Operator:
Hello, ladies and gentlemen. Thank you for standing by for the Fourth Quarter and Fiscal Year 2025 Earnings Conference Call for XPeng Inc. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Mr. Alex Xie, Head of Investor Relations and Capital Markets of the company. Please go ahead, Alex.

Alex Xie:
Thank you. Hello, everyone, and welcome to XPeng's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. Our financial and operating results were issued by Newswire services earlier today and available online. You can also view the earnings press release by visiting the IR section of our website at ir.xiaopeng.com. Participants on today's call from our management team will include Co-Founder, Chairman and CEO, Mr. He Xiaopeng; Vice Chairman and President, Dr. Brian Gu; Vice President, Mr. Charles Zhang; Vice President of Finance and Accounting, Mr. James Wu; and myself. Management will begin with prepared remarks, and the call will conclude with a Q&A session. A webcast replay of this conference call will be available in the IR section of our website. Before we continue, please note that 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 inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the relevant public filings of the company as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that XPeng's earnings press release and this conference call include the disclosure of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. XPeng's earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. I will now turn the call over to our Co-Founder, Chairman and CEO, Mr. He Xiaopeng. Please go ahead.

He Xiaopeng:
[Interpreted] Hello, everyone. Reflecting on 2025, XPeng delivered a series of milestone breakthroughs across multiple fronts. Our annual delivery reached 429,449 (sic) [ 429,445 ], up 126% year-over-year. MONA M03 became the best-selling battery electric sedan the RMB 100,000 to RMB 200,000 segment. P7+ ranked #1 among pure electric sedan in the RMB 150,000 to RMB 200,000 segment. The Kunpeng Super Extended Range EV X9 entered mass production and started our one vehicle, dual energy era. Our quality management system and customer satisfaction as measured by NPS improved rapidly. Overseas deliveries nearly doubled to 45,000 units with revenue from overseas markets contributing over 15% of total revenue. In addition, benefiting from enhanced organizational capabilities centered on physical AI, we successfully brought our Turing AI SoC into mass production and began deliveries to Volkswagen. Our VLA 2.0 saw an emergence and the debut of our humanoid robot IRON garnered significant attention globally. In 2025, we achieved not only high growth in scale, but also significant improvement of operational capabilities. Our gross margin for fiscal year 2025 reached 18.9%, an increase of 4.6 percentage points year-over-year. In response to national initiatives, we substantially reduced the turnover days of accounts payable to suppliers by 50 days. We had a free cash flow -- inflow of approximately RMB 5 billion in 2025 and ended the year with RMB 47.7 billion cash on hand, providing robust financial support for unwavering investment in fiscal AI R&D. In Q4, XPeng achieved its first ever quarterly profit with net profit exceeding RMB 380 million. This marks the emergence of a business model driven by technology leadership, which is a path to profitability distinct from that of traditional automakers. I'm glad to see that with years of hardware investment and physical AI transformation, XPeng is at a pivotal inflection point in the application of physical AI. After years of sustained and significant R&D investment, we have built a full stack in-house developed technology system, including SoC, foundation model, data, EE architecture and AI infrastructure. We're now driving upward integration across autonomous driving and smart cockpit systems while enabling cross-domain integration downward into powertrain and chassis systems. Looking ahead, we'll continue to push the technological frontier, accelerate the development of AI, expedite deployment and commercialization of our product technology innovations. In early March 2026, our VLA 2.0 successfully passed the physical touring test for autonomous driving and passengers can hardly distinguish if it's a human or AI who's driving the car, the vehicle has effectively evolved into a physical AI agent. XPeng's VLA 2.0 will soon crossed the inflection point of both technology and large-scale deployment. Fully autonomous driving can be expected to come in the next 1 to 3 years. AI-powered vehicle and humanoid robots will soon fundamentally reshape how everyone travels, works and lives. 