share more details on battery development with Inx? And what's the key hurdle for solid-state battery to commercialize now, and when do we expect to mass-produce it?
Thank you for your question. I am Wang Zhao. Regarding our joint battery development with Inx, this process began early on. Creating a new battery, particularly a solid-state one that requires significant technological advancements, is quite complex. It not only involves increasing the battery's capacity density but also improving its cycle life, maintainability, and safety features, which demands considerable research and development resources to prepare the technology for mass production and commercialization. Many companies are currently focused on solid-state battery development, and it usually takes around two to four years for these technologies to mature into mass production. With the backing of the Hefei International Advanced Technology Application Promotion Center, we've teamed up with Inx Energy to develop our batteries, leveraging our combined strengths to make impressive progress.
We have enhanced the flight endurance of the EH216-S to 48 minutes and 10 seconds, and we anticipate extending this to 60 minutes next year. Furthermore, the energy density of this battery has risen from 250 watt per kilogram to 480 watt per kilogram. The temperature increase during flight has been lowered from 60 degrees Celsius to 80 degrees Celsius. Currently, these solid-state batteries are undergoing small batch testing, and their costs are about double that of existing batteries. However, the energy density has doubled. I believe that production costs will decrease as we move toward mass production. Our aim is to achieve certification and begin mass production of these solid-state batteries for the EH216-S by the end of 2025. Next question, please.
Thank you for the answer. And my second question is regarding the progress of operator certificate. As we enter into the more in-depth review phase, can we expect that EHang still can receive OC by the end of this year?
In response to your second question, yes, the progress of the OC application is closely monitored by the industry. However, there are currently no established standards for the OC review, which necessitates improvements and innovations to the existing regulations. Thus, the OC approval process also involves creating these standards. Most of the work on the OC review has been completed, and based on feedback from the Civil Aviation Administration of China, we have recently made necessary adjustments and are awaiting further feedback. Our company has responded promptly and made adjustments accordingly. Our aim is to fulfill the safety operational requirements of the Civil Aviation Administration as soon as possible. If everything goes well, we expect the first OC to be issued within this year. However, we ask for your understanding that certifying operational safety is a rigorous process that requires significant responsibility towards passengers. Please stay tuned for further updates. Thank you. Next question, please.
Thank you. Your next question comes from Laura Lee at Deutsche Bank. Please go ahead.
Hey, thank you for taking my question. So my first question is about production. So I think last quarter we talked about there will be an additional 1,000 units per year capacity by next year. So does that include the capacity from the third-party manufacturer or partners, as you mentioned today, or is it mainly from the Yunfu factory? Also, is there any update on the CapEx of this and next year?
Thank you for your question. In response to your inquiry about capital expenditures, this year our spending is approximately $15 million, and we anticipate it will increase to $20 million next year. Regarding the production ramp-up, we plan to initiate technical upgrades at our sole factory in Yunfu, Guangdong province in the fourth quarter. Additionally, we will focus on building new factories in Guangzhou, Hefei, and Guangxi, which may involve establishing joint ventures. We are considering bringing in new partners from the manufacturing sector to enhance our production and delivery of aircraft. Next question, please.
Okay, got it. Just a quick follow up. So think about the technical upgrades in Yunfu factory in 4Q. Will that cost any kind of downtime or influence the delivery cadence for this year? Or no?
I expect the impact or disruption to production and delivery would be minimal. We actually have considered the potential impact of this technical upgrade on the deliveries, from Q2 all the way to Q3. However, we want to mitigate and minimize the impact as we upgrade to the capacity. We believe the short-term disruption, if there were any to the production, may be offset by the increase in production later on. Meanwhile, we are also considering scheduling the construction of other facilities. So, with the synergies between these upgrades, as well as additional production facilities, we might be able to minimize the impact and ensure future smooth deliveries.
Thank you. Your next question comes from James Hall at UBS. Please go ahead.
