Thank you for standing by and welcome to the Hesai Group Second Quarter 2023 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session [Operator Instructions] I would now like to hand the conference over to Yuanting Shi. Please go ahead..

Thank you, operator. Hello, everyone, and thank you for joining Hesai Group's Second Quarter 2023 Earnings Conference Call. Our earnings release is now available on our IR website at investor.hesaitech.com, as well as via Newswire services. Today, you will hear from our CEO, Dr. David Li, who will start the call with an overview of our recent updates.

Next, our Global CFO, Mr. Louis Hsieh, will address our financial results before we open the call for questions. Before we continue, I refer you to the safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements.

Please also note that the Company will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported on the GAAP in our earnings release and SEC filings. With that, I'm pleased to turn over the call to our CEO, Dr. David Li. David, please go ahead..

Thank you, Yuanting, and thank you everyone for joining our call today. In the second quarter, our team's dedication and hard work resulted in record-breaking quarterly figures. In particular, we achieved unprecedented milestones in our quarterly net revenues, experiencing a surge of over 100% year-over-year.

Furthermore, our total LiDAR shipments for the quarter soared to a record, over 52,000 units, marking a 10-fold increase compared to the same period last year.

Both our ADAS revenue and shipments also reached all-time highs, with ADAS shipments growing 27x year-over-year, further reinforcing our leading position in delivering high-quality LiDARs for passenger cars.

As a result, we are delighted to report that our strong shipments, along with our unwavering focus on operating efficiency, have generated a positive operating cash flow for the second consecutive quarter with a four-fold increase over prior quarter.

Among our six U.S.-listed peers, we take pride in being the sole player with a positive operating cash flow. These financial achievements underscore our commitment to sustainable and profitable growth in the long run.

We are also thrilled to be named as the number one global automotive LiDAR supplier for the second consecutive year in a recent report published by Yole Intelligence, a world-renowned independent research company in Europe. We have captured 47% of the worldwide LiDAR market share by revenue in 2022.

Yole report indicated astounding growth of 95% of the global automotive LiDAR market from '21 to '22. Meanwhile, we extended our leading position, increasing our global LiDAR market share from 42% in 2021 to 47% in 2022, clearly surpassing the second-largest player at 15%.

Furthermore, according to the report, Hesai is projected to be the largest shipper of ADAS LiDAR units again in 2023 with an anticipated volume almost 1.5x greater than the second-ranked supplier, firmly establishing us as a market leader.

This prestigious leadership position is a strong testament to our exceptional capabilities in designing, manufacturing, and shipping high-performance, high-quality LiDAR products at a substantial volume. We take immense pride in our unique ability to meet market demand and consistently exceed customer expectations.

Now, let's take a closer look at our second quarter business update. On the ADAS front, we're excited to announce that we have secured a new domestic design win for multiple series-production vehicle models with SAIC Motor.

Our partnership with them now includes new intelligent multipurpose vehicles in addition to our previous collaboration on passenger vehicles and battery-electric heavy-duty trucks. Among our 11 ADAS customers, six of them are scheduled to begin shipping new EV models equipped with Hesai LiDAR by end of 2023.

Also, as of second quarter of 2023, among our 11 ADAS OEM customers, we have achieved ADAS design wins for mass production across over 40 vehicle models, showcasing our commitment to providing top-notch LiDAR products to our value customers.

Internationally, our ADAS LiDAR products have attracted significant interest from global OEMs who acknowledge our proven track record in consistently delivering automotive LiDARs of the highest performance and better quality at scale and meeting production schedules.

We are making notable progress in advancing our discussions with leading global OEMs on sourcing arrangements for the next-generation intelligent vehicles.

In the second quarter, four additional programs with three leading global OEMs have moved forward to the RFQ phase and we anticipate final decision to be made starting in the fourth quarter of 2023.

Among our ongoing RFQ engagements, we forged two new strategic development programs with two leading global automotive OEM partners, one from North America and one from Europe. These comprehensive programs encompass long and short-range LiDARs, enabling us to create a comprehensive portfolio of advanced LiDAR solutions that prioritize safety.

Development programs like these represent a unique opportunity for us to fine tune our products around the design of the target vehicle models and offer OEM customers a deeper level of understanding of our technical superiority and engineering capabilities before they make final decisions. Moving onto the autonomous mobility market.

