Hesai Group

NASDAQ:HSAI

Earnings Call Analysis

Robust Growth and Optimistic Future

In Q4 2023, net revenues soared to RMB 561 million, a 37.1% increase year-over-year, with LiDAR shipments climbing to 87,736 units, indicating strong demand for the company's technology. Annual revenues hit RMB 1.877 billion, up 56.1% from the previous year, and gross margin stood at a healthy 35.2%. Despite a slower Q1 2024, primarily due to declines in the robotaxi business and seasonal trends, revenues are expected to range from RMB 320 million to RMB 350 million with over 50,000 units shipped. Transitioning towards Advanced Driver-Assistance Systems (ADAS), the company forecasts ADAS to account for approximately 60% of 2024 revenues. With a robust pipeline, including 26 vehicle models from 12 OEMs, over 200,000 LiDAR units are expected to ship quarterly in the second half of 2024. Guidance for 2024 remains strong, with projected revenues of USD 400-450 million, representing a 50-70% increase, while maintaining a blended gross margin of 30-35% and aiming for profitability in Q4.

Record-Breaking Performance and Optimistic Outlook

In the company's latest earnings call, Hesai, a leader in the global LiDAR industry, recounted an impressive performance for the fourth quarter and the full year of 2023. With net revenues in Q4 reaching RMB 561 million, this marked a year-over-year increase of 37.1% and was a 25.9% rise sequentially. Their LiDAR shipments achieved similar success with an 84.6% year-over-year growth and an astounding annual increase of 176%, reaching over 222,000 units by year-end. These figures demonstrate Hesai's growing strength in the LiDAR market and its ability to surpass prior shipment totals, meeting and exceeding investor expectations for scalable revenue and cost efficiency.

First Quarter Realities and Ambitious Annual Goals

Despite a more conservative guidance for the first quarter of 2024, with expected revenues of RMB 320 million to RMB 350 million and shipments expecting to surpass 50,000 units, the company has ambitious targets for the rest of the year. This is due to a significant slowdown in the robotaxi business and the seasonal lull in China’s automotive industry during the first quarter. However, Hesai anticipates a strong recovery in the second quarter with the addition of several new Start of Production (SOP) vehicle models and OEMs, projecting a 3x increase in LiDAR shipments to approximately 150,000 units for Q2. By the end of the year, projections suggest over 200,000 shipments per quarter, reflecting bullish company sentiment based on current forecasts and the anticipated standardization of LiDAR in new Electric Vehicle (EV) models.

Financial Guidance and Profitability on the Horizon

For the 2024 fiscal year, Hesai has set a target revenue range between USD 400 million to USD 450 million, representing a year-over-year growth of 50% to 70%. The company is confident in maintaining a blended gross margin between 30% to 35%, which speaks to their cost management and scaling capabilities. Executive insights suggest a strong focus on operational excellence and expense management strategies that they expect will drive profitability by the fourth quarter of 2024.

Strategic Partnerships and Product Evolution

The executive team spoke of successful partnerships and their flexible manufacturing capability, which allows them to capitalize on both expected and unexpected demand. This has been evidenced by a new partnership with Li Auto, which is expected to increase Hesai's LiDAR take rates significantly. Furthermore, with product advancements underpinned by 'Moore's Law,' Hesai's AT512 LiDAR is anticipated to offer higher resolution and range at a similar price point as the AT128, again demonstrating the company's commitment to innovation and value in its product offering.

Conservative Estimates and Market Expansion

The confidence shared by the executives transcends current estimates as they posit that 2 million cumulative LiDAR shipments by 2025 might be a conservative figure, especially considering the rapid expansion in the EV market, particularly in China. With LiDAR becoming more standard across various vehicle models and price points – including the more affordable 150,000 RMB segment – Hesai anticipates robust volume growth for its products. This growth trajectory aligns with the market trend where intelligent driving capabilities, and by extension, LiDAR, are becoming a hallmark of new vehicle releases.

Earnings Call Transcript 2023-Q4

[Operator]

Hello, ladies and gentlemen. Thank you for standing by for Hesai Group's Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] Please note that today's conference call is being recorded.

I will now turn the call over to our first speaker today, Yuanting Shi, the company's Investor Relations Director. Please go ahead.

[Yuanting Shi, executive]

Thank you, operator. Hello, everyone. Thank you for joining Hesai Group's fourth quarter and full year 2023 earnings conference call. Our earnings release is now available on our IR website at investor.hesaitech.com, as well as via newswire services. Today, you will hear from our CEO, Dr. David Li, who will start the call with an overview of our recent updates. Next, our Global CFO, Mr. Louis Hsieh, will address our financial results before we open the call for questions.

Before we continue, I refer you to the safe harbor statement in our earnings press release, which applies to this call, as we will make forward-looking statements. Please also note that the company will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under GAAP in our earnings release and SEC filings.

With that, I'm pleased to turn over the call to our CEO, Dr. David Li. David, please go ahead.