Thanks for taking that question. My question is regarding that since the battery price lowering and our scale is growing up, what are we expecting our breakeven would be at what kind of scale or at what kind of time period?
Yes, you can see that in the third quarter we have a
Sorry, I was on mute. Would you like to go for this bit or?
Oh, I'm finished, yes. You please go ahead.
Okay. Apologies, I was on mute. As we ramp up production, the price of battery as well as the key components will definitely come down, that's the trend. However, you should know that we are constantly iterating these models and also introducing new features. This will potentially push up some of the costs of these aircraft, but our gross profit margin is at a healthy level. Let me point out that we have achieved a positive adjusted net profit for the past quarter, and we'll definitely see a faster growth in our revenue than our expenses. In other words, we are having better operational efficiency and a stronger capacity for profitability.
Thank you for the color. My second question is regarding our supply chain strategy. What kind of investment and research and development strategy are we adopting in the electric motor and the solid-state battery?
Thank you for your question. I'll address it. In the emerging Urban Air Mobility industry, air taxis are poised to play a crucial role in the future low-altitude economy. Our focus is on enhancing the EH216-S through its airworthiness certification while continually upgrading core components and technologies to maintain our leadership in products and innovation. We have prioritized over 10 core areas, such as batteries, motors, propellers, AI, composite materials, and communication technologies. We actively engage with top suppliers through collaborative development, strategic investments, and joint ventures. We are also exploring new patents and technological advancements. In the future, we may share some of our developed key components with industry peers to encourage innovation. For instance, we successfully conducted a continuous flight test lasting over 48 minutes on the EH216 using high-energy solid-state lithium batteries developed with Inx Energy, marking a significant technological breakthrough. We aim to extend this flight time to 60 minutes. Additionally, we are creating a new generation of power systems to enhance efficiency. Besides the EH216 series, the VT-35 will also be a valuable addition to our product lineup. Next question, please.
Thanks for taking my questions. Yes, that’s it from me.
Thank you. Your next question comes from Gareth Zhao at Tianfeng Securities. Please go ahead.
Okay, yes. Management, thank you for taking my question. So I have two questions. The first one is regarding the gross margin. We saw there is a slight decline in the gross margin in this quarter. So how does the company view the potential for cost reduction in the future?
In the third quarter, we are pleased to see some repeat orders from our existing customers. However, we sell these based on last year's contract prices, which slightly affected our average selling price and led to a minor decrease in our gross margin. Nonetheless, it remains stable at over 60%, so the impact is minimal. As we scale up production, we expect some cost reductions from economies of scale. At the same time, we will continue to enhance the performance of core components like motors and batteries, which may increase costs somewhat. These factors will likely balance each other out, allowing us to maintain a gross margin of around 60% moving forward. That's my answer.
Okay, thank you. So my second question is regarding the VTC progress. Could you provide more insights about the progress of VTC certification in overseas market?
EHang has conducted flights in 18 countries and has engaged with various national aviation regulators around the world. We recognize that countries tend to be cautious when certifying new aircraft types and often lack the experience and certification systems necessary. Thus, while we are advancing our overseas certification process in collaboration with the Civil Aviation Administration of China, we are also actively exploring pilot programs internationally to operate our eVTOL as soon as possible. For example, in September, Brazil’s Aviation Authority granted our EH216-S an experimental flight permit, allowing us to conduct extensive flight tests in Brazil, which will help us gather data for future VTC certification. Additionally, in Thailand, we are exploring a sandbox pilot model with the Thai Aviation Authority and are aiming to begin commercial flight operations in selected regions next year. Thank you. Next question, please.
Thank you. Your next question comes from Ling Liu at Guxing Securities. Please go ahead.
Congratulations on the strong results. We noticed the recent announcement of the Hefei Hub completion. Could management share some insights on the future operational plans in Hefei?