In the second quarter, we successfully commenced the volume shipments on our latest deal, which represents the largest Robotaxi LiDAR contract in the Company's history, with a leading global Robotaxi player, an order we mentioned during our last quarterly earnings call.

The entire order spans the next couple of years and notably, we have already secured contracts to ship LiDARs valued at a couple of hundred million dollars for the year of 2024 alone with an improved gross margin. Next, I'd love to share an update on manufacturing and product upgrades.

We remain on track to manufacture our upgraded AT series LiDAR featuring a refined design, extended detection range, and lower power consumption. Full-scale production is anticipated to commence in the third quarter of 2023 at Hertz Center, our in-house manufacturing facility in Hangzhou, which operates at an automation rate of over 90%.

This new smarter manufacturing facility is designed to increase our production throughput, further reduce cost, and pave the way for even more scalable production. Anticipating a smooth transition, we expect to begin volume shipments of the upgraded AT128 early in the fourth quarter of this year.

In the recent development, we've deepened our longstanding partnership with NVIDIA, which dates back to 2019, through a new venture that seamlessly integrates our cutting-edge LiDAR sensors into their NVIDIA DRIVE and NVIDIA Omniverse ecosystems.

Now developers can leverage the NVIDIA platform for more accurate testing of the autonomous vehicle algorithms while significantly shortening the development cycle, facilitating a more efficient and powerful approach to autonomous driving. NVIDIA has been one of our top 10 U.S. customers since 2019.

Last but not least, safety remains at the heart of our endeavors. A commitment deeply rooted in our conviction that human life is priceless. Our unwavering dedication to spearheading advanced and comprehensive safety standards in our functional safety, cybersecurity, and product quality truly sets us apart in the industry.

The pride we take in our achievement is tangible. We are certified by SGI, the world's leading third-party certification company as the very first LiDAR sector to attain SOP product certification in our products.

Furthermore, we're truly honored to lead the themed global ISO automotive LiDAR working group, where we collaborate alongside industry giants like Valeo, BMW, Bosch, Sony, and Volkswagen. Together, we're forging a unified consensus on the testing methods for automotive grade LiDARs, showcasing our leadership role in shaping the industry's future.

It brings us immense pride to shoulder the responsibility of utilizing our technical expertise to drive the establishment of multiple safety standards for the industry. Our devotion to safety knows no bounds. And we continue to push the boundaries to empower a secure and protected future for all.

To quickly summarize, our second quarter was truly remarkable. Our operational accomplishments are a testament to the strides that we're making with the record-breaking revenue and LiDAR shipments, backed by a steady positive operating cash flow. This is just the beginning of an extraordinary returning half.

Our unwavering dedication drives us to build upon these triumphs and seize long-term growth opportunities in the booming ADAS and AM markets. Our commitment to excellence goes beyond [new words].

It is the relentless pursuit to ensure that our products are synonymous with trust and dependability to safeguard the well-being of every end customer, and to craft a tomorrow where safety is paramount and intelligence drives. Now, I'll turn the call over to Louis to share more details on the financial performance and outlook. Louis, please go ahead..

Thank you, David, and hello, everyone. Let's go through our operating and financial figures for the second quarter. To be mindful of the length of our earnings call today, I encourage listeners to refer to our second quarter earnings press release for further details.

We are delighted to see that our net revenues exceeded our guidance, reaching an all-time high of RMB440.3 million, $60.7 million this quarter, up 108.5% year-over-year and 2.4% quarter-over-quarter.

In the second quarter, our LiDAR shipments saw an impressive 10-fold surge year-over-year, 49.6% increase quarter-over-quarter, reaching a record high of 52,106 units, reaffirming our leading position in the global LiDAR industry with cumulative LiDAR shipments now exceeding 190,000 units.

In addition, we attained exceptional milestones with record high ADAS revenues for the second quarter, experiencing a triple-digit year-over-year increase in shipments of ADAS LiDAR, soaring to an astounding 27x year-over-year.

Based on reported revenues and shipments in 2022, as well as the first half of 2023, we continue to outpace the competition with higher revenues in LiDAR shipments than our six other U.S. listed LiDAR peers combined. Our gross margin for the second quarter of 2023 exceeded our earlier expectations, reaching 30%.

This achievement is a result of better-than-expected ASPs and continuous improvement in our manufacturing cost structure. Even though the gross margin is slightly lower quarter-over-quarter, as expected, due to the commencement of a larger -- a large, but lower-margin quarter with a leading global Robotaxi company.

