Lotus Technology Inc.(LOTWW)Q2 2025 法說會逐字稿

Good day, and thank you for standing by. Welcome to Lotus Technology, Inc. First Half and Second 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 your first speaker today, Michelle Ma, Head of Investor Relations at Lotus Technology. Please go ahead.

Thank you, Maggie. Good morning, and good evening, everyone. We appreciate you joining us as we review Lotus Tech's financial results for the first half and second quarter 2025. Our financial results and conference call materials were published earlier today and are available on our Investor Relations website. We are also broadcasting this call via webcast. Joining us today are CEO, Mr. Qingfeng Feng, and the 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 the 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 under applicable 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, please.

Good morning, good day, and good evening, all the shareholders, analysts, and friends from the media. Thank you very much for joining our first half and second quarter 2025 earnings release. My name is Daxue Wang, the Chief Financial Officer of Lotus. It's my privilege to briefly walk you through the company's unaudited interim financial results. In the second quarter, the company delivered over 1,400 vehicles to distributors, a decrease of 49% year-on-year. As a result, total deliveries for the first half of the year exceeded 2,800 units, down by 43% compared to the same period last year. These figures reflect a scheduled transition period as upgraded models began deliveries in Q2, the impact of U.S. tariff policies, as well as ongoing destocking activities of the company. Revenue narrowed to USD 126 million in the second quarter and USD 218 million for the first half, down 44% and 45% year-on-year, respectively. Gross margin for Q2 stood at 5%, down 4 percentage points from the same quarter last year. Although quarterly gross margin decreased by 5 percentage points, on a year-on-year basis, we achieved the first half gross margin of 8%, remaining safely in the positive territory. Now let me break down our sales by category and by region. The category, lifestyle vehicles accounted for 83% of the total deliveries in Q2, up from 56% in Q1. As a result, they contributed 68% of total deliveries in the first half of the year. By region, deliveries in China showed notable growth following the start of the deliveries of the upgraded Eletre Hyper SUV in the second quarter. In fact, it has become a leading model in China's premium battery electric SUV segment during this period. In the U.K., our battery electric lifestyle vehicles demonstrated significant year-on-year improvement. Deliveries of the Emira to North America were disrupted in Q2 due to tariff disputes, but already resumed in July. In terms of sales channels, the total number and regional composition of our retail stores remained stable throughout the first half of the year. Now turn to the key financials. I've already covered deliveries, revenues, and gross margin. Now let me move to other financial metrics. The cost of revenues decreased by 42% year-on-year to USD 199 million in Q2 and USD 200 million in the first half of the year. This resulted in a gross profit of USD 7 million for the second quarter and USD 80 million for the half. We reported an operating loss of USD 160 million in Q2, a 22% improvement year-on-year. Net loss for the quarter was USD 130 million, down 36%. For the first half of the year, operating loss was USD 263 million, a 40% year-on-year decrease, while the net loss narrowed to USD 313 million, down by 32%. For reference, on a non-GAAP adjusted basis, net loss for the quarter was USD 2 million lower, primarily due to the impact of share-based compensation. Beyond these numbers, I would like to emphasize that we have now reduced operating expenses for seven consecutive quarters, underscoring the company's strong commitment to enhancing operational efficiency and continuing to deliver value. Our first half operating expense has lowered by 42% year-on-year. Despite challenges caused by market volatility and policy uncertainties, we have achieved several key milestones. Our CEO, Ms. Feng, will elaborate on this shortly. With that, I will now turn the floor over to Ms. Feng. Thank you.