2026 marks a major year of product portfolio expansion and upgrade in our product capabilities. We plan to launch 4 new models, expanding into both large and compact sized vehicles. Designed by our newly restructured design team, these models are crafted for global market and built on dual energy platforms, supporting the evolution of autonomous driving capabilities from L2+ to L4. As deliveries of new models ramp up, we'll achieve strong quarter-over-quarter growth in volume. In Q3 2026, we'll start preorders of our first flagship 6-seat full-size SUV, the XPeng GX, bringing in a truly uncompromised best-in-class experience model to family users. The GX delivers MPV comfort and spaciousness and features steer-by-wire and rear-wheel steering. It will be our first model designed to support L4 level hardware and software capabilities. Starting from this year, we'll further expand our AI vehicles global market share and bring our VLA 2.0 model to global markets. At the same time, our lead teams to bring both robotaxi and advanced humanoid robot into mass production. With global product sales increasing, in 2026, we'll further solidify our global scale-up capabilities across production, supply, sales and service. Our supply chain, manufacturing, logistics, spare parts, sales and service systems are moving towards greater global synergies, underpinning sustained improvement in quality and brand perception in international markets. Well, our overseas deliveries, the goal is set to double in 2026 year-over-year with international business contributing over 20% of total revenue. We plan to introduce 4 new models to global market. In the key SUV segment, we aim to launch more global flagship models. We target to have 680 overseas stores for sales and service, doubling the number of stores from the end of 2025. XPeng's self-operated ultrafast charging network will also expand beyond China to 10 key international markets. This will bring our industry-leading 5G ultrafast charging experience to users globally. With an enhanced overseas competencies, our global expansion will further accelerate significantly through 2027 and 2028 and revenue from overseas markets will become one of the core drivers of the company's profitability. To make the leap from L2+ to L4 and enable global deployment, we have fundamentally redesigned the architecture of our autonomous driving technology. Starting yesterday, we began the gradual rollout of our VLA 2.0 to users. This is our first release designed for the L4 autonomous driving era, delivering a safe and smooth experience with driving performance comparable to experience human drivers and representing a generational gap ahead of the industry. The VLA 2.0 is transforming advanced autonomous driving from an early adopter feature into a truly mainstream mass market feature that even everyday drivers can trust, rely on and enjoy with confidence. All of our 732 stores nationwide now offer VLA 2.0 test drives. So far in March, a number of our daily test drives has doubled month-over-month and the percentage of the Ultra and ultra SE trims among all trims has also more than doubled. Over the next 3 to 6 months, VLA 2.0 will notably improve test drives conversion rate and substantially increase user engagement and retention for XPeng. The VLA 2.0 has broken down traditional rules and validated the applicability of scaling laws in the physical world. Next, we will continue to scale up to aggressively widen our lead. By the end of the year, we target to increase the number of parameters on the edge from several billion to [ 20 billion ] level. This will increase average miles per takeover by 25x and the safety-critical miles per takeover by 50x. At this pace of improvement, the era of fully autonomous driving is on track to emerge within the next 1 to 3 years. Autonomous driving will become part of everyday mobility. Our GX Robotaxi powered by VLA 2.0 has received official road testing approval in Guangzhou and is now conducting ongoing L4 corporate road tests. In the second half of the year, we plan to launch pilot passenger operations for our mobile taxi service to validate the technology, user experience and the business model. We'll also begin overseas road testing of the VLA 2.0. As technology advances and regulatory frameworks evolve, XPeng will be one of the few companies globally that is capable of scaling autonomous driving efficiently across multiple global markets. The strong performance of our VLA 2.0 is underpinned by the joint optimization of our in-house touring SoC, proprietary large foundational -- our foundational large model and compiler, delivering a 10x improvement in effective compute even though the plan was only to achieve 3x improvement. Since entering mass production and being deployed in vehicles in Q3 last year, the XPeng Turing SoC has actually shipped over 200,000 units. Starting from the second quarter of this year, all XPeng models, including the Max trims which will fully transition to our in-house touring SoC shipment to our SoC. Shipments of Turing SoC are targeted to reach nearly 1 million units this year. The Turing SoC is positioned to become the leading high compute AI SoC deployed on the edge by shipment volume. Volkswagen is our first external customer for both our Turing SoC and VLA 2.0. Our deep collaboration with leading global automakers, together with our ability to mass produce efficiently demonstrates that our technology is scalable, replicable and globally competitive. We welcome more automakers embody AI companies and Tier 1 suppliers to adopt our Turing SoC and integrate intelligent solutions for their customers. In my view, the ultimate competition in physical AI will be determined by foundational -- by fundamental organizational capabilities and AI infrastructure. Recently, we completed a critical organizational upgrade, integrating our autonomous