Thank you for your question. I'm Wang Zhao, and I will address it. The Hefei Hub is a key operational site developed to meet OC standards, enhancing existing sites to test various air transportation operations. The Hefei municipal government has revealed plans to construct over 30 eVTOL takeoff and landing points in Hefei within the next three years. The operational plan is quite large, integrating existing sites with operations at Luogang Park, which will function as an air transport hub. Once we secure the necessary operational qualifications, ticketed operations will commence shortly. Next question, please.
Thank you. Your next question comes from Yiming Wang at China Renaissance. Please go ahead.
The municipal government has announced plans to build over 30 eVTOL takeoff and landing points in Hefei over the next three years. The operational plan is quite extensive in its size, with existing sites integrated with operations at Luogang Park. It will serve as an air transport hub. Once operational qualifications are obtained, ticketed operations will start very soon. Next question, please. Thank you. Your next question comes from Yiming Wang at China Renaissance. Please go ahead.
Thank you for your question.
Thank you. Your next question comes from Yiming Wang at China Renaissance. Please go ahead.
My question is about the capacity increase following the technical upgrades. How much do you anticipate it will boost our capacity, and how will it assist with the delivery of our existing orders? Thank you.
Current production capacity is being enhanced through supply chain optimization and improved worker skills, as well as efficiency. However, the factory requires a technical upgrade to further increase capacity. Additionally, to significantly boost capacity, we need to build new factories. The demand for our aircraft has exceeded our expectations. We are in the process of selecting new sites and designing new factories. Existing orders are currently being delivered at a stable pace. The testing of aircraft is relatively time-consuming and complex, so the current focus is on maintaining stability and thorough testing to ensure aircraft safety. Furthermore, other infrastructures such as takeoff and landing points, operational centers, and training for operators and maintenance personnel also require time. Once the new factories and test sites are operational next year, the infrastructure for operational centers in various locations will be mature and delivery speed will increase. Next question, please.
Thank you. Your next question comes from an unidentified analyst. Please go ahead.
I have two questions. First, what are the expectations for future CapEx investments in solid-state batteries? Second, what types of collaboration are we pursuing in this area? If new property rights are created for the solid-state battery, how will we divide ownership? That's my first question.
As early as July last year, we proactively participated in the strategic investment in Inx Energy. Over the past year, both technical teams have continued to collaborate on research and development with very good coordination and responsiveness, allowing us to achieve phased goals in a relatively short time. The technical breakthrough is also supported by the Hefei Municipal Government. Last October, we reached a cooperation agreement with the Hefei Municipal Government, continuously implementing low-altitude projects in Hefei to promote the development of the local low-altitude economy. The Hefei Government is also very supportive of these technical breakthroughs. Under the incubation of the National First Center Low-Altitude Economy Battery Energy Research Institute, we and Inx Energy have successfully completed the solid-state battery R&D breakthrough and installed it on the EH216-S, and successfully tested the fluid.
We'll continue to increase our R&D investment in fast charging and solid-state batteries. These expenses are primarily recorded as R&D costs and not included in the capital expenditures. We are doing contract manufacturing, so there aren't any capital expenditures included for the production of these batteries. The intellectual property for the core technologies and components will be jointly owned by EHang and our partners. Thank you. And that's the end of the Q&A session.
Thank you. Yes, that concludes the question-and-answer session. I'd like to hand the call back to Ms. Anne for closing remarks.
Okay. Thank you, operator, and thank you all for joining our today's conference call. If you have any further questions, please contact our IR team by email or participate in our following investor events through the calendar information provided on our company’s IR website. We appreciate your interest and look forward to our next earnings call. Thank you.
Thank you, operator, and thank you all for joining our today's conference call. If you have any further questions, please contact our IR team by email or participate in our following investor events through the calendar information provided on our company’s IR website. We appreciate your interest and look forward to our next earnings call. Thank you.
Thank you all again. You may now disconnect.