Lotus Technology Inc (LOT) 2025 Q3 法說會逐字稿

Good day, and thank you for standing by. Welcome to Lotus Technology, Inc. third-quarter 2025 earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Ms. Michelle Ma, Head of Investor Relations. Please go ahead.

Thank you, Amber. Welcome to Lotus Tech's third-quarter 2025 earnings call. My name is Michelle Ma, the Head of Investor Relations here at Lotus. With me today are CEO, Mr. Qingfeng Feng; and CFO, Dr. Daxue Wang. Our conference call materials were issued today and are available on our Investor Relations website. We are also broadcasting this call via webcast.

Before we continue, please be reminded that today's discussion will contain forward-looking statements pursuant to the safe harbor provisions of the US 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 US 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 also find a reconciliation of these figures in the press release available on our Investor Relations website at ir.group-lotus.com.

With that, I'm delighted to turn the call over to our CFO, Dr. Wang, please.

Good morning, good afternoon and good evening our shareholders, analysts and friends from the media. Thank you for joining us for Lotus Tech's Q3 2025 earnings release. I'm Daxue Wang, Chief Financial Officer of Lotus. It's my privilege was again to present the company's unaudited financial results.

In the third quarter, the company delivered nearly 1,800 vehicles to distributors, which represents a 35% decrease year-on-year, but a 28% increase quarter-on-quarter. As a result, total deliveries for the first nine months of the year reached 4,612 units, down 40% compared to the same period last year. These figures reflect a transitional period characterized by the impact of tariffs, gradual destocking activities and the phased commencement of upgraded model deliveries.

Revenue for the third quarter was $137 million, down 46% year-on-year, but up 10% sequentially. Revenue for the first nine months totaled $356 million, down [46%] ( added by the company after the call) year-on-year. Gross margin improved to 8% in the third quarter, up three percentage points from the previous quarter and 5 percentage points from the same period last year. This improvement was driven by a favorable shift in our sales mix towards upgraded models, reflecting healthier inventory dynamics and a continued recovery in our underlying profitability.

Gross margin for the first nine months remained stable compared to the same period in 2024, safely in a positive territory. Now allow me to break down our sales by category and region. By category, lifestyle vehicles accounted for 77% of the total delivers in Q3, down from 83% in Q2. Consequently, they contributed 72% of the total deliveries for the first nine months of the year. And in terms of region, deliveries in the US sportscar market began a gradual recovery in the third quarter. This improvement came after the initial US-UK tariff disruptions were resolved with UK vehicles ultimately securing a favorable tariff rate of 10%.

Overall, deliveries in the first nine months of 2025 were primarily driven by China and Europe. It's worth noting that our delivery growth in China for the first nine months outpaced the broader premium auto segment in the country. This underscores the competitive strength of our product portfolio in an increasingly challenging environment.

Now let me turn to the key financials. I’ve already covered deliveries, revenue and gross margin, I will proceed to other financial metrics. The cost of revenue decreased by [49%] (corrected by the company after the call) year-on-year to $126 million in Q3 and totaled [$327] (corrected by he company after the call) million for the first nine months of 2025. This resulted in a gross profit of $11 million for the quarter, and $29 million for the first nine months. We reported an operating loss of [$94] (corrected by the company after the call) million in the third quarter, a 41% improvement year-on-year.

The net loss for the quarter was $65 million, a 68% improvement year-on-year.

For the first nine months, the operating loss was $357 million, narrowing by 40% year-on-year, while the net loss narrowed to $378 million, [improved] (corrected by the company after the call) 43% year-over-year. And for your reference, on a non-GAAP adjusted basis, the net loss for the first nine months was $2 million lower, primarily due to the impact of share-based compensation. And adjusted EBITDA under non-GAAP for the same period narrowed by 48% year-on-year to $294 million.

Beyond these numbers, I would like to reiterate that we have now reduced operating expenses for eight consecutive quarters through value-added measures. This underscores our strong commitment to enhancing operational efficiency. Our efforts in cost discipline and inventory optimization are reflected in the significantly narrowed losses for both the quarter and the year-to-date. We remain focused on prudent resource allocation and margin enhancement while also preparing for a more dynamic operating environment in the quarters ahead.

