EHang - Q2 2023

Transcript

Anne Ji (Senior Director of Investor Relations)

Hello, everyone, thank you for joining us on today's conference call to discuss the company's Financial Results or The Second Quarter of 2023. The earnings release is available on the company's website. Please note the conference call is being recorded, and the audio replay will be posted on the company's website. On the call today, we have Mr. Huazhi Hu, our Founder, Chairman and Chief Executive Officer, Mr. Xin Fang, Chief Operating Officer, and Mr. Richard Liu, Chief Financial Officer. The management team will successfully give prepared remarks. Remarks delivered in Chinese will followed by English translations. All translation is for the convenience purpose only, in case of any discrepancy, the management statement in an original language will prevail. 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 provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involving inherent risks and uncertainties. The company's actual results may be materially different from the expectations expressed today. Further information regarding this and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please note that all numbers presented are in RMB and are for the second quarter of 2023, unless stated otherwise. With that, let me now turn the call over to our CEO, Mr. Huazhi Hu. Please go ahead, Mr. Hu.

Huazhi Hu (Founder, Chairman, and CEO)

谢 谢 Anne Ji 。 大 家 好 ， 感 谢 各 位 参 加 我 们 今 天 的 电 话 会 议 。 今 天 我 非 常 高 兴 地 向 各 位 分 享 一 个 令 人 振 奋 的 好 消 息 ， 我 们 的 亿 航 二 幺 六 杠 S 无 人 驾 驶 航 空 器 型 号 合 格 审 定 最 后 的 符 合 性 验 证 阶 段 ， 已 经 按 计 划 成 功 完 成 了 所 有 的 试 验 试 飞 工 作 ， 并 且 完 成 了 局 方 最 终 的 型 号 合 格 审 定 试 飞 。 这 是 获 得 型 号 合 格 证 前 的 最 后 一 个 里 程 碑 式 的 节 点 ， 也 是 艺 航 团 队 不 懈 努 力 的 结 果 。 自 从 2021 年 1 月 ， 中 国 民 航 局 正 式 受 理 EH 二 幺 六 杠 S 型 号 合 格 认 证 申 请 以 来 ， 经 历 长 达 三 十 余 个 月 的 不 懈 奋 斗 ， 我 们 不 断 攻 坚 克 难 ， 终 于 完 成 了 所 有 的 实 质 性 任 务 。 从 电 池 、 环 境 、 材 料 强 度 、 电 子 硬 件 、 软 件 、 数 据 链 路 到 地 面 站 控 制 软 件 ， 我 们 通 过 科 学 的 方 法 、 体 系 ， 多 角 度 的 论 证 ， 严 谨 的 试 验 ， 持 续 的 优 化 ， 充 分 有 力 地 证 明 了 艺 航 二 幺 六 杠 S 型 号 符 合 中 国 民 航 局 的 安 全 标 准 和 适 航 要 求 。 这 不 仅 是 艺 航 的 重 要 里 程 碑 ， 也 标 志 着 整 个 EVT 行 业 在 适 航 认 证 领 域 迈 出 前 所 未 有 的 崭 新 一 步 。 而 且 ， 不 同 于 其 他 的 有 人 驾 驶 机 型 ， 我 们 是 全 球 首 例 无 人 驾 驶 航 空 器 型 号 的 审 定 项 目 。 我 想 特 别 感 谢 中 国 民 航 局 的 各 级 领 导 和 审 查 组 的 不 懈 努 力 ， 也 要 感 谢 公 司 适 航 团 队 的 坚 持 不 懈 和 永 不 放 弃 。 是 大 家 的 专 业 素 养 、 精 湛 技 术 和 团 结 协 作 ， 让 我 们 取 得 了 今 天 的 成 绩 。 同 时 ， 我 也 要 感 谢 艺 航 的 投 资 者 和 众 多 的 支 持 者 的 耐 心 等 待 。 我 相 信 正 式 颁 证 前 的 程 序 性 工 作 会 很 快 完 成 ， 这 将 为 我 们 接 下 来 的 商 业 化 运 营 铺 平 道 路 。 在 即 将 取 证 前 的 第 二 季 度 ， 综 合 内 外 各 方 意 见 ， 我 们 有 控 制 地 管 理 产 品 交 付 节 奏 ， 第 二 季 度 共 交 付 五 架 EH 二 幺 六 杠 S 自 动 驾 驶 飞 行 器 ， 收 入 人 民 币 一 千 万 元 ， 毛 利 率 依 旧 保 持 在 百 分 之 六 十 的 水 平 。 相 信 取 证 后 ， 我 们 的 业 绩 会 有 非 常 亮 眼 的 表 现 。 在 取 证 期 间 ， 继 今 年 一 季 度 获 得 青 岛 西 海 岸 新 区 的 一 千 万 美 元 战 略 投 资 后 ， 我 们 在 七 月 完 成 了 一 轮 两 千 三 百 万 美 元 战 略 投 资 ， 这 进 一 步 增 强 了 我 们 的 流 动 性 。 最 后 ， 我 借 此 机 会 高 兴 地 告 诉 大 家 ， 公 司 董 事 会 董 事 、 审 计 委 员 会 主 席 Conor Yang 将 于 9 月 1 日 出 任 艺 航 CFO。 他 曾 在 航 美 传 媒 、 当 当 网 、 途 牛 等 多 家 知 名 上 市 公 司 担 任 CFO， 在 爱 奇 艺 、 同 程 旅 行 等 多 家 知 名 企 业 担 任 董 事 ， 在 财 务 管 理 、 投 资 者 关 系 、 资 本 市 场 和 公 司 治 理 方 面 拥 有 超 过 三 十 年 的 丰 富 经 验 。 担 任 董 事 的 三 年 里 ， 对 公 司 有 非 常 深 入 的 了 解 并 充 满 信 心 。 热 烈 欢 迎 Kona 进 一 步 加 入 管 理 团 队 ， 他 的 到 来 一 定 会 带 领 艺 航 走 向 一 个 新 的 高 度 。 我 们 的 原 CFO Richard 刘 因 个 人 原 因 于 八 月 底 卸 任 CFO 职 位 ， 后 续 将 继 续 担 任 公 司 的 高 级 顾 问 ， 为 公 司 的 发 展 献 计 献 策 。 在 此 ， 我 代 表 董 事 会 和 管 理 层 感 谢 Richard 在 过 去 八 年 来 为 艺 航 的 发 展 做 出 的 巨 大 贡 献 。...

