Ladies and gentlemen, thank you for standing by for Autohome’s Second Quarter and Interim 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow management’s prepared remarks. As a reminder, this conference call is being recorded. If you have any objections, you may disconnect at this time. A live and archived webcast of this earnings conference call will also be available on Autohome’s IR website. It is now my pleasure to introduce your host, Sterling Song, Autohome’s IR Director. Mr. Song, please go ahead.

Thank you. Thank you, operator. Hello everyone. I am Sterling Song and welcome to Autohome’s second quarter and interim 2024 earnings conference call. Earlier today, Autohome distributed its earnings release, which can be found on the company’s IR website at ir.autohome.com.cn. Joining me today on today’s call are Chief Executive Officer, Mr. Tao Wu; and Chief Financial Officer, Mr. Craig Yan Zeng. Management will go through their prepared remarks, which will be followed by a Q&A session, where they will be available to answer all your questions. Before we continue, please note that the discussion today 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 are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. Autohome doesn’t undertake any obligations to update any forward-looking statements, except as required under applicable law. Please also note that Autohome’s earnings press release and this conference call include discussions of certain non-GAAP – unaudited non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures can be found in our earnings release. I will now turn the call over to Autohome’s CEO, Mr. Wu for opening remarks. Please go ahead, Mr. Wu.

[Foreign Language] Thank you. Sorry. Hello everyone. This is Tao Wu, CEO of Autohome. Thank you for joining our earnings conference call today. [Foreign Language] In the second quarter, Autohome’s net revenues grew steadily, user traffic increased noticeably, and our innovative business continued to make breakthroughs, driving the continuous optimization and upgrade of our entire business structure. [Foreign Language] Specifically, in the second quarter total revenues grew by 2.2% year-over-year to reach RMB1.87 billion, of which revenues from the online marketplace and others business continue to maintain double digit growth year-over-year, reaching 33.1% of total revenue. Notably, many business lines such as data products and NEV have experienced robust growth with revenues for the quarter increasing by over 15% and nearly doubling respectively year-over-year. In addition, we have maintained a healthy profitability while driving the development of our businesses and fulfilling our commitment to provide stable shareholder returns. In the second quarter, adjusted net income attributable to Autohome was RMB572 million, allowing our adjusted net profit margin to reach 30.6%. [Foreign Language] In our innovative business arenas, we have further expanded our new retail business reach, increasing and intensifying our penetration from high tier to low tier cities. By leveraging our established flagship Autohome Space store as the core hub, we have rapidly initiated our satellite plan. This plan utilizes our Autohome Space store as the core hub to extend our reach into neighboring low tier cities, create a network that radiates from single point to cover an entire region. This network dynamic not only accelerates the reach and depth of the sales network, but also significantly broadens the scope of our services, enabling us to access a broader market and a wider range of users. On digitalization, we continue to drive product innovation and upgrade by leveraging the capabilities…

[Foreign Language] Thank you everyone. Thank you, Mr. Wu. Hello everyone. This is Craig Zeng, the Chief Financial Officer of Autohome. [Foreign Language] In the second quarter, we continued to deepen our focus on enhancing our content portfolio, revitalizing the content through two categories, professional content and broader general auto-related content, establishing Autohome’s new IP matrix. [Foreign Language] For example, regarding professional evaluation, we have expanded our content to include targeted evaluations for hybrid vehicles, NEVs and ICE vehicles. On general auto-related content, we’ve expanded our design, automotive culture, off-road vehicles and other content for unique scenarios, resulting in the creation of eight IP programs including So Fast So Test, Top 10 Horizontal Evaluation, and [indiscernible]. We are also integrating live streaming and short video formats into our content to form a more comprehensive content matrix that caters to our users’ diverse consumption preferences. To date, these eight IP programs have garnered a total exposure of 860 million views across the entire network, significantly enhancing the influence of our platform. [Foreign Language] In addition by focusing on the new vehicle launch events prioritized by OEM, we’ve developed a set of content offerings that spans the pre-launch, during launch and post-launch stages of each new car launch. This approach begins with exclusive 3D car model speculation during the pre-launch, progressing to an in-depth introduction during launch, and then customer type evaluations post-launch, effectively prolonging the exposure times for each new car’s selling point. This not only helps the end customers efficiently promote their products, but also allows Autohome to gain influence among the end users. According to QuestMobile, our number of average mobile DAUs reached 67.91 million in June, an increase of 8.3% from a year earlier, and scoring our leading position in the auto media vertical. [Foreign Language] Turning to…

Operator, please open the line for Q&A session, please.

