Lotus Technology Inc.

Good day and thank you for standing by. Welcome to Lotus Technology Inc. Third Quarter 2024 Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. It is now my pleasure to hand you over to the Head of Investor Relations, Ms. Demi Zhang. Please go ahead.

Thank you, Amber Ling. Good morning, good afternoon, and good evening, everyone. Thank you for joining Lotus Tech's third quarter and the nine-month 2024 earnings call. This is Demi Zhang, the Head of IR at Lotus Tech. I'm honored to introduce company management with us today, CEO Mr. Feng, and also CFO Alexis Lee. On today's call, we'll start with the prepared remarks from CFO Alex Schiffers and then CEO Mr. Feng, and then proceed to an open Q&A session. 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 risk standards and certainties. 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 takes 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 non-audited gap financial information, as well as un-audited non-gap financial measures. Please refer to our press release, which contains a reconciliation of un-audited non-gap measures to comparable gap measures, which you can find at ir.google.com. With that, I'd like to turn the call over to our sample elections.

Elections, please go ahead.

Thank you, Demi. Can you guys hear me? Good morning, good afternoon, good evening to everyone for your attendance today. My name is Alexis Lee and I'm the CFO of Lotus Tech. I want to begin by saying the company delivered more than 7,600 units of vehicles and achieved total revenue of $653 million in the nine months ending September. More than 2,700 units were delivered in the third quarter, up 54% year-over-year and 2% quarter-over-quarter. Third quarter sales revenue was $255 million, up 36% year-over-year and 13% quarter-over-quarter. Most notable is the new revenue stream from our ADAS technology-related income, which is high margin. To actually quantify the contribution, Revenue of our intelligent driving business from customers other than Lotus surged to $11 million in the first nine months, with a year-over-year growth of 450%. Investors can find the details in our earnings release published before this evening. Besides the Lotus models, other reputable brands of passenger and commercial vehicles will be rolling out with our in-house developers across the world. Gross profit margin was just 9% in the first nine months, a step down versus the 11% achieved in the same time last year. Third quarter gross profit margin was just 3%, mainly due to proactive management of our inventory in response to trip protectionism, inflation impact, and macro uncertainties. The margin impact is temporary and is likely to be shaped in the fourth quarter 24. Gross margin of our service revenue was 35% in the first nine months versus 28% same period last year. Next slide, please. To your left, you'll see that our EVs, which is mainly containing the luxury electric SUV model and partly the EMEA GT sedan model, jointly contributes more than 50% of total volume, while the EMEA sports car model still is contributing the remaining. This pointed to accelerated delivery for the electric SUV and the EMEA GT sedan model in the third quarter. This is mainly driven by ongoing new market entries, improving customer attractions, and rising product and brand awareness. The chart in the middle and the right shows a very balanced vehicle delivery and the retail network distribution across the world. Europe, inclusive of the UK, is home base given our British heritage. Contributions to volume and revenue was 35% in the first nine months, pointing to nearly 45% in 3Q. This is the fastest expansion quarter given new model entries. Through our arrangements, more than 300,000 charging stations are now available and accessible for Lotus drivers in Europe to charge their vehicles. Given that Lotus is early mover in electrification, ESG-sensitive conglomerate for fleet purchase of luxury courtesy cars are growth potential opportunity for the company. China is new market to Lotus and the only market that operates under the direct-to-customer model. Contributions in terms of volume and revenue was 25% after six years of ongoing investment and expansion. CapEx cycle already picked up and forward-looking strategic partnerships will enable Lotus drivers to access more than 18,000 charging stations across China, of which some of them are fully robotics. The US market remains as the key market for heritage performance sports car, contributing 22% of total volume deliveries. Given trade uncertainties, the company targets the ultra-luxury segment with limited editions and performance variants EV models for brand positioning, Profitability and deliveries can begin as early as end of this year. Lotus is well recognized in rest of the world regions for its F1 heritage and racing history, especially in the GCC region and other parts of Asia. The market is fragmented and operates under the distribution model, which is very asset light and fastest growing given that generation X customers are seeking digitalization and smartification The market is also least impacted by any trade uncertainties, and new production orders for the next two quarters' delivery is likely to increase its overall weighting in terms of contributing to our overall sales. Next slide, please. Coming to our financial highlights, total revenue for the first nine months was $653 million, a 105% year-over-year increase. Sales of goods was $624 million, a 104% yield increase. Service revenue was $29 million, a 129% yield increase. Gross margin for the first nine months