我 们 也 迎 来 了 1 位 新 的 独 立 董 事 ， 刘 永 基 先 生 加 入 董 事 会 ， 担 任 审 计 委 员 会 主 席 和 薪 酬 委 员 会 委 员 。 刘 永 基 先 生 在 财 务 管 理 和 会 计 领 域 有 超 过 30 年 的 资 深 经 验 和 专 业 知 识 ， 在 多 家 上 市 公 司 和 行 业 领 先 的 公 司 担 任 过 CFO 和 财 务 高 管 ， 包 括 RoboSense、 完 美 世 界 、 奥 美 传 媒 等 ， 并 在 普 华 永 道 有 10 年 的 审 计 经 验 。 我 期 待 与 Connor 和 刘 先 生 携 手 合 作 ， 带 领 亿航 迈 入 1 个 新 的 阶 段 。 下 面 交 给 我 们 的 首 席 运 营 官 方 欣 先 生 。 谢 谢 大 家 ！

Anne Ji (Senior Director of Investor Relations)

Below is the English translation of Mr. Hu's remarks. Hello, everyone. Thank you all for joining our conference call today. Today, I'm thrilled to share an exciting news with you about our type certification of EHang 216 S unmanned aerial vehicle system, that we have successfully completed all the planned tasks and the trial flights in the last phase of demonstration and verification with compliance, and also completed the definitive type certification flight test by the CAAC. This is the last milestone before obtaining the type certificate, and also the result of the unwavering efforts of EHang team. Since the time when the CAAC officially accepted the EHang 216 S TC application in January 2021, our unyielding efforts has spanned over 30 months.