Thank you. [Operator Instructions] Our first question comes from the line of Thomas Chong from Jefferies. Please ask your question, Thomas.

[Foreign Language] Thanks management for taking my question. So recently we saw some luxury car brands exited the price war. So what do you think the reasons behind? And also government launched some policy a couple of days ago. So how it will positively impact us and the whole industry? Thanks.

[Foreign Language] Okay, thank you for raising this question. Since last year we said that the auto market competition becomes even more fierce with very severe rat racing and all kinds of automakers start to wait the price war and in order to gain more shares from the market. You can see that the duration of this round of price wardens intensity of the price cuts as well as the depth to this impact goes beyond everybody’s expectation. Since the beginning of last year to now, the price war has already lasted for more than 500 days. So for BBA [ph] as well as the other luxury brands, they decided to withdraw from the price war after participating for more than one year. We think there might be the following reason. [Foreign Language] So first of all, from the OEM perspective, we have observed that price for volume strategy doesn’t slow down the decline of the sales. You can see there’s one example. They originally priced 300,000 cars, now only sold at RMB200,000 with a price cut of RMB100,000. Even like that, in first half of this year, Mercedes-Benz and BMW here in China sales continue to decline versus the similar period last year. However, at the same time, the price cut also imposes negative impacts on the brand image of those luxury brands. Besides, we can see continuous price will also harm the profitability of the automakers. [Foreign Language] And secondly, from the dealers perspective, those dealers are also under big operation pressure because of the continuous price war. There are two aspects of it. The first thing is a pretty high inventory pressure. According to the statistics of Chinese Association of Automobile Manufacturers in June, you can see that the Chinese dealers Inventory Alert Index was 62.3%, which…

[Foreign Language] [Indiscernible] Mister Choi Dongshu, secretary general of the DA also said that this round of car rapid and replacement subsidy expansion and doubling is a very favorable news for the entire auto market. It is expected to drive around 2 million car consumptions of this year. Sorry, 2 million cars repeat this year and also in favor of driving more than hundreds of billion of replacement related consumption. And for Autohome, you can see that with the increase of the NEV replacement, it will be favorable for our NEV business and with the opening of the offline franchising stores, we will better satisfy the customer’s needs on car selection and car purchase. And for Autohome, we can see that the revenue coming from the NEV brand will also quickly rise in the near future. [Foreign Language] In short term, you can see that more than one year of [indiscernible] in this industry really compromised the profitability of the automakers and also triggered a series of issues and were also affected by this industrial headwind. However, in the long run, with the mitigation of the price war and with government keeps launching favorable policies to support the auto market consumption, we strongly believe that the auto market still equipped with long term growth potential and we are also bullish about the long term sound development of the auto industry in China.

Thank you. Our next question comes from the line of Brian Gong from Citi. Please ask your question, Brian.

[Foreign Language] Thanks management for taking my question. I have two questions. First question is regarding the used car markets given recently using price lowered by OEMs. What’s the latest situation for used car markets? Have you observed any improvement – marginal improvement for used car market? And the second question is about dealers. Have we seen a lot of closure of those dealers recently or do you expect any large scale closure in the future? Thank you.

[Foreign Language] Okay. Thank you for raising this question. If you look at the used car market because the new car price has been keeping the client, as a result it impulses a lot of pressure on the used car market. In June you can see that the used car sales dropped by 1 percentage point year on year. So anytime a lot of used care potential buyers have to purchase the new car and the car holders because of their price and volatility, they wouldn’t like to sell their cars. So here you can see that we are already approaching the half year, so for the half year volume Champaign resulted in very big volatility after new car transaction price. As a result, the sales rate [ph] for used cars is already intensifying. And in June, you can see that used care UCMI index is also define it to 41.2%, a drop of 2.4 percentage points year-on-year. And also highlighting that the used car market is not performing pretty well with a lot of big competition as well as the pressure of the entire market.