was 9% versus 11% in the same period last year. And gross margin of sales of goods was 7% versus 10% in the same period last year. Gross margin of service revenue was 55% versus 28% in the same period last year. Operating loss was $598 million in the first nine months of the year, 18% year-over-year increase. Net loss was $667 million. Excluding the share-based compensation expenses, adjusted net loss non-GAAP was $633 million, a 20% year-over-year increase. Adjusted EBITDA loss non-GAAP was 563 million, a 16% year-over-year increase. Now, to the right-hand side is the quarterly numbers. Total deliveries was 2,744 units, 54% year-over-year increase. Total revenue was 255 million, 36% year-over-year increase. Gross margin was just 3% versus 15% same period last year, while net loss was 206 million, a 19% year-over-year increase. Excluding share-based compensation and expenses, adjusted net loss was $209 million and adjusted EBITDA loss non-GAAP was $182 million, an 18% yield increase. Next slide, please. In the first nine months of 2024, we continued to deliver strong operational growth driven by both the sales of goods and the sales of service. On top of the delivery of delivery growth, we have also made significant progress in our intelligent driving business, or better known as the ADAS, which is not booked under the service revenue. Currently, revenue of the ADAS business from customers other than Lotus was 11 million, contributing to nearly 2% of total revenue of the company, and is likely to expand in the future. Secondly, gross margin. strength due to proactive management of the inventory and is likely to V-shape in fourth quarter. We recently also announced securing of new $130 million worth of ADAS contract in 2024 and part of it will be converted to revenue in 2025, supportive of blended GPM . Lastly, as part of our commitment to our 26 strategy, we made continuous improvement to streamline our operation, drive efficiency and resource optimization, and achieve operating expenses reduction for four consecutive quarters. Operating loss was $160 million for the quarter, narrowed by 22% quarter-over-quarter and 2% year-over-year. Next slide, please. In the first nine months of this year, Lotus is the fastest-growing brand and top-performing British luxury heritage brand with deliveries ahead of the likes of Bentley, Rolls-Royce, Austin Martin, and McLaren. This is driven by four models in delivery, including our Evia hypercar model, our electric SUV model, our Emira sports car model, and our latest addition to the family, Emia, the GT sedan model. Despite faster than the segment in industry growth, we kept blended MSRP above 100,000 US dollar per unit as part of our pricing integrity and brand equity value protection measures. We have achieved 130 million contract value from intelligent driving ADAS business with multiple global auto conglomerates in this year. We are continuously been making expansion into new markets and fill them with more models availability, more technologies and high performance variants to cater to different market demands. For example, we have reviewed the electric carbon model that is tailored for the North American market. Technology innovation is at the heart of LOTUS and this is demonstrated in the newly reviewed theory one concept car. made with sustainable materials and all the next-generation automobility technologies that will redefine performance and luxury in the future. Many of these components will be found in new models forthcoming. Business sustainability is at the core of the company, and the company has been improving efficiencies through streamlined operations and has won multiple awards, including the Reuters Sustainability Awards, the EU CCC Business Awards, and so on. In all, the company is committed to continuously improve profitability, create long-term value, and deliver results to our stakeholders and shareholders. I'll pass it over to Mr. Fung, our CEO, for more details on the pillars that is driving our future growth. Mr. Feng, please. Thank you.

For our future growth, we will look at three aspects. One is the brand, the other is the technology, and the other is the future growth of our smart driving business.

I'd like to demonstrate our future growth from three aspects, brand, technology, and also autonomous driving.

For a luxury premium brand, it is very important to prioritize brand awareness, improvement, and also user experience. Meanwhile, we have to manage our costs. First, we have opened our Lotus boutique store in Beijing and has been widely recognized by the industry and also our customers. through this kind of high-end customized service to enhance the value and price of our deals. Since the start of the first half of 2024, Lucy has been in China. It will also enter North America in the fourth quarter of this year. We have started to deliver this customized car in the third quarter of China.

In addition to that, we have also provided a chat and bespoke service to our customers. This is the way to help us to increase our delivery value and also delivery price. This service has been deployed in China already and in quarter four it will be launched in North America. The delivery of bespoke vehicle will commence in quarter three this year. Besides, we've also launched a Lotus Champion Driver Initiative because Lotus is born from the track and also born from the British. This is one of the reasons that we are trying to offer the track service to our customers. Every series that we open this to our customers, within one hour, the poster will be acquired by all of our customers.