Throughout this journey, we have overcome various challenges and finally successfully completed all the substantive tasks, ranging from battery, environment, material, strength, electronics, software, data link to ground control station. We have sufficiently proved that EH216-S meets the safety standards and airworthiness requirements by the CAAC through scientific approaches, multi-angle demonstrations, rigorous testing, and continuous optimizations. This marks a significant achievement not only for EHang, but also indicated an unprecedented advancement in airworthiness certification for the entire eVTOL industry. Furthermore, unlike other ongoing TC projects of a piloted eVTOL aircraft, to our knowledge, ours is the world's first TC program for an unmanned aerial vehicle. I would like to express my gratitude to the CAAC's officials and the review team, as well as the company's airworthiness certification team, for their unwavering efforts and persevering spirits.

It is their professionalism, exceptional technological expertise, and collaborations that have led us to our impressive achievement today. I would like to thank our investors and so many supporters for their patience throughout the process. I believe the remaining procedures will be finished very soon before the official authorization of the type certificate. It will pave the way for our commercial operations in the next stage. In the second quarter, taking into consideration of internal and external devices, we managed our product deliveries in a controlled manner before the upcoming type certificate. 5 units of EHang 216-S AAV products were delivered in Q2. Total revenues were RMB 10 million. Gross margin stayed around 60%. I believe we will have an excellent financial performance after the certification.

During the certification period, we secured a round of $23 million strategic investment in July, following the $10 million strategic investment from Qingdao West Coast New Area in Q1 of this year. This has further enhanced our liquidity. Finally, I'm glad to take this opportunity to announce that Conor Yang, a Director of our company's board and the Chairman of the Audit Committee, will take over the position of CFO of the company, effective on September 1. He served as the CFO at several listed companies, including AirMedia, Dangdang, Tuniu, et cetera. He also served as a director at several well-known companies such as iQIYI, Tongcheng Travel, et cetera. Conor has more than 30 years of extensive experience in financial management, investor relations, capital markets, and corporate governance.

During the three years, he served as a director of our board, he has a profound understanding and confidence in the company. We warmly welcome Conor to join our management team. I believe he will definitely take EHang into a new level. Richard Liu has tendered his resignation from the CFO position due to his personal reasons, which will be effective at the end of August, but he will serve as a senior advisor to the company, contributing his expertise to our continued success. On behalf of the board of directors and management team, I would like to thank Richard for his tremendous contributions to EHang's development during his eight-year tenure with us. In addition, we have also welcomed Mr. Winky Lau as a new independent director to the board, and also as the Chairman of the Audit Committee and a member of the Compensation Committee....

Mr. Lau has over 30 years of experience and expertise in financial management and accounting, and has served as the CFO and finance executives of various listed companies and industry-leading companies, including RoboSense, Perfect World, Ogilvy and Mather, et cetera. He also has 10 years of auditing experience at PwC. I look forward to working together with Conor and Mr. Lau to take EHang into a new stage. Next, I will hand over the call to our Chief Operating Officer, Mr. Xin Fang. Thank you.

Xin Fang (COO)

