Lotus Technology Inc.

Good day and thank you for standing by. Welcome to Lotus Technology Inc. first half and second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your questions, please press star 11 again. 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 the second quarter of 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. Ching-Feng Feng, and the CFO, Dr. Dashie 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 statement. except as required and 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.hisonlotus.com. With that, I'd like to turn the call over to our CFO, Dr. Wang, please.

Good morning, good day, and good evening, honored 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 Dashie Wang, the Chief Financial Officer of the Lotus. It's my privilege to briefly walk you through the companies that are audited entry in 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 delivery in Q2. The impact of the U.S. tariff policies, as well as ongoing destocking activities of the company. Revenue narrowed to $126 million in the second quarter and $218 million for the first half, down 44% and 45% year-on-year, respectively. Growth margin for the Q2 stood at 5%, down 4 percentage points from the same quarter last year. Although quarterly growth margin decreased by 5 percentage points a year-on-year basis, we achieved a first half gross margin of 8%, remaining us safely in the positive territory. Now, let me break down our sales by category and by region. By category, lifestyle vehicles accounted for 83% of the total deliveries in the Q2, up from 36% 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 electric hyper-SEVs in the second quarter. In fact, it has become a leading model in China's premium battery electric SEV segment during this period. In the UK, our battery electric lifestyle vehicles demonstrated significant year-on-year improvement Deliveries of the EMEA to North America were disrupted in Q2 due to tariffs 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, $299 million in Q2 and $200 million in the first half of the year. This resulted in a gross profit of $7 million for the second quarter and $80 million for the half. We reported operating loss of $160 million in Q2, a 22% improvement year-on-year, Net loss for the quarter was $130 million, down 36%. For the first half of the year, operating loss was $263 million, a 40% year-on-year decrease, while the net loss narrowed to $313 million, down by 32%. For reference, on a non-GAAP adjusted basis, net loss for the quarter was $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 the operational efficiency and continuing to deliver values. Our first half operating expense has lowered by 42% year-on-year. and despite challenges posed 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 Qin Fengfeng, CEO of Lotus Technology. Let me brief you. on the latest achievements and then recent development.

On the latest achievements and then recent development. On the latest achievements and then recent development. On the latest achievements and then recent development. On the latest achievements and then recent development. On the latest achievements and then recent development. In the latter half of the year, the exchange rate will be 2.9 billion US dollars.

First, let me begin with the new funding arrangement of the company. So on August 19, 2025, we have entered into a security purchase agreement with ATW Partners, pursuant to which the company agrees to issue and sell convertible notes for up to an aggregated principal amount of 300 million US dollars. Present to this agreement, Lotus has issued already notes in the original principal amount of 10 million on the day of August 19.

On July 28, the company and Geely Control Group signed the Main Belt Framework Agreement. According to the agreement, Geely agrees to provide up to 1.6 billion yuan to the company and its related companies

And on the other side, we have also secured funding commitments from our strategic partner, Geely. So on July 28, 2025, Lotus has also entered into a Master Credit Facility Framework Agreement with Geely.

In terms of marketing, the most important event was in July, when Lotus launched the ImeraCup racing car at the DeWood Speed Festival. announced the official return of the BWC. Lotus also showed the C01 concept car to many BWC spectators. They also showed the classic cars such as E-Maya, Elettra, and E-Mera, including E-Maya, Elettra, and E-Mera. In the recent years, the market performance in the UK has been very good.

On the marketing front, in July, we have proudly announced our official return to Goodwood Festival by unveiling the E-Mira Cup race car at the event. And we have also exhibited our concept vehicle, Theory 1, with also the full lineup, including the Hypercar Evia, the Hyper GT E-Maya, the Hyper SUV Electra, and also our proud sports car E-Mira, as well as several legacy race cars. to numerous Goodwood visitors. And then, we have also seen a positive result in terms of our UK market sales.

As for the Lotus robot, it is a full-fledged subsidiary of Autopilot. We have also signed an MOU with our strategic partners to carry out strategic cooperation in the future in the field of AI and smart driving, including the development and development of Shutter's RoboTaxi project.

And on the AI side, the Lotus Robotics, a wholly-owned subsidiary of the company, which focuses on AI and autonomous driving, the company has entered into an MOU with a strategic partner in the Middle East to pursue a strategic collaboration in terms of AI and autonomous driving technologies, including the exploration of a robot taxi in Saudi Arabia.

Next, I would like to talk about product verification. First of all, EMERA, the year of 2026, will start selling globally next month. In order to meet the development and new power development of the European Union, in 2027, we will change the new power structure. The new power structure includes this V6, and the plug-in hybrid will be applied to EMERA.

a few words on the product pipeline, beginning with our sports car, Emira. We're rolling out the model year 26 next month globally. In terms of our future plan for Emira, we're going to upgrade our powertrain in 2027 to comply with EU7. That includes also the potential consideration of a V6 engine

and then also alternative plug-in hybrid solutions.