[Yifan Li, executive]

Thank you, Yuanting, and thank you, everyone, for joining our call today. 2023 was a landmark year for Hesai. We not only continue to substantially outperform our LiDAR peers, but also extended our leading market share with stellar full year results across revenues, total shipments and the blended gross margin, all of which surpassed our previous expectations. Furthermore, we created a virtuous cycle of cost control and economies of scale and achieved multiple significant milestones on our path to profitability.

For instance, our operating cash flow for the full year of 2023 reached positive territory, a feat unparalleled within the industry. These remarkable accomplishments reflect our unwavering commitment to sustain and responsible growth to our mission of reducing accident, saving lives and making global transportation safer for everyone.

Let's delve into our fourth quarter business update. On the domestic side, we achieved a significant milestone in the fourth quarter by expanding our collaboration with one of the world's largest EV manufacturers based in China. Our extended cooperation encompasses another fresh lineup of vehicle models that are set to debut starting 2024. In addition, we were recently selected by Li Auto, as the exclusive LiDAR provider for their MEGA MPV platform. Li Auto also may ADAS standard equipment on their popular L7 and L8 Pro versions, immediately added hundreds of thousands of LiDAR units to Hesai's growing order book.

We also recently forged new strategic partnerships with Great Wall Motor, one of China's largest auto brands, and Leapmotor, who has recently formed a joint venture with Stellantis to include joint research endeavors and the integration of a variety of LiDARs into their vehicle models with SOP scheduled to commence in 2024. We anticipate that our partnership with these prominent domestic OEMs will soon deepen even further.

The EV revolution is in full swing, particularly in China. In 2023, the estimated NOA penetration rate in China stood at 10%. It is projected to increase to over 20% by 2025. OEMs are eager to distinguish themselves through intelligent NOA functions. For instance, as I just mentioned, Li Auto's L8 and L7 Pro models now feature our LiDAR, as a standard configuration with an urban NOA function, which navigates from urban point A to point B with minimal driver intervention. Additionally, LiDAR is increasingly recognized as an essential safety feature just like airbags. Consequently, LiDAR has become a prerequisite for safety-cautious consumers seeking the highest safety standards.

Moreover, as the industry advances towards L2+ and L3 autonomous driving systems, a transformative trend is emerging with ADAS systems equipped with LiDAR configurations, making their way into passenger cars in a growing range of price categories. This evolution began with vehicles priced at RMB 400,000 range in 2022 to RMB 300,000 range in 2023 and now has extended to models priced near RMB 150,000 range in 2024, as illustrated by the recent launch of Leapmotors latest EV model.

The widening accessibility of LiDAR technology across affordable price categories represent a transformative phenomenon for our industry, unveiling a mass market opportunity 10x to 20x larger than the previously served premium sector only. The catalyst signal is a key inflection point for ADAS and LiDAR adoption in China and the rest of the world.

China has maintained its global leadership in EV production and the sales for 9 consecutive years, commending a majority market share exceeding 60% worldwide. Meanwhile, Chinese OEMs commenced the mass EV production in 2021, 2022, in contrast to global OEM time line, which mass EV production is anticipated to begin around 2025 and 2026. In other words, China EV industry is approximately 5 years ahead of the global curve.

We are in the right place at just the right time to capture the opportunity with accumulative shipments surpassing 300,000 LiDAR units by end of 2023, Hesai has not only realized financial advantages through economies of scale, but also [ amass ] significant technological expertise and a profound understanding of mass production and a quality management system. This serves as a compelling evidence of our established proficiency for global OEMs, particularly those who may be more conservative in vendor selection due to past unsuccessful attempts with our U.S. and European peers. Armed with this strength, we are well positioned to compete successfully on a global stage.

Let me walk you through some of the specifics. First, Hesai's pioneering R&D initiatives are defining the LiDAR industry's product development trajectory. In January 2024, we unveiled AT512, our NextGen ultra-long-range flagship ADAS LiDAR scheduled for mass production in 2025. This cutting-edge technology is establishing new industry benchmarks, boasting the highest available detection range and resolution. It not only outperforms industry's competitors by a significant degree, but also challenges long-standing misconceptions about technical bottlenecks, including the notion that only LiDAR designed with 1550-nanometer wavelength can detect beyond 250 meters.

Standing out with industry-leading performance across every key metric, AT512 greatly enhances the vehicle's perception capability by detecting objects at least twice as far away as competing LiDARs in its category, given the intelligent driving system over 40% more reaction time to make the safer decisions. As the CEO of a leading global OEM declared, when it comes to safety, the second best of LiDAR isn't good enough.

We firmly believe that investing in development of the best LiDAR products, which not only meet, but exceed the dynamic demand of the market provides substantial long-term benefits to society, as well as our company and stakeholders. We are seeing various new LiDAR debuts at 2024 CES event in Las Vegas reflect a technological conversions towards our innovation direction.

Several competitors, who have traditionally emphasized the use of the 1550-nanometer lasers or MEMS technologies are now unveiling products based on rotating mirror scanning system for the 905-nanometer laser. This underscores a growing recognition of the benefits of our technologies offers in terms of cost, performance and reliability. Our leadership and [ ingenuity ] were recognized at CES event, where our groundbreaking ultra-thin long-range in-cabin LiDAR ET25, won the prestigious 2024 Innovation Award at CES.

