Q4 2023 Ecarx Holdings Inc. Earnings Call
Participants
Rene Du; Investor Relations; Ecarx Holdings Inc.
Ziyu Shen; Chief Executive Officer and Chairman; Ecarx Holdings Inc.
Peter Cirino; Chief Operating Officer; Ecarx Holdings Inc.
Zhou Phil; Chief Financial Officer; Ecarx Holdings Inc.
Derek Soderberg; Analyst; Cantor Fitzgerald & Co.
Presentation
Rene Du
Good morning, and welcome to ECARX fourth quarter and full-year 2023 earnings conference call. With me today for ECARX are Chairman and Chief Executive Officer, Ziyu Shen; Chief Operating Officer, Peter Cirino; and Chief Financial Officer, Phil Zhou.
Following their prepared remarks, they will all be available to answer your questions during the Q&A session that follows. Please note, today's call is being recorded.
Before we start, I would like to refer you to our forward-looking statements at the bottom of our earnings press release, which also applies to this call. Further information on specific risk factors that could cause actual results to differ materially can be found in our filings with the SEC.
In addition, this call will include discussions of certain non-GAAP financial measures. A reconciliation of the non-GAAP measure to GAAP measure can be also found at the bottom of our earnings release.
With that, I'd like to hand the call over to Ziyu.
Ziyu Shen
Thank you, Rene. Hello, everyone, and thank you for participating in our fourth quarter and full-year 2023 earnings call. 2024 was a pivotal year for China's automotive industry. China exported 4.9 million vehicles in 2023, surpassing Japan to become the world's top auto exporter. Global auto sales topped 74 million as EVs continue to gain significant market share with their global penetration hitting another record high of 23% in December.
With demand for EVs, expanding globally, the top software identifies them as and is enriched in high current. The offer will grow in tandem. According to PCG. software platforms for vehicles are forecast to grow at a 12 per ton CAGR by 2030 with a market value of USD 13 billion, creating enormous market opportunity in data that we are uniquely positioned to benefit from with our innovative product portfolio. There are over 6 million vehicles on the road that incorporate our technology across 25 brands offered by all our 15 automotive OEM customers, E-Car as equipped vehicles on the road increased 8% from last quarter and 30% from the same period last year.
We are starting out the year strongly with a solid pipeline that includes the expectations launch of 14 new vehicle models over the next 18 months, which we expect to translate into an additional 1 million vehicles on a road that incorporate our technology. This growth is reflected in our financial results where our revenue during the fourth quarter hit a record high of RMB1.87 billion, up 22% year over year while full year 2023 revenue hit RMB4.67 billion, up 31% year over year. The sector continues to present enormous opportunities for growth despite increasing price pressure as competition intensifies.
While we continue to invest in our future long-term growth, we are submitting obviously working to improve operating efficiency across our supply chain to build a sustainable path towards profitability as our business grows to scale, our net revenues for the year narrowed significantly to RMB1 billion compared to RMB1.6 billion in 22. Our customer base continues to grow at automotive OEMs increasingly recognize the significant value for precision precision that our solution offers.
And we added one new mass market and Japanese brand in December and the multi high EV project wins through our strategic collaboration with one of China's top automotive OEM groups. These are all in addition to winning three new projects within the GDE. Covington during the quarter. Our international profile and brand awareness continues to strength alongside our expanding customer base.
Last month, we showcased our for Pardot and met with a number of well-known global automotive OEMs at the Las Vegas for four also saw the launch of the product for and Volvo Car EX. three deals. We showcased the product ROS. that might always debate on Friday, oral and E-Car. Eskom picked up Wabtec. Both vehicles are equipped with Google Automotive Services, which highlights our ability to deploy this service at scale and at a par both Target and global automotive OEMs with the launch of the vehicles into national.
Our unique partnership ecosystem continues to be a key driver of our success during Q4, we embarked on our new joint venture with March to corroborate our Intelligent Audio product and a strength to our existing partnership with back to semi to further develop our Intelligent Driving ecosystem. This is in addition to our partnership with Mobileye, which was our fourth player with the launch of the portal for, I'm extremely pleased with the progress we have made throughout the year. With our profile growing internationally, strong partnerships and cutting age solutions, we couldn't be in a better position to benefit from the enormous growth opportunities ahead.
I will now pass the call over to Peter, who will go through the operating results for the quarter in more detail.