Hello, everyone. This is Qingfeng Feng, CEO of Lotus Technology. I would like to provide you with an update on our recent achievements and developments. To start, I want to discuss our new funding arrangements. On August 19, 2025, we finalized a security purchase agreement with ATW Partners, which involves issuing and selling convertible notes totaling up to USD 300 million. We have already issued notes worth USD 10 million under this agreement. Additionally, we secured funding commitments from our strategic partner, Geely, and on July 28, 2025, we entered into a master credit facility agreement with them. In July, we were pleased to announce our return to the Goodwood Festival, where we unveiled the Emira Cup race car and showcased our concept vehicle Theory 1, our Hypercar Evija, Hyper GT Emeya, Hyper SUV Eletre, and our sports car Emira, along with a selection of legacy race cars. We have seen positive growth in our U.K. market sales as well. On the AI front, Lotus Robotics, our wholly-owned subsidiary, is dedicated to AI and autonomous driving. We entered an MOU with a strategic partner in the Middle East to collaborate on AI and autonomous driving technologies, including exploring robotaxi services in Saudi Arabia. Regarding our product lineup, we are set to launch the model year '26 Emira globally next month. We plan to enhance the Emira’s powertrain in 2027 to meet EU7 standards, considering a V6 engine and hybrid options. The model year '26 Eletre and Emira are already being delivered. We are also making substantial progress in developing our plug-in hybrid vehicle, with production set to begin at the end of this year and market deliveries starting in Q1 next year in China, followed by Europe and other markets. Additionally, we are working on a new model referred to as Vision X, which we aim to release in 2027. I want to highlight our 900-volt hyper-hybrid EV technology, which delivers a driving range of over 1,000 kilometers. This includes industry-leading dual hypercharging technology that allows for extremely fast charging both while plugged in and on the go. Our first plug-in hybrid model featuring this technology is set to be unveiled this year with deliveries starting in Q1 2026. I would also like to talk about our intelligent chassis system, which will also be part of our first plug-in hybrid model launching at the end of this year. This system allows for a dual driving mode: comfort mode for daily use and performance mode for high-performance driving. In terms of our global market strategies, we are strategically phasing out some underperforming outlets in China while expanding our urban coverage. We have developed targeted pricing and product strategies for each market we enter, focusing on tariff-advantaged and premium EV markets. Our delivery strategy includes a balanced regional share: 20% to North America, 38% to Europe, 13% to the rest of the world, and 29% to China. Lotus Robotics also serves as a provider of intelligent driving solutions not only for Lotus but for other leading automakers as well. We deliver cutting-edge ADAS software and hardware R&D, with a broad global reach. Our ADAS and PAS solutions have been deployed across multiple regions, including Europe and North America, with upgrades well received in the market. In the next couple of years, we aim to provide services for an additional 10 models, both passenger and commercial vehicles, while advancing our technology to achieve Level 4 or Level 5 automation capabilities globally. We also previously discussed our strategic partnership to develop the Robotaxi project in Saudi Arabia. Thank you.

Thank you, Mr. Feng, and Dr. Wang. This concludes our opening comments, and we will now move to the Q&A portion of the call. Operator, please.

First question comes from Edison Yu from Deutsche Bank.

This is Laura on for Edison. Could you share more details about the company's product roadmap and the future business outlook? How should we think about the upcoming product launches and the growth trajectory, etc.?

As we previously discussed regarding our powertrain technology, I would like to elaborate further on it. We will be actively promoting our Hyper Hybrid technology, starting with an SUV that will enter the market, with customer deliveries beginning in the first quarter of next year. The presentation deck also features another vehicle, a new model that will be equipped with Hyper Hybrid technology. It will embody the Lotus DNA with a focus on performance. As a global brand, we are ensuring that all our products adhere to global standards and compliance. For both the Eletre and Emira models, we have secured homologation for most markets, including the U.S. However, we have experienced fluctuations in U.S. tariffs this year. If tensions subside, we aim to resume exporting those vehicles to the United States. Regarding the Emira sports car, we plan to introduce a facelift in 2027 in alignment with the EU7 regulations. We also intend to upgrade our V6 engine and introduce a plug-in hybrid as an alternative.

Next, we have Eugene Hsiao from Macquarie Capital.

I would like to inquire about the put option that was exercised in early July and the anticipated merger with Lotus U.K. Could you explain the ONE LOTUS strategy and how you intend to integrate this business along with any expected synergies?

Regarding the ONE LOTUS strategy, we currently have Lotus cars in the U.K. focused on developing and manufacturing sports cars, while Lotus Tech is dedicated to developing and manufacturing lifestyle vehicles. In terms of our consolidation plan, we see substantial opportunities for efficiency improvements by merging various functions, including technology synergies. Once we achieve the ONE LOTUS integration, Lotus U.K. will gain from Lotus Tech's Hyper Hybrid and plug-in hybrid solutions. Our future goals for Lotus cars operations are ambitious, concentrating on high-performance attributes and offering high-performance engineering services to external clients. Lotus Tech operations in China will focus on intelligent engineering and electrification development, maximizing synergies between both entities. With the completion of all prerequisites for the put option in 2024, our consolidation plan has received official approval from the Board. We are currently in the process of closing, aiming for completion by the end of this year or by Q1 next year at the latest.

Due to time constraints, we will conclude the Q&A session. I will now pass back to Michelle for closing remarks.

Great. All right. With that, I think we are all done for today. If you have any questions, please feel free to contact our IR team through the contact information on our website. We look forward to talking to you next quarter. Thank you very much, and goodbye.

This concludes today's conference call. Thank you for participating. You may now disconnect.