Niu Technologies Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 18, 2024

Key Takeaways

  • In Q4, total unit sales were 137,000, down 0.6% YoY, with China sales down 6.4% to 110,000 units and revenue sliding 21% to RMB 478.7 million despite a 33% rise in overseas volumes.
  • Full-year 2023 was challenged by lingering lithium-battery cost headwinds, cautious premium consumer spending in China’s top-tier cities and distribution disruptions in key European markets.
  • New product launches drove momentum: the MQiL (16% of China sales in 7 months) and Falcon series (35% of China sales) gained rapid adoption, and the new NX series secured over 10,000 preorders generating RMB 100 million.
  • While overseas electric 2-wheeler sales plunged 70% due to distributor issues, the micro mobility segment saw a 0.5% volume rise, activations doubling and expanded retail partnerships in the U.S. and Europe.
  • Looking to 2024, management forecasts Q1 revenue up 5–15% YoY (RMB 438–480 million), aims for 1.2 million unit sales, flat ASPs, a 1–2 ppt gross margin improvement and controlled expense ratios.
AI Generated. May Contain Errors.
Earnings Conference Call
Niu Technologies Q4 2023
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Niu Technologies 4th Quarter 2023 Earnings Conference Call. At this time, all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

Operator

As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I would like to turn the call over to Ms. Crystal Li, Investor Relations Manager of Niu Technologies. Ms.

Operator

Li, please go ahead.

Speaker 1

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss New Technologies' results for the Q4 2023. The earnings press release, corporate presentation and financial spreadsheets has been posted on our Investor Relations website. This call is being webcast from our company's IR site as well, and a replay of the call will be available soon.

Speaker 1

Please note, today's discussion will contain forward looking statements made under the Safe Harbor provisions of the U. S. Private Securities Litigation Reform Act of 1995. Forward looking statements involve risks, uncertainties, assumptions and other factors. The company's actual results may be materially different from those expressed today.

Speaker 1

Further information regarding the risk factors is included in the company's public filings with the Securities and Exchange Commission. The company does not assume any obligation to update any forward looking statements, except as required by law. Our earnings press release and this call included discussion of certain non GAAP financial measures. The press release contains a definition of non GAAP financial measures and a reconciliation of GAAP to non GAAP financial results. On the call with me today are our CEO, Doctor.

Speaker 1

Yan Li and CFO, Ms. Piyang Zhou. Now, let me turn the call over CEO, Yan.

Speaker 2

Thanks, Crystal, and hello, everyone. In the Q4 of 2023, our total sales volume was 100 and 37,000 units, maintaining the same level 1 year ago with slight year over year drop of 0.6%. Specifically, sales volume in the China market dropped by 6.4% to 110,000 units, while sales in overseas market had a significant increase of 33 percent to 27,000 units. Total revenue in Q4 was RMB478.7 million, a decrease of 21%. Those results wrapped up the financial year of 2023.

Speaker 2

In 2023, the total sales volume was 7 100 and and 9,000 units, total revenue for the entire year was RMB 2,700,000,000. Now the year of 2023 presented significant challenges for Niu's operation. The lingering effect of lithium battery price hike in 2022 continued to impact our sales in the first half of twenty twenty three, While the price of lithium battery returned to the normal levels in the second half of the year, our business faced additional setbacks due to consumption upgrades and downgrades in the top tier cities in China. This trend characterized by cautious spending behaviors among the premium market customers resulted in a slowdown in sales. Now in the international electric two wheeler market, we encountered challenges both externally and internally.

Speaker 2

The decline of electric mobile market in the key European countries, such as Germany and the Netherlands, coupled with temporary operation disruptions due to issues faced by our distribution partners in Europe, further hindered our growth in 2023. But despite the headwinds, our 2023 presented itself a year with opportunities to reflect and refocus our strategy. In the China market, our product strategy remains focused on the premium market segment, enhancing our product line by growing our classic series and also by successfully introduce a more sporty style Falcon series. One notable product released in 2023 is the MQL, the legacy return product updates our iconic M Series with significant design performance improvements. In just 7 months of launch, the MQIL sales volume in 2023 represents 16% of China's total sales.

