Good day, ladies and gentlemen. Thank you for standing by and welcome to the EHang Fourth Quarter 2021 and Fiscal Year 2021 Earnings Conference Call. As a reminder, we are recording today’s call. Now, I will turn the call over to Julia Qian, Managing Director of the Blueshirt Group Asia, EHang’s IR firm. Ms. Qian, please proceed.

Hello, everyone. Thank you all for joining us on today’s conference call to discuss the company’s financial results for the fourth quarter and the fiscal year of 2021. The earnings release is available on the IR website as well as from Newswire services. Please note, the conference call is being recorded and the audio replay will be posted on the company’s IR website. Today, EHang management team, which includes Mr. Huazhi , Chief Executive Officer; Mr. Edward Xu, Chief Strategy Officer; Mr. Xin Fang, Chief Operating Officer; and Mr. Richard Liu, Chief Financial Officer, will successfully give prepared remarks. Remarks delivered in Chinese will be followed by English translation. All translation is for convenience purpose only. In the case of any discrepancy, management’s statements in original language will be prevailed. A Q&A session will follow afterwards. Before we continue, please note that today’s discussion will contain forward-looking statements made pursuant to the Safe Harbor provision 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 maybe materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company’s public filing 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 the numbers presented are in RMB and are for the fourth quarter and the full year of 2021, unless stated otherwise. With that, let me now turn the call over to CEO, Mr. Huazhi. Please go ahead, Mr. Hu.

[Foreign Language]

Below is the translation of Mr. Hu’s remarks. Hello, everyone. Thanks for joining our earnings call today. I am very delighted to share EHang’s operating performance for the fourth quarter and fiscal year of 2021 as well as our recent developments. Despite challenges at home and across the global in the past year, EHang has always focused on exploring the vast market of the urban air mobility as an innovative and technology-driven enterprise. We are committed to creating value for our industry, partners and shareholders while making significant progress in the following key areas. First, obtaining the Airworthiness Certification of the EHang 216S has always been placed as our top priority and the past year has seen a remarkable progress on this project. Notably, we work with the Civil Aviation and Administration of China, in short, CAAC, to develop the special conditions for the EHang 216S tax certification, the first for passenger carrying autonomous aerial vehicles in the world, which was formally adopted and issued by the CAAC in February this year. And this means that the top certification of EHang 216S has the certification basis for further implementation. At present, the certification of EHang 216S is in the compliance review phase and we are grateful for the CAAC support to EHang. Next, turning to our 100 Air Mobility Routes initiative, we are the frontrunner of the industry and carried out operational trial flights in China during their certification process. We are developing UAM pilot projects in multiple cities in China to continuously accumulate real flight experience in various scenarios. In the near future, we will disclose the first group of Chinese cities that will have our commercial UM services and fly routes after we secure the Airworthiness Certification. Moving on to sales and marketing, we are pleased to gradually…

Thank you, Mr. Hu. Hello, everyone. I am Edward Xu, Chief Strategy Officer of EHang. Now, let me summarize the operational results of the year of 2021. Basically, we followed our strategic positioning as a UAM platform operator and prioritized the Airworthiness Certification of the EHang 216S AAV throughout the year. We invested significant resources in the certification project by working closely with CAAC experts since the beginning of the year with EHang’s diligent and solid contributions. In December, the CAAC finally published the world’s first special conditions for the EHang 216S type certification, which sets a foundation for Airworthiness Certification for all the AAVs. We believe this is a new milestone, not only in the certification project, but in the history of human aviation. While the type certification process for the EHang 216S is still ongoing, we have added the strength in our efforts to obtain the type certificate as soon as possible. On the other hand, we accelerated the test operations of EHang 216 AAVs with the aim to fully rollout commercial operations soon after obtaining the type certificate. As we have positioned ourselves as the world’s leading UAM platform operator, it defines our innovative business model as a hybrid one of sales plus operation, which is a combination of OEM and AAV operations. As we have highlighted in our previous calls, we believe this new model has strategic importance because AAV sales should be boosted by real commercial operations. This is especially true when our self-developed autonomous flight technologies make the hybrid model possible and necessary to ensure absolute safety and maximum market acceptance of our products. Specifically, our ongoing 100 Air Mobility Routes initiative was launched in middle of 2021 under the guidance of CAAC. With the focus on the Guangdong, Hong Kong, Macau Greater Bay…

[Foreign Language]

