Xiaopeng He: [Foreign Language] Thank for that question. It’s a bit tricky. I’ll try to answer it to the best of my capability. My short answer is that 2025 or 2026 be the iPhone 4 moment for autonomous driving. Now there are several influencing factors to it. The first one is the full area coverage. When I mentioned full area, I’m actually referring to covering 95% of China roads, including not just highways but also urban areas and also within the different neighborhoods and also parking garage, et cetera. And the second factor is the cost of manufacturing and also producing such high level of intelligence. And the third factor is its overall capability, and that is actually twofold. The first one is safety profile and the other is the overall driving experience.
As you mentioned, the takeover rate definitely matters. So we expect to actually have for example, in the coming two to three years, with a level of having zero to one or one takeovers within 1000 miles, 1,000 kilometers. And maybe on the highway, we have already achieved that, which is to have one takeover per 10,000 kilometers. Another thing is — another big part to the driving experience is actually whether or not it can actually beat a human driver in terms of its smartness and also it’s driving efficiency. Now personally speaking, I expect to reach that point of iPhone 4 moment in 2025 because thanks to the rapid development of LLM, we believe that it’s actually bringing up the schedule. Otherwise, it could be 2026. Thank you.
Yuqian Ding: [Foreign Language] My second question is about the new product cycle, although we understand there could be limited that can be shared on the detail side. But the company did talk about the pricing spectrum to be arching between RMB150,000 to RMB350,000. So we see the midsized G6 targeting RMB200,000 to RMB250,000 and the compact size may be covering the below. So do we consider like to revise or refresh G9 model for the potential RMB250,000 to RMB350,000 pricing point? And how do we position within the pricing spectrum we want to target? Any color would be useful. Thank you.
Xiaopeng He: [Foreign Language] Actually, this is a topic that we have discussed internally multiple times. And unfortunately, I cannot give you all the information. However, what we can say is that we expect that by the second half of 2024, XPeng is going to launch multiple new models as well as multiple replacement versions of previous models based on the same platform, and it will be between RMB150,000 to RMB350,000. And that is because we actually have from our previous experience, identified multiple market needs or demands or user demand for different price range and different models. They could be individual use or for smaller families and big families. And between RMB250,000 to RMB300,000 level, there — definitely the space is very crowded and is very, very competitive.
And there are different use or different demands. It could be individual customers, smaller or bigger families. However, we are very glad to report that with our current big platform strategy using our SEPA 2.0 platform with our modular designed, we can actually produce new models meeting different demands in the market in a very high efficient manner using very low cost as well. So definitely a lot to look forward to in the future. Thank you.
Operator: Thank you. And the next question comes from Ming-Hsun Lee with Bank of America.
Ming-Hsun Lee: [Foreign Language] So my question is related to your second quarter gross margin. So besides certain discounts and also sales contribution from G9 is lower than first quarter. Is there any other reason why your gross margin declined Q-o-Q in the second quarter? Is there any non-cash item?
James Wu: Hey, thank you. This is James. I’ll answer this question. So you’re right. In Q2, as mentioned earlier, there’s a portion of the G3i EOP impact that we have booked in Q2. And I just want to emphasize that a majority of the impact is noncash because — that’s because of the acceleration of the unamortized toolings that we have booked because of the decision. Excluding the EOP impact, we still have a slight lower gross margin versus Q1. That is mostly because of the increased promotional spend on some of the older models that we have. That is partially offset by lower battery costs that we’ve seen in the second quarter. And to your question, we have seen a pretty healthy improved cash flow in Q2, and we will continue to see that in the second half.
Other than the profitability impact, a big impact is — will come from the working capital impact because as we increase volume, we will improve our collections from a delivery perspective, and we will clear our payables on a stack basis. So as we increase volume, we will have considerable working capital gain in the second half, which will help to improve our operating cash flow. Thanks.
Ming-Hsun Lee: [Foreign Language] So my second question is for the fast-charging battery. So in the past [July] (ph), you already start to sell the 4C NCM battery in [July] (ph). But at that time, the sales portion is pretty small probably because the battery is expensive. And also the supercharging station is still not comprehensive enough. So since recently, there are some fast-charging LFP battery in the market. So will you start to discuss with your supplier to adopt such kind of a battery in the future of your product to lower your costs?
