18. LEASE

Operating leases

The Group’s leases consist of operating leases for administrative office spaces in different cities in mainland China. The Group determines if an arrangement is a lease at inception. Some lease agreements contain lease and non-lease components, which the Group choose to account for as separate components. The allocation of the consideration between the lease and the non-lease components is based on the relative stand-alone prices of lease components included in the lease contracts. As of December 31, 2024 and 2025, the Group had no long-term leases that were classified as a financing lease. As of December 31, 2025, the Group did not have additional operating leases that have not yet commenced.

Total operating lease expenses for the years ended December 31, 2023, 2024 and 2025 was RMB40,772, RMB153,880 and RMB183,800, and was recorded in cost of revenues, selling expenses, research and development expenses and general and administrative expense on the consolidated statements of operations. Short-term lease expenses were immaterial for the years ended December 31, 2023, 2024 and 2025.

The noncash decrease of operating lease right-of-use assets due to early terminations and modifications was RMB192,694 for the year ended December 31, 2025.

18. LEASE - continued

Operating leases - continued

Payments under operating leases are expensed on a straight-line basis over the periods of their respective leases. The terms of the leases do not contain rent escalation or contingent rents.