Second, we firmly believe that mass production at scale is the only way to ensure sustained operation, effectively manage cost and cultivate enduring trust with our customers. As of now, we operate 2 major factories, our Maxwell center in Shanghai, focusing on new product R&D and testing and our Hertz Center in Hangzhou, a facility dedicated to mass production, boasting an unprecedented automation rate of over 90% unparalleled in the global LiDAR industry. By the end of 2023, we achieved an annualized production run rate of over 800,000 units, a figure we project to rise to [ 1.5 million to 2 million ] by end of 2024. Meanwhile, we expect to accumulate, we ship over 2 million LiDAR units to the market by end of 2025.

Third, beyond manufacturing capability, stable quality and reliability have emerged as crucial indicators for OEMs when considering mass installation of LiDAR systems. LiDAR systems require the sophisticated integration of [ optics ], mechanics, electronics, as such, quality and precisions are paramount. Amid intense competition and widespread adoption of ADAS systems, LiDAR product [ materially ] has become EV manufacturers primarily concern. From OEM's perspective, there's no better indicator of our products' superior quality and reliability than their outstanding long-term performance in real-life road conditions.

Drawing upon these assets know-how, we are confident in our ability to expand our domestic leadership to a global scale. We are beyond surreal to announce that as of now, we have won over 60 ADAS series production EV models from 16 major OEMs and Tier 1 suppliers worldwide. We've been selected by 2 top global automotive OEMs for their new EV series production programs and there are more.

Our global RFI/RFQ lineup has expanded to include a total of 13 with 9 leading global OEMs from North America and Europe, and we're adding Asia ex-China to the [ roster of the quarter ]. These major accomplishments marks a promising start to our global ADAS journey. Stay tuned for the updates.

As we look ahead, the road ahead is filled with opportunity to broaden our impact. Our achievement thus far are just the beginning. With market-leading LiDAR technology and strategic partnerships worldwide, we are poised to capitalize on the evolution of intelligent driving, reducing accidents, saving lives and creating a safer global transportation system.

I'll now turn the call over to Louis to share more details on our financial performance and outlook. Louis, please go ahead.

[Tung-Jung Hsieh, executive]

Thank you, David, and hello, everyone. Let's go through our operating and financial figures for the fourth quarter and full year 2023. To be mindful of the length of our earnings call today, I encourage listeners to refer to the fourth quarter earnings release for further details.

In the fourth quarter and full year of 2023, we achieved a host of remarkable milestones that underscores our leadership in the global LiDAR industry. In Q4, our net revenues exceeded RMB 561 million, an increase of 37.1% year-over-year and 25.9% sequentially. Quarterly total LiDAR shipments reached 87,736 units, an increase of 84.6% year-over-year and 84.9% sequentially. Our fourth quarter 2023 shipments alone surpassed our combined total for full year 2022.

Even more exciting, for full year 2023, our net revenues increased by 56.1% year-over-year to a new high of RMB 1.877 billion with a full year blended gross margin of 35.2%, above the top end of our guidance range of 30% to 35%. Our 2023 total LiDAR shipments topped 222,000, up 176% year-over-year. Meanwhile, our cumulative LiDAR shipments exceeded 300,000 units by the end of 2023, making Hesai the first automotive LiDAR company worldwide to reach this mark. We remain focused on enhancing revenue scalability and cost efficiency and delivered positive operating cash flow for the first year, underscoring our clear path to profitability.

Heartened by these stellar results, we have set ambitious targets for the first quarter and full year of 2024. We anticipate the revenues in the range of RMB 320 million to RMB 350 million and total shipments to exceed 50,000 units in the first quarter. This muted guidance is attributable to 2 main factors: first, a significant slowdown in our robotaxi business compared to last year. It is crucial to note that given the reasonable price discount granted to a certain large robotaxi customer, the suspension of deliveries to that customer will not hinder our ability to meet our gross margin target. Despite this setback, demand for the rest of our AM line LiDAR products remains strong.

Second, the first quarter of the year traditionally marks the slow season for China's automotive industry. Due to the New Year's holiday, both OEMs and suppliers strategically pull forward production and deliveries to the fourth quarter of the preceding year. As ADAS LiDAR shipments accelerates, our revenue mix will transition from autonomous mobility led, including robotaxi and industrial robotics to ADAS led in 2024. ADAS revenues are projected to increase from below 40% of our revenues in 2023 to approximately 60% in 2024.

The first quarter of 2024 will be a transitional quarter with steady growth in robotics and strong growth in ADAS accompanied by a drop in robotaxi contribution. Thereafter, our outlook for 2024 is highly optimistic with a significant uptick in revenues and shipments expected in the second quarter of 2024. This optimism is bolstered by addition of 13 SOP vehicle models and 6 SOP ADAS OEMs in the second quarter alone. We believe this will lead to an approximate 3x quarter-over-quarter increase in total LiDAR shipments or about 150,000 units in the second quarter of 2024.

