Good day, and thank you for standing by. Welcome to Lotus Technology Inc. First Quarter 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Demi Zhang from the company. Please go ahead.
Thank you, operator. Good morning, good afternoon, and good evening, everyone. Thank you for joining Lotus Tech's First Quarter 2025 Earnings Call. This is Demi Zhang, the Head of IR at Lotus Tech. I'm honored to introduce and welcome company management with us today: CEO Mr. Feng Qingfeng and CFO Dr. Daxue Wang. Before we continue, please be reminded that today's discussion will contain forward-looking statements pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today. Further information regarding risks and uncertainties is included in relevant filings of Lotus Tech with the U.S. Securities and Exchange Commission. The company undertakes no obligation to update any forward-looking statements, except as required by law. Please also note that our earnings press release and this conference call will include disclosure of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. You can find a reconciliation of these figures in the press release available on our Investor Relations website at ir.group/lotus.com. With that, I'd like to turn the call over to our CFO, Dr. Wang. Dr. Wang, please.
Good day, and good evening. Distinguished shareholders, analysts and members of the press, thank you very much for joining our Q1 2025 earnings release. My name is Daxue Wang, Chief Financial Officer of Lotus. I'm honored to take this opportunity to brief you on the company's unaudited financial results. In Q1, the company delivered nearly 1,300 vehicles to the distributors, up 42% year-on-year, and user vehicle deliveries exceeded 2,000 units, up by more than 10% year-on-year. These numbers reflect the scheduled transition period as upgraded models started delivery in Q2, related to the effect of prior destocking activities in Q4 last year. As you may know, we started revamping our Eletre Hyper SUV and Emeya Hyper-GT lineup with upgraded configurations. We kicked off customer delivery of the upgraded models in China during the second quarter and expect to begin deliveries in Europe in the upcoming third quarter.
Although the quarterly revenues narrowed to USD 93 million in the first quarter, the company achieved a notable gross margin recovery, improving from the negative result in Q4 last year to the current 12%, placing us firmly in positive territory as the impact from prior destocking effects eased. Now, I will break down our sales by category and by regions. By category, lifestyle vehicles accounted for 56% of the total Q1 deliveries, consistent with the full year 2024 figures. By region, Europe, China and North America each contributed approximately one-third of the company's total deliveries, while the rest of the world region accounted for the remaining 4%. Regarding our sales channels, the total number and the composition of the sales starts by region remained stable during the first quarter. For the key financial indicators — deliveries, revenue and gross margin — profit margin has just been reported.
Cost of revenue decreased by 43% year-on-year to USD 82 million. Consequently, gross profit was USD 11 million. We reported an operating loss of USD 103 million for Q1, a 56% year-on-year decrease. The net loss of the quarter was USD 183 million, representing a 29% reduction. For your information, the adjusted net loss under the non-GAAP measures for the quarter was unchanged. Behind these financial numbers, we have to highlight our achievements of reducing operating expenses for six consecutive quarters, driven by continued rigorous implementation of efficiency enhancement plans. And now I will stop here and hand over to Mr. Feng.
Hello, my name is Feng Qingfeng, CEO of Lotus. Allow me to share with you the most recent business progress and the strategies of Lotus. As a premium brand, we have highlighted the importance of brand establishment, particularly on sports cars, and this is something that we have been focusing on this year through increased track activities. On May 30, we launched a national-level GT1 main racing series Lotus car that features high downforce in China and Malaysia. We successfully completed the first race in the city of Chengdu. The racing series stands as China's premier FIA-recognized GT Series eligible for international C-license upgrades. Among our customer group at Lotus, they highlight the vehicle's aesthetic styling and the performance of the vehicle, and this is why this year we've been spending most of our efforts on the performance side. As ultimate handling and riding are iconic features of Lotus, we've been trying to stand out among other premium brands.
This is also one of the reasons that this year we are trying to leverage the racing series to improve our brand awareness. On May 26, we also released our 2024 ESG report, highlighting our progress in advancing sustainable practices, developing innovative green products and demonstrating global leadership in green mobility. In 2024, we launched a new technology called Hyper Hybrid EV Technology. This has gained a lot of interest. The progress of this technology is very good, and I will elaborate more on the details shortly. As for our product pipeline and product planning, our Emira model year '26 has already started its deliveries; the vehicle will commence deliveries in the U.S. In April, we also started to deliver our Eletre and Emeya model year '26; they started in the China market first and then we will commence delivery in the EU. In recent years, premium brand BEV penetration has not met our expectations.