Speaker 2

The F Falcon series is also another popular series that we introduced in 2023 that quickly become well known style besides the classic Halo Live series with the recent launch F400TF200F100 products. The new F series together represent nearly 35% of total China sales. So our dedication to craft a premium product is complemented by our unwavering commitment to build a premium brand. Throughout 2023, we remain deeply engaged in branding and marketing activities, leveraging various user events and cross brand collaboration to strengthen our presence in China market. We actively participated in exhibitions and road shows collaborating with leading lifestyle brands such as the North Face Mountain Festival, sneaker comp, G Fusion Game set and the Designer Toy Expo.

Speaker 2

These events provided us with valuable opportunities to showcase our products and elevate our brand presence. Simultaneously, we maintained a robust online presence through a strategic communication and marketing campaigns, predominantly on short video platforms like Xiaohongshu and Douyin. Collaborating with over 600 KOLs and KOCs, our content generated over 250,000,000 views, further solidifying our brand's digital footprint. Furthermore, 2023 saw us embark on an impactful cross brand collaboration, such as our partnership with globally recognized IP Kumamon, resulting in the launch of new Cross Kumamon G100 Scooters. Additionally, in Q4 2023, we established a significant official partnership with JD Gaming, a leading esports team in China and a finalist in the League of Legends World 2023.

Speaker 2

Moving forward, we'll continue to leverage our strategic collaboration and high profile events to amplify our brand visibility and reinforce our position in the market. Now turning into the overseas market. In 2023, we encountered a mix of challenges and opportunities. Our electric 2 wheeler sales experienced a significant decline of 70%, primarily attributed to the operation disruption faced by 1 of our key distributors. However, our micro mobility segment saw a modest increase of 0.5% year over year.

Speaker 2

Despite decline in the electric 2 wheeler sector, we have initiated efforts to make operational adjustment to improve our performance since the second half of twenty twenty three. We continue to introduce new product in 2020 3 in the electric two wheeler market. In the Q4, we introduced the RQI, the high performance urban quad electric motorcycle to the European market. Its cutting edge design, swift acceleration and integrates smart features such as keyless lock and lock, GPS navigation, OTA update have been met with enthusiasm from the market. Alongside the RQI, we launched the XQI Electric Durbite available in 2 variants, the XQI 3 Street for urban riders and XQI 3 Wild for off road adventures.

Speaker 2

The SQI quickly garnered acclaims winning the 2023 Gold Winner of the New York Product Design Awards. Furthermore, 2023 marks the official launch of our new battery swapping solutions compatible with our newly introduced F600E MOPET. This initiative aimed at collaborating with partners across Southeast Asia, South America and Europe revolutionized the way riders engage with our product by offering quick, efficient battery swaps, thereby opening doors in the markets that we have previously yet to penetrate. We officially kick out solution in Q4 2023 and expect to have battery swapping cabinets available by working closely with 3 to 5 operational partners by the end of year 2024. In the micro mobility sector, we delivered sales volume slightly higher than the previous year with the increase of 0.5%.

Speaker 2

However, the total activation number in 20 23 grew by 2x compared to 2022. In product strategy, we focused on rounding our product portfolio to cater a broader spectrum needs, the launch of our premium KQI Air and the KQI Air X models constructed predominantly from lightweight carbon fiber for incredible low weight of under 12 kilograms, solidifies our range in micro mobility categories. With the KKR Air series, we now brought the comprehensive lineup that spans from high end innovative design scooters in US1 $1,000 plus range to high performance scooter in the US800 dollars to US900 dollars range to assessable entry level options in the $300 to $400 bracket. This diverse range lays a strong foundation for anticipated sales growth in 2024. The expanded sales channel of our micro mobility product also played a bigger role in the growth.

Speaker 2

In 2023, we transitioned from focusing on online sales through our Amazon and Shopify to a combination of online offline sales by working with official retail partners like Best Buy, Media Mart, Blangie and More. Through those retail partners, we're able to place our products in more than 1,000 physical locations in the United States and Europe. Our active participation in global exports and road shows, including the AIM Expo in Las Vegas, IFA in Berlin and ECOMA in Milan and the electric Expo in various countries have significantly elevated news spreads visibility. Moreover, our inclusion in popular media such as the appearance in the movie Murder Mystery 2 and TV shows like The Grandma Show and The Price is Right has pleasantly surpassed our expectations, further enhancing our brand's presence on the global stage. Now as we move into 2024, our optimism for growth is brought by strategy adjustment laid out in 2023 across our operations.

Speaker 2

In China, our commitment remains strong towards the premium market segment, focusing on premium product development, targeting very specific consumer segments, channel expansion into Tier 2 and Tier 3 cities and same store sales growth via online, offline traffic optimizations. In terms of product, back in 2022, we introduced our new classic UQI plus model, an upgraded U series featuring improved life design smart control enhanced rider ergonomics. This model quickly captures market attention and contribute to near 14% of total sales in 2022. Similarly, the MQL introduced in Q2 2023 as the enhancement of all time popular M series present itself as a classic return with the performance improvement. The MQL contributed to 16% of total 2023 China sales.

Speaker 2

Both models serve a clear testimonial to the consumers' preference for our classic design combined with upgrade technology, both in powertrain and smart functionalities. Those design styles are deeply set a foundation for our new product. Now on February 29, 2024, we debut our newly designed NX series, continues the design sale of our first legendary product, the M1, which laid the foundation for our company back in 2015. The Enwon was our 1st electric moped in China and has sold over 500,000 units since its launch. It has not only become the legendary design for Niu, but also a classic example of premium high quality smart electric scooter in China.

Speaker 2

However, since 2019 with the newly with the introduction of new regulations on China electric bicycles, the M1 no longer met the updated standard and has to be sold as a motorcycle leading to a decline in sales. Nonetheless, consumer has long been requesting an upgrade in 1 that complies with both the regulation for electric bicycles and motorcycles. Now in 2024, we finally debuted MX3 with MX representing electric motorcycles and MXT as electric bicycle. Both models inherited design style of the original M1, but are refined upgrades modern loop. The design stands out with a futuristic style incorporating magnetic transparent panels to showcase its strong circuitry.

Speaker 2

The body is designed with sharp yet smooth aerodynamic lines. Additionally, we have upgraded the Halo Lite, a signature element shared across our most well known scooters. In the NX series, the Halo Lite is embedded in the front panel, adding another futuristic touch to the design. The X and XT are equipped with our most cutting edge technology functions to date, making them the smartest electric scooters on the market. For driving safety, they are equipped with the full function ABS TCS.

Speaker 2

Additionally, they feature the BSC, the blind spot detection and RCW, the rear cross traffic warning, along with automobile grade dashcam in the front and the millimeter wave radar in the back. To further enhance the riding experience, they're outfitted with the interactive TFT display serving as smart cockpit. This incorporate writing its features such as keyless start, navigation, remote access, as well as interactive features including lap timing, writing routes, logs and entertainment system. Also to simulate integrate with user smart device ecosystem, the update also incorporate new smart features like map for navigation and compatible with Apple and Huawei Harmony system. The integration and novel features such as the voice control, shortcut phone display and device management, including Apple's front mic features.

Speaker 2

Now as one of the highest performance electric motorcycle we ever released, the NX boosted maximum power of 20,000 watts with top speed of 135 kilometer per hour and accelerates from 0 to 50 kilometer per hour in just 2.45 seconds. The NXP is available immediately since its launch with pricing from RMB 6000 to RMB12500, while the NXP is available in May. The NXT were well received as evidenced by online preorders of NXT initially through live streaming of major platforms. With the initial 2 weeks launch, we secured more than 10,000 units in preorders, generating sales revenue exceeding RMB 100,000,000. This amount is 40% more than compared to our initial crowdfunding campaign for the release of 1st month.

Speaker 2

Those pre order results position us as top seller across all major e commerce platform during the period. Now with the successful launch of NXT series targeting the premium motorcycle consumer segments and performance driven electric bicycle segments, we also plan to introduce several products to target diversified user group. For example, our recently upgraded U1 product launched just a few days ago, targeting female users with this new color scheme, ergonomic improvement in handle and seat position, easy to use smart functionalities and options to include baby seat and accessories. The key to our product strategy in 2024 is to build our product portfolio targeting the premium consumer segment with diversified needs. Our support with those new products, we also plan to restart channel expansion in Q2 2024, building up the channel coverage across Tier 1 to Tier 4 cities.

Speaker 2

We initially focused on top 45 cities, which represent 80% of our sales, with plans to build sales from in the lower tier cities as well. Now with addition of store comps, key focus for 2024 remains the improvement of same store sales, leveraging the combination of online and offline traffic. We initiated those efforts in the second half of twenty twenty three, conducting over 15,000 live stream sessions on Douyin and Xiaogung Fu. We have recorded some successful case of achieving a GMV of over RMB 100,000 in just one live stream session, indicating a successful online to offline conversion model we plan to further scale up. Starting Q1 2024, we have continued live stream initiatives in 30 key city markets, enabling those stores to sell directly through online live streaming on a daily basis.

Speaker 2

Additionally, we have planned to launch online sales campaigns and co create over 10,000 widespread social media content. With those strategy in place, we anticipate to improve our same store sales by 10% to 20 percent in 2024, driving significant volume growth for the company and enhance store profitability. Now with our product strategy and retail channel expansion in focus, we aim to further strengthen our brand through marketing and branding campaigns. A recent highlight was our collaborations with JD Gaming team. Expanding our partnership formed last year, we joined forces with JD Gaming team as their official electric scooter partner.

Speaker 2

This collaboration extends from social media engagement to product launches and seek to make significant impact within the Generation Z demographics. The collaboration with JD Gaming marks the beginning of series partnership plan for 2024, we intend to continue our co branding effort with several strong IPs targeting specific user groups and leveraging social media platforms. Now in the overseas market, our comprehensive product portfolio, which includes the introduction of MGT-one hundred, RQI and XQI models in the Q4 of 2023, strategically bridge the gap between our product offerings and high performance electric motorcycle market demand. The MGT 100 price and the Euro 5000 together with NGT provides a comprehensive coverage from 50 cc to 125cc electric motor. The RQI targets electric motorcycle category offering a high performance quad motorcycle option with price starting at €8,000 Additionally, the new 3rd bike XQI marks our debut product in the off road motorcycle sector priced at €6,000 the XQI model has garnered significant attention.

Speaker 2

Our active engagement industry events such as an expo in Las Vegas, moderator in Dortmund, Germany has further amplified our brand visibility. At those expos, we brought our latest bikes, providing attendees, including influential KOCs with opportunity to test drive through our product. The positive feedback and the heightened interest from the diverse user group received at those events has been instrumental in solidifying our presence in the market. Most importantly, since the later half of twenty twenty three, we have undertaken substantial adjustment in our business operations in overseas electric 2 wheeler sector. In some of our key markets, in addition to the existing distributors, we have we are established entities and operation team for direct distribution of some of our product to retailers.

Speaker 2

We believe this direct distribution model will enable us to invest more in local branding and marketing, establish strong ties with customers and make us more adaptable to local market changes. With those operational adjustments, we initially delay the revenue recognition on 2 products actually reached to individual retailer dealers. They will help us create a strong foundation in each local market in the long run. With a comprehensive product portfolio and operational adjustment complete in Q1 2024, we are confident in kick starting the growth beginning in the Q2 of this year. Now in the overseas micro mobility sector, we have established a solid foundation for growth in 2024 over the past 2 years.

Speaker 2

Although the book sales volume has remained relatively flat compared to 2023 to 2022, the actual sell volume to customers has doubled as suggested by the activation number increase and the trend continued at a 2x rate. We believe that our effort in product portfolio building and the sales channel establishment has positioned us well for the further growth this year. On the product portfolio front, with the introduction of KQI Air, a full carbon fiber lightweight high performance kick scooter in September 2023, we now posted a comprehensive product lineup. Additionally, in January 2024 marked the launch of KQI 300 Series, an enhancement of popular KQI 3 Series designed for all current use. This KQI 300 Series feature is dual hydraulic suspension for better handling on an even surface, promising up to 60 kilometer range per charge and starting at $700 We have several other product upgrade plans throughout the year of 2024.

Speaker 2

Now with those product lineup, we made significant progress in entering retail channels in the second half of 2023, laying a solid foundation for growth in 2024. In the U. S. Market, we're well positioned in over 8 100 Best Buy stores and advanced in our effort entering retailers such as Walmart, Target and Costco. In Europe, our products are displayed in over 400,000,000,000 mark stores in Germany, over 200 Blanche stores in France, and we are making progress in placing them nearly 100 core English stores in Spain.

Speaker 2

Additionally, we are moving forward with new retail partnership with Media World in Italy and retailers in Australia and others. By the end of 2024, we plan to double the number of point of sales of micro mobility products by expanding the retail sales network. So heading into 2024, we're optimistic about organic growth. In the China market, the excitement surrounding our latest product release has been powerful. Leveraging the momentum gained from the newly released product, we have also a roll out schedule prepared for all the other products throughout the year as well as the channel expansions.

Speaker 2

In the overseas motorcycle market with the ready to ship product and the operational adjustments already in place in Q1, we're confident in the growth of 2024. However, those operational adjustments may temporarily result in a decline in sales in Q1 as the sales are actually booked differently due to the model change. For the micro mobility segment, we anticipate fast growth in Q1 as well as throughout the entire year, given that we have laid our product portfolio and established both online and offline channels at the beginning of this year. Now with those factors considered, we anticipate the sales volume in 2024 reaching 1,200,000 units. Now I'll turn to Bian to discuss.

Speaker 3

Thank you, Yan, and hello, everyone. Please note that our press release contains all the figures and comparisons you need, and we have also uploaded Excel format figures to our IR website for your easy reference. As I review our financial results, I'm referring to the Q4 figures unless I say otherwise. And all monetary figures are in RMBs not specified. As Yan mentioned, our total sales volumes for the Q4 was 137,000 units, a decrease of 0.6% compared to the same period of last year.

Speaker 3

And specifically speaking, the China market sales volume was 110,000 units and overseas market was 27,000 units. And for the full year 2023, the total sales volume was 710,000 units, including 601,000 units in China and 109,000 units overseas. And the total revenue in the 4th quarter was RMB479 1,000,000, down 22% compared to the same period of last year. To break down the scooter revenues by Beijing, the scooter revenue in China was RMB 355,000,000 down 21%. This decline primarily contributed to a shift in product mix.

Speaker 3

As the Chinese economy was still recovering, our premium series showed a slower recovery rate compared to the mass premium series. As a result, the ASP reached to RMB 32, 16, a 15% lower on a year over year basis. However, the ASP in each category has increased. The premium ASP remained almost nearly 5,000 and the mass premium ASP increased to nearly 3,000. The overseas scooter revenue, including hip scooters, e mopeds and e motorcycles, was nearly 60,000,000.

Speaker 3

The blended scooter ASP decreased to 2,200, down 49% year over year. Despite the higher sales volume contribution of Peak Scooter with the lower ASP, the new launched K1 and KUs contributed to 22% of the sales volume, which targeted towards the youth and the entry level market and had lower retail prices. Accessories, spare parts and services revenue were maybe $65,000,000 due to the decrease in the overseas spare parts and services as we mentioned in the previous quarters. For the full year 2023, our total revenue decreased by 16% to RMB2.7 billion And China scooter revenue as a whole saw a 15% year over year decline to RMB2 1,000,000,000. And the overseas scooter revenue decreased by 29% to RMB349,000,000.

Speaker 3

The total overseas revenue, including scooters and non scooters, contributed to 15% of the total revenue. And now let's look at the ASP in 2023. The overall scooter ASP was slightly decreased to 33.23, a 3% down year over year, while the domestic scooter ASP was 33.44, up 1%, and this minor growth was driven by higher ASPs in both premium and mass premium series despite a shift in the mass premium in overall product mix. And overseas blended scooter ASP was 3,200, 21% down as the proportion of kick scooters increased and also combined with the decrease in the newly launched lower ASP kick scooters in Q4. The gross margin for the 4th quarter was 19%, 3.4 ppt lower than the same period of last year and mainly due to the product mix change in the domestic market.

Speaker 3

While for the year end 2023, the gross margin was 21.5%, up from 21.1% and representing a 0.4 ppt increase on an annual basis and mainly due to a reduction in raw material costs, especially in domestic new product lines. And talking about operating expenses, the 4th quarter OpEx was $246,000,000 dollars 50,000,000 higher than the same period of last year and mainly due to a lower revenue base. Selling and marketing expenses were $191,000,000 $84,000,000 higher than the last year and primarily resulting from our expansion into the overseas market. Out of which, $43,000,000 was from the overseas micro mobility holiday season promotion, and the other half stems from the rental expenses largely driven by the inventory buildup resulting from geopolitical conflicts and early start taking for the expected peak season in 2024. Additionally, the current warehouses are incurring higher unit per area cost since the micro mobility sector is still in the early operating stage and those expenses are expected to decrease in the subsequent quarters.

Speaker 3

R and D expenses were $36,000,000 $5,000,000 lower than the Q4 of 2022 and mainly due to the decrease in stock comp and share based compensation of RMB 8,000,000 and partially offset by the increase in design and testing expenses of new model, which has been and will be launched in 2024 of RMB 3,000,000. G and A expenses were RMB 19,000,000, dollars 28,000,000 lower on an annual basis, mainly caused by the decrease in provision for credit office of RMB22 1,000,000 and the decrease in stock related costs of RMB5 1,000,000. For the full year 2023, the OpEx was RMB 891,000,000, 15% higher than 2022, and the increase was mainly due to the provision for credit losses of RMB114,000,000 and the increased promotional activities and rental expenses in overseas markets of RMB 101,000,000 partially offset by RMB 45,000,000 decrease in G and A and also $40,000,000 decrease in domestic marketing and promotions. Despite prudently raising provision for credit losses on overdue payments, we retain a positive outlook on future receivables collection, given our current partners' robust financial spending and their ongoing payments continuously. Exclude the non cash expenses, such as the provisions for credit losses, depreciation and amortization and share rate compensation, the OpEx increased 2% year over year.

Speaker 3

The non GAAP of OpEx was RMB845 1,000,000. In the Q4, we had a net loss of RMB130 1,000,000 and a non GAAP net loss of RMB122 1,000,000. On a full year basis, due to the factors including the lower than expected domestic sales and increasing overseas business expansion, as mentioned above. We had a net loss of 272,000,000 and non GAAP net loss of $224,000,000 Turning to our balance sheet and cash flow. We ended the year with RMB 1078,000,000 in cash, restricted cash, term deposits and short term investments.

Speaker 3

On an annual basis, the operating cash flow was inflow of $96,000,000 primarily because we made a net income after adjusting for noncash items. And our Q4 CapEx was $22,000,000 For the full year, the CapEx was $79,000,000 $56,000,000 lower than the last year as we cautiously opened up stores in domestic markets. And now let's turn to guidance. We expect the Q1 revenue to be in the range of RMB438,000,000 to RMB 480,000,000, an increase of 5% to 15% year over year. And please be aware that this outlook is based on the information available as of the date and reflects the company's current and preliminary expectations, which is subjected to change due to uncertainties related to various factors.

Speaker 3

And with that, let's now open the call for any questions that you may have for us. Operator, please go ahead.

Operator

Thank you. We will now begin the question and answer session. Our first question comes from the line of Joon Lee from Citix. Please ask your question.

Speaker 4

Good evening. I'm Zhejun Li from Citiks. Thank you for your time. And I would like to be more interested in the following questions. The first 2 are more about us and the last 2 are more about our industry.

Speaker 4

The first one is this year's store expansion plan and the strategy. It means would we like to restore the original channel or more to supplement the new thinking channel? And the second question is about how to evaluate 9 Boat aggressive sales target this year and whether it would squeeze our sales target. And the above 2 is about us. And I wonder if you'd like to solve this too and then I'm going to the sector.

Speaker 2

So I'll talk about first on the store openings. I think you're actually a mix of basically, I think we're still going to be focused on the top 45 cities as first and with the option to expand into other cities as well. So notably in the past, if we look at last couple of years, because the lithium price hike, we have lost roughly about 400, 500 stores. So I think the expansion for including actually including the store we have lost and reclaiming back as well as opening new areas. So I think those are basically I think we have a clear road map and actually location map on where to open stores and based on our new product portfolios.

Speaker 2

Now, I think with the second question about competitors, I think overall, if you look at our product offerings, so our current product offering is basically the price range anywhere between basically RMB 3,500 above to up to RMB 12,000. So you look at this entire market, the volume above RMB 3,500, that volume is basically somewhere around 14,000,000 to 16,000,000 units. So within that, let's call that our addressable market, 14,000,000 to 16,000,000 units. And with that number, last year, we only did, what, 600,000. So even with this year's forecast, I think the market still the addressable market is still very significant large than our volume target.

Speaker 2

So in the sense that, I think it's we're less worried about the competitors, but I think we're more focused internally on how to getting the best product out there and how to expand the channels, expand the stores, so the consumers, the interested consumers actually have a location to acquire the product. I think that's sort of hopefully that address your second question.

Speaker 4

Got it. Quite clear. And I really hope that this year could be we could see a robust change in our market. And the next few questions about the sector. First one is the Nanjing fire has attracted the attention of the society to the batteries of the 2 wheelers.

Speaker 4

What is our view of the impact to this sector? And the second is our users are more concentrated in high tier cities, as you just mentioned. And also, our users' time of using our products is relatively long and has accumulated for a long time. So I'm very curious about whether we can we have ever done some analysis of our users' behavior on whether we can detect change in their consumption habits from this accumulated data such as changes in the cycle, changing costs or batteries? Thank you.

Speaker 4

This is my two questions about sector.

Speaker 2

Sure. I think first of all, I'll address the issue with the fire accident. I think it's unfortunate. So I think what it really comes out for high quality products. And I think that's so in the case what we observe in the market, many people who buy products either low quality or they buy products, then they buy the original scooters, but then they complement with a modified 3rd party lithium batteries.

Speaker 2

And usually, those 3rd party lithium battery are secondhand lithium batteries, it's poorly manufactured with low quality, that's where so I'm not sure what the actually the cost of Nanjing fire, but our experience back then then throughout the time, it's actually the modified lithium batteries, like a not original manufacturer ones are one of the main causes. So I think from our perspective, I mean, we have actually taken many cautious preventive measures. For example, our scooters only work with our batteries, not necessarily not working with 3rd party, the second time batteries. And I think with this, I think it basically rings a bell saying it's basically I think it's basically people cry for I think it's a high quality product with original parts are necessary and to guarantee safety, right? So I think that's actually a set advantage for us.

Speaker 2

Now, I think in terms of your second question about user behaviors, I think typically we observed that people tend to keep these scooters, I guess, for 3 roughly about 3 to 4 years, I think 3 years roughly sort of the usage cycle. I think the for us, we're highly we're a bit too concentrated in the top tier cities. I think this year is actually what we're looking at is actually beyond besides giving market share in the top tier cities is actually expand our footprint and getting more store coverage as well as market shares in the Tier 2 and Tier 3 cities with basically with product that suitable for those market.

Speaker 4

Got it. Quite clear. And thank you again for your time and sincerely hope that we could achieve the goals of this year and the new returns. Thank you.

Speaker 2

Yes. Thanks.

Operator

Thank you for the questions. The next question comes from the line of Yatin Chen from CICC. Please ask your question.

Speaker 5

Hi, thank you for receiving my questions. My first question is about our sales volume target. As we can see the target growth for 2024 is more optimistic than last year. And so I like to know what is the target sales volume of kick scooters? And about and what is the sales target for 2 wheelers, especially for domestic and overseas market?

Speaker 5

This is my first question. Thank you.

Speaker 2

No, I think for the kick scooters, we're looking at because in the past few years, even though the selling volume to our distributors remain roughly constant, but the sell off basically, the sell to the consumer has been doubled. If I compare 2023 to 20 2022. So that's because the comprehensive product portfolio also over the year, we're actually able to get to all these offline channels. So we expect the sellout volume this year also double, which sort of implies the sell in volume to the distributors actually double as well. So on the kick scooter, we're looking at somewhere anywhere between 200,000 to 250,000 units.

Speaker 2

So I think that's on the peak scooter market. Then the rest of is sort of the electric 2 wheeler. And within the electric 2 wheeler market volume, I think majority of them are going to be in the China side, where the international electric 2 wheelers and electric motorcycles, probably somewhere around 20000 to 30000 units, and the rest of it all

Speaker 5

China. Thank you very much. And my first question and my second question is about our profit margin. Especially, I'd like to know our product strategy in 2034 to achieve our sales volume target, will the average selling price or profit margin will decline in 2024?

Speaker 2

So I think basically, if you look at I guess, this question sort of relates to our first newly product launch, the MXP in March. So that's actually more the premium or high end product for our case, the pricing retail pricing is between RMB 6000 to RMB12000. But then, you look at the another product, which is launched, it's called UYE, basically operating U1, which a few days ago, that retail pricing is around RMB 4,000. So if you look across the board, we expect our average ASP to roughly remain constant compared with last year. So I'll let Piyang to comment on the margin part.

Speaker 3

Yes. Well, as Yan just mentioned, even though that we operated our classic N Series and we're about to launch the new products in the following months with a better price versus the product. But the ASP will stay at a relatively flat level in the domestic product line. Well, in the overseas product line, since we have a highly expectation on the Imola Cycle and MOPES recovery in overseas market with it, those are almost 3 to 4 times higher than the key scooters ASP. So, we will expect a slightly recovery from the overseas scooters ASP in 2024.

Speaker 3

Altogether, we'll give us a blended scooter ESP almost at the same level in this year. Go back to the gross margin for the domestic scooters and the overseas scooters, we were expected a slight free gross margin increase to 1.2.pbt altogether, blended with the domestic and the overseas market. And we have already made the cost efficiency, those operational activities in 2023. And with the scale of the sales volume increase, we may get the benefit from the gross margin. But we didn't expect a higher gross margin increase because we still consider to share the profit with our dealers and also the overseas market expansion with our partners.

Speaker 3

That's why we consider the gross margin altogether. Will only increase 1 to 2 points PPG for the whole year.

Speaker 5

Thank you very much. And my last question is, I'd like to know, do you have any guidance for 2024 on the selling expense ratio? Or to say, will it grow or remain steady comparing with 2023?

Speaker 3

Well, 2023 is a very special case since we have we are in the transition of the overseas expansion and also the heart in the domestic market. That's why the expenses ratio is pretty high. But I think the benchmark for the expenses as percentage of revenue, we could use the benchmark in the second half of twenty twenty one, first half of twenty twenty two. We may

Speaker 5

we will

Speaker 3

try to bring back the expenses as a percentage of revenue, go back to that level, which means at least that we will have a we will maintain the expenses within 20% to 24%, since it's a slightly large range. We are still in the transition for the overseas and the domestic market balance. But the first half of twenty twenty two and second half of twenty twenty one is a benchmark of the expenses ratio. So this is our target for 2024 expenses ratio.

Speaker 5

Thank you very much. That's all my questions.

Operator

Thank you for the questions. We have a question from the line of Michael Simmons from Global View S. A. Please go ahead.

Speaker 6

Yes. Hello, Doctor. Lee. Yes, I'd just like to ask a question about the balance sheet in these sort of slightly tough trading conditions. You and your team have done a good job sort of maintaining a good cash level in the balance sheet.

Speaker 6

Can you just give us a feel for looking forward to this year, particularly as you've explained, you're going to be spending some money on your international expansion and also continuing to launch many new products. Can you just give some feel for what the balance sheet and the cash position is likely to look like going forwards, please?

Speaker 3

Well, this is Pyeong from you. I think I can I just can't give the trend of our balance sheet instead of the exact figures because we are still at the very beginning of 20 point 4? As Yan just mentioned, except for the operating activities and strategies we introduced, On top of that, we may spend higher CapEx on the store opening in domestic markets. I think this is the big non operating consumption in the domestic strategy. Well, in the overseas market, we didn't expect any large CapEx.

Speaker 3

The only operational activities will happen in 2024 is how we launched our products in our strategic partner stores. So those are purely the operational activities. We reflected in the operational cash flow. So this is the cash flow part and the CapEx part. In the meantime, we didn't expect the huge increase in the receivables or the payables since the business model is very straightforward.

Speaker 3

And we also didn't expect the higher increase in the inventory as well because right now, we already have enough inventory for the big season sales in 2024. And after that, we may remain a relatively secure level of the inventory, but we'll not reach to the higher one than 2023. So I think the business model doesn't change. The only thing that if we want to expand the stores in domestic markets, it will bring up the CapEx. While the current production has already reached to 2,000,000 production capacity.

Speaker 3

And we didn't expect as high as this level of sales volume. So we don't have any further demand on the expansion on our facility. Hope this will address your question.

Speaker 2

Yes. Thank you very much

Speaker 6

for those.

Operator

Thank you for the questions. With that, I would like to turn the call back to management for closing.

Speaker 2

All right. Thanks everyone for the participant in today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Thank you.

Operator

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect your lines.

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