In other words, it demonstrates our users' passion to get involved in such attractive services.

And for our growth driven by technology, in our Vision 80 strategy, electric transformation is the cornerstone for our sustainable growth.

We launched our 900-volt Luyao Super Mixed Electric Technology during the Guangzhou Motor Show.

In this Guangzhou Auto Show, we have released our 900-volt hyper-hybrid EV technology.

I would like to emphasize that when we talk about hybrid, we are not talking about hybrid. There is a huge difference in this. Hybrid is a driving form based on the engine. It is supplemented by electricity. So hybrid is different from hybrid. The products we will launch in the future I want to highlight the difference of the hyper-hybrid EV technology with the commonly understood hybrid technology.

Usually it was driven by engine and supplemented by electric motor. But for the hyper hybrid EV technology, it will offer electric vehicles driving experiences along with engine driven technologies.

There is a characteristic of Zengcheng that it is unable to satisfy our pursuit of performance in this specific situation. For example, in the case of Zengcheng losing power, it has to go into the shape of a rock. So it can't satisfy our pursuit of performance. For Lutz, we have to be able to use all the performance of this vehicle in 100% of the situation.

And such technology will satisfy Lotus users' pursuit of driving joy and the passion of driving. And in addition to that, I also want to highlight that this technology is different from extended range because in some circumstances, the extended range could not offer extreme or ultimate performance to our customers. For example, when the battery capacity is very low, the vehicle could not accelerate fast enough. And for our Lotus users, what we are trying to do is to provide a technology that can deliver the performance of Lotus at all such scenarios. And we will be the first one globally to launch this 900-voltage hyper-hybrid EV technology.

I will use a few numbers to describe it. I will call it 125. One is that the total range is more than 1,000 kilometers. It can be more than 1,000 kilometers. Two, we will call it a dual ultra-flash charge. And I also would like to share some of the parameters regarding this particular technology.

first it's the total range of this technology can give you more than 1000 kilometers in addition to that you can offer dual flash or hyper charging experience when the vehicle is plugged in it can charge from 10 to 80 percent within 10 minutes and when the vehicle is on the drive the engine can also offer a flash charge experience to our customers Another feature of this technology is that when the vehicle is on the drive, the charge speed is five times that of a discharge. So as long as there are sufficient gasoline in the tank, it can offer a similar driving experience as the BEV vehicle instead of the pure ICE driving experience.

In some cases, for example, when driving at high speed, you can drive with the engine instead of electricity. We all know that when driving at high speed, the energy efficiency of the engine is the highest.

In some certain scenarios, such as in the highway, the vehicle equipped with technology can be purely driven by engine because in such a scenario, engine has the higher energy efficiency compared with electric.

This technology will be put into our future product. Lotus Robotics is a company of Lotus Technologies, a company of Lotus Technologies, a company of Lotus Technologies, a company of Lotus Technologies, a company of Lotus Technologies,

And our growth is also driven by ADAS. Lotus Robotics, this is a wholly owned subsidiary of the Lotus company. It provides intelligent driving solutions with global coverage for both Lotus brand intelligent vehicles and other global leading auto partners.

Our automatic driving solution has already achieved a large-scale model. It is a form of one model.

Our solution can be achieved through end-to-end, and this is a one-model approach, and such a solution has been put on a vehicle already. For our solution, the best advantage of it is that it can cover global markets. At this moment, OEMs or the suppliers of ADAS technology could not say that they can cover all global markets. However, we have already deployed this solution to Europe, Asia, GCC region, North America, Oceania. In addition to that, we have also upgraded this technology through OTA in Europe.

Especially in Europe, we have prepared our high-speed NOA. As long as the European law passes, we will immediately become the first OEM in Europe to implement high-speed NOA.

Especially in Europe, we are ready to offer high-way NOA capabilities as long as the regulation is passed. Once it's passed, we will be the first brand to offer highway NOA capabilities in Europe. For our ADAS technology, we will not only be able to supply it within Lotus, but also to other OEMs. For example, we have already cooperated with or under GDE. In addition to that, we're also building partnerships for external customers, such as one OEM in Europe and also one top tier from Japan.