driving center and smart cabin center into General Intelligence Center. This is more than a structural change. It represents a paradigm shift in building intelligent systems, Driving decisions and human vehicle interactions will no longer exist in isolation. How the vehicle drives on road and how humans interact with it now share the same physical AI foundation model and infrastructure. R&D efficiency and effectiveness have improved substantially. XPeng has established a full integrated AI infrastructure stack, including computing power on the cloud and on the edge, data compilation, quantization, deployment, simulation and real-world testing in great scale. Our physical AI foundation model will evolve at an exponential speed. It will power vehicles, robotaxis and humanoid robots and become a unified super foundation model for all of our physical AI agents. Our next-generation humanoid robot, IRON, is targeted to enter mass production by the end of 2026. Powered by 3 Turing AI SoCs, IRON's computing power on the edge far outpaces both robots in the industry. Our technology focuses on the robots brain and cerebellum. The brain enables independent thinking and decision-making while the cerebellum controls emotions. At the same time, we continuously accumulate data for embodied intelligence models. Our VLA 2.0 technology stack is now running successfully on our robots. Paired with the fourth-generation motion control system, IRON will deliver industry-leading agility and motion control in the second half of the year, establishing a clear generational lead in intelligence capabilities. IRON will focus on 3 key application scenarios: commercial, industrial and household. Initial deployment will support reception, guidance and retail assistance across XPeng stores and campuses in China and overseas. In the first quarter of the year, we began construction of our humanoid robots mass production based in Guangzhou. IRON aims for a monthly production target of over 1,000 units by the end of this year. Leveraging IRON's advanced intelligence and our strength in mass production with quality and supply chain management, XPeng will become one of the world's largest and most valuable humanoid robot companies. Because we already saw the tremendous disruption that the physical AI world has brought to the original software development paradigm in 2025, we invested RMB 9.5 billion in R&D, including RMB 4.5 billion in AI. Our sustained and efficient investment in AI R&D over the past few years has enabled us to build an industry-leading fully in-house physical AI technology stack, including SoCs, foundation models and AI infrastructure. Powered by this technology stack, the pace of advancement in physical AI will accelerate significantly starting 2026. We'll see the mass production and application of physical AI agents with their scale poised to enter a steep growth curve. Over the next 5 to 10 years, the market for physical AI is expected to surpass that of the automotive industry. Both robotaxi and humanoid robots represent $1 trillion to $10 trillion level global market opportunities. In the future, the sales rankings of physical AI agents may matter even more than the ICE vehicle volume charts a decade ago or NEV volume charts today, and they will change very, very fast. We're confident that XPeng will become the global leader of physical AI agents. Pushing the boundaries of physical AI is very exciting for my team and me. We're more committed than ever to intensifying our R&D investments. This year, in addition to vehicle development, investment in physical AI-related R&D will increase to RMB 7 billion. In my view, this investment will not only help us increase our competitive advantage and deliver substantial long-term returns. Scale allows us to survive in competition, but it is sustained leadership in physical AI technology and commercialization that will define our core competitive advantage. For the first quarter of 2026, we expect deliveries to be between 61,000 and 66,000 units. Revenue is expected to be between RMB 12.2 billion and RMB 13.2 billion. March deliveries are expected to grow sequentially by 69% to 101% month-over-month. As the VLA 2.0 and 4 new models enter mass production, we expect quarterly sales to continuously trend upward and achieve year-over-year growth in the second half of the year to significantly outpace the industry. We are on the cusp of large-scale mass production, our fourth physical AI agent. Going forward, I will dedicate more of my efforts to develop strategies, establish organization and operational capabilities for XPeng's globalization and commercialization with a focus on translating our technological leadership into commercial success. The innovative business models of physical AI will add [ network ] effect and agent effect on top of the traditional automotive economies of scale, meaningfully raising market entry barriers and industry concentration. As a leader in physical AI, we will possess a long-term sustainable advantage, securing a higher share in a vastly expanded market and achieving greater corporate value. Thank you, everyone. With that, I'll now turn the call over to our VP of Finance, James, who will walk you through our financial performance for the fourth quarter of 2025.