Peter Cirino
Thank you to you and good day, everyone. We gained significant momentum in diversifying our business and partners during the quarter. As you mentioned, we added a mass market Japanese brand to our customer base and recently picked up multiple project wins for EV models throughout our collaboration with one of China's top automotive OEM groups with the start of production expected by the end of 2024 or early 2025 to sustain this momentum and boost the visibility of our solutions. We held eight tech shows across five cities in China in Q4, which generated significant engagement with over 2000 attendees. We also won three new projects from existing customers within the Geely group and ecosystem brands during Q4. Our recent progress underscores the significant market opportunity for our innovative product portfolio and the strength of our technology. I'll start with the E correct and Taurus series, which embodies the fundamental requirements needed for a truly Intelligent Vehicle. And horror series integrates the world's leading seven nanometer high performance automotive grade as SOC SE. 1,000, which features unique hardware architecture, including built in function and inflammation, safety islands that don't require versus virtualization and a high performance programmable NPU with eight tops, a computing power and multiple accelerations building on the Q3 debut of the Lincoln Coke Zero eight, the first vehicle to launch with our full stack solution, Q4 saw the mass production of the entire 1,000 computing platform to be integrated into the updated version of the linking those HERO6, the entire series has become the benchmark platform for a number of car models in our pipeline. The macro platform is one of the most powerful intelligent cockpit available in the market with its ultra high-performance digital cockpit computing platform with unparalleled 3D graphics, security and entertainment features. The macro platform is expected to begin production in the first half of this year on two core models, which we are very excited about incorrect, I try and grow our first generation autonomous driving controller unit with L2 plus capabilities, integrated save parking and driving solutions. Highway NOA. and remote parking assist was deployed on the Lincoln Coke Zero eight last September. With computing power of 118 tops and a high safety MCU E-Car Skyline Pro is able to support more advanced software such as birds eye view and light. Our perception integrated data solutions, combined with our cobot cockpit solutions, strengthen the loyalty of our automotive OEM customers, while providing and end users a seamless in-car experience.
One of the key growth drivers for ECARX. has been our focus on innovation. We continue to invest in research and development to ensure a steady pipeline of cutting-edge technologies and features for our products. This keeps us ahead of the curve. As of December 31st, 2023, we had 563 registered patents and 557 pending patent applications globally. We have a clear product roadmap that spans from entry-level solutions to premium level with plans to integrate next-generation supercomputing platforms starting later this year and into 2025, a key driver for our ambitious market share objectives. Our profile continues to grow globally as more vehicles with our technology hit the road. The Pulsar for launch was a significant milestone during this quarter. It is the first model to feature Polestar OS. an operating system based on climbing auto, which highlights our ability to build custom operating systems with iconic brand designs for global automakers.
Polystar four also marked the debut of the integrated driver assist system we developed in partnership with Mobileye this mass-produced one-box solution is a strong testament to our ability to grow the advanced technologies from our partner ecosystem.
Onto the road. The Bumble EF. 30 was launched across 33 markets internationally during the quarter and comes equipped with ECARX. cloud, the cross-domain software stack from Google Automotive Services because cloud, it manages the seamless integration of all the information and EX. 30 drivers needs, including navigation instructions from Google Maps and three help from the Google Assistant and apps of Google Play of particular. Note it also integrates wireless CarPlay for the first time in a Volvo. In addition to wireless Android Auto Cloud Peak is also networked into the vehicle's comprehensive suite of ADAS features, including collision avoidance and mitigation traffic jam assist, lane change, assist Park pilot assist store opening alerts and three significant reviews from Cloud Peak is a fully flexible modular platform created to provide global automotive OEMs with a customized and intelligent platform or state of the art infotainment and advanced driver assist systems in the market today. This is a key product line for us and leverages our unique ability to develop full-stack solutions in-house in close collaboration with other suppliers, technology companies and automotive OEMs. The successful launch of the Volvo EX. 30 will significantly boost our brand recognition in the industry. We also had a great presence at this year's CES in Las Vegas, where we showcased our latest cutting-edge technology offerings and sought to make new connections with global automotive OEMs. It was a highly productive week as we're able to meet over 50 customers and partners on the sidelines are there.