In the next two to three years, there will be many car brands In the next two to three years, there will be more brands covering more than 10 models, including commercial vehicles adopting Lotus data solutions.

in the future will be our second revenue path for Lotus, which can give us greater profit and also a profit margin. As of September, Lotus Robotics has already achieved 19 million US dollars revenue a year, over a year growth of 217%. 其中来自于非路特斯的业务的收入已经达到了110亿,1100万美元,同比增长了450%。 Revenues from other customers surged to $11 million, a year-over-year growth of 450%.

In other words, external customers' revenue has achieved 58%. If we break it down by region, currently China is contributing 70% of the revenue. And for non-China region, they are accounted for about 30%. In the future, we believe it will be another way around. Revenues in the future will come more from US, Europe, and also Japan. Especially in October, Lotus reached 40% of its potential in China's more than US$80,000 luxury electric market.

And some of our recent development progress. Our first is our delivery updates. We have delivered a total of 8,631 vehicles in the first 10 months of 2024. And in China, Lotus has already acquired 40% of the ultra luxury vehicles, which means the vehicle is priced above 80,000 US dollars.

Although we are entering a small market,

Even though we are in a rather niche but luxury premium market, and the size of this market is not that huge, whatever we are trying to do is to increase our market share in this particular segment.

I'm bullish that by the end of this December, within the segment of 80,000 US dollars in China particularly, our market share can be above 50%. As long as the French law in Europe passes, we will go online through OT in Europe.

Besides the end-to-end solutions, we are also working on urban NOA solutions. In some key cities in China, we've been doing our beta testing, and in the future, it will be pushed to our users through OTA. So this OTA will be based on a one-model solution, and in the future, once the Europe region passes the regulations, our highway NOA will also be delivered to our customers through OTA.

In addition to that, in more regions such as GCC India, Asiania, Japan, South Korea, and Southeast Asia countries, EMEA will also be opened for order soon. So, as a iconic Lotus Day, we will continue to hold it in March next year. In March, in addition to the Lotus Day event, we will also launch our new model year, the 26th model car. This new model car will bring a bigger surprise.

As usual, in next year, March, we're going to celebrate our Lotus Day. On that particular event, we are planning to launch our model year 26 products, which will bring more impressive solutions.

And Lotus Capital Market Day will also be held in December 4, 2024.

We are implementing our decision-making plan for 2026.

We are currently undergoing to implement our Win26 plan. In other words, in 2026, our operational cash will turn positive and EBITDA turn positive. In 2026, we are planning to deliver our PHEV products globally. It will help us to boost the sales volume above 30,000 and our profit margin above 20%. For Lotus, we can't get into the price range, but we have to increase our average price to improve our profitability. We will also launch more limited editions and increase the proportion of our high-end cars.

For Lotus, we are not going to participate in the pricing competition. On the contrary, we are trying to increase or maintain our average selling price to give us more profitability. And meanwhile, we are also launching more limited editions and a bespoke edition.

In terms of high-end autonomous driving services, our contract has already reached $1.3 billion. For our ADAS services, currently we have already acquired a country value of $130 million. In the future, we are trying to expand this business because it will give us a higher profit margin and also more revenue.

In addition to that, we will keep optimizing our autonomous experience and also intelligence experience to increase the intake rate of our software subscription.

To increase our profitability, besides expanding our revenue streams, we're also trying to manage our costs through bond reduction and also streamlining our operations. Thank you.

Thank you. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. For the convenience of everyone on the call, if you wish to ask your questions in Chinese, please translate your questions to English right after. There may be a short pause while we compile the Q&A roster. We will now take our first question from the line of Laura Lee from Deutsche Bank. Please ask your question, Laura.

Hey, thank you for taking my question. And my first question is about you mentioned the $130 million contract value of intelligent driving solutions. Could you give more color on the cadence of revenue generation like when exactly will those models be launched and will we like receive the contract r d or other payments before the launch motion

Thank you. Thank you, Laura, for your question.

I will invite Mr. Feng to give answers to your question.

First of all, our contract income comes from two parts. One is NRE, and the other is license. This is part of our contract. NRE's income is based on the node of the project. For example, from startup to SOP, based on different nodes. When it comes to SOP, when it goes into the market, that is, when it is delivered to users, we can receive all the NREs. Then license is based on the authorization fee for each car.

So the contractor value of our ADAS solutions, it will be categorized by two groups. One is through NRE. And NRE, in other words, it will, based on the project, different milestones, for example, the kickoff stage of the project, all the way to the SOP stage of the project. And when the vehicle is delivered to customers at that moment, we will be able to receive the full NRE. And the second approach is licensing. And then the The revenue for it will be calculated based on per vehicle.