Jiaming Wu:
Thank you, Xiaopeng. Now let me provide a brief overview of our financial results for the fourth quarter of 2025. I will reference RMB only in my discussion today, unless otherwise stated. Our total revenues were RMB 22.25 billion for the fourth quarter of 2025, an increase of 38.2% year-over-year and an increase of 9.2% quarter-over-quarter. Revenues from vehicle sales were RMB 19.07 billion for the fourth quarter of 2025, an increase of 30% year-over-year and an increase of 5.6% quarter-over-quarter. The year-over-year and quarter-over-quarter increases were mainly attributable to higher deliveries. Revenues from services and others were RMB 3.18 billion for the fourth quarter of 2025, representing an increase of 121.9% year-over-year and an increase of 36.7% quarter-over-quarter. The year-over-year and quarter-over-quarter increases were primarily attributable to the increased revenues from firstly, the technical R&D services rendered to the Volkswagen Group due to the successful achievement of certain key milestones in the current quarter. Secondly, parts and accessories sales in line with higher accumulated vehicle sales; and lastly, carbon credit trading. Gross margin was 21.3% for the fourth quarter of 2025, compared with 14.4% for the same period of 2024 and 20.1% for the third quarter of 2025. Vehicle margin was 13% for the fourth quarter of 2025 compared with 10% for the same period of 2024 and 13.1% for the third quarter of 2025. The year-over-year increase was primarily attributable to the ongoing cost reduction and improvements in product mix of models. R&D expenses were RMB 2.87 billion for the fourth quarter of 2025, representing an increase of 43.2% year-over-year and an increase of 18.3% quarter-over-quarter. The year-over-year and quarter-over-quarter increases were mainly due to higher expenses related to the development of new vehicle models and technologies as the company expanded its product portfolio to support the future growth. SG&A expenses were RMB 2.79 billion for the fourth quarter of 2025, representing an increase of 22.7% year-over-year and an increase of 12% quarter-over-quarter. The year-over-year and quarter-over-quarter increases were primarily due to higher commission to the franchise stores related to the sales volume and the launch of new models. The year-over-year increase was further due to higher marketing and advertising expenses. As a result of the foregoing, loss from operations was RMB 0.04 billion for the fourth quarter of 2025 compared with RMB 1.56 billion year-over-year and RMB 0.75 billion quarter-over-quarter. Net profit was RMB 0.38 billion for the fourth quarter of 2025 compared with net loss of RMB 1.33 billion year-over-year and net loss of RMB 0.38 billion quarter-over-quarter. The company recorded positive net profit for a single quarter for the first time in Q4 of 2025. As of December 31, 2025, our cash position was RMB 47.66 billion. To be mindful of the length of the earnings call, I would encourage listeners to refer to our press release -- earnings press release for more details on our fourth quarter and full year 2025 financial results. This concludes our prepared remarks. We'll now open the call to questions. Operator, please go ahead.