Lastly, I'll share a couple of key updates on our partnership ecosystem. In December, we formed a new joint venture with SMART to locally develop intelligent experiences within smart vehicles. We previously worked with SMART to co-develop a customized smart EOS operating system for two of their earlier models and are excited about what we can accomplish as we deepen our collaboration.
We also strengthened our partnership with Black Sesame, which will pave the way for us to bring a powerful new AI that solution into the market. We have lots of synergies in place, Azmi and are incorporating their cutting edge intelligent driving technologies into our products, and this will enable us to offer a compelling full-stack solution to automotive OEMs.
In conclusion, our growing commercial momentum, leading technology and rich partner ecosystem, ideally positions us to seize the tremendous opportunities created by the growth, the EV and software defined vehicles in China and globally. While we are pleased with the progress we've made in 2023. We recognize that there that we are still in the early stages of our journey with a lot of work ahead of us to meet our ambitious market share goals. With confidence at all-time highs when you look forward to execute our plan and our vision for the future.
I will now turn the call over to Phil, who will go through our financial results.
Zhou Phil
Thank you, Peter, and hello, everyone. We closed out the year with strong momentum as our business continues to grow and our financials include total revenue for the quarter was RMB1.87 billion, a significant increase of 22% year-over-year. Computing hardware gross lending was RMB1.31 billion, up 26% year over year, driven by volume increases in digital copy sales for new vehicle programs. Software license revenue came in at RMB93 million, a decrease of 62% year over year and a 32% sequentially, primarily due to the timing of booking intellectual property license revenues and the decreasing volume of software sales. Service revenue maintained a strong growth momentum surging 95% year-over-year to RMB463 million. This remarkable increase was primarily due to launch of evolve or EX. study and a post-op for during the quarter. Gross profit was RMB432 million, an increase of 1% year-over-year, which translates into a gross margin of 23.1%. Total cost of revenue was up 31% year-over-year, primarily driven by an increase in sales volume of digital cockpits and the service revenue. As discussed on the last earnings call, we expected margin pressure on our hardware products to continue over the medium term, driven by enhanced industry-wide pricing competition, customer E architecture evolution and transition acquisitions and strategic progress we have in the pipeline our focus going forward will remain on enhancing the adaptability of our business and improving operating efficiency. We will do this by driving products and solutions running growth, strategically, cutting costs and making targeted new investments. This will allow us to strike a balance between top line growth and profitability as well as mitigate any potential impact on our margins.
Operating expense during the quarter increased 28% sequentially and decreased 37% year-over-year. The sequential increase was primarily due to the impact of seasonality as well as continued investments in our core product roadmap and international R&D expansion. The year-over-year decrease was mostly due to lower share-based compensation expenses. Adjusted EBITDA loss was RMB232 million, up from a loss of RMB292 million during the same period last year, primarily attributable to change in fair value of equity. Investment loss per share was minus RMB0.87 compared to minus RMB3.26 during the same period last year. Having finished the year on a solid footing, 2023 full year revenue came in at RMB4.67 billion, up 31% year over year with gross profit of RMB1.27 billion, an increase of 28% year over year giving a gross margin of 27.2% throughout the year, be further optimized and improved operating efficiency by prioritizing investments in our global expansion and the technology development fully operating expenses decreased 17% year over year with adjusted EBITDA loss of RMB710 million, an improvement off RMB37 million from last year.
Moving on to our balance sheet. As of December 31st, 2023, we had RMB588 million of cash and restricted cash, which gives us sufficient resources to investments in our future and accelerate growth going forward, we will further optimize our operating expenses with a particular focus on product sales and the supply chain and manufacturing strategies on the product side, we will continuously invest in R&D to drive mid to long-term growth opportunities on the sales side. And we will focus on engaging with new automotive OEMs, partners, both in China and internationally. And finally, we will further optimize the supply chain management and improved cost structure of products and components less. We will also support a strategic transition off our manufacturing strategy from ODM to NOEM. model to summarizing Oliver's focused on a balanced portfolio and a wider array of higher-margin premium products, largely in order to proactively mitigate the impact of an increasingly challenging geopolitical environment. We are strategically expanding our global presence for both R&D and customer acquisition. We want to build it to close the loop systems now for China and the outlook for global markets, each close the loop system, we have spent the entire process from R&D to delivery to do so. We have had to make acquisitions strategic investments and a supply chain upgrades that will take time to mature but are critical to ensuring the sustainability of our business model.