Furthermore, our unrelenting efforts to improve revenue scalability and cost efficiency resulted in sustained positive operating cash flow for the second consecutive quarter of RMB58.3 million, $8 million.

This accomplishment, which is unparalleled in the LiDAR industry, represents a four-fold quarter-over-quarter increase, underscoring our robust financial trajectory to profitability in the long term. Turning to our financial outlook.

For the third quarter of 2023, we expect net revenues to be between RMB405 million, $55.9 million, and RMB425 million, $58.6 million, representing a year-over-year of approximately 21.3% to 27.3% growth. The lower-than-normal year-over-year quarterly net revenue growth can be attributable to two primary factors.

First, net revenue in Q3 '22 were elevated due to a significant rebound in Q3 '22, following the Shanghai COVID lockdowns in 2Q '22, resulting in a high base year-over-year comparison for Q3 '23. And second, LiDAR units totaling several million U.S.

dollars that were initially scheduled for delivery in 3Q '23, are now anticipated to be delivered in 4Q '23 instead, an adjustment that purely reflects a shift in timing. We are still on track to meet or exceed our revenue target of [RMB 1.8 billion], approximately [$250 million].

It's important to highlight, that the strong growth comes in the face of challenging currency backdrop. With RMB having weakened about 8% against the U.S. dollar over the past year, shifting from around RMB6.71 to RMB7.25 to the U.S. dollar. Regarding LiDAR shipments.

Our original goal was to achieve 250,000 for the full year '23 due to some delays from our OEM customers, particularly relating to new model releases and the product transition in our updated AT128, which mandates testing and validation by our customers. We are now projecting shipments of approximately 220,000 LiDAR units for the full year 2023.

With respect to gross margins, we anticipate the commencement of production of our Hertz factory in Hangzhou in the third quarter 2023 will further improve our ADAS gross margins as it reaches economies of scale in manufacturing and utilization. We also expect our group level gross margins to rise in the fourth quarter of 2023.

We are now confident that we will exceed our gross margin target of 27% to 30% for the full year 2023, and expect to reach our long-term target of stabilizing the blended gross margin between 30% to 35% in this '23 year, one year ahead of our previous estimate.

In summary, our full year 2023 revenue, gross margin, and operating cash flow have all surpassed our expectations, whereas our LiDAR shipment volume is slightly lower than our initial estimation made at the end of last year. Nonetheless, our business continues to make significant strides, paving a clear path to sustained growth and profitability.

The above outlook is based on our current market conditions and reflects the Company's preliminary estimates of market and operating conditions and customer demand, which all -- are all subject to change. This concludes our prepared remarks for today. Operator, we are now ready to take questions..

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

Congratulations on another solid quarter. I have two questions. The first one is about the delivery delay because according to the earnings release, there will be several million U.S. dollars sales of LiDAR delay from third quarter to fourth quarter.

I think Louis briefly highlighted that, but could you elaborate a little bit more about what caused the delay and what kind of program it is? Is it mechanical or semi-solid state LiDAR? And any real cause to the impact to Hesai's fourth quarter margin.

And lastly, do we expect any further delay of other projects from the fourth quarter to sometime next year?.

Thank you, Tim. As far as the delays, they relate to both ADAS LiDAR for the solid state as well as for the AT series. We won't discuss any names, but they will move to Q4. And then I don't, at this point, know of any delays into Q1 of next year.

But you can basically expect a large Q4 ADAS delivery number as basically many of our customers will ramp up for next year. You think about it this year, we'll probably have three or four programs that are shipping, that are actual models shipping in ADAS. Next year -- by the end of next year, we expect over 30 models.

So some of them will be -- begin to accept LiDAR and ramp up in Q4. So it's just been a shift in time, but I won't call out any specific names..

Got it. My second question is about the overseas projects because during the presentations, I think, David mentioned that the Company has received several RFQs from Europe and U.S. car makers, and some would turn to the confirmed purchase orders likely later this year.

So could you please shed some light regarding the rough scale of those projects versus what we currently have in China? And if there is any potential SOP schedule you can share with us?.

David, do you want to take the overseas?.

Yes. Thank you, Tim. This is David Li. So you asked about the global programs, right? So I think first we have moved from quite a few of the RFIs to RFQs, which is really the last stage before they make the final decision to go usually with one vendor.

And yes, based on the schedule we are given, they will start giving out final decisions starting in Q4 of this year and rather than Q4 this year and Q1 next year.