By the end of Q2 2024, we anticipate SOP for 26 vehicle models from 12 ADAS OEMs. We are poised for an even greater surge in shipment figures in the second half of 2024. We expect over 200,000 LiDAR shipments per quarter in the second half of 2024, as we expect 12 OEMs representing approximately 40 vehicle models to SOP by the end of this year. These projections are based on current customer forecast and may be subject to change.

Our revenue guidance for full year 2024 stands firm in the range of USD 400 million to USD 450 million, an increase of 50% to 70% year-over-year. Meanwhile, we expect to maintain a blended gross margin within the 30% to 35% range for the full year of 2024, a testament to our robust cost management systems and growing economies of scale. Furthermore, we expect our commitment to operational excellence and prudent expense management strategies to help us achieve profitability in the fourth quarter of 2024.

To wrap up, Hesai is defined by our unwavering commitment to reducing traffic accidents, saving lives and making global transportation safer for everyone. We are firmly committed to delivering on our promise to our customers, partners and shareholders. This concludes our prepared remarks for today.

Operator, we are now ready to take questions.

[Operator]

[Operator Instructions] Your first question comes from Cindy Huang with Morgan Stanley.

[Cindy Huang, analyst]

Congratulations on splendid results. So my first question is regarding the dispute with U.S. DoD. Is there any update on the development? And will there be any impact in terms of working with U.S. OEMs?

[Tung-Jung Hsieh, executive]

Thank you, Cindy. This is Louis. I'll take that first, and then, David can chime in. Yes, for the 1260, as we had said in our statement, after January 31st, when we were put on the DoD list, we don't know why. So we're trying to ascertain that. As we've said very clearly in the past to our investors and to the whole world, we do not work with the Chinese military. We do not -- our LiDARs cannot do surveillance, do not store data, and we are -- only for civilian use and commercial use only. So we made that very, very clear. So we have now asked the DoD for information, as to why we're on the list. We have moved forward with the legal proceedings. But at this point, we don't want to comment further given the sensitivity of litigation, but that's where it stands.

As far as effects on U.S. OEMs, it certainly has a reputational effect, and it has impacted us in a negative way. So we continue to monitor it. We're still in discussions with our OEM customers, but it's certainly not something that we want to happen, and we will do everything we can to get removed from that list. We don't believe it's justified. David, do you want [ to add ] anything else.

[Yifan Li, executive]

Yes. Yes. Thank you, Louis. I think Louis has made our position very clear. And we do not -- we are not a military company, and those accusations are false. So I will not repeat that. I think what I'll try to add are 2 things: a, is -- and it's true that it's becoming an increasing -- increased concern, especially the U.S. OEM that and geopolitics is becoming part of the equation, and it is hurting us. And of course, this is not a company-specific issue, it's becoming a global issue that any U.S. OEMs will have concerns using parts directly from China. So that's why we are working very diligently with them, hopefully, to resolve the issue.

On top of that, what I'd like to comment is that it is also becoming clear that because geopolitics is going to become an issue, and remember, those European and American OEMs, the premium brands, they also have a significant size of the market in China and then, sometimes up to 50%. And for those cars and actually, we become a preferred vendor because they like us anyways, but they definitely wanted to use us or a Chinese brand in China for obvious reasons. So on the flip side, it is not great that geopolitics is becoming an issue across the border, and it is impacting our U.S. business, for sure. But they also build cars in China, and it's a significant volume. And for that, we don't have any problems and that is not a concern. So that is also part of the equation that I think is important to us.

[Tung-Jung Hsieh, executive]

Did that answered your question, Cindy?

[Cindy Huang, analyst]

Thank you, David. And my second question is related to our shipment forecast. The [ 540 ] new model launches in the pipeline and demand and demand and model sales are super volatile. Does Hesai apply any adjustment to OEMs order forecast? And how would you respond to a rapid order change?

[Tung-Jung Hsieh, executive]

You mean order change for the positive or the negative?

[Cindy Huang, analyst]

Both ways.

[Tung-Jung Hsieh, executive]

Okay. I think you've known me -- you guys have known me for many, many years, I always build a discount into the forecast. So our actual orders are much higher than the numbers we give. So that is already built in.

As far as upside surprises, we have the capability with our manufacturing facility to meet almost any demand level because of our efficiency and manufacturing in Hertz and also because of our automation and our access to raw materials. So upside is always good. In fact, we were very, very happy to do the partnership with Li Auto, where the MEGA -- and the MEGA standard equipment or LiDARs, hey, it was just launched, and then on their MPV. Their new L7 -- or their L7 and L8 models Pro will now be standard equipment to have Hesai LiDARs used to only be the Max version.

That alone will do the take rate from the auto from 30% -- in the 30% range plus to probably 60% to 80%, so you think about that's hundreds of thousands of orders over the next couple of years. So there is -- so we have the upside surprises. And then any kind of downside surprises, we obviously can handle because we discount to you the number we give for our LiDAR deliveries.