Operator:
[Operator Instructions] Your first question today comes from Tim Hsiao from Morgan Stanley.

Tim Hsiao:
[Foreign Language] I have 2 questions both are related to smart driving. The first one, what type of major upgrade should we expect for XPeng's VLA 2.0 in the coming months? How do you anticipate VLA 2.0 will impact order conversion and the user retention in the following quarters? That's my first question.

He Xiaopeng:
[Interpreted] Thank you for your question. Let me answer your first question first. So basically, going forward, each quarter, we are expecting at least one major version of OTA. And I think we can share some of it, just to give you some examples. In our Q2 OTA, for example, the autonomous driving is -- will be able to actually cover more roads, whereas currently or traditionally, it was only able to cover the major highways. And in the future, for Q2 OTA, we'll be able to cover smaller parking lots and campuses or communities in different parks. It is actually a very critical change, meaning that our capability is evolving from navigation enabled public road to cover more areas. In addition to that, we would like to also highlight that autonomous driving in the future, we will also become more AI agent oriented. Actually, if you look at all of the scenarios of application for robot systems, it's essentially very similar to that. Also, the 4 levels of autonomous driving and navigation also follow the same logic as well. This year, we also expect to do a lot more upgrades in terms of our capabilities. For example, if you look at our model on the vehicle or the edge side, we are increasing the parameters from 1 billion level to actually up to 20 billion level. We also hope that we can increase our mileage takeover by about 5 to 10x. In addition to that, apart from autonomous capability driving -- I mean, upgrade, we also have added some multi-language support capabilities as well. So that's another level of upgrade for localization support, which will allow us to combine smart cockpit with autonomous driving. Now because our VLA 2.0 only started to be officially pushed our users yesterday, and I mentioned in the prepared remarks that we started promoting it in early March. And as a result, we could actually see that the market reacted very, very positively. For example, our test drives actually more than doubled sequentially across our stores and also Ultra and Ultra S1 sales also more than doubled as well. And I believe when we fully launch our VLA 2.0 to the market and to our users and continue to upgrade it, we are expecting actually a higher sales volume and also a higher level of conversion rate, which will also eventually raise the average selling price of our vehicles. Now when it comes to user retention or engagement, I would like to share my own case and experience as well after trying out the VLA 2.0, there's no going back for me, honestly, because I travel a lot and a lot of the times, I actually rely on professional drivers who drive me around. And after trying VLA 2.0, I realized when I now use other types of autonomous driving versions or when I ride our professional driver's cars, they are not nearly as good as VLA 2.0 because VLA 2.0 now gives me the smoothness of driving. And also on top of that peace of mind as well, that kind of experience that I've got offered is unparalleled. And it's been what, only 2, 3 months, and I'm no longer the same person. I mean there's no going back really. So I believe that in the future, advanced autonomous driving will definitely be part of everyone's daily necessity. User rate potentially will reach basically 100% and I feel this very, very strongly. And recently, my professional drivers have been asking me a couple of times that from my perspective, when will our profession, he was talking about being a professional driver, be eventually phased out. I would like to just add one brief last point, which is that this is really representing a completely new paradigm, which, from my perspective, that our current priority is to really address a lot of safety issues and many of our weaknesses first. However, since the launch of our second-generation VLA, the rules have completely changed. It's never the same again. So I believe that with making up of our weaknesses or the weaknesses being compensated for, now we can actually spend a great deal of our time on enhancing our overall strength and deployment globally.

Tim Hsiao:
[Foreign Language] My second question is also related to smart driving. So what is the deployment road map for XPeng Ultra model and VLA 2.0 in the overseas market? And how will the overseas expansion of smart driving affect XPeng's global sales? And does the smart driving software have the potential to be monetized along? That's my second question.

He Xiaopeng:
[Interpreted] Let me briefly address this question. First of all, we have already launched the preparation for testing our VLA 2.0. So by end of this year or beginning of next year, we are going to gradually roll out the VLA second-generation testing in great scale and also its delivery or deployment across different regions. And I believe that VLA 2.0 has a significant advantage overseas. First of all, we found that it's actually very generalizable. In our testing across multiple markets, we realized that even without any overseas actual road data, VLA alone performed really well and achieved excellent results. The second point is that compared to some of our competition, for example, FSD out there, our VLA has a particular advantage over them in the capabilities across smaller roads and also country roads or uncharted territories. And we've tested -- we've seen that in some overseas markets such as Southeast Asia and Europe. So that made me, again, having a stronger conviction that our VLA 2.0 can actually provide high-quality, saver autonomous driving for our users overseas at a higher quality and also lower cost. So with that, we now have done all the preparation in the hardware. And so by second half of this year, we definitely are ready for a bigger test and also for the future launch as well. And I believe that we are also considering some business model upgrade or transition for our smart driving software in the overseas market. And I believe there's definitely a lot of opportunities for commercialization or monetization, and we have strong confidence in converting our great technology into good business opportunities and revenue.