[Foreign Language] So if you look at the market we can observe the following characteristics of the used car market. The first thing is that the price remains low. And in June you can see that the used car average price remains at about RMB64,400 yen, which is the low point within this year. And I think that this is within our expectation because of the new car price. And the second thing is that the cross regional trading is very active and the entire market is do have a lot of bigger and vitality. This is pretty unique in the Chinese market. As a result, to construct integral and trustworthy and transparent industrial environment is very important. [Foreign Language] Even though there are some challenges in short term before the used car market that in the long-run we think that the scale, the policy environment, market structure as well as the consumer demand of the used car market doesn’t fundamentally change. And I think that’s when the car consumption, market expansion as well as the rising recognition of the consumers for the used car in the longer future. We think that used car market is still got a lot of potential and expected to grow in a sound manner. And you can see from autofocus perspective, we’re also very much focusing our own capacity building. For example, we intensify our products in terms of the car conditions and car statures in quarry products in the first half of this year I already mentioned our platform the authenticated high quality vehicles number increased by 50% year-on-year. We hope that with the entrance of Autohome into this market, the consumers can actually purchase the used car in the reassured manner and the used car market can become very active again. [Foreign…

Okay operator, the next one please.

Thank you. Our next question comes from the line of Ritchie Sun from HSBC. Please ask your question Richie.

[Foreign Language] Thank you management for taking my questions. I have two. First of all, in terms of competition, we have observed that a lot of Internet platforms started to develop the lead generation businesses as well as using large language model to improve the efficiency and conversions. So what does management will do, what will measurement do to address these challenges? Second of all, in terms of the cash balance, it is very adequate and profit is also quite stable. Our management, what does management feel on the potential special dividends or even lifting the dividend payout ratio? And would management consider launching a big scale by that program? Thank you.

[Foreign Language] So for your first question which is actually about the other entrance into the lead generation businesses, actually this is not something new and it already happened for quite a long time and for Autohome, we think that this is a long term challenge for us because we cannot monopolize this business. [Foreign Language] Before Autohome enter into this area actually there are already some search platforms as well as pan-media engaging in this business. And after we enter into this area for more than 10 years, we still face quite serious competition. And for Autohome, we think that our specialty is about professionalism in the verticals and we actually cover the whole lifecycle including car selection, car purchase, car use as well as car replacement. [Foreign Language] And in terms of the content measures to these challenges, we have three solutions. First is in terms of the content innovation. In recent years Autohome have introduced a lots of short form videos and live streaming as well as the other new formats says to enrich our ecosystem of the content. While at the same time we also built a lot of inclusive and unique IPs that have our IP ecosystem to differentiate from our competitors. And the second is in terms of the user experience enhancement, we keep optimizing our website as well as app interface design just to offer more convenience to our users. And third one is in terms of the cooperation channel expansion. We have been cooperating with a lot of pan-media platforms so as to build the traffic matrix and so as to deliver win-win against the competition. [Foreign Language] So the second question is about dividend payout. Let me first review our dividend payout history. Over the past two years we have been keep enhancing the return to our shareholders. From 2019 to 2021 we actually distributed 20% of our net margin to the shareholders as a dividend. And in the year 2022 we also updated our dividend payout policy with a fixed amount of RMB500 million, which is equivalent to 28% of our net margin of the same year. And in December 2023 we keep an end of dividend payout policy and over now about RMB1 billion dividend payout decisions, which is enhanced our dividend payout ratio to 50% of our net margin. So I think that in the next three years, from 2024 to 2026, the annual dividend payout amount will be no less than RMB1.5 billion. [Technical Difficulty]

[Operator Instructions]

Operator the next question please.

Thank you. Next question comes from the line of Xiaodan Zhang from CICC. Please ask your question.

[Foreign Language] So thanks management for taking my questions. And my question is regarding your new retail model for NEVs. At Autohome launched the so called satellite plan in the second quarter. So how should we think of your expansion plan going onwards? Thank you.

[Foreign Language] Okay. Thank you for raising this question. I think that since the launch of the first offline store in September 2022, now we are already actually our Space store already take roots in 28 cities in China and covering southeast and southwest as well as north part of China. And so far you can see that our satellite store model already covers five cities including [indiscernible]. And this is actually a new trial. And in the future we’re going to have a similar trial from the different angles. And the store opening pace is quite consistent with our communication at the beginning of the year because the satellite store is pretty new model and the major purpose is to cover more low tier cities so that our Space stores can have a better reach out and coverage.

Okay, operator, that’s the end of the Q&A session.

Thank you. I’ll now turn the conference back to the management for closing comments.

[Foreign Language] Thank you everyone. Thank you very much for joining us today. We appreciate your support to the company and look forward to updating you on next quarter’s earnings conference call in a few months’ time. And in the meantime, please feel free to contact us or email us if you have any further questions or other comments. Thank you very much. Bye-bye.

Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.