Model year 26, Electra and EMEA are being delivered to the market globally.

We have been concerned about the development of PHEV. The project is going very well. And also, as most of our friends are concerned, the plug-in hybrid vehicle, we are in good progress.

We're going to start our production of that model end of this year and then begin to market entry deliveries. quarter one next year, beginning with China market.

And then for the future, we'll also roll out to Europe and some other markets.

And then we have also a new model, internal project code, we call it Vision X. That project we are foreseeing to launch into the market in 2027.

And also a brief introduction of the hyper-hybrid technology which Lotus possess. Now it has started to compete. I just said that our first PHEV will be at the end of this year, SOP. This comprehensive range will be more than 1,000 kilometers. The main highlight of it is the double flash charge. That is, it can flash when charging. It also flashes in the form. That is, in the case of charging, it can reach the speed of changing electricity. The extreme experience of both charging and leaving. Highlights of the 900 volts

hyper-hybrid EV technology. So with this technology, we can deliver the combined driving range of over 1,000 kilometers. And also, the highlights of the technology includes the industry-leading dual hypercharging technology, meaning that we enjoy the ultra-fast plug-in charging and also the ultra-fast on-the-drive charging. The ultra-fast plug-in charging speed is leading the industry. very similar to a battery swap. And then also, on the drive charging, we can achieve the rate of five times the power consumption of the typical driving. And also, we can provide uninterrupted electric driving performance in any of the situations, including acceleration at very high speeds and also in extreme cold weather. So with this technology, Lotus will be unveiling this technology into our first plug-in hybrid model this year. The deliveries of the model, which I have previously introduced, will be beginning in 2026, Q1.

I would like to say that there is another important highlight of this super hybrid model, which is our chassis system. We fully utilize the characteristics of this smart chassis. We can adjust this car And also, I would like to mention a few words on our intelligent chassis system, which will be also equipped in our first plug-in hybrid model, launching end of this year.

So with this technology, we are able to achieve a dual mode of driving function, driving mode. So on a comfort mode that we're tuning this vehicle to allow the comfort of the daily use, and also we can tune to the performance mode while the drivers or users can enjoy in the extreme conditions, extreme performance.

So with this technology, previously

Without this technology previously, comfort and performance are always hard to balance. But with this technology equipped in our vehicle and with the fine-tuning of our chassis performance team, we will be able to elaborate, we will be able to perform the vehicle in two very different driving modes. We can enjoy the comfort in daily use and also we can enjoy the performance in the performance driving mode.

And then some of our global market strategy.

So in China market, the sales network, we have also plans to strategically phase out some of the underperforming outlets while we continue to broaden our urban coverage.

At the same time, according to the needs of different regions around the world, we will design a strategy for each country to upgrade in each country to ensure the satisfaction of local consumer habits and adapt to the changes in the policy environment. At the same time, countries with strategic focus that are not affected by tariffs, such as the UK, as well as the high-end electric car market with rising potential, will rely on the UK brand

We also developed a very customized and tailor-made pricing and product strategies aligned with every single market and every single user demands that we enter into across the globe. Whilst we are strategically prioritizing the tariff-advantaged markets and then the premium EV market with growth potential. This is supported by a UK-anchored brand hub for expansion into Europe.

We are actively collaborating with multiple strategic partners to architect

a localized market entry solution leveraging the GD's global ecosystem synergies.

As according to our plan,

the regional share of our deliveries is balanced. So North America enjoyed 20%, Europe enjoyed 38%, R&W 13%, while China enjoyed 29%.

Let me talk about the growth of our smart driving business. Lotus is a subsidiary of Lotus Technologies, a smart car brand for Lotus. A few words on our AI front.

So as we previously introduced the Lotus Robotics, it does not only provide intelligent driving solutions to Lotus, but also to other global leading auto partners.

Then we will become a provider of the solution of the automatic driving solution at this station. It includes the research and development of automatic driving software and hardware, as well as the purchase service, as well as the leading large model algorithm to meet the L2 and L2++ level of ADAS software services, including intelligent upgrade. And we can achieve global range coverage. So far, It is a one-stop provider of intelligent driving and also providing the R&D and engineering solutions to our customers.

It provides intelligent driving software and hardware R&D, including the procurement services. We're leading one model algorithm and also providing the L2 and L2+, ADA software and its upgrades over the year. We have the global coverage. So to date, the ADA and PATH solution fully delivered across Europe, Asia, GCC, North America, ASEAN, and so on. with the latest highway assist functions upgraded in Europe and well-received by the market.

The core is the smart driving solution of Lotus. It's not just about serving multiple brands in Gili Ecotourism. What's more important is that in addition to Gili, there are other important customers as well. So far, they include a large European car company and a top tier T1 supplier in Japan.

Our clients include the multiple brands from the GD ecosystem, but also to emphasize as well as other clients, external clients such as the leading European conglomerate, a top Japanese tier one supplier, and a few others.