Operator:
Your next question comes from Nick Lai from JPMorgan.

Y.C. Lai:
[Foreign Language] My first question is really related to humanoid robot ambition and the long-term strategy. First of all, management mentioned that in the near term, we'll see the product launch at Beijing Auto Show followed by mass production by year-end. Aside from that, is there any major milestone that investors should be mindful in the next, say, 1 or 2 years? And in addition to that, when we expand our footprint from smart vehicle to humanoid robot, anything we can leverage regarding R&D production and also supply chain?

He Xiaopeng:
[Interpreted] First of all, thank you for your question. And I would like to clarify something. We didn't mention April, but very much in second half of this year. I just want to clarify that from your question. And again, what you asked is very, very big, and I'll try to address it. First of all, last year, a lot of supply chain partners and also a lot of companies asked us the same question about robot supply chain or humanoid robot supply chain and whether or not it should be car grade. We believe that car grade is the minimum requirement because obviously, costs, they typically have 1 engine. And if the engine breaks down, it already caused A class accidents. And when you look at humanoid robot, they have at least 70 to 80 joints and any kind of damage to those joints will cause information loss or signal loss and will cause very, very serious accidents and will compromise our safety. And so we need to look at humanoid robots from at least a car grade level standards. And since beginning of last year, we already started the development for our humanoid robot adopting car grade standards as well in preparation for its manufacture. So overall, you can see that XPeng is a very unique robotic company in that sense because we are adopting the same kind of high-level rigorous of developing a vehicle in developing our humanoid robots. And you can actually see that we have to do a lot of in-house development covering not only the joints, but also the torso and other parts of the body from the SoC to the foundational model from data to all the training of the brain and cerebellum, et cetera. And we are very unique in that sense. I believe that we are actually using a very, very challenging way or a very new methodology, which can be 10x harder than developing robotaxi in doing our humanoid robots to achieve the highest quality mass production. And by end of the year, our targeted production is at least 1,000 units. And I think in future vehicle companies will also be robotic companies. However, one of the biggest difference between humanoid robots and vehicles is that robots actually generate a lot of value from the software, and it can start at 50% already since day 1 and cars may start slow with only 10%, 15%. It will take them some time to actually ramp up in the value creation. And -- but I believe that they actually come from the same logic and also share the same origin. So whether when it comes to R&D, mass production, supply chain management, quality, et cetera, and also the global management -- globalization management, the supply chain, sales and marketing services, et cetera, there's going to be a lot of similarity between car and robotic development, and that sets us apart from our competition because we have always been doing things in-house with full stack technology and also cross-domain integration. And fundamentally, we use the same kind of logic as well. when we develop our robots from the, I would say, elbow to hands to leg to feet, we do everything in-house or at least we do joint development, which again set us apart from other car companies or robot companies.

Y.C. Lai:
[Foreign Language] My second question is also related to humanoid robot regarding the cost and the selling price and how should we expect the cost reduction after mass production from year-end? And also, should we expect any external sales after mass production from year-end?