This is our first car on the market, a non-Luxury car, which is the Lynk Z110. It has been on the market. We have already opened the high-speed NOA. The city NOA will be opened soon, that is, in the near future.

The first vehicle that is equipped with our ADAS solutions is LINK ENCODE-Z10. This vehicle has already been launched for highway NOA capabilities. We have already equipped this vehicle with this technology and for urban NOA technologies in recent months, the vehicle will also be available for this vehicle.

There are four vehicles in the back.

In the future, there will be four more models from Lincoln Co. to be equipped with our solution. And for commercial vehicle, next year, there will be one more model equipped with our solution.

Okay, that's helpful. My second question is about, we mentioned the hybrid product to be delivered in 2026. So will that be one or more completely new models where it's like a PHEV version of the current offerings?

First of all, we will put PHEV in all of our future models. That is, our future models will both have PHEVs and EVs. I think it's better to keep this a secret for now.

For the PHEV technology, it will cover all our models in the future. In other words, all of our models in the future will have EV version and also PEV version. As for the specific model that we are trying to launch in 2026, I think at this moment, I want to comment on it.

Please pay attention to our future product release. In addition to the release of technology, also pay attention to our product release.

But please stay tuned to our future product launch event. After we announced this technology, we have gained interest from both China's OEMs and also Europe's OEMs. And for this particular technology and vehicle models, there are a lot we really would like to share, but not at this moment.

When we push these technologies into the market,

The reason that we want to keep it for now, because when we are ready to launch this product to the market, we want to be the first one to launch this technology and also the first luxury premium brand to do that, to do so.

Okay. Appreciate that, Carlo. I have one more question about the margin, because I think the gross margin in 3.2 was about 3%. There is actually a material sequential decline. So my question is about, like, what's the main driver of this? And also, looking ahead, how we think about, like, the trajectory of the vehicle margin?

Thank you. Thank you, Laura. I will also still invite Mr. Fan to give you an answer on that question.

Mr. Fan, please.

Otherwise, if there is an old storage bag, it is not good for our new car. So the main thing is the impact caused by the new storage bag. We have already cleaned up the storage bag in China. Now there is also a delivery, which is a new car ordered by the delivery user.

For the question, I want to say that in China, quarter one next year, and also Europe and the rest of the world, quarter two next year, we are planning to launch our model year 26 product. But before that, we are trying to finish our D stock, particularly in Europe, because an unhealthy stock level is not going to help us to launch our new models. Currently in the China market, the stock level is at a relatively healthy while delivering new products to our customers. So our focus is to reduce the stock to a healthy level for Europe region next quarter one. And once the stock level returns to a healthy level, the gross margin will also be benefited from that.

Let me give you an example, but I'm not going to talk about which one. It's because the new and old models are not doing well. When the new model is launched into the market, the old model hits sixfold. When the old model hits sixfold and the new model starts to launch into the market, the new model starts to sell and hits eightfold. This is a very bad way. We must avoid this kind of situation.

And when we are planning to launch new models to the market, we have to precisely plan the cadence because if the old models still have a relatively large inventory in the market, it won't be conducive to selling new models. A good example is that one particular OEM, when they are switching from old models to new models, they didn't plan it well. So the old model had a 40% discount and when they launched the new models immediately, the new model discounted by about 20%, and this is not a good outcome.

Thank you. Thank you so much. Thank you, Laura. I hope we're doing ready for the next one.

Thank you. Next question comes from the line of Kevin Smith from Ethos Collective. Please ask your question, Kevin.

Good evening, and thank you, Lotus Management, for providing the informative updates to third quarter earnings. I have two questions here, hoping to get color on. My first question is, management mentioned earlier that operating expenses have declined for four quarters, consecutive quarters so far. Will we continue to see a decline in quarter four? this year and what is the expectation for 2025? And what do you see as the major maintenance or drivers to help facilitate the further expense decline? Would it be a reduction of staff or by some other means?

Thank you, Gavin. I'll invite Mr. Fenton to give you an answer on that.

We launched a small but beautiful strategy throughout the company, because we don't have a lot of sales. In this segmented market, the electric car's penetration rate is not very high, so we have to do some research on the company.

We have promoted a strategy called Lean 30 Factors, because in the segment, the EV penetration rate is not very high, and we have to think about how to manage to reduce the cost.

For example, in the marketing field, our stores must be small and beautiful, not big and full. The larger the store, the higher the cost, and the more people it needs. Then we have to make our store small and beautiful. At the same time, in terms of research and development, we are more focused on developing high-tech technologies for Lutes, rather than developing everything. At the same time, we also need to use a few resources, such as electronic electronics architecture.

For example, in marketing and sales aspect, we're trying to streamline our shop. The shop will be small but effective instead of a large shop. And for large shops, it requires a higher cost and more people to run it. And for R&D side, our focus is on technologies that will bring Lotus as the leading player in this industry, instead of spending our R&D in all fields. In addition to that, we're also trying to leverage Geely's resources, for example, in EE architecture.

I believe that in the future, electrified vehicles will definitely be in the smart sector. users will become more and more in demand. Therefore, we will focus on the advanced technology that can bring us income. For example, autonomous driving. This is where we will focus. Of course, we will still play our role in the long term, in terms of the base plate.

In the future, we believe in the EV industry, intelligence features will be the must-have features for our customers. So our current focus is on cutting-edge technology development and also the technologies that can bring us the high profit margin, such as the ADAS solutions. In addition to that, Lotus is also working on its traditionally well-known field, which is the chassis. We are currently working on intelligent chassis, and those are the other aspects that we're currently focused on.

To sum up, our future investments will only focus on two directions. One is the development of technology and product development. This is in terms of development. The other is the construction and market expansion of a trading brand. All the other things that are related to our main business, we have to get rid of them all.

In summary, our future expense will be in two directions. One is on the technology and the product development. The second direction is about brand awareness, establishment, and also market exploration. In quarter three, we've already started to see some outcomes. And in quarter four, we believe it will be more pronounced.

It also plays a role in the co-efficiency of the base. We can better co-operate with the base. For example, in the future, the development of this electronic structure will be led by the base, and we will use it. This can ensure its progress, and it can ensure that when we are in it, it is divided by quantity. Because we don't have a lot of quantity, so we don't have much cost to divide.

And our synergy with Geely will also give us more benefits. In the future, the development of the EE architecture will be led by Geely, and we can use this technology off the shelf. And besides, the cost will be shared based on the volume. And for us, it won't be a huge cost to show them.

Thank you.

Thank you, Michel. Vincent, do you have another question?

Thank you. Our next question comes from the line of Vincent Yeung.

Operator, I think Gavin has another question. Gavin, was that you?

Would I have the opportunity to ask my second question here?

Yeah, sure. Please.

Thank you. So my follow-up question is, what does Lotus Management expect the full-year total loss to be for 2024? And generally, what will be the expectation for the next year, 2025? Thank you.

Thank you, Gavin, for your question. I will invite to give you color to your question. Alexis, please. Alexis.

Hi, Gavin. Can you hear me? Yep. Let me share with you a little bit of our disclosure process and also how. First and foremost, we kept our 2024 guidance and we have a win 2026 strategy as what Mr. Fung has mentioned. So our objective is 30,000 units of sales volume driven by one new model that's forthcoming and the aim of 20% gross profit margin. Now, we are doing a monthly disclosure on our sales volume So by about a tenth of every month, you will get the sales volume for the last month. It is likely that before Chinese New Year, end of January and also early February, we will be rolling out our 2025 guidances. So that is the time where we will probably finalize most of the things that's going on in the market. Now, of course, I will say that 2025 is likely in the midpoint or just below the midpoint versus the 2024 guidance and also the WIM26, but most important thing is that because we have a new model that's forthcoming in 26. Now that's all probably I can share right now in terms of

Thank you. Thank you, Gavin. Thank you.

Our next question comes from the line of Vincent Yeo from SC Asia. Please ask your question, Vincent.

Hi. Good evening. Thank you for having me. I have two questions. The first one is the company has delivered about 8,600 vehicles in the first 10 months. Is the management confident to achieve annual sales target of 12,000 units? What are the drivers to boost the monthly delivery to 1,500 or 1,200 in November and December? Considering the holiday season are coming in Europe, which is your major market, so please, could you give the guidance on deliveries in first quarter of 2025 and the regional allocation?

Thank you. First of all, the 12,000 units are very challenging, but we are still very confident. Because the growth of China and the UK, especially the growth of the UK market, is still very visible. At the same time, we also want to drive the growth of the European continent, so that we can achieve our goals. The second is that we have already started to deliver in the new market.

