Qianlei Fan

Qianlei Fan from Morgan Stanley asked about the ongoing impact of the anti-involution policy on market pricing and the rationale behind ZTO's wide Q4 volume guidance, including specific near-term challenges. She also sought details on a recent regulatory consultation with ZTO regarding network management and its potential future implications.

Answer

Chairman and CEO Meisong Lai explained that the anti-involution policy, implemented since August, is driving rational price recovery and a shift from high-volume to high-quality development, expecting prices to stabilize above cost. He noted ZTO views this as an opportunity to invest in automation, prioritize network partner interests, and uphold compliance. CFO Huiping Yan added that the policy addresses excessive price competition, leading to a healthier industry structure. She confirmed the regulatory consultation, stating it aligns with the anti-involution policy and emphasizes high-quality development, serving as a reminder for internal optimization and strengthening service quality and network stability.

Qianlei Fan asked about the ongoing impact of the anti-involution policy on market pricing and the rationale behind ZTO's wide volume growth guidance for Q4, including specific near-term challenges. She also inquired about a recent regulatory consultation with ZTO regarding network management, seeking details and potential future impacts.

Answer

Chairman and CEO Meisong Lai stated that the anti-involution policy, implemented since August, has led to rational price recovery, addressing past excessive competition and guiding the industry towards healthy, high-quality development, a trend expected to continue. He anticipates market prices to stabilize above cost levels and competition to become more benign, with regulators encouraging quality development and standardizing market behavior. ZTO views this as an opportunity, investing in automation and digitization, focusing on grassroots network stability, and prioritizing compliance. Regarding the regulatory consultation, Mr. Lai explained it aligns with the industry's shift to high-quality development, requiring leading enterprises to prioritize service quality, compliance, and network health alongside business scale. He acknowledged it as a reminder and stress test, prompting internal optimization in service quality, last-mile stability, and partner support, believing it will build long-term competitive advantages. CFO Huiping Yan added that the policy aims for rational price recovery and a shift from high-volume to high-quality development, with market rates stabilizing above cost. She confirmed ZTO's alignment with regulatory guidance, focusing on automation, digitization, network stability, and compliance. She also reiterated that the consultation aligns with anti-involution policies and ZTO's intentions, serving as a catalyst for internal improvements and building a more robust, sustainable collaborative model.

Qianlei Fan of Morgan Stanley inquired about the express delivery industry's outlook for the second half of 2025 and asked for details on ZTO's application of technology and AI to improve operations.

Answer

CFO Huiping Yan, translating for Chairman Meisong Lai, acknowledged a potential industry slowdown and explained that ZTO's revised, wider volume guidance of 14-18% growth reflects macroeconomic and competitive uncertainties. She detailed several key AI initiatives, including 3D digitized models for sorting centers that cut miss-sorting rates by over 60%, AI-driven route planning for last-mile efficiency, and an AI customer service agent that handles over 2 million daily requests.

Qianlei Fan asked for a full-year forecast on unit volume incentives, noting the significant increase in Q1. He also requested an updated outlook on unit cost reduction, given the strong Q1 performance and low fuel prices. Additionally, he inquired about recent progress in applying AI to operations and its potential future impact on ZTO's competitive advantage and earnings.

Answer

CFO Huiping Yan, translating for Chairman Meisong Lai, attributed the higher Q1 incentives to 'white-hot' competition and a greater proportion of smaller parcels, noting the impact was partially offset by a CNY 0.12 positive mix shift from KA and reverse logistics volume. On costs, she detailed that combined unit transportation and sorting costs fell CNY 0.09 due to scale, process standardization, and performance-based pay. Regarding AI, Yan confirmed its use in sorting, route planning, and barcode recognition, and stated ZTO will continue to explore applications in last-mile delivery and autonomous vehicles to drive efficiency.

Qianlei Fan asked about the potential for new cost savings and revenue expansion from emerging technologies like AI and autonomous driving, as traditional scale-based efficiencies may be diminishing. She also questioned how rapid technological advancements might affect ZTO's medium-term CapEx outlook.

Answer

Chairman Meisong Lai, translated by CFO Huiping Yan, detailed current AI applications in sorting, tracking, and customer service. He highlighted the significant cost-saving potential of autonomous vehicles for last-mile delivery, which could reduce per-package costs from RMB 0.15 to as low as RMB 0.05. He clarified that ZTO's strategy is to empower network partners via OEM partnerships rather than direct capital outlay. CFO Huiping Yan added that technology investments are paced with volume growth and efficiency goals.

Qianlei Fan asked for details on ZTO's retail parcel business, including current daily volume, its percentage of total volume, and targets for this year and beyond. She also inquired about initiatives to help network partners and last-mile couriers reduce their operational costs.

Answer

Chairman and CEO Meisong Lai, translated by Sophie Li, reported that daily non-e-commerce parcel volume now exceeds 5.4 million, with a year-end target of 6 million. He outlined strategies including targeted marketing, courier training, and platform cooperation. To reduce last-mile costs, Mr. Lai described initiatives that increase courier income and improve outlet profitability by enabling direct package routing from outlets to last-mile posts, which can save outlets approximately RMB 0.20 per package.