He Xiaopeng:
[Interpreted] This is a very good question. And I think when it comes to thinking about the cost structure for humanoid robot, first of all, it's very different from what we've seen in cars. There are 3 major cost items for humanoid robots. First of all, you have the hardware cost and then the R&D cost. Lastly, you have the operational cost. Hardware cost of a robot is very similar to a car. But when it comes to R&D costs, AI-related R&D costs will be way higher than that of vehicles, especially in the past, cars used to partner with Tier 1 suppliers when they can actually do the rule-based system and they can just borrow other people's already very established software and hardware solution, but that was in the past. In the AI era, day and age, you cannot do it the way that it was for especially humanoid robots development. And when it comes to operational costs, it's a completely different world as well because there's different data for different scenarios. And when you apply it -- deploy it in the new scenario, you need to retrain the AI and the robot as well. And there are 2 types of humanoid robots. You have the general purpose, you have the specialized purpose robots as well. What we mean by a general purpose, basically, if you've attended college, you know that you first will take some general purpose courses that allow you to have some transferable skills and general knowledge. However, if you want to specialize in investment, for example, or in medical practice, that will require a lot of special training, right? And it's the same for humanoid robots. So I believe that when it comes to mass production, there will be chances or -- mass production will allow us to continue to drive down the BOM cost for humanoid robot. However, software and operational costs will continue to improve depending on what model and also what application scenarios that we're talking about. And we are different from a lot of the other companies out there because we do not target academia. We actually target actual deployment and commercialization. And we will first go into the commercial scenario before going to industrial and lastly, household. Commercial application actually requires a lot of motion control, especially for the full body control, which is something that we're really good at and leading the industry. Industrial application will focus more on the hand movement and the agility of both hands, which we are working towards. And then household will be the most challenging scenario to actually deploy human robots in. And so we'll gradually move towards commercialization -- from commercial to industrial and to household.

Operator:
Your next question comes from Tina Hou from Goldman Sachs.

Tina Hou:
[Foreign Language] Congrats on a strong set of results. So my first question is regarding our overseas expansion. Wondering which will be the key market for us to achieve the 100% volume growth in overseas this year, and also looking at 2027 and 2028, what kind of products or technology are we going to introduce in order to drive further expansion overseas. And then also related to that, when will we start to launch our Kunpeng Super Hybrid platform models in the overseas market.

Gui Hongdi:
Tina, it's Brian. Let me address your question. In terms of key markets, obviously, we start our global journey in Europe and now Europe -- pan-European market, I would say, represents our largest regional market, approximately 50% of our overseas volume is in Europe. And we actually saw our premium positioned EVs in a number of countries, especially in Nordic countries, have a leading position in their categories. And also, we saw very encouraging growth in large markets like Germany, France and Great Britain. So I think, obviously, Europe will represent a key focus for us. And then after Europe, Southeast Asia last year also represent a large important growth market for us. We saw a very, very exciting growth for Thailand, for Indonesia, for Malaysia, and we continue to see that market become a very key growth point for our business. Outside of these 2 large markets, additional emerging markets like Middle East, like Central Asia, like Latin America also has great growth potential, and we actually have established operations last year, and we see continued penetration will lead to also good growth prospects in those emerging markets. So how do we really accelerate that development? I think there's actually a number of factors contributing to our growth prospects. First of all, as you mentioned, is actually we are launching more products that covers wider market segments for these international markets. As we mentioned earlier, this year, we intend to launch 4 new products. All 4 of them actually are global products. All 4 of them actually complements our current market segments, either on the lower end or the high end and also has a format that's actually, I would say, very, very attractive and potentially useful for international markets as well. Also, as you just alluded to, this year, we also intend to launch our extended range product line by the end of this year to select markets. I think that will also help us cover some of the international countries where charging facility as well as driving distances has been building, I would say, block for EV penetration. So I think that's one of the areas that we are focused on supporting the global growth. On top of it, we also have been stepping up our localization efforts. For example, last year, in our key markets in Europe, in Southeast Asia, we have started local production for some of our products. And I think that will definitely be a very important part of our growth strategy by providing more attractive products, better service closer to the customers with local production facilities and supply chain associated with that. We also intend to launch our smart driving technologies along with, obviously, the expected DCAS regulation in place by the end of the year, hopefully, by early next year, our autonomous driving VLA 2.0 system can be utilized in international markets such as Europe and select markets in Southeast Asia as well. And on top of it, I think there's other things we have to do as a company in organizational structure development, talent recruitment, brand building and marketing as well as we actually are starting to roll out our proprietary charging facilities in select countries as well. All those efforts are intended to increase our competitiveness in international markets and elevate expand brand awareness and positioning. So we have a very exciting prospect in the next, I would say, 3 to 4 years. We anticipate the global overseas market will represent a much faster market growth compared to our overall growth rates as well as becoming a core profit center for our business.