I think we also mentioned briefly that on top of this RFQ, some OEMs are taking an actual step to do a development project with us, which is one step further, meaning that for the few of the lenders who are on the shortlist of the RFQ, they usually go with one or two of those lenders to do in-depth development first before making that decision, essentially front-load some of the work for them to further understand our capability in a development style as opposed to just looking at and testing the units.

So this is very helpful to us because -- and if you should think about Hesai's capability, we always outperform peers when we are -- our products are testing directly against especially in an integrated way. And now we're getting this very special opportunity to prove that.

So we are in the process of the two, one is with European OEM, the other with American OEM..

Got it. David and Louis, looking forward to more productivity in the new project wins..

Your next question comes from Olivia Xu from Goldman Sachs..

Congratulations on the results. My first question is about the pricing. We've seen the intensified pricing competition in the EV space in July and August.

How do we see the pricing pressure to LiDAR products into the second half this year and longer term?.

Thank you, Olivia. I think for Q3 -- Q2, our pricing remained relatively stable. There was the large contract with a global robotaxi company that obviously lowered our prices and affected our gross margin. But that was accounted for already. We have seen a stabilization in prices for AT, XT, QT, and Pandar.

In fact, the pricing for other customers has actually been better than expected. And that's why you saw the gross margin got up. So we raised our gross margin profile. So, so far it's been relatively stable. Into Q3 and Q4, we expect that stability to continue for this year, because we sign longer-term contracts.

And then as far as next year goes, we will have to wait for Q4. So we are lucky so far that prices have stabilized..

Got it. Yes, my second question is about financials. We see that both sales and marketing, also R&D expense was lower in the second quarter versus the first quarter this year.

How should we expect the OpEx to churn into the third and fourth quarter this year?.

I think sales and marketing and G&A are certainly under control. So they will continue to trend down as a percentage of revenue. R&D, if it goes up more, it's actually a good sign. That means we're winning programs. So obviously when you win a RFQ, and you must put resources into the initial phase for getting the product to SOP.

So if we do increase the R&D side, it will be good. Also, Maxwell will open next quarter, and that will mean R&D spending to move and buy testing and validation and calibration equipment and moving it into the new facilities as well as additional headcount. Same thing on the Hertz side.

Hertz will begin full-scale operation in September and so, it will require some spending there. But R&D spending at this stage for the rest of this year is actually a good sign. That means we're winning a lot of business..

Your next question comes from Bin Wang from Credit Suisse..

I've got two financial questions. Number one, can you provide third quarter volume guidance, because you provided revenue. Can you provide the volume for the LiDAR. That's number one. Number two is about -- question about service revenue.

Why such a big jump in the second quarter revenue compared to the first quarter or previous quarter as well? So do you change accounting to determine the service revenue?.

First question on the units. We don't typically provide units guidance, but it will be lower likely than Q2. That's why the revenue is slightly lower because of the shift in timing. Q4, the units will be quite high. But it will somewhere be -- my best guess would be the units will be somewhere between 45,000 and 48,000 units.

And then on the services revenue, I didn't see any specific bump up.

Do you know why? The services revenue went up in Q2?.

I didn't really see it..

Okay. So it relates to a specific project where we're working with to build basically. It's a new software development program. So that one, we haven't really disclosed yet, but that's the reason. It's not significant in our business yet..

Your next question comes from Leping Huang from Huatai..

The first question is also about the margin outlook in the next few quarters. So you mentioned it's due to a one-time big order from one major customer in second quarter.

What should we look at the margin outlook in the next few quarters? Will it stabilize in this below 30% range? And since we see some -- also related is that we see some further price cuts on the OEM side in these days. How this translates into your margin? Yes, this is the first question..

Yes. I think for us, Q3, we'll see a dip in margin as we've already telegraphed to everyone. I would expect Q3 gross margin to be somewhere between 20% and 25%. And then Q4 will bump up. Q4, with the Hertz facility running and also with the new version of AT in the market, you should see a bump up in gross margin back to 30% to 35%.

So for the full year of 2023, we did 38% gross margin in Q1, 30% in Q2. Q3 will be our low point, 20% to 25%. Q4 will be back to 30% to 35%. And so for the full year, we will exceed 30% gross margins.

So we will hit our long-term target of 30% to 35% gross margins for the whole year, and Q4 will do that because of the size and the volume shipments in Q4. For long-term gross margins next year, we expect it to be in the range of 30% to 35%, because the enhanced AT will be shipping in large volume.