Below is the translation of Mr. Xin Fang’s remarks. Thank you, Edward. Hello, everyone. I am Xin Fang. First, I would like to thank Mr. Xu for inviting me to join EHang. After joining the company, I was deeply impressed by the energy, dedication to innovation and release efforts of everyone at EHang. Safety and security are at the heart of every member of EHang team, and they strive for innovative AAV technology research and development. We expect to obtain the type certificate of the 216 SAV around the middle of 2022, which will lay a solid foundation for its commercial operations. Meanwhile, we are accelerating our arrangement for operating the EHang 216 AAVs to ensure that our commercial services can be launched gradually after obtaining the type certificate. We plan to upgrade the production line at the same time. This way, we can quickly and steadily increased production based on the highest standards of the aviation industry after obtaining the type certificate growth attention to high quality will also be strictly implemented in order to ensure we will deliver safe, reliable and compliant product to the market. For the fiscal year 2022, we expect total revenues to be in the range between RMB190 million and RMB210 million with most of the revenues are expected to be generated in the second half of the year upon receiving the EHang 216 SAV type certificate and launching commercial operational services. From the perspective of application scenarios, we expect our revenues in 2022 will mainly come from air mobility usage, including Aerial Sightseeing, Aerial Firefighting and Aerial Logistics as well as smart city investment area, etcetera. EHang is now seeking partnerships with leading companies in the industry with the aviation potentials by leveraging our existing technologies. Through the leading advantage in our original…

Thank you, Sheng, and hello, everyone. Before I go into details, please note that all numbers presented are in RMB and are for the fourth quarter of 2021, unless stated otherwise. All percentage changes are on a quarter-over-quarter basis unless otherwise specified. Detailed analysis are contained in our earnings press release, which is available on our IR website. I will now highlight some of the key points here. 2021 was a unique year as we initiated a strategic upgrade and transition to implement our strategic positioning as an urban mobility platform operator and migrate our sales model from a product sales-centric model towards a more operating platform-oriented and integrated model. As discussed earlier, in 2021, we have been focusing on the ongoing certification project and preparation for the 100 Air Mobility Routes initiative in China. And we believe this will lay the essential foundation for our next stage revenue growth with increased sales and deliveries and operational services after obtaining the certification. As such, in Q4, total revenue were RMB8.7 million compared with RMB13 million in Q3. The EH216 series of AAV deliveries in Q4 was four units compared with eight units in Q3. For the fiscal year 2021, total revenues were RMB56.8 million compared with RMB180.1 million in 2020. The EH216 series of AAV deliveries in 2021 were 30 units compared with 70 units in 2020. Gross margin was 60.1% in Q4, a minor decrease of 1.7 percentage points from 61.8% in Q3, mainly due to the changes in revenue mix. I’m glad that our margin continued to be kept at a relatively high level, demonstrating our solid competitiveness. We even achieved a year-over-year increase of 4.4 percentage points in 2021, a record high gross margin of 63.4% with a contribution from a commend-and-control system delivered in 2021. In…

Thank you. [Operator Instructions] Your first question comes from the line of Tim Hsiao from Morgan Stanley. Please ask your question.

Hi, everyone. Thanks for taking my questions. This is Tim from Morgan Stanley. I’ve got two questions. The first point is about the impact on the resin from pandemic in China. In light of resins, the tightening COVID control majors in China, especially in the first quarter, have we seen any potential hiccup to our supply chain management, TC certification progress and also the order delivery, especially in largely into second quarter this year? In the meantime, how do we think about this kind of margin trend this year, given the impact from the pandemic and of course, the cost inflation? So, that’s my first question. And my second question is about the urban air mobility operation. We saw pretty strong progress, but could you please share a little bit more about more like the quantitative updates about business development. It would be great if the management can elaborate a little more about the fleet size, the volume rules in terms of numbers that have been implemented and also our current operational situation. Thank you.

Okay. Thank you, Tim, for your questions. This is Edward Xu, Chief Strategy Officer of EHang. So, let me answer your first question. And I think, yes, our CFO, Richard, can elaborate more on the margin trend. So, on the – on your first question, basically, regarding the ongoing COVID-19 pandemic, in China, and we – so far, we see not a material impact on our supply chain because our supply chain suppliers are mostly distributed in South China in Dongguan area. We noticed that the recent closedown of Shenzhen, but it didn’t have much impact so far. And also we did some preparation by prepare the inventories for our products beforehand. So far, we see our inventories at a satisfactory level. So, we don’t see any major impact so far. And on this TC certification right progress, we think it is still on the right track. And so far, our special team is working very closely with CAAC experts and so which is not disrupted by the pandemic as well. So, that’s all for this. And Richard can elaborate more on the margin trend. Thank you.

Okay. Tim, this is Richard. I will take the second part of your first question regarding the margin trend. As Edward just said, we have not seen any material impact from the increased situation of recent pandemic in China. In addition, there are some recent price increases of raw materials due to the changes of the world political landscape. We have so far seen some impact from this aspect. As such, we have been trying to stock up some key components and materials as our stock reserves. On this slide, it is expected that our overall gross margin might be brought to the average levels of previous years, roughly in the range from 55% to 60%. Having said that, in our revenues, as you know, there are revenues from selling our proprietary command and control systems on which the price increases of raw materials and supplies would be limited. So therefore, if the percentage of the revenues from this in the total revenues will go up in the year, it will actually help to enhance our overall gross margin, as you can see. So, basically in sum, we will continue to pay close attention to the development of the cost conditions as a result of the recent development and take proper measures to minimize such impacts on our gross margin.