[Yifan Li, executive]

So again, let me talk about this topic from a technical standpoint. So one thing worth noting is that we actually built a standard product. We always call that AT128. It was like not specific to any customers because it's the same LiDAR. The only difference is some of the communication software [ and some of the mounting ], which is a minimal change. It means that -- yes, you're absolutely right. There are ups and downs across some 40, 50 car models that we're expecting to ship and it's impossible to predict 6 months down the road.

But if you look at the aggregate effect, it is not very difficult to understand how many of the units will be needed across the entire especially price category, right? What we are happy to see is that used to be more on the premium category. And now it's penetrating down to the RMB 150,000 level, which is a much bigger market, given that we have many car models now in a more cheaper part of the bracket. And we're actually more confident that with the blended volume, and it will be a very robust and steadily growing volume this year.

[Cindy Huang, analyst]

That's very clear. And can I follow up with one more question on next-generation product. So how do we bridge the gap, [ I mean ], the transition from AT128 to AT512?

[Yifan Li, executive]

Yes. Yes. This is a great question. Thank you. So I think there are 2 parts of the strategy. First, if you remember our overarching thesis has always been a simple term called Moore's Law. If you look at it what Moore's Law does is that there are actually 2 ways of using Moore's Law. One way is that you try to keep the price range. It's like your CPU, right? But then your performance almost doubles every 18 months or so. So that's one of the way we're doing. Essentially, this is the path, the AT512 is taking in the sense that AT512 will always stay at the range of the AT128 on the price. And -- but as you can already tell, it is 8x more resolution and roughly 50% more on the range at a similar price range. So this is exactly what Moore's Law did to a lot of the consumer electronics, right? Your CPU didn't just have its price over time, right? It becomes 0, right. Of course, [ that didn't ] happen.

Having said that, we also recognize that for LiDARs to be widely deployed to more vehicles, not just hundreds of thousands of them, but tens of millions of them, the mass market needs a cheaper LiDAR, and that's possible too via Moore's Law. Of course, if we try to build a more affordable version of it, it wouldn't have the full performance of the AT512. It will still be reasonably good, especially definitely better than AT128, but it could be cheaper over time if you don't need the full performance of AT512. That is the direction we're looking at. We're not quite there yet. And we will release information, as they become available, but this will definitely be another trend, especially for the Chinese market that people want, and we know we have technology platform to support that.

[Operator]

Your next question comes from Tina Hou with Goldman Sachs.

[Tina Hou, analyst]

Congrats on the result and the strong gross margin number. I have a question. So David, you -- just now you mentioned that by 2025, there will be -- you guys will cumulatively ship 2 million LIDARs, so which means about 1.7 million in 2024 and 2025 together. So I'm just wondering, is that also a conservative number, like a bear-case scenario that you're giving? Or this is more of like a base case scenario?

[Tung-Jung Hsieh, executive]

Thank you, Tina. I'll take that since given it's a numbers question. I think the 2 million cumulative figure is realistic and probably leaning towards the bear side. So I think, as David mentioned in his remarks, the demand for LiDAR as it moves down to the affordable car midrange and lower range, the adoption of LiDAR in new EV vehicles is going to just explode. So I think as -- there was a holy grail mentioned in 2020 by all the LiDAR makers in the world, reaching 1 million units by 2025. I believe Hesai will be the only company to actually do so by next year.

So yes, if you add the 300,000, we've done now, 600,000 or 700,000 for this year, and we expect to ship over 1 million units in 2025. And that's partly because of what David discussed, a market, where we have high-end AT512, and we have lower end versions for the mass market cars that are more affordable. Those 2 together, you'll have to wait to hear the details, but those 2 together will generate expected units of well over 1 million for 2025.

[Yifan Li, executive]

I also believe -- Tina, this is David. I also believe this is -- could be on the more conservative side for another [indiscernible] and the consumer market, especially car market in China, it moves very fast. Everybody is kind of looking at each other and what they do, and then they try to incorporate something into their car model that will roll out in the next 18 months. So today's projection is definitely based on the bottom-up projection of the numbers we already have. But if you watch very closely for the media for especially past a month or 2, everybody is mentioning LiDAR.

So if you look at all the car releases, and they always only mentioned now very few things, right? One of them is LiDAR very specific. The other is the 800-volt charging, and what was the other thing people talk about? I couldn't even remember. I think it is one of the top 3 things that is mentioned across every car release. And of course, a lot of the OEMs are now just claiming that sure, we're going to make it a standard because this has become the symbol of the level of intelligent driving, and that's not a competition, [ I kind of ] we're losing. So I think this snowball effect, we know it will start, it starts to moving, and is ramping up really quickly. So that's why I think the current best estimate today from the bottom-up numbers could be on the conservative side.

[Tung-Jung Hsieh, executive]

Yes. Tina, you know that as we move into this year, we're actually -- our LiDAR will become platform LiDAR for some of these top 5 or 6 OEMs in the world. So they're actually going to be volume-wise. They're going to be actual -- and the platform, which rolls out to the whole new fleet of EV cars, whether it's at the low end or the high end, just may be different LiDAR, but all from Hesai. So then those -- that's why David said the bottom was up, but the numbers actually can be much larger, especially if it becomes standard equipment on all their EV models, which I believe will happen in the next several years to many of the top auto manufacturers.

[Yifan Li, executive]

Yes. The third one, the competing factor is like aerodynamics coefficient. Yes, I remember. Yes.

[Tina Hou, analyst]

That's really helpful and comprehensive. Yes, yes. And I do agree that it's definitely one of the top, if not the top functions that gets mentioned by the OEMs recently. And then can I have a follow-up question is, in terms of the OpEx. So wondering what is our SG&A and R&D as well as CapEx budget for 2024? And also, do we have like an estimated time of non-GAAP net profit breakeven?

[Tung-Jung Hsieh, executive]

Yes. I think it's a good question. OpEx was higher in 2023 because we had a very large expansion year, right? So we went into -- we built Hertz Center. We built Maxwell R&D Innovation Center. And we also had rolled out a lot of new programs on the ADAS side. So our hiring went from -- I think we had [ 905 people -- had 905 people ] after a set of layoffs in 2022, finished '23 with a little bit over 1,100 people. That was set to slow.

R&D and G&A hiring will not increase much, and sales and marketing will grow. But together, I think the total amount of increase in OpEx will be much lower than the revenue increase. As long as we maintain 30% to 35% gross margins, if we hit USD 550 million to USD 600 million, we'll be profitable from a GAAP basis.

And from a non-GAAP basis, we should be very close to breakeven or [ probably ] in the second half of this year, as volumes hit over 200,000 a quarter. And for Q4 of 2024 in a few quarters, we expect -- we hope to get GAAP profitable for that quarter because, of course, Q1 in 2025 is our slowest quarter seasonally. So that will slow down. But overall, we expect to be GAAP profitable in 2025.

[Operator]

Your next question comes from Jessie Lo with Bank of America.

[Yu Jie Lo, analyst]

My first question will be related to our shipment orders. So apart from Li Auto, could you also like shed some light on the -- who will be the top other 4 clients? And how would the volume looks like in 2024?

[Yifan Li, executive]

Yes. I think we don't have the right to mention their [ true ] names. But Li Auto is roughly going to be more than half of our total volume, but the rest of the top 5 customers, they will each take at least 20,000 units to 30,000 units. And I think you probably will be able to figure out the names and as some of them are already have been disclosed, but we won't be able to associate those numbers directly with them. So essentially, this is a roughly half from Li Auto and half from the rest of the top players. Yes. Jessie, without disclosing names, the top 5 automakers in China will start shipping with our LiDAR this year. That's why the numbers go up. Okay.

[Yu Jie Lo, analyst]

Also, my second question would be related to the ASP adjustment or negotiation with the OEMs. If we take this revenue guidance of USD 400 million to USD 450 million, pairing with our shipment or delivery guidance, it sounds like the ADAS LiDAR ASP drop wouldn't be as much as 10%. So could you maybe share some details with how you're dealing with our clients on the ASP? And then especially, we have a high concentration on Li Auto, and then we -- apart from that, we also have more shipment on FT series as well.

[Tung-Jung Hsieh, executive]

Yes. I think the -- I mean, most of the product is in the AT series for ADAS. So it's negotiated by contract and usually it's relatively a similar price for the whole year. The ASP decline for 2024 is higher than 10%. It's actually closer to 20%. But the key thing is that our cost goes down even faster. So we can still maintain the margins on a blended basis. Because remember, we still have the very high gross margin business of robotaxi and robotics. So our gross margin is still intact at 30%, 35%, but we're able to absorb any kind of negotiated price reductions better than anyone else in the market. So we have the ability to take down price, even if we don't -- obviously don't like to do it. But the price decrease will be a little bit higher than 10%.

[Yu Jie Lo, analyst]

And finally, just follow-up...

[Yifan Li, executive]

And also -- sorry, real quick. I want to quickly add my comments on this. So also, remember, this is also due to a strong effect of economies of scale, right? And it is true that the ASP is declining probably faster than we expected. But more importantly, the total volume growth is much faster, right? And so that -- and you have to combine those factors to figure out.

[Tung-Jung Hsieh, executive]

I mean, Jessie, you can just look at Q4, and you can see that once we start manufacturing in high volume, the economies of scale really kicks in on the gross margin.

[Yu Jie Lo, analyst]

So also, I want to follow up on top of that fourth quarter gross margin, so previously, we were still doing the transition. So how was that transition on the AT series? And then are we having any further like product or cost upgrade or improvement in 2024?

[Yifan Li, executive]

Sorry, can you...

[Tung-Jung Hsieh, executive]

The transition from AT is smooth, right? No issues, right?

[Yifan Li, executive]

AT to ET.

[Tung-Jung Hsieh, executive]

AT128. Remember from the old AT?

[Yifan Li, executive]

Yes, right, that -- and that is close to completion, and it is a very solid upgrade. And so -- and it also, it has gone through more validation than the previous ones. So it is a very smooth transition.

[Tung-Jung Hsieh, executive]

There's -- I think there's one for a small number of cars, 1 or 2 this year that was still shipped with the old AT because it was validated last year, but it's very low numbers. So I think AT -- the new AT is certainly going to be 95%, 97% of the...