So if we ship 220,000 total LiDAR this year, next year we'd probably expect a double on that to over 400,000. So things will be at scale. Therefore, gross margin will go up with the new enhanced AT product. Second is the large robotaxi business.

We will also have an enhanced Pandar product, which we will begin to ship in Q1 of next year, and that will also improve margins. So between the two, with our revised enhanced products in AT and Pandar, you will see a gross margin stabilization between 30% to 35%. In fact, '24 should be higher than '23 in gross margin.

So that's why we're moving very quickly on a clear path to profitability by the second half of 2024..

Okay.

So the second question is about do you have any -- since you used to have some [postponed on] the revenue to the fourth quarter? So, based on the latest view on the market, do you have any visibility on your outlook for the next year, for 2024?.

Yes, I think the Q4 '23 will be our biggest quarter at this point. So that's why we will hit our -- for the first two quarters, we've done $120-something-million. Our target for the year is $250 million. And don't forget, when we made that projection last year, the RMB was [6.7]. So that's actually $270-plus-million.

So we'll exceed our original forecast. So if you put that in perspective, Q4 will be our largest quarter. ADAS units will ship the highest as people ramp up for '24. So we would expect to hit that $250 million mark with a strong Q4 both in deliveries and in revenue for the quarter.

For 2024 our current estimate, and we'll refine it as we get closer to 2024, is for units to be over 400,000. So basically a double almost from this year. And revenue should easily be at least 60% to 80% growth year-over-year. So we're targeting somewhere between $400 million and $450 million, which would be 60% to 75-or-so percent growth.

So we expect a strong '24..

[Operator Instructions] Your next question comes from Tim Hsiao from Morgan Stanley..

Thanks for giving me another opportunity to ask the follow-up questions. So I actually have another two related to the operation. So the first one is about the client concentration, because despite the 11 ADAS customers, I think David just mentioned earlier, currently the single largest customers contribute a big chunk of Hesai's ADAS revenue.

So looking forward, should we expect more diversified salesmates in 2024 or such sales concentration, in your view, might continue to be the case given increasing divergence in performance of Hesai's end customers? We noticed that probably one or two of them are doing very well. So this is my first question..

Yes, I think for this year you're correct, Tim. The concentration is well over 50% on the ADAS side in one customer and about 50% on the robotaxi side in one customer. We obviously expect some diversification in '24 because right now only three or four models are shipping SOP. By 2024, by the end, over 30 models will be shipping.

And we have one of over 45 models in our pipeline. So you can see that obviously with more models shipping, in '24 the concentration in ADAS will [diminish]. Also the same thing on the robotaxi side. We have hundreds of customers on the robotaxi side and industrial robotics side.

And so the concentration we would expect to lower in '24 although these two customers on ADAS and robotaxi obviously are our biggest two customers. But we do expect some reduction in the percentage.

You had a second question?.

Yes.

My second question is about the product itself because I just want to check that are most orders of ADAS LiDARs in our order backlog still standardized product and do we see increasing requirement of the product customizations by our clients or most OEMs or car makers are still fine with the standardized products? So going forward, do you expect the Company to have more co-developed or bespoke projects with OEM that could help probably companies tied up with the car makers in the long term?.

Yes, I think you're seeing a bifurcation in the standard versus optional side. So for the high-end models, for the highest end models in most of these OEMs, I think LiDAR will become more and more increasingly a standard feature. For cars that are in mid-range or lower, you will see it as an optional feature.

But over time, as you will see, as the market moves to L3 and L4 LiDAR becomes a necessity. So for one of our customers, for the NOA product, so the navigation on autopilot, it requires LiDAR. So if you want that feature to be able to hands free driving in the city or on your commute or in parking, you're going to need LiDAR.

And you'll see that as the features become rich and the functionality increases across the OEM spectrum that LiDAR will be seen as a necessity. But right now I would say it's for the high-end cars. You'll see that in our largest ADAS customer and others is standard.

But for products that are not the highest level as far as their price point, you will see it as an option. Even on the option, the take-up rate for us has been about 30% plus. So it's not bad..

Louis?.

Yes, go ahead, David..

I think he is asking whether we're providing a customized product or standardized product to the customer..

Yes, that's right..

Is that right?.

Most of it is standardized, the AT..