During the third quarter, we achieved several key milestones amid challenges posed by fierce market competition. We will be unveiling our new PHEV model in the coming months to further expand our electrification product roadmap and address consumer demand in diversified powertrain segments. Our CEO, Mr. Feng, will elaborate further on these developments.

With that, I will now turn the floor over to Mr. Feng. Thank you.

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Thank you for joining the Lotus Tech Quarter three 2025 Earnings Call. Now I'd like to walk you through the company's latest progress across four key areas: recent highlights, market strategy, product portfolio and the acquisition of Lotus UK.

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For Lotus with a 77-year (racing) [added by the company after the call] track DNA, it is important to keep enhancing its global image. On September 5, Lotus made a strong appearance at IAA Mobility 2025 in Germany, showcasing the concept car Theory 1, Eletre, Emeya and Emira, demonstrating a seamless blend of brand legacy cutting-edge technology and electric strategy.

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To carry over Lotus' racing track DNA, the 2025 Lotus Cup One-Make Racing Series kicks off in June, featuring our International lineup for the drivers. The third round concluded successfully in Chengdu with the season finale set to take place in Sepang international circuit in Malaysia this month.

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On September 15, during the London Design Festival, Lotus served as the official automotive partner and opened an immersive exhibition at our Mayfair showroom, exploring the design DNA of the brand and received positive feedback from the public.

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On November 16, Drivers Lu Wenlong and Liu Kai Shun piloted the Emira GT4 to claim the first and third place in the Macau Grand Prix Greater Bay Area GT Cup. This marks back-to-back podiums for the Emira GT4 following its first and second place finish in the same event in 2023.

The Macau circuit is known for its long straights and tight twisting corners, is regarded as one of the most challenging street circuits. This double podium not only highlights the drivers’ exceptional skills but also underscores the outstanding performance and reliability of Emira GT4. It strengthens customers' trust and enthusiasm of our sports car and also carries over Lotus racing track DNA.

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For market strategy, Lotus continues to optimize our global presence and enhance our retail efficiency. As of the end of September, we had 213 retail stores worldwide. We have a well-balanced distribution across four key regions. Europe, we have 70 shops, China 54, North America 49 and other markets 40. Those covers roughly 45 markets globally.

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Besides the retail channel efficiency improvement, we've also explored other measures to reduce our costs and improve our efficiency. For example, we've implemented prudent countermeasures and optimized our store portfolio. This includes relocating high-cost stores, closing underperforming locations and expanding high-efficiency outlets. It helped boost our conversion rates while reducing operating costs.

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In addition to that, we've also relocated our European headquarters from the Netherlands back to the UK cutting operational expenses and allowing us to focus resources on key markets. Returning to Lotus' birthplace also helps us better tell the brand story and strengthen our reach across Europe and beyond. Such measures further improve our overall efficiency.

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We are also preparing to enter new markets, starting with Brazil. Brazil is the seventh automotive sales country. In 2024, the total sales was roughly around 2 million units with new energy vehicle penetration rate around 8%. Ending the first nine months of this year, the total sales reached 1.44 million units with the penetration rate of new energy vehicle increased to 10.1%.

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As for our products portfolio, two years ago, we have already planned on that. Actually, we've already launched our hybrid technology and what we believe that all of you will be soon see the fruits. And for Lotus, we currently offer 4 models globally, including Evija, Emira, Eletre and Emeya. Emira, Eletre and Emeya were updated in 2025. The upgraded models have all been well received with the share in total deliveries continuing to grow.

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We plan to introduce two additional hybrid models based on a new architecture. The first hybrid model is set to launch in China in the first quarter next year with a dedicated technology preview event in January, a European release will follow.

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The new hybrid also carried our inherited Lotus DNA in the following areas. The first is the ultimate handling, thanks to Lotus Engineering. It’s also equipped with the dual-chamber air suspension and a standard 48-volt active stabilizer.

It can be capable of a long range and also high performance. It is enabled by the latest architecture, delivering over 1,000 kilometers of range and 952 horsepower. It's also inherited the inspired design featuring the sensational width to height proportion of our hypercar Evija staying true to Lotus design DNA.

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The introduction of hybrid models offers more choices for luxury vehicle buyers and will help us to expand into broader markets, including regions with slower EV adoption, such as Italy and Spain and Saudi Arabia. It will also help us to attract the new customer segments.