The acquisition of Geka and the investments in eight US over the past few quarters reflect the careful and strategic nature of lease approach. This will ensure our business will be in a healthier and more sustainable position over the long term in conclusion, we are pleased with the strong finish to 2023 and eagerly look forward to the enormous opportunities ahead of us.
That concludes our prepared remarks today. I would now like to hand over the call back to the operator to begin the Q&A session.
Question and Answer Session
Operator
(Operator Instructions) Derek Soderberg, Cantor Fitzgerald.
Derek Soderberg
Yes, we are good evening, everyone. Congrats on reaching the 6 million vehicle mark. So you talked a bit about operational efficiencies, how will that impact gross margins for 2024? Can you talk about your expectations on how gross margins will trend throughout the year and and when do you guys think you're you'll hit EBITDA profitability?
Hey, Derek, I think your latest spill, I'm happy to address your questions. So we had communicated earlier that we see on pricing competition in entire industry, right? Ami versus lots of many Tier one players are having profits decreased due to a faster price erosion while the cost optimization is behind. But from a price erosion. So are we also on facilities hardware product profitability will face Harvey's in the upcoming quarters as we see a continued high competition and pricing pressure through our customers. And we also want to do a new business acquisitions and the strategic of our program development pipeline. So in order to mitigate the heavy impact. So we will continue to provide our diversified and full-stack solutions. And then we will also implement our proactive pricing and improve our cost structure through our proactive cost side. It is and at the same time, our consistent strategy is to embrace software defined our EV evolution in a big way, okay. As a result, the share of wallet in a blind structure keeps increasing and the content per vehicle keeps improving as well. And we also extend our coverage to serve OEM brands with print in both in China and oversea markets. Lots of customer names like in a smart noticeable way in a post-op and to the Board yesterday is a typical example. We support a mobile launch will affect ships because 33 global markets with our unique power peak cross domain software, which are highly integrated into the advanced, got a dozen features up. And we are very few players in the market in industry with ability to deploy Google Automotive Services globally, so most dedicated focus is to enable us to diversify our business portfolios and we are able to drive sustainable profit growth.
So are you worried that, Eric, we will maintain our focus on product software service, product portfolio, selling and driving cost, a series of products and solutions from growth, cost reduction, supply chain and fulfillment efficiencies while stay very disciplined on new investments and a balance between top line growth and profitability in order to mitigate margin impact.
Got it.
Ziyu Shen
That's helpful. And just just on a little bit of the pricing pressure, what's your average content per vehicle today? And how do you see that trending through 2024 as you guys continue to innovate, add new feature sets? Are you guys continually signed new partnerships. And it seems like from an R&D standpoint, I mean, you continue to add more features. Can you just talk about how you expect that to trend? And additionally, can you talk a bit about the software element within the content per vehicle and how we should think about how you're allocating the content on the software side per vehicle? What's what's the revenue per vehicle on the software side or maybe talk about some of the attach rates on software and anything there would be helpful. Thanks.
Yes, sure, Derek.
Derek Soderberg
So I'm I will talk about the content per vehicle numbers and argue that maybe you got just a question regarding how to Arrow killer software home increase of profitability through the content per vehicle improvement.
So Derek, we have a wide portfolio of our product solutions and the content per vehicle range from RMB1,000 to RMB15,000 per car. We have a solutions covering low end to high end. And I just want to meet different customer demand on only a Veeco progress and taking a lingual zero eight. For example, last time we discussed the is almost our full-stack solution. You saw that on a Linguist oh eight, we provide an for a 1,000 fold computing platform where we provide prime auto solution early operating system in. And out of that, we also provide our skyline Pro, the RADC., you have autonomous driving solutions developed and that helped us increase our content per vehicle to RMB10,000 on night of knife, allow me to RMB10,000 around and you know, take could be above what you have 30. For example, we also provide our on our unique cost on main topics solution. And that is also on our newly developed functionality. And it's a first launch in the market. And definitely, Steve, on the software we will improve our profitability as well.
So a lease on the numbers I can share with you. And Peter, maybe you can see it on my information.
Yes, sure. Good morning, Derek, are doing well, and I talk to you today. So just some few comments on the product portfolio and impact of software. This tends to be a very OEM specific topic with some OEMs who are providing a base platform with base-level capabilities and then working with that OEM to build the software stack on top of it.
Others are, you know, Phil mentioned a few examples of Lincoln cow and Volvo, we're we're doing the complete software stack. So I think it's very, very dependent on the OEM strategy and how we engage with them. But certainly, I think we're very confident from a e-commerce perspective that with our capabilities really from silicon to cloud, we bring our unique value proposition that we can work very closely with the OEMs and mine up to their model and make sure we can drive value to those customers in all markets.
Derek Soderberg
Appreciate the detail. Thanks, guys.
Operator
Chi Lee from Jefferies. Your line is open. Please ask your question.
Zhou Phil
Yes, I am.
Rene Du
Thanks for taking my question. My first question is regarding our economic cooperation with Mobileye. It was mentioned that we will have a collaboration with Mobileye on IQ six platform. And I'm just curious on if there are more details can be provided for the IQ. IQ six project at the moment?
Yes, you think you.
Derek Soderberg
This is Peter.
I'll address that question. And I think we announced we were collaborating with Mobileye on a number of different platforms. The first one will come out with Polestar in 2024. And then the one you mentioned the more advanced chauffeur system. We would expect to be a few years later launch. So we're very excited with the collaboration, Mobileye they've got they've got a great system and we've partnered with them in a unique way where we can bring our specific value propositions to the table as we integrate the systems into the vehicles. So I think as we are able to help customize and adapt those solutions into the OEM.s needs and requirements. We're pretty excited about what we can see on a go forward basis for Mobileye across a number of different brands and Thanks, that's very helpful.
Rene Du
And my second question is regarding the progress of overseas expansion on So at what do we what proportion of overseas revenue do we expect longer-term and on, do we have any like a a breakdown by each market?
Ziyu Shen
Yes, sure.
I mean, it is, as you know, we started our international expansion a few years ago. I think this this year marks a very significant event that we're able to launch the ease of mobile. We have 30 with the Google Automotive Services on top and from that across North of 30 different markets throughout the world. So it's a big this is a very significant milestone for Car-X to be able to demonstrate that capability as we continue to move forward. We're having a number of great, great engagements with a few European OEMs. And I think hopefully we'll be able to make further announcements as we go throughout the year design cycles in this industry can be a number of years. So as those programs continue to develop and launch and ramp up in terms of volume, it could be a period of time before we start to see meaningful movement on the financial numbers. But I think the traction we're seeing as we're approaching a number of different large customers now that we've demonstrated clear capability.
Peter Cirino
We're quite excited about the potential there for the unlisted.
Rene Du
I have no more questions.
Operator
Thank you. Now we're going to take our next question.
Just give us a moment.
And the next question comes from the line of Ivan Cheung from Social Security's Financial Holdings Limited. Your line is open. Please ask your question.
Ziyu Shen
Hello, everyone, and congratulations on the performance FX question is I know Intel has already applied EIPC. to the call.
Zhou Phil
Therefore, I would like to know if there is any impact to our company, it's a challenge or an opportunity?
Yes.
Thank you for the question, Mike. As we look at the VA impact, I think we'll see a broad set of changes throughout the entire environment. You look at the application, the vehicle speech can be enhanced capabilities of the vehicle to provide a better user experience can Pino can show significant details. We've got a number of projects inside our pipeline that we anticipate providing more detail on, especially as we are. We have some events that will go through this quarter, but we've got a large number of programs and projects deploying AI into our systems throughout our both what the user will experience plus the back-end capability to drive efficiency and effectiveness inside the software that we also see fairly significant opportunities internally to improve our capability to deliver great software in the vehicle by using AI in our internal belt and processes and even rapidly accelerate our capabilities to deliver solutions very quickly in the automotive market. We see that as a strong capability of the Company, our ability to operate very effectively in tight development time lines. And I think the use of AI can even enhance that capabilities.
Zhou Phil
Thank you very much.
And the expression is I would like to know how we viewed the impact of exchange rate collections on our co.
Peter Cirino
Okay.
Thank you.
Derek Soderberg
A follow-up question. So so we are monitoring clear Chinese yen, the RMB channel Carefree, but I decide not to do any cash considering the cost of hedging could be higher than the benefit. And we also observed that many multinational companies also not choose chose not to hedge our meaningfully our business operation operations in China because of the same reason and our revenue and operating expenses mainly in RMB, while 70% of our costs are in foreign currency. So in order to mitigate risks, we have the following exchange rate cost causes in the procurement and a sales contract to mitigate your, you know, the potential ForEx fluctuations. And meanwhile, we are reinventing and E hikes outside of China as I call in my script, we will have for a need a closed loop systems in overseas market from R&D production to customer delivery. And with the overseas revenue, our mix increasing. We will launch proactive our treasury tactics, including in our currency hedging to stabilize the ForEx impact.
Ziyu Shen
But okay, thank you very much.
I have no more questions.
Operator
Thank you. Now we're going to take our next question. Just give us a moment.
And the next question comes from the line of Charles Shi from Janney from CITC., your line is open. Please ask your question.
Thank you for taking my questions, but the congratulations for the team for having a very strong revenue for the year of 2022. So I have three questions. The first one is regarding the cloud, the gross margins, the gross margin for the place, I would say we have to there's a trend of erosion and we are also experiencing that there's a fierce competition going on in China and the trend is definitely going to be our most years for the year 2024. So my question is, could the team give us a forecast on the quarterly gross margin in 2024? And what are the actions and cards that will take to improve the profit margin, for example, to have more software content. So that's my first question, please.
Ziyu Shen
Yes.
Thanks.
Derek Soderberg
Thank you for the clinical question on. Yes, since the second half of 2023 we observed the fierce pricing competition throughout the entire industry and value chain profit side has compressed on well. Our goal is still to maintain a 20 ish gross margin through our product service software portfolio selling as well as the premium product launching while managing a good balance between our revenue growth and profitability achievements. And as I mentioned earlier, E-House has a very unique solutions. And we also launched a proactive pricing protection plan. And we aggressively drove cost down cost reduction initiatives in 2023. And we are going to do that in 24. So we will continue to increase the average selling price or content per vehicle. The example I like is linked modulate and what like a 30 less successful launch demonstrate what our ecosystem can deliver and support our path to profitable growth path again, and we will mitigate the impact of list pricing, competition or margin dilution with our diversified our full-stack solutions, pricing and attractive pricing activities and cost structure improvements. On Larry said, we are basically on a basically our approach to going to drive that mitigation of our margin erosion and we will continue to fight for our margin improvement, our margin stabilization in tenant mix.
Right.
Thank you. So my second question is regarding the projects. Our design win with a Japanese company. So congratulations and congratulations on a long way. And could you provide us more insights into how did you manage to secure this designing with this Japanese OEM and the this project to be a global project are going to face into the Chinese market?
Peter Cirino
Thank you.
Yes, sure. Thank you for the question. And as we've put a lot of energy inside the organization towards customer diversification, I would say it's, you know, we're certainly one of our top priorities to continue to broaden our customer base. You onboard new new clients and then we'll execute with excellence as we work very closely with them. So I think we've made some significant progress as we go through the quarter today as we got through the end of last year. Today, we talked about onboarding of two new customers. These will initially start with the market here in China, and I think we have a opportunity to continue to work more closely with those customers to broaden that partnership and grow beyond go outside of China as well. So we'll continue to put tremendous amount of focus inside the organization and I think we'll see continued advancements as we go through 2024 of similar announcements where we can engage quite deeply with new customer new customers, both in our markets in China as well as in markets and the rest of the world.
Well, I thank you all the yes, the engagement of a very important slide. So unless your question is regarding actually segmentation founded previous mobile questions. So could you give us a more clear indication of the boundary of collaborations? Are we going to develop on the mobile device domain controller or mobile apps are going to develop R&D of energy cost of control after, et cetera?
Yes. Sure.
I mean, I'm engaging with Mobileye is really quite a tight collaboration of WiChorus capabilities as well as a mobile, I called capabilities as we implement those systems. So I think we're bringing the best of both organizations together. Mobileye certainly brings some fantastic technology in their SOCs in their perception software stack in their sensor set for the vehicles. The Car-X deal brings that overall system integration capability to that to that partnership supply chain capabilities as well. And we also help inject and piece key software that's inside our portfolio in terms of spaces like the driving decision software, the vehicle as well as some parking and other other functions that we bring to that overall suite system solution to the car to the automakers. So we've had a great discussion with the Mobileye team in NCES. and I think we'll continue to work on opportunities to collaborate quite closely with them, bring great systems into that.
Right.
That's very clear. Thank you so much for your attention.
Operator
Thank you now we're going to take our next question, just give us metrics.
And then question comes from the line of Megan Shin from Macquarie. Your line is open. Please ask your question.
Rene Du
Thanks for taking my question. I have two questions or one on our overseas business. I noticed that from this year of Europe and the U.S., the trend of that EV transition to start slow there, a plan of delay in the US, but that line of transitioning and also like Mr. Burns have been announcing that the delay in plans. I'm wondering how this would impact on and over on the growth outlook for this year to our business.
And also on overseas business, what is our competitive advantage versus the more established tier player like Bosch and Continental when we tried to get orders in the OEM?
Operator
Thanks.
Rene Du
That's my first question.
Peter Cirino
Yes, thank you.
I think that's a great question. If you look at the first of all outlook on the market. We continue to see a lot of significant opportunities in the market for our technologies, as you as you as we continue to advance in this industry and these spaces in the vehicle are definitely undergoing significant investment. I think they tend to be often a focus on EVs, but not exclusively. So the digital experience inside the vehicle, autonomous driving the software-enabled vehicle. So the OEMs have tended to make those investments in the big EV bus platforms as they launch those new. But certainly those same technologies are somewhat drivetrain agnostic because they provide great a great experience for the vehicle driver. And there's a number of opportunities concerning connectivity and electrification that can help the systems work efficiently, but they're not exclusive to the EV industry. So we can use these. We scan the market and both across all of our markets, a very large and growing opportunity in our space and carmakers are making fairly significant investments in these technologies. I think we'll continue to do as we go through future cycles.
When we look at the ECARX. capabilities, a number of unique capabilities that E-Car X brings into the market. And as we talk with new customers like the first one, we highlight very frequently our full-stack solution. So as we look across our fill us in a very tight partnership ecosystem, whether that's through joint ventures or steel, deep strategic collaborations, and we are able to take a very unique self developed a full-stack solution from the silicon all the way to the cloud services through the entire full stack of the system capabilities and that that deep understanding helps us bring a very customized, unique solution built on platforms to each customer. And we today we operate with a very broad set of customers, those that are very cost-conscious and extremely cost competitive to extremely premium brands throughout the the customers that we talk about in these calls and having that capability and that wide breadth and built on platforms, I think is something very unique to Car-X.
The second piece, I think, is speed. And when we operate at an extremely rapid speed with scale and with high quality, we're able to deliver systems that drive safety and operate at our automotive capability into vehicles at a very rapid pace were where a company has been operating only since 2017. We've already got 6 million vehicles on the road, and that continues to grow quite substantially. Last year, we saw a 30% growth in those number of vehicles. So to be able to operate at speed with the number of launches in our pipeline with strong capability. I think it's very impressive.
And then you talk about scale again, you know, 30% growth on number of vehicles last year wide variety of brands. And when you see the capabilities we're bringing to the international market, these are big differentiators for Car-X as we're talking to through our existing customers as well as new customers.
Rene Du
Got them because we're clear.
The second question is on the China market. I also noticed that there was a fast-growing trend to have more and more advanced features and installed in cheaper and cheaper model in China. And then I'm wondering, how do we think about this trend and how the impact of COVID on, especially how do I think about the competition as well. And as we move into maybe a more lower lower end of part of the product in the market, I think we see the China market's very dynamic market, right?
This market evolves very quickly. Customers move very fast and react to the deal. The advanced advancing trends in the industry and ECARX. as a company over over our seven years, has done a fantastic job executing in that market, and we continue to do that. There are times we can see and bringing new technologies into a vehicle within less than 12 months. And I think this is something very unique that we can demonstrate that capability and do it with a high quality at a at a global quality level certification. And this is something very special freight cars. I think the market in China will continue to be very dynamic and diverse for sure. There's a lot of pressure on cost. There's a lot of pressure on competition here, but a Car-X has been very successful. I'm competing in that environment in our in our 67 years of existence. I think we'll continue to do very well, yes, time.
Rene Du
I got no more questions.
Operator
Thank you.
Dear participants, as a reminder, if you wish to ask a question, please press star one one, a telephone keypad. And now we're going to take on question. Can you give us a moment?
And the next question comes from the line of Michelle Neale from HSBC. Your line is open. Please ask your question.
Ziyu Shen
Thanks, management, for taking my questions. I have two for you with previous investors' questions. And the first one is regarding a customer. Could you just roughly map out the models with our smart hardware this year in both domestic market and global market? And what is the pipeline there?
Yes, yes, for sure, I mean, we don't you know, in the in the environment we're in. I don't think we always get hyper specific on launches that we see coming. But we've had a great 23, especially got capped off with the Volvo EX. 30 launch. I think we what we've only talked about the Pulsar launch inside of China. We will launch a vehicle of global scale as we go through 2024, we have already talked about that. We'll continue to see a broad set of launches. I think we've discussed two new customers that we will probably see at least one of them launch vehicles towards the end of this year. So we can start to get more specific on those platforms that are coming I mentioned earlier, we're having some great dialogue with with some customers in Europe that I think could even produced launches as we go into 2025. So that the shortening of the development cycle. I will continue to see across the gold market. And as I said earlier, I think peak Rx's executed extremely well in that type of launch window environment. So I think we're excited to see that pressure come to the global markets, and we see that we can add a lot of value and our ability to deliver great solutions at the automotive grade quality at a very, very fast and rapid pace.
Got it.
Ziyu Shen
Thanks. And the second one is regarding the cost. Obviously, we note that the competition environment is very serious this year. And you touched on this in previous questions. And also we see customers that are attaching more importance on the smart functions, including the digital cockpit into and I'm striving assumptions about the willingness of customers to pay for this kind of smart hardwares or softwares is not that strong. So last year over the OEM.s Expo, we mentioned in their earnings call that they're going to cut 50% of their smart hardware of the costs. So how do we project our trajectory of cost reduction as well as the overall smart hardware cost reduction in the coming years?
Thanks.
Derek Soderberg
It's is also a very good question. So on for cost, because E-Car to provide our full stack solution covering computing platform software and lots of other ones that features to our customers. So regarding a hardware solution, for sure, we will are Dr. And we are driving our cost down activities aggressively so less always in our mobile story about the cost of the kinds of optimization. So we have a large enough scale. We have a lot of bargaining power and then we can be highly effective, a pricing negotiation with our suppliers at a center. As I mentioned earlier, we also start to the sun protection costing two software products. All those activities can protect us from a faster cost, you know the challenge with that, we are able to maintain a relatively healthier on cost structure in our hardware solution. At the same time, we are investing heavily into our next-generation computing solutions as well. And with that, actually, we can build up our price premium and we can we can present a good launch Flow Solutions first, the first lien market and also timing docking king or sell our software on a pricing loan place to play at the same time in our service revenue mix and the service margin mix also play a significant supply of our home portal business. So as long as we can deliver our service to customers, we lean on a faster timeframe and that we can satisfy our customer has looked in terms of loss features, will comments we feel can economic loss of profit from subs revenue. So again, with our software service and the heart of the portfolio play at the same time are driving effective cost activity from our hardware. We are we have a full confidence in delivering a balanced our profitability come here yes.
Maybe I just add to that. I think you also see that in our in our OpEx results, especially in 2023, we had this very significant growth in the top line revenue. We continue to invest in technology and produce a lot of launches through our pipeline, and we do that under a very tight cost control from an OpEx perspective, in 23. And I think we'll get we'll get better that as the business continues to scale its 24. So I think we see a lot of the activities that Phil mentioned on the gross margin line, but we also see that in engineering and technology efficiencies and investments that we're making, yes, mutual fund, lean operations and other business.
Derek Soderberg
And therefore, our operating expense, as Peter mentioned, is a very effective control. And the front year over year perspective is a 17% decrease. And in parallel, we just repeat probably how we are saving front and all the SG&A to our R&D and global expansion. So all those are right approach to capture our future growth opportunities.
Got it.
Ziyu Shen
Thanks, management. That's very helpful.
Thank you.
Operator
Thank you. There are no further questions at this time, and I would now like to hand the conference over to your ex management team for any closing remarks.
Ziyu Shen
Okay.
Sorry, I will first of all, thank you, everyone, for their time and their questions today. And I think you're correct, we've continued to execute quite well, Tom, at an ever competitive environment, but we've done that for many years and continue to anticipate that we'll we'll ask you well, and we'll have the right focus on the growth mindset, but also making the right investments in the business to drive drive the right behavior in terms of profitability expansion. So I think we're looking forward to a very exciting 2024 with a number of new activities as we go forward in terms of new launches, new product debuts as well as new customers.
So thank you again for the time you spent with us today.