So I think the short answer is that we always provide the standardized product in a sense that it's the same platform, same specs. When we, for example, upgrade from the current AT128 to the upgraded version, everyone also moves over. And in the end, it's about economy of scale and efficiency.

So we always try to provide the same product to everyone with no customization on the performance and definitely no customization on the reliability part.

And the only part that might be slightly different is the communication, because different customers probably talk to our LiDARs in a different way on the data side, right? So that's the only part that's different.

And other than that, and people always -- we always ask them to join the same platform so that we can focus on polishing one product for everybody at each generation. And that has always been the strategy..

Your next question comes from Yang Kong from CICC..

I'm Yang from CICC and congrats on your achievement. Would you like to share with us your opinion about the relationship between 4D radar and LiDAR? Because as far as I know, Li Auto has used 4D radar on its L7 model.

So would you think this will be a trend in the future and how this will impact on LiDAR future volumes?.

David, you want to take this?.

Yes, sure. We follow the development of any of the new sensors on the vehicles very closely, and 4D radar has definitely been one of the interesting options.

But let's just talk about the specs, right? So I think one of the things 4D radar is really good at is that it doesn't have any moving parts and it's performing relatively better in the more difficult weather.

But other than that, I think the biggest challenge for 4D radar today is if you just look at the image of it, resolution wise, when I say resolution, it's how many points per second from LiDAR, right. That's one of the most important specs of LiDAR or a camera.

4D radar is roughly 1% resolution of a good LiDAR, which means that the image you see is going to be kind of blurry because the resolution is so bad. It's like you take off your glasses and you look at what's in front of you. Yes, you get an idea of what's going on. But for safety, if you fully rely on that, it's going to be difficult.

And I can name quite a few cases that 4D radar's resolution simply isn't good enough and then for camera alone, it doesn't fully give you the 100% confidence in detecting them.

That's where really LiDARs come in, right? LiDARs are not about the 99% of the scenario and safety is always about the last 1% or maybe the 1% of the 1% of the scenario where LiDAR performs much better than any other alternative. And I am not seeing 4D radar to match the resolution of LiDAR anytime soon, if ever.

I won't be able to comment on the rationales behind why Li Auto is using some of the 4D radars, but I think it's sufficient to say that even for the L7 model, the Max version also have our LiDARs on. And at least we haven't seen the trend that any of the 4D radar is replacing LiDAR at all.

So this is our view and if you just simply look at it, whether you can use 4D radar to do the driving and if you look at a point cloud, you get a much clearer picture..

[Operator Instructions] Your next question comes from [Jessie Lowe] from BMO Securities..

So my first question will be for the new partners you mentioned happened in second quarter, the two leading global OEMs. So I guess it's difficult to share the news.

But how is their attitude and expectation in the cooperation in terms of the launch time on the model equipped with the LiDAR model, price range, potential end market and also their ideal cause on adopting LiDAR in their mind?.

David?.

Yes. First, I won't be able to give the exact names, but I could comment on the rest of the questions. First is for the global OEM it's normally from late 2025 to '26 to '27, which is a bit later than a typical Chinese OEM which has a shortened development cycle. And then the second question is about this process and their attitude.

It's actually very interesting because the typical traditional global OEMs, they are normally known for being conservative and have long vetting process and decide LiDARs earlier or more years in that event than a typical Chinese player. And usually at least some of the OEMs have already some prior relationship with a competitor in the LiDAR space.

I think what -- at least what I was told is that they understand the complexity of this selection and they think that it's not very easy to make the right choice. That's why they're being very careful at this time. I think I also briefly mentioned that during even RFI, RFQ phase. Now they are demanding more tangible evidence.

In other words, it used to be that if you have very nice PowerPoint and some very good samples and that's enough. And now the OEMs are like, oh, I need to see the full set of evidence, especially all the way to production, which is more than fair.

Right? Because now LiDAR space is entering a new era where some of the players like us are already shipping in larger volume and others are not. And that's also one of the things they pay a lot of attention to, because in the past, no one is shipping yet, you can only rely on the sample assessment.

Now they spend a lot of time auditing our factory, looking at our production capability, especially looking at the quality of the parts we shipped, right? We shipped close to 200,000 sensors so far as a company and more than 100 on the ADAS side.

And then they come to us and they say, look, we really care about the quality you shipped because a lot of your peers are far away from the scale you are. But are you shipping at automotive grade quality that we need? Of course, that can only be answered by looking at the reliability of our sensors.