Well, first of all, I want to say that the 12,000 target is definitely challenging. However, we are confident to deliver this target. In China and particularly the UK, the delivery cadence and the progress is quite promising. Meanwhile, we are trying to drive our delivery speed in the EU. And in addition to that, we have already started our deliveries in some new markets, for example, Japan and South Korea.

About the first quarter of next year, our model year 2.6 will start to deliver in China. The first quarter will start to deliver. This will definitely be an increase for us. Of course, Europe...

And for quarter one next year, the model year 26 products will commence delivery in China, and it will be another driven point for our sales volume. And in quarter two, our delivery will also commence in Europe and also the rest of the world.

In next quarter one, as we are launching our model year 26 product, we believe it will stipulate our growth in sales for sure. Thank you. Okay, thanks. I have another following question is that,

How do you view the luxury EV demand in the Chinese market? Because I've seen that Lotus vehicle sales in China have dropped, actually, in the first nine months compared to last year. So what do you think the reason caused that sales decline? And what are the strategies you have in plan to boost sales in China besides, you just mentioned, launching new models? Thank you.

First of all, the Chinese market is good.

We're going to call it a super luxury market worth more than $80,000. Electric vehicles' penetration rate has dropped quite a bit, nearly 50%. It's dropped by 50%, but Lotus has still maintained growth. That's the first point. Second, although in this area, uh uh This is an improvement of our competitiveness. By improving our competitiveness, we can improve our quantity.

In China, in this particular luxury premium EV segment, which is the vehicle's price above 80,000 US dollars, it is true that the penetration rate of the EV has dropped to roughly around 50%. However, Lotus is keeping growing. And for our strategy, we are trying to gain our market share in this particular segment. Like I previously shared with you, in October in China, we have already acquired 40% in this particular segment. In the future, our target is to improve our market share to 50% or even 60%. This is one of our approaches to demonstrate our competitiveness, and by boosting our competitiveness, it's another way to give our confidence to increase our sales volume.

In this market, we hope to improve our market share.

In this particular segment, our expectation is to improve the penetration rate. However, if the penetration rate could not be improved then our target is to increase our market share to become the absolute leading player in this particular segment.

Thank you. Thank you very much.

We will take the last one, one more question due to the time.

Thank you. Our last question comes from the line of Ling Zhou from UE Capital. Please ask your question, Ling.

Hello, Mr. Feng. First of all, we are very happy to see that the company's intelligence industry has made better progress. There are also two questions about smart value. The first one is that we see that the overall development investment of the company is about $300 million to $400 million per year. So we want to know how much is the development investment of our robot business so far and how much is expected to be invested in the future. The second question is about whether our company has a plan and idea to capitalize the smart value business. I will repeat my question in English. My first question is, how much has been invested in the R&D of Lotus Robotics so far, and how much do you expect to invest going forward? And my second question is, does the company have any plans to capitalize on the intelligent driving business? Thank you.

For the first question, the data is autonomous. The technology requires constant investment. This is not a one-off, one-time investment. As our user base is growing, the data is growing, it requires more and constant investment.

As I just said, we will focus on intelligentization, including intelligent base, intelligent warehouse, and intelligent driver. In these three areas, we will continue to invest. So we will continue to invest in this field. At the moment, we don't have this idea of automation.

Currently, we will prioritize our intelligence investment into three areas, the intelligence chassis, intelligence smart cockpit, and also autonomous driving. Particularly for autonomous driving, it can keep us at the cutting edge in the industry, and it will be very important in the second revenue stream. So we will continue to invest in this particular area, and currently we do not have a plan for capitalization.

So in this super luxury industry, we are undoubtedly the world's leading smart product, far beyond other super luxury brands. This will be our advantage.

In the luxury premium segment, Lotus undoubtedly is the leading player when it comes to intelligent solutions. And we will be far beyond compared with other players in this same luxury premium segment.

And such an advantage of Lotus is not only limited to China, but also other global markets. Thank you.

Thank you very much.

Thank you. I am showing no further questions at this time. I'll turn the conference back to Ms. Demi Zhang for her closing comments.

Thank you, Emily, and thank you, everyone, for joining us today. If you have any further questions, please feel free to contact our IR team, and given the time constraint, this will conclude the call. And thank you again very, very much, and have a great day.

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