谢 谢 Huazhi Hu 。 各 位 好 ！ 第 二 季 度 ， 我 们 在 持 续 全 力 推 进 一 航 二 幺 六 杠 S 型 号 合 格 认 证 的 同 时 ， 也 在 国 内 外 积 极 开 拓 新 的 商 业 机 会 与 合 作 ， 为 即 将 到 来 的 证 后 运 营 奠 定 坚 实 的 基 础 。 继 今 年 三 月 ， 我 们 与 中 国 领 先 的 旅 游 企 业 深 交 所 上 市 公 司 西 域 旅 游 签 订 合 作 框 架 协 议 之 后 ， 第 二 季 度 我 们 的 合 作 继 续 深 化 推 进 ， 双 方 共 同 设 立 了 合 资 公 司 ， 并 相 继 交 付 了 首 批 五 架 一 航 二 幺 六 杠 S 自 动 驾 驶 飞 行 器 。 西 域 旅 游 计 划 在 国 家 五 A 旅 游 景 区 天 山 天 池 及 国 内 西 北 地 区 其 他 风 景 名 胜 区 ， 利 用 我 们 的 AAV 开 展 低 空 旅 游 观 光 项 目 ， 计 划 在 未 来 五 年 投 入 运 营 的 AAV 数 量 不 低 于 一 百 二 十 架 。 此 外 ， 深 圳 作 为 中 国 低 空 经 济 创 新 发 展 的 桥 头 堡 ， 致 力 已 打 造 全 国 首 个 低 空 经 济 发 展 示 范 城 市 。 在 此 背 景 下 ， 今 年 七 月 ， 我 们 与 深 圳 航 空 枢 纽 所 在 地 宝 安 区 政 府 签 署 了 战 略 合 作 备 忘 录 ， 共 同 致 力 于 在 宝 安 的 文 旅 地 标 欢 乐 湾 ， 打 造 首 个 城 市 空 中 交 通 运 营 示 范 中 心 -- 湾 区 之 翼 ， 计 划 开 发 首 条 EVTOL 商 业 化 航 线 ， 在 一 航 二 幺 六 S 起 征 号 开 展 运 营 ， 推 出 空 中 旅 游 观 光 体 验 服 务 。 作 为 大 湾 区 的 企 业 ， 一 航 落 子 深 圳 宝 安 将 成 为 我 们 郑 后 运 营 计 划 中 的 关 键 一 步 。 我 们 也 很 高 兴 看 到 ， 今 年 六 月 份 ， 国 务 院 正 式 颁 布 了 我 国 无 人 驾 驶 航 空 器 管 理 的 第 一 部 专 门 行 政 法 规 ， 无 人 驾 驶 航 空 器 飞 行 管 理 暂 行 条 例 ， 这 将 有 力 促 进 无 人 驾 驶 航 空 器 产 业 的 健 康 发 展 ， 扩 大 低 空 经 济 的 市 场 机 遇 ， 这 也 将 会 为 我 们 一 航 二 幺 六 杠 S 起 征 后 的 商 业 运 营 奠 定 良 好 的 基 础 。 随 着 一 航 二 幺 六 杠 S 的 型 号 合 格 认 证 临 近 收 官 ， 我 们 在 空 中 交 通 本 线 计 划 试 运 行 也 取 得 了 丰 硕 的 成 果 。 截 止 今 年 七 月 底 ， 在 过 去 的 两 年 内 ， 我 们 携 手 客 户 与 合 作 伙 伴 ， 在 中 国 的 十 八 座 城 市 开 发 了 二 十 个 试 运 行 网 点 ， 围 绕 低 空 旅 游 飞 行 体 验 的 应 用 场 景 ， 累 计 完 成 约 九 千 三 百 架 次 的 一 航 二 幺 六 杠 S 的 安 全 运 行 试 飞 ， 为 我 们 起 征 后 的 商 业 运 营 积 累 了 丰 富 的 经 验 。 在 一 航 二 幺 六 杠 S 起 征 后 ， 我 们 将 有 序 地 交 付 国 内 的 在 手 订 单 ， 目 前 已 经 累 计 超 过 了 一 百 多 架 。 在 国 际 市 场 ， 我 们 持 续 在 亚 洲 和 欧 洲 地 区 积 极 参 与 UAM 行 业 活 动 ， 发 展 潜 在 客 户 与 合 作 伙 伴 ， 并 不 断 开 展 AAV 的 测 试 和 演 示 飞 行 。 在 今 年 四 月 ， 我 们 加 入 了 日 本 先 进 空 中 交 通 政 企 合 作 委 员 会 。 六 月 份 ， 我 们 在 日 本 冲 绳 成 功 完 成 了 日 本 首 例 无 人 驾 驶 EVTOL 的 跳 岛 飞 行 。 近 期 ， 一 航 二 幺 六 系 列 的 AAV 在 以 色 列 和 比 利 时 成 功 完 成 试 飞 ， 使 得 我 们 的 EVTOL 飞 行 主 机 延 伸 到 了 全 球 多 达 十 四 个 国 家 。 我 们 相 信 ， 随 着 我 们 的 运 行 规 模 和 架 次 的 稳 步 增 加 ， 会 有 越 来 越 多 的 监 管 方 、 客 户 和 乘 客 熟 悉 并 认 可 一 航 独 特 的 AAV 技 术 和 产 品 ， 也 让 更 多 人 亲 身 感 受 到 安 全 、 自 动 、 环 保 、 高 效 的 空 中 交 通 体 验 ， 推 动 行 业 创 新 与 变 革 ， 为 社 会 创 造 更 多 的 价 值 。 下 面 请 我 们 的 首 席 财 务 官 Richard 介 绍 财 务 情 况 。 谢 谢 。