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And for the acquisition of Lotus UK, we are now making steady progress on the merger or the acquisition of Lotus UK, which we expect to complete in 2026.

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After the acquisition, we are going to operate under our One Lotus strategy. We plan to maintain a consistent global identity as a high-performance luxury brand to strengthen worldwide recognition and to maximizing our heritage.

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We are also streamlining reporting lines and to enable faster, clearer decision-making. A globally aligned governance model with regional adaptation will improve efficiency and support medium- to long-term strategy execution.

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For our business integration, we are driving synergies across the key areas. On R&D, we consolidate global engineering under one team to improve efficiency, share technologies and accelerate new vehicle development. On purchasing, we leverage shared sourcing to reduce costs across lifestyle vehicles and the sports cars. And on logistics, we will optimize warehousing and parts distribution to further lower costs. We have also aligned the channels and administration globally to eliminate duplication and boost the brand value and operational effectiveness.

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Thank you. We will now open the line for your questions.

(Operator Instructions)

Laura Lee, Deutsche Bank.

Could you elaborate a little bit more about like the key highlights of the upcoming PHEV models? And maybe talk more about the strategic rationale behind those products.

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Thank you for your question. First, allow me to elaborate on the highlights of the features of our hybrid model. It has the best energy-efficient engine, the best-performance dual-motor hybrid system and also the highest-power motor. Those are three features demonstrate the Lotus of DNA from both the handling and also performance perspective.

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As for the details about how to further enhance its handling performance as well as the details of our hybrid architecture, please stay tuned to our tech preview event in January.

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And also, we would like to elaborate on the strategic rationale behind our hybrid model. I'd like to start with the market. For the premium vehicle market in China, plug-in hybrid and extended range models make up a large and rapidly growing segment. Among new energy vehicles priced above RMB400,000, about 70% are plug-in or extended range models and their growth is a major driver of the broader new energy vehicle expansion. The penetration rate of new energy vehicle in this price bucket has also risen quickly reaching over 40% in January to September with advanced plug-in and extended range models’ penetration more than 30%.

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The competition in China’s premium E-class hybrid SUV is still relatively less crowded. The premium E-class hybrid means the price of RMB500,000. And the competition is relatively less crowded compared to the battery electric E-class SUV. And most of current models also lean heavily toward business or off-road. This creates a clear opportunities for Lotus to introduce our hybrid models.

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In Europe, hybrid models represent a large market with faster-growing share. As the emission standards tightened, new energy vehicle adoption is accelerating in Europe, just as it is in China.

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From January to September this year, NEVs, including battery electric vehicle, plug-in electric vehicle and hybrid electric models, reached 60% of the total market. And among those NEVs, PHEV and HEV together accounted for about 73%.

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And notably, the PHEV sales have surged in Europe. As of September this year, PHEV sales have grown year-over-year for seven consecutive months with EU-wide sales up 65% in September alone. (interpreted)

Last week, I visited EU, and I heard of positive feedback from our dealers who know about this hybrid model. And in the successive phase, we are going to invite dealers and also medias to have an in-depth test of our new models.

[Dunlin], CICC.

Hello, this is Daniel from CICC Auto team. Congrats on your sequential improvements. And I have one question about your gross margin. Do you have any guidance on your gross margin for this year and next year?

Thank you so much for your question. With the recovery of the vehicle gross margin in the third quarter of the year, our gross margin for the full year is expected to remain at a high single-digit range. And looking ahead, our gross margin is projected to further improve primarily due to the following factors.

First, the launch of the PHEV products, which is based on a new architecture will further reduce the per-unit vehicle costs and achieve higher gross margin. And second, as the BEV upgraded products penetrate global markets, our sales are expected to increase, thereby boosting the gross margin; and third, the implementation of the merger with Lotus UK will further enhance efficiency. For instance, Lotus UK’s manufacturing gross profit will be consolidated into the listed company and economies of scale resulting from the integration of the supply chain and research and development will contribute to higher gross margin.

So I think for the next year, we have the confidence it's going to be higher than this year.

I am showing no further questions at this time. And with that, I'll now turn the conference back to Ms. Michelle Ma for her closing comments.

Thank you all again for joining us today. We will conclude the call soon. Investor Relations team remains available to answer any further clarity you have. Please feel free to contact us through the contact information on our website. Have a great day. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.