[Yifan Li, executive]

And it has been agreed that it will finish the transition very [indiscernible]. So yes, I think this is a very smooth transition.

[Tung-Jung Hsieh, executive]

And FT is rolling out. The numbers aren't huge yet, but there is getting -- it is getting some traction. And then, of course, ET comes out next year in SOP form. And also AT512. Yes.

[Operator]

Your next question comes from Bin Wang with Deutsche Bank.

[Bin Wang, analyst]

I have 2 questions. Number one is about costs [indiscernible]. So what's your volume forecast for the [indiscernible] impact for this year -- next year volume? That's number one about costs.

The second question is about the gross margin in the #4 quarters really high despite your product mix actually deteriorate, which means much more ADAS LiDAR in the #4 quarter, however, you actually got more than 10 percentage margin increase, kind of what's the reason for that? What's the change in the first quarter because this seem to be the similar product mix in the coming quarter?

[Tung-Jung Hsieh, executive]

Thank you, Wang Bin. I think we don't discuss individual customers.

[Yifan Li, executive]

Yes. So I think Wang Bin, is first, again, we won't be able to comment specific individual customers without their permission. But I think you're right that we do see a significant slowdown of the robotaxi market, and it would be hard for us to speculate on whether it's a technical reason or economics reason, but the decline and the slowdown of some of the orders, it is true, right?

So of course, the flip side is that we see actually better momentum on the ADAS side and especially the penetration rate and the unit shipment is -- and also the new car models coming in and is exceeding our expectation. So they kind of canceled out each other for the year to help us to maintain our very strong growth. But again, as I said, we are not a robotaxi LiDAR company. We are not an ADAS LiDAR company. We are a LiDAR company with very strong semiconductor capability and manufacturing capability.

And it was true that when robotaxi was growing very fast, we capture the majority of the market. Now it's slowing down, and it actually doesn't hurt us to continue to focus on the much faster growing part of the market, which is ADAS. So that...

[Tung-Jung Hsieh, executive]

So Wang Bin, you recall when I made -- when we made our forecast for this year of $400 million to $450 million in revenue, at that time, our ADAS LiDAR count was about 400,000. That is now up to over 600,000. And I still left the revenue intact at $400 million, $450 million, just to be conservative given the impact from the slowdown in robotaxi. So we didn't take the number up.

[Yifan Li, executive]

Yes.

[Tung-Jung Hsieh, executive]

But that shows you that because David said it kind of evens itself out. And as your question on the gross margin for Q4, you have to remember, that's our busiest quarter, and that's at a time when we still had the higher pricing from 2023.

[Yifan Li, executive]

And also, on top of it, so the slowdown of the robotaxi really is starting this year. So last Q4 was still a good quarter. So we do expect this year not be able to ship a high gross margin, large volume robotaxi LiDARs. I think that has been already factored in and disclosed to everyone. But I think last Q4 was still very strong for both of the [ LiDARs ].

[Tung-Jung Hsieh, executive]

Yes. I think as -- robotics is still growing, so that market will still grow 30%, 40% this year. And ADAS, of course, will [ grow ] well over 100% this year. And so together, on a blended basis, we still expect very, very strong revenue growth of 50% to 70% year-over-year. And that -- and then obviously, the shipment numbers keep going up. They don't go down. So it's gone from 400,000 to 600,000 and still climbing. Did that answer both your questions, Wang Bin.

[Operator]

Your next question comes from [ Jan Yu with HDFC ].

[Unknown Analyst]

Can you hear my voice?

[Tung-Jung Hsieh, executive]

Yes. Go ahead.

[Unknown Analyst]

So my first question is about robotaxi and robots. We noticed that the demand of the robotaxi slow down perhaps the humanoid robots are developing really fast this year. Could you give us a guidance for the shipment for the robotaxi and robots this year? Also, do we have any intent to launch a specific LiDAR for the humanoid robots in the future?

[Yifan Li, executive]

So I -- so the second question is kind of a surprise because I think you're talking about a completely different industry. And this is a very exciting industry and that at some point, it will use a large amount of LiDARs. I think that's one topic.

And I think your question is, are we going to build humanoid robot this year? As far as I know, we don't have concrete plans to do the robot itself today, but that could benefit from using different types of our LiDARs technology and hopefully, this answers your question.

[Tung-Jung Hsieh, executive]

And then your first question, on the number of units for robotaxi and robotics, the actual number of total units last year for PandarXT and QT was approximately 27,000. We expect that number to still increase. So it's not -- overall, it's not shrinking. But because there is price reduction, and also there may be a mix shift toward lower priced Pandar or XT yet, the revenue will not be -- grow high basically. Robotics will grow. Robotaxi will not. It will actually shrink year-over-year. Okay. But the actual units is still going up.

[Unknown Analyst]

Okay. May I have another question. I want to ask the cooperation with the global OEM. And where should we expect [ to see ] your ramp-up in the sales from the global OEMs order?

[Tung-Jung Hsieh, executive]

Depending on which one, but it's a much [ later ] volume. And so, we don't have the specific numbers to announce yet. And it is slower than the rest of the China EV market.