Anne Ji (Senior Director of Investor Relations)

Below is the English translation of Mr. Fang's remarks. Thank you, Mr. Hu. Hello, everyone. During the second quarter, as we continue to make progress in the final stages of EH216 type certification, we have also been actively exploring the new business opportunities and cooperation on both domestic and international fronts, so as to establish a solid groundwork for the upcoming post-certification operations. After the initial signing of a cooperation framework agreement with Xiyu Tourism, a Shenzhen-listed leading tourism enterprise in China in March of this year, our collaboration moved forward in the second quarter. We have established a joint venture with Xiyu Tourism and delivered the first batch of 5 units of EHang EH216 AAVs to this joint venture.

The customers plan to develop low-altitude tourism and sightseeing projects with the EHang AAVs in the Heavenly Lake of Tianshan, a national five-A class tourist attraction, and other scenic areas in northwestern China, and plans to operate a minimum of 120 units of AAVs within the next 5 years. Moreover, Shenzhen, positioned as a pivotal gateway for propelling China's innovative low-altitude economy, has committed to shaping itself into a national low-altitude economy development demonstration city. Against this backdrop, in July, we inked a memorandum of understanding for a strategic partnership with the government of Bao'an District, which is Shenzhen's aviation hub.... This collaboration is dedicated to jointly establishing the first UAM operation demonstration center, named The Wings of the Bay Area, at the OH BAY, one of the Bao'an's cultural and tourism landmarks.

We plan to develop the first eVTOL commercial route, initiate the operation of EH216-S after obtaining its certificate, and launch aerial tourism sightseeing experience services. As a company in the Greater Bay Area, our cooperation with the Shenzhen Bao'an District will serve as a crucial step in our post-certification operational plans. We are pleased to see that in June of this year, the State Council of China officially issued the Interim Measures for the Flight Management of Unmanned Aerial Vehicles, the first special administrative regulation of this kind in China. This will greatly prepare the robust growth of the UAV industry while expanding the market opportunities of the low-altitude economy market. It will also lay a good foundation for the commercial operations of our EH216-S after obtaining the certificate.

As the EH216 type certification project is approaching the final line, our one hundred air mobility routes initiative trial operations also have achieved fruitful results. Along with our customers and partners, we have also developed a total of 20 trial operation sites across 18 cities in China within the 2 years by the end of July this year. More than 9,300 safety secured operational trial flights for low altitude tourism and aerial sightseeing have been conducted by EH216-S at these sites, which will pave the way for our commercial operations after the certification. Following obtaining the certificate of EH216-S, we will deliver the existing domestic order pipelines in a proper order, which have accumulated to more than 100 units.

In the global market, we maintain a proactive engagement within the UAM industry in Asia and Europe, cultivating potential customers and partners while conducting AAV test and demonstration flights. In April of this year, EHang was inducted as a member of Japan's Public and Private Committee for Advanced Air Mobility. In June, we have successfully completed the test flights of EH216S in Okinawa, making Japan's first island-hopping flights by the unmanned eVTOL. Recently, our EH216 series AAVs successfully completed the test flights in Israel and Belgium, extending our eVTOL flight footprints to as many as 14 countries around the world.

We are confident that as our operation scale and flight numbers steadily grow, an increasing number of our regulators, customers, and passengers will know more about and appreciate EHang's unique AAV technologies and products, enabling more people to enjoy a safe, autonomous, eco-friendly and efficient air mobility experience. It will drive industrial innovations and changes and create more value for the society. Next, I will turn the call over to our CFO, Richard. Thanks.

Richard Liu (CFO)

Thank you, Xin. Hello, everyone. Before I go into details, please note that all numbers presented are in RMB and are for the second quarter of 2023, 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. In Q2, the total revenues were RMB 10 million, compared with RMB 22.2 million in Q1, primarily from the delivery of 5 units of EH216-S to the joint venture with a Shenzhen-listed leading tourism operator in China, Xiyu Tourism. In light that the TC process of EH216-S is approaching the end, some deliveries have been extended to be post TC per customer's requests.