Tina Hou:
[Foreign Language] My second question is regarding our AI investment and overall computing power. So as Mr. Xiaopeng mentioned that this year, the physical AI investment will increase to RMB 7 billion. So wondering what is our compute power right now and also the plan for the next few years? And whether these investments are all recorded in R&D or some of it will be also allocated to capital expenses.

He Xiaopeng:
[Interpreted] Thank you for your question. Since this involves long-term investment, I can only provide a relatively general response to your question. In the coming years, I believe that R&D in the automotive sector of our business will continue to converge, and we will gradually stabilize that. But investment in AI will gradually increase and will trend upwards because of our conviction in AI development. And however, the R&D spending will become more efficient. So in the subsequent years, the growth rate of our AI R&D investment will not be as significant or aggressive as previous years. And also, our major investment will include autonomous driving, smart cockpit and also robotaxi and humanoid robots among multiple categories and capabilities. And so in the future, after mass production of humanoid robot begin to launch, we also see greater investment in humanoid robots as well. And all of those investments will be booked as R&D expenses and not CapEx. Regarding the second part of your question, I think nobody nowadays can pinpoint exactly what is the compute power kind of requirement in the long term for physical AI. And right now, we have [ tens of ] thousands of GPU. In the future, I think we need to at least reach 100,000 units for computing power accumulation for physical AI data training purposes, at least that number. And I believe that cars training computing power requirement is going to be 1,000x for digital -- over digital AI and humanoid robot or robotics training will be 100 -- sorry, 1,000x of that of vehicles computing power requirements or standards. And in the future, definitely, I believe new methodology will be used to solve the computing power issue or shortage for physical AI and also the infrastructure, including power generation as well. Those will be long-term challenge for physical AI. However, we believe that we're going to figure something out to address that in the long term.

Operator:
Your next question comes from Ming Lee from Bank of America.

Ming-Hsun Lee:
[Foreign Language] So what is our current progress of robotaxi testing? Do you expect -- what do you expect an important milestone and the timing for our robotaxi business with a safety driver and without a safety driver in operation?

He Xiaopeng:
[Interpreted] Thank you. I think I've already touched upon that question. We believe that a fully autonomous driving capability on the software side will actually arrive in about 1 to 3 years' time, not only in China, but also around the world. Our hardware development regarding that has been moving and progressing smoothly. And right now, what is left is to address the regulatory requirements. And I think it will take time to do it step by step to obtain the testing license and also to move from having a safety driver on board to going without a safety driver on board. And we are also doing some extra R&D for robotaxi global operation as well. And so I believe that by second half of this year, we should be able to do some test drive with a safety driver on board. And by beginning of next year, hopefully, we can do without the safety driver on board. And in the future, we are going to open the whole system to cover not only China, but also around the world, partnering with reliable operational partners around the world using our platform, our technology and also our products so that we can provide this robotaxi capability or autonomous driving capability for users around the world.

Ming-Hsun Lee:
[Foreign Language] So what do you expect the scale or costly number of our robotaxi business in the future? And which models will provide the robotaxi service? .

He Xiaopeng:
[Interpreted] Regarding this question, I think the expansion or the actual deployment of robotaxi services depend on the regulatory development. And I think in the future, all parts of this ecosystem needs to quickly develop and whether -- and what kind of vehicles or what kind of model will support robotaxi, I think in the couple of years, there will be a lot of thinking and exploration. And I think fundamentally, we need to really figure out whether or not robotaxi should be driven by cars or should be driven by robots. And I think in some time from now, people will actually see clearer with very clear results or answer to that. Thank you.

Operator:
Thank you. As there are no further questions, now I would like to turn the call back over to the company for any closing remarks.

Alex Xie:
Thank you once again for joining us today. If you have further questions, please feel free to contact XPeng's Investor Relations through the contact information provided on our website or the Piacente Financial Communications.

Operator:
This concludes today's conference call. You may now disconnect your line. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]