Okay. Tim, I would add one point. Yes, on the operational side, you are right, maybe there are some impact on our operation because we do have collaboration with a helicopter company in Shenzhen. And also we plan to launch more operational spots in July, for example, so which was disrupted by the pandemic at this – at the moment. So, on the operational side, we do see some impact, yes. So next, regarding your second question, right. So, as updated in our earnings release, so far under the 100 air mobility routes initiative, our UM operating team has selected and developed the line operations spots in Chinese cities, including Guangzhou, Hezhou, Shenzhen, Zhaoqing and Sanya, etcetera. So, at these nine operational spots, so far we have conducted over 4,000 operational trial flight with our EHang 216 AAVs in real practical scenarios for the Aerial Sightseeing. So far multiple flight routes can be developed at each operational spots. So, in the near future, we will be able to release the first group of cities in China as our target to launch our commercial operational services and flight routes at the local operation spots after we obtain the TC and also the commercial license from the government from CAAC. Thank you.

Thank you very much Richard and Edward. Thanks for the detailed sharing. Thank you.

Thank you.

[Operator Instructions] Your next question comes from the line of De Lu from Tianfeng Securities. Please ask your question.

Hi. Thanks management team for taking my question. I have two questions as well. First is geographically speaking, like can we say China is EHang’s top most priority regarding obtaining the type certificate and all the licenses? And how should we think about other regions coming down on was, for example, in terms of licenses, where will be EHang’s next – targeting next, like, for example, like Korea or like Europe? And my second question is in terms of competitive advantages and the market share-wise. How does the management team view other competitors? And where does EHang stand among those competitors like foreign or domestic? Thank you so much.

Yes, thank you for your question. This is Edward again. Let me answer your questions. So, first of all, regarding the geographical distribution, we believe that China appears to be our most prioritized markets so far, given the following reasons. First, it is our home market, where our firm is based. Second, we got the support from the regulator, i.e., the CAAC in respect of air worthiness certification for unmanned aircraft for low altitude passenger-carrying urban air mobility operations. And three, this is a huge market, and there was a good potential with the largest population and the prosperous major city clusters, such as Pearl River Delta, the Yangtze River Delta and the Bohai Bay areas, etcetera, so which means that the huge urban population has a potential for this mobility market. And meanwhile, we also keep our focus on the overseas market such as Asian countries, including Japan, Korea, Indonesia, Malaysia, etcetera, those countries which we have made a visible progress in client acquisitions, trial flights and regulatory relationship construction, etcetera. And finally, we think that some Western countries, including Europe and the U.S., but those markets, the regulations could be more conservative. So, we are taking a more passive stance. And we focus on China, and we believe that any success in China’s certification could be a leverage for us to go into those markets. Thank you. And so regarding your second question, so, yes, we have kept a close watch on the global UAM market, especially on the development of the peer group as well. And we believe we are a leading player in terms of product design and a real flight record so far. For example, our EHang 216 AAV is by far the world’s leading aerial vehicle product that is able to complete autonomous flights. We noticed that from the peer group with – most of them are still focused on this manned flight. Autonomous flight is definitely something that is on their next steps, and we have built the world’s first centralized AAV platform to manage multiple AAV operations with cluster management technologies. And so far, we have conducted over 20,000 autonomous trial flights in 11 countries. Moreover, we have made the most progress in air worthiness certification with CAAC. We published the world’s first set of special conditions for the type certification for autonomous air vehicles like the EHang 216, right. So, that means we are leading in terms of the certification progress as well. As we are targeting around the middle of the year for type certificate ground for our EHang 216S AAVs, we aim to be the first firm to launch commercial operational service in the world, probably in the second half of the year. So, given that, we believe that we do have the first-mover advantage over our peer group. Thank you.

Thank you so much.

Thank you. As there are no further questions and the interest of time, I would now like to hand the conference back to the speakers for any closing remarks.

No further questions?

Thank you, operator.

We do have a question that has just come through. Are you happy to take this? Your question comes from the line of David Zazula from Barclays. Apologies, it looks like we are not taking no further questions.

Okay. Operator, can you hear me?

I can hear you, yes.

So, we can give the closing remarks, right?

Yes, please. Please go ahead.

Thank you. Okay. Thank you all for participating on today’s call. We will look forward to reporting to you in our next quarter. Thank you very much.

That does conclude the conference for today. Thank you for participating. You may all disconnect.