However, interest in PHEV is gaining momentum. We believe that Hyper Hybrid technology can address some disadvantages of BEV. For customers who prefer ICE, they can still enjoy the drivetrain; for customers who favor BEV, they can feel less worry about range. Our new model is expected to be launched at the end of this year and the delivery of this vehicle is expected to happen in Q1 next year. Allow me to share some of the highlights of this particular model. Performance will still remain our iconic feature for this model, and this vehicle is going to be the world's first mass-produced PHEV that is performance-oriented. Particularly in markets with low BEV penetration such as APAC and the Middle East, we believe such hybrid technology could be widely accepted. This Hyper Hybrid Technology features a 300-kilometer pure electric range, and on combined driving at high speed, the range can reach over 1,000 kilometers.
In addition, it also features a Dual Hyper Charging Technology: Ultra-Fast Plug-In Charging and Ultra-Fast On-The-Drive Charging. The On-The-Drive charging rate is five times the power consumption of typical driving scenarios. It can deliver a battery charge from 10% to 80% within 12 minutes, comparable to battery swap speed. As we are very focused on performance, it can deliver ultimate performance under any circumstances. Even when the battery level drops to lower than 5%, the performance can still be secured. Again, this first performance-oriented Hyper SUV is going to debut at the end of this year, and deliveries will start in Q1 next year. Our initial target is to deliver a balanced distribution across our markets: 30% in the U.S., 30% in the EU, 30% in China, and 1% in the rest of the world. Between 2023 and 2025, the main challenges included the U.S. tariff hike, which led us to be unable to export many vehicles to the U.S. market.
Given that, the current regional share of deliveries since 2024 is as follows: 22% in North America, 38% in Europe, 14% in the rest of the world and 26% for China. This year, we expect China's contribution to be a bit higher compared with the previous year. In the future, we are trying to leverage our U.S. strategy to catch up the losses due to the tariff hike. At this moment, we are discussing localization plans with our strategic partners in the U.S. in order to avoid the influence of U.S. tariffs. With our strategic partners, we have had in-depth discussions around the U.S. landscape, and we believe that localization is a feasible plan. We will continue to explore the U.S. market with our PHEV and BEV products.
Thank you very much, Mr. Feng and Dr. Wang. Due to time constraints, we will not be holding a Q&A session today. However, we have received a number of questions regarding the progress of our Hyper Hybrid initiatives and our global market strategies. To address these key topics, I would like to invite Mr. Feng to share more of his insights. Mr. Feng, please.
For our PHEV products, I'd like to start with our observation that the PHEV market is actually growing very fast in both China and the U.S. Lotus PHEV is quite different from the traditional PHEV structure, which is engine-driven. We combined the advantages of the ICE engine and the electric motor. It can deliver ultimate performance when needed for our customers. For example, on high-speed driving, if driven only by the motor, it may not be energy efficient. With our technology, at high speeds the vehicle can be driven by the engine. Overall, the technology delivers both performance and energy-saving features, and it can satisfy lifestyle scenarios as well as racetrack scenarios. The Hyper Hybrid Technology has been widely proven and accepted in the China market. We have also done thorough studies for the U.S. and EU markets. At this moment, there isn't such a product existing in those markets.
But if our customers become aware of these products, we believe they will be interested because it satisfies both the demand for performance vehicles and lifestyle vehicles. In the future, our technology will be centered on this Hyper Hybrid Technology. We are also investigating the feasibility of a sports car Hyper Hybrid solution. For sports cars, we understand there is a larger market for ICE sports cars, and we aim to satisfy those enthusiasts and petrolheads. At the same time, we also understand that pure electric sports cars may not attract all of those customers. So we are investigating the feasibility of a Hyper Hybrid sports car to see if it will work. In the future, we will prioritize Hyper Hybrid Technology for both lifestyle vehicles and sports cars. If you look at the history of Lotus, many of you may be aware that Lotus has relied on external parties or suppliers for its engines such as Toyota and AMG. However, when it comes to PHEV, if Lotus possesses such technology internally, we believe we can address the drawbacks associated with reliance on external ICE engines. Thank you.
Thank you very much, Mr. Feng, for sharing your insights. And again, thank you all for joining us today. We will conclude the call soon. If you have any questions, please feel free to contact our IR team. This concludes the call. Have a good day, everybody. Thank you. Portions of this transcript marked Interpreted were spoken by an interpreter present on the live call.