And the quality is interesting thing in the sense that it's impossible to predict, right? You can only know some parts are of high quality when they have shipped enough, and you can look back and look at it. So we're one of the very few competitors who can tell the OEM that we have shipped large volume and please look at it.

We really meet your standard. So that's one of the things that makes us very unique in those discussions. And I believe that's one of the reasons we are advanced to not only in RFQ, but also the development phase. Yes, hopefully that will yield good results in the next quarter or 2..

I think also to add on that -- I think to add on that, these development agreements are for much larger volume in the long term than the initial ones that were awarded based on PowerPoint. So those were kind of test projects to test the concept of LiDAR. The ones that are upcoming are much larger. They're platform based.

So they will cut across many more models and higher volume cars. So it's a bigger game to play now than it used to be. The prize is much larger..

Yes, sure. So my second question would be the sensor numbers equipped on a car. So [indiscernible] comments on cutting the sensor number by 50% and carry out their ADAS function through these algorithm evaluation or progress in 2024 to '25.

Did we see any related feedback and thoughts from our existing OEM clients? And on the other hand, as they started this cooperation with Volkswagen, of course, good for their supply chain, but do we see any potential to break in to such kind of opportunity?.

I didn't catch the question.

David, you want to handle that?.

Yes, I'll answer -- I'll take the question. So I don't think we can comment specifically on each of the customer. So I will focus on the previous question, which is do we see the trend of number of LiDARs going down on the vehicle? First of all, the most of the customers we work with today are using one LiDAR versus two.

Well, I guess it depends on their strategy. When you use one LiDAR, it's focusing on the long range, looking forward, more like a highway type of application. And as they evolve, a lot of people are considering putting more, especially around the vehicle. I think it's the need of the scenario the ODDs.

And my belief is that the functionality of the different ADAS vehicles are evolving very quickly and in the end they're going to be able to handle many different scenarios, including low speed urban driving, even last mile valet parking, things like that.

For that, the coverage you need is more than just forward facing long range and that naturally require more number of LiDARs. And that's also the trend we see. Of course, in the end, it's depending on the speed of the software deployment on the OEM side, on when they can fully deploy and release those functions to the customer. But we already see that.

And some of the customers we work with, they already have three LiDARs starting this year. So we definitely see that..

Your next question comes from Yi Lu from JPMorgan..

This is Yi Lu from JPMorgan. I actually have two questions.

The first is that could you give me more guidance regarding the delivery pipeline from six OEMs by end of this year to 11 OEMs by end of next year? Because I'm actually curious if we may have some seasonal volatility on shipment throughout the next year, if any large order from one single client, and whether there will be potential downside risk if that order got late.

That's my first question..

I think for 2024 we expect 10 or 11 OEMs to be shipping by then. And you know we have one customer as our largest customer. I think the risk there is not high as far as the delays. They're obviously selling very, very well. So, so long as they do well, we will do well.

I think the overall total number of shipments for ADAS LiDAR should be in the range of 380,000 to 420,000 units for next year, and that's between 11 OEMs. And then for the robotaxi side, should be well over 30,000 units. 30,000 to 40,000 units. That's your question or you want [more questions]? Yes, okay..

Yes, that helps.

And my second question is that could you give us more updates regarding the XT series and FT series? Any orders on that part and what is expected through time?.

XT has done quite well. So -- XT is actually growing 30%, 40% a year in units, and the price is quite good. QT is also doing well. So the ones below Pandar, the whole robotaxi side is doing quite well.

So the growth rates are -- we've sold so far in the first two quarters over 12,000, and then for the whole year, we should be over 25,000 units on the non-ADAS LiDAR. So the Pandar, the XT and the QT. So all three of them are selling quite well. XT probably better than QT.

We don't break down specific total units, but those three together will be about 25,000 or more units for this year..

And so that confirmed that it's about FT better than QT?.

Yes. FT is supposed to be released this quarter. To be perfectly honest, the number of units that we'll deliver won't be high. That's one of the ones that will miss the target. We originally forecasted 10,000 units. It'll come in well short of that.

So, yes, FT, we still have a couple of customers for it, but the volume will be much lower than originally forecast..

There are no further questions at this time. I'll now hand back to the Company for closing remarks..

Thank you once again for joining us today. If you have further questions, please feel free to contact our Investor Relations team. This concludes today's call, and we look forward to speaking to you again next quarter. Thank you and goodbye..

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect..