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In 2023, as China's epidemic prevention and control entered a new phase and production and daily life gradually resumed, the national economy continued to recover and showed an upward trend. Various government regulatory departments have recently indicated that they will continue to stabilize and expand automobile consumption. Multiple regions have also introduced policies to promote automobile consumption and encourage automotive development. Combined with large-scale infrastructure projects resuming across the country after the Spring Festival, these factors are expected to inject confidence into the steady development of the automotive market.

As 2022 drew to a close, orders flooded in. To ensure delivery, approximately 350 frontline production staff remained at their posts throughout the Spring Festival holiday. The Chairman also mentioned in his New Year WeChat message: "With the implementation of non-road China IV standards, the blizzard of recent orders is a great omen for Kailong's takeoff."

In early 2023, the company approved its second equity incentive plan, further stabilizing and motivating the core team, protecting and enhancing shareholder interests, and providing a long-term incentive mechanism for the company's steady and sustainable development. To further improve the company's value distribution system and align the interests of the core management team with the company, ensuring shared risks and shared rewards, the second incentive plan adopts the first category of restricted shares. Incentive recipients are required to purchase the corresponding number of restricted shares at the time of granting, reflecting the principle of balanced incentive and constraint, and demonstrating core employees' confidence in the company's development and recognition of its value.

I. Gross Margin Expected to Recover

In 2023, as the company delivers China VI road products and non-road China IV products at scale, many of the issues that caused the sharp decline in gross margin due to emission standard upgrades are expected to be gradually resolved — including higher unit fixed costs, bulk procurement cost reduction, and in-house production of core components.

II. Blue Phoenix New Materials Silicon Carbide Project Successfully Commissioned

Recrystallized silicon carbide (R-SiC), formed at temperatures above 2000°C with hardness second only to diamond, represents a key strategic material. The successful commissioning of this project marks a major step forward for the company's advanced materials business.