[Yifan Li, executive]

[indiscernible] the 2 that are referenced in our earnings release [ were ] SOP in 2025. So it's not 2024.

[Operator]

Your next question comes from Michelle Jing with Haitong International.

[Michelle Jing, analyst]

I just -- I think I have a few questions. So the first one would be based upon your estimation for ADAS shipments, do you guys have an idea about the ADAS shipment for the whole industry in 2024?

[Tung-Jung Hsieh, executive]

About the whole industry for ADAS shipments?

[Yifan Li, executive]

Oh, the entire market.

[Tung-Jung Hsieh, executive]

Yes. The [ entire ] market.

[Michelle Jing, analyst]

Yes [indiscernible].

[Yifan Li, executive]

I think you probably have to refer to the third-party reports because we don't have the full projection for some of the OEMs that we don't directly work with. My very rough estimate is probably a little more than double of our volume. That's my guess.

[Tung-Jung Hsieh, executive]

I mean, we have to be very close to 50% of the global market, if not, even slightly [indiscernible]. And I think if you break it down without getting into geography, I think China will roughly be [ 67% -- 60% to 70% ] of the global market over the next several years. So given our position, as the market leader in China, we have to be close, if not higher than [ 50% ] of the global market. For -- not for everything, for ADAS -- for ADAS LiDAR. There's obviously other categories like ADAS automotive there.

[Michelle Jing, analyst]

And my second question would be for products. So -- for the AT512, do you guys have any orders yet? Did you receive any orders?

[Yifan Li, executive]

That will be the future Level 3 products for the global OEMs. We have -- I think we've openly disclosed that we have quite a significant number of RFI and RFQ and some of them are in a very late stage. Basically, there was very strong interest for 512, but there's only samples available. So orders won't come in until those samples are evaluated and contracts negotiated. But the orders will come in usually the year before or right the year is actually ships -- actually firm orders.

[Operator]

Your next question comes from [ Ron Jao with TF ].

[Unknown Analyst]

So I have some questions regarding demand side. So apart from [ Linkpower ], have you observed any demand from other OEMs for equipping vehicles priced below RMB 200,000 with LiDAR systems? And how much longer do you anticipate it would take for LiDAR product to further penetrate the market for vehicles under this price point? And also, with the projection that LiDAR sales will exceed 1 million units by 2025, is it -- like is it taking into account that this volume will include sales driven by this category of vehicles and besides [ Linkpower].

[Yifan Li, executive]

So I didn't quite get the last question, but I'll answer the first one, first. So yes, we have a few models, and that is already in the pipeline that will be in the range or below the RMB 200,000 range. And we do start to see a lot more request considering using LIDAR as the standard configuration for more car models in that range, again, it has a snowball effect, right? It's -- and China market is always rolling, right?

And once they see somebody doing that and the customers will always refer to that and ask the OEM why can we have that? Does that mean this car is inferior in terms of intelligence driving then the competition. So that is becoming amplified very quickly, and we do start to see that in the next -- already seeing that, but definitely for the negotiations we have in the next year, which, of course, we will be shipping in 2025 and 2026.

The second question, I just didn't quite get...

[Tung-Jung Hsieh, executive]

Remember -- yes, on the second question, remember the trend globally, EVs in China were over 8 million or so last year, and that's still growing. So let's say, it's 10 million, 12 million over the next -- this year and next year. I think as we said earlier, the penetration for intelligent driving systems at Level 2+ and 3 is going to increase even into the mass market cars below RMB 200,000.

Second trend is, as David mentioned, is people asking for intelligent driving systems with LiDAR. That will push, and I think we've already had discussions with OEMs, where they will make a standard equipment on all their EVs. So those 2 factors will cause that snowball effect and will take us easily over 1 million units in 2025 based on current discussions with OEMs.

[Yifan Li, executive]

Yes. So I think a year ago, this was a much more heated topic when everyone is saying that we know the competition is difficult in China. Everyone is cutting costs. What makes you think that people will take more LiDARs as opposed to less, right? And my answer stands, if price is the only differentiating factor people consider, we should all go back to [indiscernible] right, make a [ bearable ] car with no ADAS, right? Why would we even talk about ADAS at all?

The reason is that just because exactly competition, they need to use the best [ demand ] for the buck. So a buck is a buck, but the demand is defined differently based on the market, it used to be the big entertainment screen, now it's really the charging and the LiDAR. So everyone is asking about it, then this becomes demand for the buck. So that's why I think it's becoming more popular that people realize with this little of investment, your vehicle can stand out or at least not falling behind. So that's the rationale.

[Tung-Jung Hsieh, executive]

And it's all similar to airbags. It's all about safety and actually making your drive more -- driving experience much more pleasurable, where the car helps take the stress off your -- you having to be full attention on the road all the time. So it's safety and convenience and driving enjoyment, that's pushing the LiDAR development.

[Operator]

As there are no further questions now, I'd like to turn the call back over to the company for closing remarks.

[Yuanting Shi, executive]

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

[Operator]

This concludes today's conference call. You may now disconnect your lines. Thank you.