WeRide - Earnings Call - Q1 2025

Transcript

Speaker 6

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to WeRide's first quarter 2025 earnings conference call. At this time, all participants are in the listen-only mode. The company will be hosting a question-and-answer session after management's prepared remarks. Please note that today's event is being recorded. The company's unaudited financial and operating results were released by the news wire earlier today and are currently available online. Joining us today are WeRide's founder, chairman, and CEO, Dr. Tony Han, and CFO, Ms. Jennifer Li. Before we continue, I'd like to refer you to the Safe Harbor Statement in the company's earnings press release, which also applies to this call, as today's call will include forward-looking statements, including WeRide strategies and future plans. These forward-looking statements are made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve inherent risks and uncertainties. The company's actual results could differ materially from those stated or implied by these forward-looking statements as a result of various important factors, and please refer to the risk factors section of the company's Form 20F, filed with the SEC, for full disclosure of these risk factors. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please note that all numbers stated in management's prepared remarks are in RMB terms, and we will discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported in the company's earnings release and filings with the SEC. With that, I'll now turn the call over to the company's founder, chairman, and CEO, Dr. Tony Han. Please go ahead, sir.

Speaker 5

Hello, everyone. Thank you for joining us today. I'm excited to give you an update on our last quarter. We have reached a number of new milestones as we continue our global expansion and also cemented deeper collaboration with key partners such as Uber. Specifically, with Uber, we have committed to providing robotaxi services in 15 additional cities internationally and accepted a commitment for an additional $100 million equity investment on the heels of their initial investment at our IPO. Other notable milestones included launching the first driverless robotaxi testing in Abu Dhabi, the first of its kind in the Middle East. In China, we rolled out the country's first autonomous mobility service in the central area of Guangzhou, the number three city in China. While some of this will be reflected in our near-term financial results, others laid the foundation for the robust growth in the quarters to come.

First, let's quickly discuss our latest Uber announcement. This expanded partnership and the incremental $100 million investment is a testament to our shared commitment to autonomous mobility and the confidence in our operational and technological excellence. We began our partnership with Uber in the Middle East and continue to scale our operations there. As a reminder, we first launched Abu Dhabi in December of last year and have recently announced plans to expand in Dubai. There has also been mentions of expansion to a third city recently in the press, so look out for more information there. We are excited by our progress in the region and the opportunity that it presents.

In addition to the Middle East, we expect to scale and expand our robotaxi presence to other geographies such as Europe, with a particular focus on markets where we have already deployed some of our other autonomous mobility products, such as our autonomous buses. We believe having multiple autonomous mobility products widens our term and also makes dialogues with stakeholders such as regulators more substantive. We continue to expand our autonomous mobility operations in China and abroad. As a loop to the earlier, we launched full driverless robotaxi testing in Abu Dhabi. This means that we will be the first company to have robotaxi running without safety drivers. At the same time, we also expanded our operational service to include new destinations such as Al Maryah Island and Al Reem Island, covering a range of vibrant areas in the city.

Through this, you can see in action our phased approach to operational expansion. This phased approach allows us to ensure a high quality of service while ensuring that we meet all regulatory and safety standards. To date, we have a leading safety track record in the commercial delivery of our services. In China, we expanded our robotaxi service in Beijing and Guangzhou. In Beijing, we added routes between the sub-center of the city, Beijing Yizhuang, and the Beijing Railway Station, spanning over 600 sq km. In Guangzhou, we launched China's first 24/7 autonomous ride-hailing network and added eight routes in the city center, connecting landmarks and transport hubs such as the airport, Guangzhou South Railway Station, Canton Tower, and the Canton Fair Complex. These routes cover more than 250 km of public roads in a densely populated urban area with very busy traffic.

Going forward, our robotaxi service in China will be integrated into Tencent's Smart Transportation Mini program on WeChat to serve a wider use base in China. We also continue to expand our other autonomous mobility businesses. Our robo-bus has entered downtown Guangzhou, one of the most complex urban environments. The development follows our launch of the first robust BRT route in the city last year. Robo-bus has now become an integral part of the day life of Guangzhou citizens, who can easily hop on the driverless shuttle in the main district by simply tapping their city pass. It stands as a paradigm of the future mobility that we envision, where autonomous vehicles are fully integrated with the local transportation system, enabling safe and seamless movement for the communities. We are also making headway in the international market, bringing our products to Switzerland, Spain, and France.

In March, our robo-bus was granted an operation permit by France, making WeRide the first and to date the only autonomous driving company whose products have received operational approvals in five countries, including China, the UAE, Singapore, France, and the US. Technology and safety are the cornerstones of our success. Our autonomous mobility product operates atop what we call WeRide One, an autonomous driving technology platform designed to handle a broad spectrum of operational environments, from complex urban settings to full-day functionality and varying weather conditions. Its proven adaptability in a range of real-world applications provides a fundamental tech advantage over our peers. The high level of universality of WeRide One has recently demonstrated once again through our RoboVan W5, which secured Guangzhou's first group of driverless testing permits for logistic equipment in less than three months after the product launch.

The powerful adaptability of WeRide One is further demonstrated by our real-world operations across a broad geographic area. The initial deployment of our AV fleets in a new city can be completed in just a couple of weeks, enabling rapid adoption for our partners. We believe safety is the best test of autonomous driving technology. In over 2,000 days of operation, our safety records remain industry-leading. While we have iterated multiple times, we have not had any accident attributed to the failure of our autonomous driving systems. Our commitment to safety and transparency is key to earning the confidence of both regulators and partners. We also leverage our core autonomous mobility know-how in our ADAS business. In April this year, we announced a partnership with QNX, a division of BlackBerry, to work together to enhance the safety and reliability of our ADAS solution.

By integrating QNX OS for safety into our ADAS system, WeRide is helping OEMs and tier-one companies fast-track the future of intelligent vehicles. I will now hand over the call to our CFO, Jennifer Li, to discuss our financial results in more detail. Jennifer, please go ahead.

Speaker 3

Thank you, Tony. Hello, everyone. Before we get into the financials, please note that all amounts are in RMB and all comparisons are on year-over-year basis, unless otherwise stated. Now, let's discuss our first quarter financial performance. Total revenue for the first quarter of 2025 increased 1.8% to RMB 72.4 million, primarily driven by the growth in product revenue, which was partially offset by a slight decline in our service revenue. Robotaxi has been one of the core drivers in our business. Following our achieving record-high robotaxi revenue for the financial year of 2024, we continue with the momentum in the first quarter of this year with robotaxi revenue of RMB 16.1 million. Robotaxi's contribution in group revenue reaches 22.3%, rising from 11.9% of the same period of 2024. Product revenue delivers strong growth, increasing by 46.7% to RMB 9.5 million for the first quarter.

This encouraging growth was primarily driven by a substantial increase in the sales of robotaxi and RoboSweeper, which were introduced into a new international market with expanded operations. To RMB 62.9 million, primarily due to a reduction of RMB 33.5 million in revenue from ADAS Research and Development Services, as the customized R&D project for a certain client has been completed in 2024. This decline was partially offset by an increase of RMB 29.8 million in revenue from intelligent data services and an increase of RMB 1.9 million in revenue from operational and technical support services, as technical support engagement increased this quarter along with the transition into the operation phase of certain projects. We recorded a group-level gross margin of 35.0%, representing a gross margin for product of 49.9% and a gross margin for service of 32.8%, respectively.

This reflects a sustaining improvement of our business structure in line with our robotaxi business expansion and globalized commercialization. We are building a sustainable business model by engaging trusted partners and localized deployment. It helps us sustain a healthy gross profit level. Now, turning into our operating expenses, we recorded a rise of 14.2% for the first quarter, amounting to RMB 463.5 million. The increase was driven by a 48.4% rise in personnel-related expense compared to the same period of 2024. We remain highly cost-cautious and disciplined. The increase of operating expense is mainly driven by our incremental R&D effort. In this important phase of development, we prioritize strategic investment in talent acquisition and retention to drive our technological advancement. Combining with our expansion of selling and marketing activities, we aim to solidify our leading position by laying a sustainable foundation.

To further break down, R&D expense represents 70.3% of operating expenses. This line item increased by 17.3% to RMB 325.7 million compared to the same period of 2024. Excluding share-based compensation, R&D expenses increased by 54% to RMB 278 million. Administrative expense increased by 5.2% to RMB 123.9 million compared to the same period of 2024. Excluding SBC, administrative expense increased by 105.8% to RMB 73.9 million. Selling expense increased by 32.4% to RMB 13.9 million compared to the same period of 2024. Excluding SBC, selling expense were up 66.7% in the first quarter. Our net loss decreased by 17.7% to RMB 385.1 million in the first quarter of 2025. On an on-IFRS basis, the net loss increased by 108.2% to RMB 294.6 million, which was mainly contributed to our continuous investment in R&D.

As of March 31, 2025, we held a total capital reserve of RMB 6.2 billion, including RMB 4.4 billion in cash, cash equivalent, and time deposits, RMB 14.7 million in restricted cash, and RMB 1.7 billion in financial assets measured at fair value through profit and loss. We believe that our strong cash capital position will continue to support our ongoing R&D initiative and facilitate the expansion of our growing global business. On a separate note, our board has recently authorized a share repurchase program and, in which the company may repurchase up to $100 million of its Class A ordinary share over the next 12 months and indicate a vote of confidence in our business fundamentals, growth trajectory, and long-term outlook. In conclusion, we feel encouraged by our financial performance of the first quarter.

As we continue to scale our operation with additional deployment underway in international markets, we are confident to build on this success and turn global opportunity into long-term value for our stakeholders. With that, Operator, we are now ready to take our questions.

Speaker 6

Thank you. We will now begin the question and answer session. To ask a question now, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. We will now take our first question from the line of Tim Hsiao from Morgan Stanley. Please ask your question, Tim.

Speaker 1

Hi. Thanks for taking my question. This is Tim from Morgan Stanley. I have two questions, and both are related to our collaboration with Uber. The first question, we noticed that Tony briefly touched on the collaboration with Uber at the beginning of the call. Just want to quickly follow up on why WeRide and Uber decided to expand this partnership. It would be great if you can share more colors on the deal with us. That's my first question. Thank you.

Speaker 5

Okay. I will take this question. Thank you, Tim, for this question. First of all, I think our expanded partnership with Uber builds on a proven model. This model is demonstrated by our successful integration of WeRide Robotaxi into Uber's app in Abu Dhabi. Under this collaboration, WeRide delivers our tried-and-tested autonomous driving product, while Uber will manage fleet operations and customer access via its platform. Together, we also announced a driverless robotaxi launch in Dubai, where we are currently finalizing mapping and expect to begin operations soon. I want to talk about this strong collaboration. We have committed to deploying services across 15 major global cities within the next five years. This is a significant milestone for scalable autonomous mobility. I think this partnership combines WeRide's world-class autonomous driving technology and international expertise with Uber's unparalleled marketplace reach and operational excellence.

I want to re-emphasize, as a testament of this alignment, Uber is already our shareholder, and we will invest an additional $100 million in WeRide over the next six months. To my best knowledge, this ranks among Uber's largest investments in non-affiliated autonomous driving companies. Besides, beyond the technology, I think our mission is very important. Our shared mission is to make autonomous mobility affordable and accessible worldwide. WeRide operates in over 30 cities across 10 countries with our research, R&D, testing, and commercial deployments. When entering new markets, we are not just solving the mobility challenges. We want to invest in the local ecosystem by creating jobs in fleet management, maintenance, and customer support. We have a community-oriented approach to ensure sustainable growth, and I think we share this kind of mission with Uber.

We also believe that by leveraging both companies' leadership in our respective fields, we can accelerate the global adoption of autonomous mobility service. I think in terms of, to summary, technology, mission, and approach, and the shared value, I think Uber and WeRide are well aligned. We are very excited for the next five years to expand 15 cities globally.

Speaker 1

Great. Thank you very much for sharing all the details, Tony. Just another quick follow-up on the collaboration. According to the announcement, also what you just shared, out of the 15 cities and probably others, the potential global market, which regions or market would be the main focus to WeRide for the robotaxi roll-out? In the following quarters, any signposts or milestones the investors should monitor? Yeah, that's my second question. Thank you.

Speaker 5

About the regions of focus, currently, we are focusing on markets mainly in Europe and the Middle East. We are going to take a phased approach. Basically, we are not going to roll out a robotaxi service in one night in 15 cities simultaneously. We want to add cities one by one. New cities will come online each year, maybe probably three new cities every year. It's just a rough estimate. We will be following a pattern of regulatory approval, then testing, then commercial operation, then scale deployment. There are four stages. These four stages have been approved in our current deployment in Abu Dhabi, and I think soon it will also be approved in Dubai. Cities will be chosen based on favorable policies, guidelines, and initiatives for autonomous driving.

We look forward to really maximize social value and also want to create value for our long-term stakeholders.

Speaker 1

Great. That's super helpful. Thanks for the additional quarters. Thank you, Tony and Tim. Thanks.

Speaker 5

Thank you, Tim.

Speaker 6

Thank you. Our next question comes from the line of Li Ping Zhao from CICC. Please go ahead, Li Ping.

Speaker 2

Good evening, Tony and Jennifer. Congrats for the strong robotaxi revenue in this quarter. I got two questions here. First, could you share with us your robotaxi economics? How should we consider the cost structure as you scale? Second, could you please share more about your recent rollout at Guangzhou City Center? When should we expect you to start providing robotaxi service in the whole city? Thank you.

Speaker 3

Okay. I'll take the first question. Tony will take the second. For the first question on the robotaxi economics, let's just take a look at the number. In the conventional ride-hailing, driver takes home roughly 60% of each fare as like 6 out of every 10. Robotaxi revolutionized this model by reducing the driver cost to nearly nothing. Yes, we still have the vehicle cost for robotaxi, which is slightly higher than traditional taxi, but eliminating the 60% cost changes everything about this business model. Cost optimization has been one of our key focuses, and we are making continuous progress. First, let's talk about the vehicle cost. Leveraging on the booming and more mature EV supply chain here in China, we have access to components of high quality on competitive pricing. Second, we have also built in-depth collaboration with global OEMs such as Renault and Nissan.

Thirdly, we adopt a modularized design of our sensor suite, enabling 90% shared components across different autonomous driving products. We also converted to the most cost-effective semi-solid leather a few years ago. Leveraging on all of those, our autonomous vehicles are quite cost-competitive. For instance, the cost of our sensor suite has reduced by more than 70% over the past five years. Going forward with the more integrated design and increasing adoption of redundant drive-by-wire chassis, we anticipate another 20-30% headroom for future cost reduction for the next gen of robotaxi. Today, we operate one of the world's largest AV fleets globally, over 1,200 vehicles, with more than 500 dedicated robotaxis. All of our vehicles use the standardized tech as well as similar sensors, same computing platform.

This will give us tremendous buying power and make the maintenance so much simpler in the long run. Our OEM partnerships help us keep optimizing every part of the supply chain. In short, compared to the traditional taxi and ride-hailing services, robotaxi is expected to be 50% or more cost-effective in developed markets. We're doing testing and operation of AV in 10 countries already. We're seeing that on the ground confirms a very critical pain point. Many markets are facing a very severe driver shortage, also with growing challenge in hiring and retention of the drivers. This is exactly where our solution makes the difference. By working hand in hand with our local partners, we're not just deploying technology. We're solving real transportation crises caused by the labor shortage. Yeah. That's all for this first question, Li Ping Zhao.

Tony, I'll leave you to the second question on the Guangzhou plan.

Speaker 5

I believe the second question is about we want to discuss a little bit about our recent rollout at Guangzhou City Center. Also want some details about our robotaxi service. First of all, I want to say last week, we launched China's first 24/7 autonomous ride-hailing network covering the core areas of Guangzhou. As I mentioned, Guangzhou is a number three city in China. Our expanded robotaxi service features actually eight pilot operation routes in the city center, connecting landmarks and transport hubs such as the airport, Guangzhou South Railway Station, Canton Tower, and the Canton Fair Complex. If you are familiar with Guangzhou, you know they are all the busiest and also the most important place and hubs. You probably, if you come to Guangzhou, you will visit these places.

When we first kicked off commercial robotaxi service back in the year of 2019, we started in Guangzhou. This is a mega city with very busy traffic, and the population is at least 20 million. To date, we have been providing autonomous mobility service to the local citizens for more than 2,000 days. I'm quite confident and quite proud for this achievement. The expansion of this service is a very important milestone in the industry. For the first time, robotaxi is allowed in the central area of such a big city. That's not easy, actually. It incorporates some of the most complicated scenarios we have ever seen, including really various road types and traffic conditions, as well as very subtle interactions with a wide range of road users like passenger cars, engineering cars, pedestrians, cyclists, three-wheelers. You have to handle all of these things.

It is a big challenge to our technology, but I think we solved all these issues quite well. Also, being allowed to operate in central Guangzhou underscores our confidence in safety records and robust technology. We will strive to maintain a high standard of service, and we will also be very careful. We will expand progressively and responsibly in accordance with the requirement of local authorities. I think that's all I want to say about this question.

Speaker 3

Okay. That's very helpful. Thank you.

Speaker 5

Thank you.

Speaker 6

Thank you. Our next question comes from the line of Joel Ying from Nomura. Please ask your question, Joel.

Speaker 0

Thank you for taking my question. This is Joel from Nomura, and I have two questions. For the first one, what's the implication of a recent launch of driverless taxi in UAE? Is there any operation plan as a next step? My second question is, since we see some aggressive OEMs also plan to enter into the robotaxi business, what's our company's view on it? Are they competitive compared to level four players given they have more driving data? What is our edge on this? Thank you.

Speaker 3

Okay. I'll take the first question. We're very excited about the driverless taxi in Abu Dhabi. To my knowledge, this is the first of its kind in the Middle East, and it's also the first time that robotaxi without safety driver on public road is allowed outside China and the US. WeRide is a veteran in the Middle East. We started a robotaxi trial in UAE as early as 2021. The desert climate of the country, including high temperature and the sunny environment, created all the special challenges to the autonomous vehicles. Nevertheless, our robotaxi fleet delivered a high level of reliability and safety during the initial two-year public operation. Building on this confidence, WeRide secured the first national autonomous driving permit in UAE in 2023, which also remains the only national permit in the world as of today. Last year, our local operation entered into a new chapter.

Sorry. As they join forces with Uber.

Speaker 5

Yeah. Have some water. And then we have plenty of time.

Speaker 3

Yeah. Speaking of our joint forces with Uber, it also allows us to provide local citizens with better services and accessibility. The driverless testing marks a major milestone as we begin driverless testing. This is a significant leap forward in our journey in the Middle East. We are also particularly excited to have received approval to expand our service area to include Abu Dhabi's Al Maryah Island and our Reem community. Both islands, they are the most dynamic urban center in Abu Dhabi. We're very excited to bring the cutting-edge transportation solution to those places. Now, Tony, I'll leave you to the next question. Thank you.

Speaker 5

Okay. Yeah. You can take this time to really clear this road. Okay. Our other question. I think thank you. This question is really deep, and I really appreciate this question. The question is about our competition against major car OEMs for robotaxi service and my view and our edge. First of all, I want to say the competition is ubiquitous. If you are afraid of competition, you are not eligible to be a leading company. WeRide is a first mover and a leading company in the autonomous industry. We welcome competition. As long as the winner can bring the best quality of service, most reliable robotaxi service to ordinary people, the citizen, I think that will be great enough.

We are confident with WeRide because, first of all, I think our proven record has already shown the superiority of our technology and also the reliability of our technology. Over the past seven years, we have been closely working with some major car OEMs. The major car OEMs help us to build the reliable vehicle platforms for robotaxi service. I want to say OEM actually plays a very important part in the whole ecosystem. We did learn a lot from them. Having all this said, I want to emphasize the difference between the ADAS system and the robotaxi system. ADAS system stands for Advanced Driver Assistance System. The major component who is responsible for driving the car is the person. Alpha-level robotaxi is full autonomous driving vehicle. They are two different things, two different species.

Mistakenly using ADAS for robotaxi is just like mistakenly using an L2 system for L3 system. We will lead to very tragic accidents. I think some accidents we have already experienced. I want to emphasize, if you really want to do robotaxi to L4, you really need to spend lots of time, lots of energy in simulation platform, in robotaxi fleet, sharpen your technology, and test for millions of miles. Only have a big user base is not enough. Lots of time, a big user base only tells you that your car is very good, can produce a very good L2 system, but there's nothing to do. You can do an L4 system. Basically, a warrior, a great warrior on the land may be not a so good warrior in the sea warfare. They are totally different.

Today, WeRide's real-world robotaxi operation in multiple locations is actually supported by continuous investment in building and improving our platform. The safety has been proved. We want to very proudly announce over the past seven years, we have a very good record. We have not experienced any autonomous driving system failure. I think that is a very remarkable score. Currently, WeRide is one of very few companies that have brought level four mobility to the public. We are really confident to maintain a leading position in this industry. Thank you for this question. That is all I want to say about this question.

Speaker 6

All right. Thank you. Our next question comes from the line of Yawen Tan from BNP Paribas. Please go ahead, Yawen.

Speaker 4

Hi. This is Yawen from BNP. Thanks for Tony and Jennifer's time. Thanks for the opportunities to discuss the exciting industry here. I have two questions. The first one is, is there any specific plan for further expansion of the fleet size and operation area? Secondly, what's your view on regulations in different markets? Have we seen there are countries that are accelerating the adoption of L4 technology? Thank you.

Speaker 3

Thank you. I will take the first question for the plan for future expansion. As robotaxi is penetrating traditional mobility in different regions, we will remain a balanced strategy between China market and international markets. In China, we will gradually increase the deployment in selected Tier 1 cities. Our service was throughout step by step, and it is in accordance to this adoption roadmap by the local authority. We have a track record of more than five years' public operation in China. Our recent development that entered into the city center in both Beijing and Guangzhou is a natural progress built on the existing momentum. We will keep on the momentum, riding on the momentum. In overseas market, we will be scaling through strong global partnerships.

By working together with mobility and transportation stakeholders worldwide, we'll be able to localize and accelerate our deployment in the market, in the international market, more effectively. For example, some of our global partners, including say in UAE, we have the Integrated Transportation Center in Abu Dhabi and the Road and Transport Authority in Dubai that are extremely helpful. In France, we have Renault, Beti, and Massif as our partner. In Switzerland, we have the SBB, which is the Swiss Federal Railways. We have the Condensoric and Swiss Transit Lab that are also we are working on multiple projects in Switzerland as well. In Singapore, we have ComfortDelGro and Chatham Maintenance in Singapore. In Germany, we have Bosch as a key partner.

Last but not least, Uber is a key partner with our plan of rolling out commercial robotaxi service in 15 new cities globally. If we're talking about the size, the expansion plan, all those cities we're planning to enter typically already have an existing ride-hailing and taxi ecosystem that ranges from a few thousand to tens of thousands of shared mobility vehicles. This is an ideal environment for L4 technology to integrate and to scale up. As part of this partnership, WeRide's robotaxi service will be available through Uber's app, and Uber will be responsible for the fleet operation. As you can see, our global partner strategy is based on our shared execution, risk management, and local market insight. We are not entering into the new market alone.

Alone, we're building a network of trusted global collaborators to accelerate the adoption, to shorten the deployment cycle, and to meet the regulator's expectation of each region together. Yeah. Tony, I'll leave you to the next question on the regulation in different markets.

Speaker 5

Okay. I'll talk about the regulations of different markets. Actually, there are markets that are favorable to autonomous driving vehicles. Currently, I want to name a few, like several countries in the Middle East, like UAE and Saudi, and also several countries in Europe. Of course, China is very, very welcome. China is actually fostering autonomous driving vehicles. They are the major markets we want to deploy. Actually, for the cities, for the countries, if they really want to welcome or embrace the autonomous driving vehicle, that's because there are several factors they consider. Number one is the safety. Number two is the cost of labors. You need to take all of these factors into account.

Also in this region, for the countries that favor autonomous driving or need autonomous driving or need robotaxi service, I think that represents huge opportunities for first movers like WeRide. Actually, we experience this kind of increasing interest in AV technology. Actually, this kind of increasing interest can be demonstrated by our expansion and our operation. I just want to name a few, actually. In January and May, we rolled out our robotaxi and robo bus service in Guangzhou city center successfully. That one I have already mentioned. In February, we actually received approval to launch our GXR for fully unmanned paid ride-hailing service in Beijing, just only four months after we officially announced the new purposely built robotaxi GXR. In March, we obtained level four operation permit in France.

In April, we partnered with Dubai's Road and Transportation Authority and Uber to integrate our robotaxi fleet into Dubai's public transportation system. I can't wait for this to come because our dream, our mission is to deploy robotaxi all over the world. In May, we have started first driverless testing in Abu Dhabi. Actually, I'm currently in Abu Dhabi. I just tested it, and I think it's fantastic. We now have deployed in 10 countries across Asia, Middle East, and Europe. From our experience, we understand that regulators are generally supportive towards autonomous driving, but conditioned on we can keep our track record for safety. Overall, we are really optimistic about the future. We believe WeRide is well positioned to capture the expanding penetration for autonomous driving technology. That's my answer to this question. Thank you for this question.

Speaker 6

Thank you. We will now take a next question from the line of Tian Quang Hu from China Securities. Please ask your question, Tian Quang.

Speaker 3

Hi, everyone. Can you hear me?

Speaker 5

Yes, yes, we can.

Speaker 3

Yeah. My first question is, is there any new product development that you could share, especially robotaxi?

Speaker 5

Okay. New product, we are actually last October, we launched the new generation of robotaxi GXR, which is really a purpose-built robotaxi tailored for L4 drivers. We also trimmed it for the deployment in the Middle East like in today. The temperature is like 40 degrees Celsius. You have to have a car that is with very powerful AC and a very big battery. We actually upgraded our GXR to make it more suitable. It's a purpose-built robotaxi to make it more suitable for the market of Abu Dhabi and Dubai. To work on this, we worked closely with Geely to customize GXR. We spent tons of time and efforts on it. Now, our proprietary Sensor Suite 5.6 and our HPC are ready and integrated into GXR. It's very suitable for the extreme heat weather condition. We also work on some redundant system. Okay.

The whole system, the GXR with full redundancy, several rounds of redundancy so that we have very reliable and stable braking and steering system. There is another thing I want to mention for the new products, new things. That is, we are going to further upgrade GXR with the computational platform. In the second half of the year, we will build our computational platform by newest NVIDIA DriveSoar platform. As you have already probably noticed, NVIDIA's next generation Soar platform is extremely powerful. It has the computational power. The whole computational power in our controller is actually more than 2,000 TOPS. For the past five years, we also tried to reduce the cost. The cost of our sensor suite has reduced by more than 70%. We want to do it through innovation and the new products. For the next generation robotaxi, currently it is under development.

I think we look forward to another 20-30% cost reduction. Further details, we will reveal it after the spec be finalized. There are lots of new things ongoing. What is really happening is working on robotaxi and this AI stuff. New things come every day. We believe that with a powerful and smart brain, the new GXR will not only provide a high level of safety and comfortability. It will also, our new purpose-built GXR will redefine the robotaxi business. This car is ready for large deployment. I really look forward to seeing the large deployment of GXR in Abu Dhabi and Dubai. Okay. That is my answer to this question.

Speaker 3

Thank you. Thank you. I have another question. My second question is, what's your view on the growing level of competition in China as more companies are rolling out autonomous driving technology?

Speaker 5

Yeah. As I mentioned in my answers in the previous question, right, as a leading global company, you have to face all kinds of competition, either globally or inside China, either from Carl Yan or from Ada System Company or from Robotaxi, another robotaxi company. For my view, my view is the competition is good. I love the beauty of the free market, right? Through trading, through competition, the customers can get the most cost-effective and high-quality products. What's wrong with that? That's a great thing. The thing is, are you worried about losing in this competition? I think the past eight years of record has already shown WeRide grew from a 10-person startup to a leading autonomous driving company with more than 2,000 employees.

It has already proved when we have nothing, we only have a few people, a very small fund, we can start to grow. We are now in a very advantageous and in a leading position. We are very confident. I always mention we have four core pillars that set WeRide apart from the competition. The four pillars, I want to name them one by one. They are tech competence. Technology is always our foundation. Second, proven business model. We are really looking to the large-scale deployment and also deploying global market. Third one is the safety and reliability record. Please go ahead to check the record. I believe WeRide has the best safety record all over the world. The fourth pillar is a strong partnership network. If I have time, do I still have some time? I want to elaborate actually these four pillars.

Thanks for this question. First of all, technology one, over the past eight years, we built up a WeRide One universal platform that can be deployed to use for robotaxi, robo-bus, robo-sweeper, RoboVan, and ADAS system. At the same time, you get data from all over these five branches. Basically, you are five times more efficient in collecting data, collecting corner cases, and five times more efficient in proving your idea. You are deploying large-scale, not only in robotaxi fleet, but also in RoboVan, in robo-sweeper. That is a grand vision from WeRide. I think no other company has such a grand vision. I think no other company has achieved concrete steps for such a grand vision. For proven business, look at our operation. I think I'm quite proud.

At every step, we have created a repeatable, scalable, and monetizable business model across multiple verticals, including mobility, logistics, and sanitation. That proves actually our autonomous solution can address a variety of real-world challenges. We operate in 30 cities across 10 countries. That means the business model is proven not in a time frame, but also globally. Third pillar, safety and reliable record. I want to read you something about some record. Our L4 autonomous vehicle has undergone successful tests and commercial deployment in diverse and extreme environments, including urban villages in China, such as congested and unpredictable road environments in downtown Guangzhou. In a very northern part of China, Heihe, that is like 30 degrees Celsius below zero in winter. Also in Abu Dhabi, the high heat where I'm currently sitting in the office, 40 degrees Celsius.

We show that we can still operate safely. Last one, very strong partnership. We emphasize many times our collaboration with Uber, with all different local authorities in Switzerland, France, Singapore, UAE, and Japan. We also have partners with multiple partners in Singapore, like in Resort World Sentosa and the robots operation. I won't be able to name them. This is a way long list. Also for ADAS system, we work with the top one tier one supplier, Bosch. With all of this, I think from the competition, we are confident. I think that's also the value of WeRide. Okay. That's my answer to this question.

Speaker 3

Okay. Thanks a lot. Very clear.

Speaker 5

Thank you.

Speaker 6

Thank you. Our next question comes from Leo You from CLSA. Please ask your question, Leo.

Speaker 2

Hi. Good evening, management. Thank you for the opportunity. I want to ask about the use of cash. We are quite excited about the share repurchase program. Would you please share more about your thoughts behind rolling out the program now, and how would you strike the balance between the shareholder return and investing in technology and products?

Speaker 3

Yeah. I'll take this question. Thank you, Leo. The board has authorized a share repurchase of $100 million, which reflects their strong confidence in the company's solid foundation and leading position in the autonomous driving industry and compounding long-term growth trajectory. The proposed risk structure can be made from time to time in the form of compliant transactions. Yeah. We think this initiative can allow us to opportunistically buy back shares when we see the opportunity, which also demonstrates our commitment to deliver value to the shareholder while maintaining financial flexibility for future growth. Yeah.

Speaker 2

Okay. Thank you, Jennifer. I have another question on the financial part. Can you share more about the growth drivers behind the product revenue and service revenue in the first quarter, and how do you see the trend of the revenue line?

Speaker 3

Yeah. As of this stage, our growth momentum for the first quarter is primarily attributed to the growth of the robotaxi business and our global expansion. At this stage, given all the revenue for different product lines, it is still relatively small. We think we will just focus on the product itself instead of breaking down because the product and service mix changes every quarter, as sometimes when we deliver a mega project for one quarter, the product revenue can significantly increase. On a different quarter, the service revenue can be the dominant factor for the quarter. If we are talking about the robotaxi service as a business, this is our core business from day one. The revenue contribution for robotaxi witnessed a significant increase of 10.4% year on year, which marked up 22% of the total revenue of this quarter.

This is based on our knowledge, and it's also the largest published announced robotaxi revenue among the peers. Yeah. And the margin level, we're still at a very healthy level of around gross margin of around 35%. Yeah.

Speaker 2

Okay. Thank you very much.

Speaker 3

Thank you, Leo.

Speaker 6

Thank you. There are no further questions. I'd like to hand the conference back to our management for closing remarks.

Speaker 5

Okay. So everyone, thank you again for your participation. I would also like to take this opportunity to thank our partners and our employees. I have to say, none of the progress is possible without their support and hard work. We look forward to speaking with everyone again in our next call. Thank you very much. Goodbye.

Speaker 6

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