In the next two to three years, we will integrate with several car brands, about a dozen models, including this commercial car, to prepare a smart driving solution for routers and robots. on the future growth in the next two or three years we are planning to equip to provide the services to another 10 different models including passenger vehicles and also the commercial vehicles

We are actively seeking an upgrade of our technology solution using the large model algorithm to be able to enable the company to deliver a level four or level five solutions to the globe. And also, we introduced previously, we have entered into a strategic partnership to allow us to explore the Robotaxi project expansion in Saudi Arabia. Thank you.

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

Operator, please. Thank you. As a reminder, to ask a question, please press star 1 and 1 on your telephone keypad. and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. As a reminder, if you ask your question in Chinese, please translate to English afterwards. Thank you.

Just a moment for our first question. First question comes from Edison Yu from Deutsche Bank US. Please go ahead. Hey, this is Laura for Edison.

Thanks for taking our question. 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, et cetera? Thank you.

First of all, according to our product plan, In the future, we will focus on the development of the Hyper-Hybrid EV technology. We rely on the new Lotus-Luyao technology. The first model we plan is the SUV. We will start to deliver it in 2026. In the future, based on the Luyao technology, we will develop a new model. So as we introduced earlier that the powertrain technology, I'll say a few more on the powertrain technology.

So we will actively promoting our hyper-hybrid technology. And then the first vehicle to be equipped will be an SUV launching into the market, beginning delivery to the customer starting from quarter one next year. And also you can see in the presentation deck that we have another vehicle. It's a new type of vehicle. Also will be equipped with the hyper-hybrid technology. It will have the strong embedded Lotus DNA inside with the performance-targeted product definition.

Each of our vehicles is not for a specific area. They must be globalized. In fact, when we developed Elettra and EMEA, all of them met the legal requirements of the United States. So as a global brand, every single

product that we are developing into global standards and global compliance. So basically that for Elettra and Maya, we have the homologation of a majority of the markets, including the U.S. However, that we have seen the U.S. tariff fluctuations throughout this year. So we expect that with the ease, expect if the tension is eased, then we will be hoping to divert those vehicles into the United States again.

So, as a typical Emira sports car product, in 2027, the year of O7 will come. So, in 2027, we will change the new power, that is, the new power of V6.

In terms of our proud Emira sports car, we are having a facelift in the month in the 2027 due to the EU7 kick-in. For that, we are planning to have an upgrade on our V6 engine and also plugging hybrid as an alternative. Thank you.

Thank you. Just a moment for our next question, please. Next, we have Eugene Hassan from Macquarie Capital. Please go ahead.

Hello, I'm Eugene from MyGully. Thank you for accepting my question. I would like to know more about the company's announcement of the put option project in the beginning of this year. In the future, it will be merged with the UK. Please introduce our One Loaders to integrate the input and communication of business. Thank you, management, for taking my question. I'd like to ask about the put option that was exercised, I think, in early July and the expected merger with Lotus UK. Could you please help explain the one Lotus strategy and then how you plan to integrate this business and any expected synergies? Thank you.

First of all, we have to implement a strategy of OneLux. Now, LCL, which is an English company, is making a sports car. Lotus Technology, LTI, is making a daily car. This is still divided. And there is no good strategic coordination. A lot of technology, including efficiency, has not been improved. After this becomes OneLux, we will carry out So on the one Lotus, so basically as per current status, so we have the Lotus cars in the UK who develop and manufacture sports cars and we have Lotus Tech

to develop and manufacture the lifestyle vehicles. So in terms of consolidation plan that we see big room for efficiency improvement while we consolidate a lot of the functions together. including the technology synergies. So basically, that we introduced the eMira. Once we have done the consolidation of One Lotus, so Lotus UK will be also enjoying the Lotus Tax plug-in hybrid solution.

In the future, in the UK, we will pay more attention to the development of high-performance vehicles, including our engineering services for high-performance vehicles, China is more focused on intelligent development and electrical development in China's Lotus Technology, and fully exploits China's advantages. In this case, both parties can achieve better efficiency. After the merger, the two companies can achieve better efficiency.

And then we have also ambitious goals for the Lotus Car operation in the future that we will focus on the very high performance attributes and also the high performance engineering services that we can seek external clients. And then as per the Lotus Tech operation in China that we will focus on the intelligence and then also electrification engineering and development in China. while we have the synergies between both.

In the last 24 years, we have achieved all the conditions to implement the put option. In recent years, the two companies have received the approval and approval of the board of directors. So we are now in the process of programming, because we have more countries involved, such as China, the UK, and Malaysia. We are in the process. If we are fast,

Because the company has delivered all the prerequisites of the port option in 2024. And then also the consolidation plan has been officially approved by the board. So we are now in the process of closing. We are targeting to close the deal by... end of this year, no latest by quarter one next year. Okay. Thank you.

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

Great. All right. And 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.