Gross margin stayed at a high level, 60.2% in Q2, a slight decrease of 3.7 percentage points from 63.9% in Q1. Despite this minor fluctuation, our gross margin continued to be notably higher than the players of other types of electric transportation vehicles, such as those electric car companies. This is largely attributed to our unique advantages in the global UAM and the eVTOL industries. In Q2, our adjusted operating expenses, which are operating expenses, excluding share-based compensation expenses, were RMB 58.1 million, compared with RMB 50.1 million in Q1. The change was mainly because of increased expenditures related to the conforming aircraft and the compliant tests in the final demonstration and verification phase of the EH216-S type certification process, increased marketing activities to enhance our brand awareness, additional provisions for some long-aging accounts receivable, et cetera.

As a result, our adjusted operating loss in Q2 was RMB 51.3 million, compared with RMB 34.3 million in Q1. Adjusting net loss was RMB 51.8 million, compared with RMB 33.6 million in Q1. Furthermore, we have kept optimizing our balance sheet with a prudent approach to cash and liquidity management. As of the end of Q2, we had RMB 160.7 million of cash, cash equivalents and restricted short-term deposits. In July, we have further strengthened our liquidity with a $23 million equity investment via a private placement from some long-term strategic investors. The funding will help enhance our liquidity and provide vital support for our execution of the post-certification commercial plans in our next phase of growth. This brings our cash reserve to RMB 320.6 million as of the end of July.

At last, as Huazhi mentioned earlier, today is my last time joining the earnings conference call as the company's CFO. I would like to sincerely thank the board, Huazhi, and the investment communities for all your trust and supports in the past eight years. It has been my great honor to be part of the force to drive EHang from an innovative technology startup into an industry-leading listed company in the past eight years. I believe Conor is an ideal successor as CFO to take EHang to a new stage. I will continue to serve as a senior advisor to the company and wish the company a continued greater success. Thank you. That conclude our prepared remarks. Let's now open the call for questions. Operator, please go ahead.

Operator (participant)

Thank you. Thank you. As a reminder, to ask a question, you'll need to press star one one on your telephone. To withdraw your question, please press star one one again. Please wait for your name to be announced. Please stand by while we compile the Q&A roster. One moment, please. Again, to ask your question, that's star one one. Our first question comes from Veronica Jiang with Goldman Sachs. Your line is now open. Veronica, your line is open. You can ask your question.

Veronica Jiang (Senior Analyst)

Hi.

Operator (participant)

You can go ahead. Veronica, your line is open. You can ask your question.

Veronica Jiang (Senior Analyst)

Hi, sorry, can you hear me now?

Operator (participant)

Yes, we can. Thank you.

Veronica Jiang (Senior Analyst)

Okay, thank you, thank you. My first question is about the timeline for the TC, because we have finished all of the testing. Just wondering how, how long it would take for the production cycle? After we, we gain the TC, how soon that we can expect the full production of our factory? Thank you.

Richard Liu (CFO)

Hi, Veronica, this is Richard. Thank you for your question. Basically, our team have been continuing working with the CAAC expert team very closely to finish the remaining procedures, which are expected to be completed soon, and the TC will be issued accordingly. Once the TC is issued, this TC is expected to be the first of its kind in the eVTOL industry. In terms of timing, we will make an announcement at that time. Please stay tuned. In respect of the production post TC, as you know, that we have a production facility in Yunfu City with an initial annual capacity of 600 units of EH216 series products.

Basically, after we obtain the TC, those capacities will be utilized to support the, you know, the post-TC deliveries in the future.

Veronica Jiang (Senior Analyst)

Thank you, Richard. I have also another follow-up question here. For the second half, outlook, apart from the TC part, could you also share about the end market demand? For example, for the tourism, market recovery, are we still seeing the recovery ongoing for the second half? Thank you.

Richard Liu (CFO)

Okay. Basically, on the demand side, our existing order pipeline has accumulated to more than 100 units in China. This is, this pipeline is expected to continue to increase. To give you some examples, in our previous press release, we announced our cooperation with Xiyu Tourism. This cooperation will further lead to a potential order demand for about 120 units in the future 5 years. Additionally, our strategic partnership with the Bao'an District of Shenzhen City is not only a very important step for our post TC commercial operations, but also expected to help generate potential order demands gradually.

As far as the tourism market is concerned, the continuing recovery and increasing demands in the tourism market, for sure, are a very key driver for our ongoing revenue growth. Additionally, our innovative products are more in line with the customer needs in scenarios such as aerial sightseeing and flight experiencing, et cetera, compared to the traditional helicopters. Further, we are about to obtain the TC, which means commercial operation will be soon.

Since the beginning of this year, more and more cities in China have been issuing preferential policies to promote the development of what is called a low-altitude economy and unmanned aerial vehicle applications, which mainly include UAM and eVTOLs. So this has also created the very favorable policy environment to accelerate the development of this new industry. To further give you an example, the Shenzhen City. Shenzhen City is a civil unmanned aviation pilot zone approved by the CAAC. Shenzhen City has been planning to issue policies such as regulation to promote low-altitude economy industries this year. This is expected to become China's first regulation to support the development of the low-altitude economy sectors.

Shenzhen's measures to support high quality development of a low-altitude economy, are expected to provide strong support to the development of the industry. Basically, both initiatives are expected to bolster our operations and revenue growth once we commence our projects in Shenzhen. Further, as a company based in the Greater Bay Area, we have abundant experience and the resources in the area, which will make our collaboration with the local cities more practical and viable.

Veronica Jiang (Senior Analyst)

Thank you, Richard. It's very clear. Thank you.

Operator (participant)

Thank you. One moment for our next question, please. Our next question will come from the line of Di Wu, from Tianfeng Securities. Your line is now open.

Di Wu (Equity Research Analyst)

Hi, can you hear my voice?

Operator (participant)

Yes, we can hear you. Thank you.

Di Wu (Equity Research Analyst)

Thank you. I have two questions. The first one is, we noticed recently China has published an enforcement stating that certain unmanned aircraft will face an export prohibition. Will there be, will there be any implication for our aircraft or hinder the TC process? The second question is, can the management team shed more light on potential application scenario that could be implemented in the near future? Thank you so much.

Richard Liu (CFO)

Hi, hi, Di. This is Richard again. I will take the question.

Di Wu (Equity Research Analyst)

Thank you.

Richard Liu (CFO)

Basically, for your first question, I would like to say, first of all, EHang as a internationally listed company, we have always been strictly following the export related laws and regulations in China and other countries where we do business, and adhering to the principle of legality and compliance in respect of export activities. In the recent new UAV-related export control policy in China, basically has no significant impact on our business, nor our TC process, because we have already been complying with the relevant export licensing requirements for our export products. It has been going smoothly. In addition, the spokesperson of the Ministry of Commerce has stated that export control does not mean export prohibition. As long as the UAV products exported are for-...

legitimate civilian uses, the company follow the relevant procedures, it is understood that exporting activities can be conducted normally. we, we are dedicated to leveraging our innovative technologies and products to serve the people around the world. The company have been taking strict and approved measures in compliance management and customer restrictions in order to make sure our products are only used for legal civil uses. in respect to your second question, as you know, after our EH216-S gets its TC, our first priority will be focusing on the so-called low altitude tourism market. we will continue to team up with tourism operators and partners as many as possible in China for operations in scenarios like aerial sightseeing, flight experiencing, et cetera.

Location wise, initial ones are such as the Jishou Aizhai scenic area, Hechi Fengshan scenic area, the Heavenly Lake of Tianshan scenic area, and Shenzhen OH Bay, which we announced previously. Furthermore, we will continue to leverage our EH216 series product platform to explore other use cases, such as aerial logistics, emergency response, medical deliveries, aerial firefighting, et cetera. Yeah. Thank you.

Di Wu (Equity Research Analyst)

Thank you. Thank you, Richard.

Operator (participant)

Thank you.

Anne Ji (Senior Director of Investor Relations)

Thank you.

Operator (participant)

Seeing no more questions, in the queue at this time, let me turn the call back to Ms. Anne for closing remarks.

Anne Ji (Senior Director of Investor Relations)

Thank you, operator, and thank you all for participating on today's call. If you have further questions, please contact our IR firm by email or participate in our following investor events through the calendar information provided on our website. We appreciate your interest and look forward to our next earnings call. Thank you.

Operator (participant)

Thank you all again. This concludes today's conference call. You may now disconnect. Everyone, have a wonderful day.