Lotus Technology - Q2 2024
August 28, 2024
Transcript
Operator (participant)
Good day, and thank you for standing by. Welcome to the Lotus Technology Inc. first half 2024 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 need to press star one one on your telephone. You'll then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the call over to your host today, Miss Demi Zhang from the company.
Demi Zhang (Head of Investor Relations)
Thank you, Desmond. Good morning, good afternoon, and good evening, everyone. Thank you for joining Lotus Tech's second quarter and the first half 2024 earnings call. I'm Demi Zhang, the head of IR at Lotus Tech. I'm honored to introduce company management with us today, CEO Qingfeng Feng and CFO Alexious Lee. On today's call, we'll start with the prepared remarks from CFO Alexious first, and the CEO, Mr. Feng, will join for Q&A. 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 included in relevant filings of Lotus Technology 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 be noted 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. Please refer to our press release, which contains a reconciliation of unaudited non-GAAP measures to comparable GAAP measures, which you can find at ir.group-lotus.com. With that, I'd like to turn the call over to our CFO, Alexious, please.
Alexious Lee (CFO)
Thank you, Demi. Good morning, good afternoon, good evening to everyone for your attendance today. My name is Alexious Lee, and I'm the CFO of Lotus Tech Inc. Now, let me go to the slides, please. Thank you. I want to begin by saying the company delivered approximately 4,900 units of vehicles that achieved total revenue of $398 million in the half, of which both are record first half year numbers in the 76 years of the Lotus history. Just under 2,700 units were delivered in second quarter, up 128% year-over-year, and 22% quarter-on-quarter. If you look at the center, you will see that second quarter sales revenue was about $225 million, up 103% year-on-year, and 30% Q-on-Q.
Most notable is the new revenue stream from ADAS technology-related income, which is very high margin. Besides Lotus models, other reputable brands of passenger and commercial vehicles will be rolling with our in-house developed ADAS across the board. To your right-hand side, you will see that gross profit margin was 13% in the first half, a step up versus the 5% achieved in first half 2023. But this number is lower than the 15% by the end of last year. To quantify the decline, it was mainly due to the inflationary impact to the cost of Emira sports car. Notable growth comes from gross margin of service revenue, which was about 58% in the first half of this year versus 16% same period last year. This is mainly contributed by ADAS-related revenue. Next slide, please.
To your left, you'll see that our EVs, which is mainly electric SUV model, and partly Emeya, the GT sedan model, contributes approximately 50% of total volume, while the Emira sports car sales contributes the remaining. Demand for Emira sports car in the U.S. market is strong, given well-established sales network and brand recognition. The chart in the middle and the right shows a very balanced vehicle delivery and the retail network distribution across the world. Europe, including U.K., is home base. It remains the biggest contributor to volume and revenue, given our British heritage. China is new market to Lotus, and contribution expanded from 1% in 2018 to 25% of total vehicle delivery and retail stores after six years of continuous investments and efforts.
Contributions from the rest of the world is trending up from recent deliveries of electric SUV model in many new markets. And new production orders for the third quarter, delivery is likely to further increase its weightage contribution. Next slide, please. In terms of global distribution, China is the only market operated under direct customer model, while the others operate through retailers and wholesalers, mainly with long-standing relationships with the company. The U.S. market remains as the key market for heritage sports cars. Given the trade uncertainties, the company will target the ultra-luxury segment with limited editions and performance variants EV models for brand positioning and profitability. Europe, including U.K., is home base, and through our arrangements, more than 300,000 charging stations are now accessible for Lotus drivers to charge their vehicles.
Given that Lotus is early mover in electrification, ESG-sensitive conglomerate for fleet purchase of luxury courtesy cars are potential growth opportunity for the company. China is new market to Lotus, and the only market operated under direct customer model. Contributions in terms of volume and revenue exceeded 25% after six years of intense investments. CapEx cycle already peaked out, and through strategic partnership with NIO, Lotus drivers can access 23,000 chargers across China, of which some of them are fully robotic. 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 asset-light, with very fast-growing Generation X customers for growth. The market is also least impacted by any trade uncertainties. Next slide, please. Coming to our financial highlights.
Total revenue for the first half was $308 million, a 206% year-over-year increase. Sales of goods was $383 million, 207% year-over-year increase. Sales revenue was $50 million, 104% year-over-year increase. Gross margin for the first half was 13% versus 5% in the first half last year. Gross margin of sales of goods was 11% versus 4% first half last year. Gross margin of service revenue was 58% versus 16% in the same period last year. Operating loss was $438 million for first half this year, 27% year-over-year increase. Net loss was $460 million, excluding share-based compensation and expenses. Adjusted net loss non-GAAP was $424 million, a 20% year-over-year increase.
Adjusted EBITDA loss non-GAAP was $382 million, 15% year-over-year increase. To the right-hand side is the quarterly numbers. Total deliveries was 2,679 units, 128% year-over-year increase. Total revenue was $225 million, 103% year-over-year increase. Gross margin was 9% versus 5% same period last year. Net loss was $202 million, a 4% year-over-year increase. Now, excluding share-based compensation expenses and adjusted net loss, non-GAAP was just $201 million. Adjusted EBITDA loss non-GAAP was $177 million, a 1% year-over-year decline. Next slide, please. In the first six months of this year, Lotus is the fastest growing British luxury heritage brand, with deliveries just behind Bentley and ahead of Rolls-Royce, Aston Martin, and Lexus, McLaren.
This is mainly driven by four models in delivery and include our electric SUV model, our Emira sports car model, our Emeya GT sedan model, and Evija, our halo sports hypercar. Despite faster than segment and industry growth, we kept our ASP above $100,000 per unit to protect our pricing, integrity, and brand equity value. We not only launched the Bespoke, Chapman Bespoke services, which offers personalization and customization services to our customers, but also began the production of the one-off Evija Fittipaldi model and the delivery of the Emeya Blossom limited edition model. Both electric SUV model and the Emeya GT sedan model won the Red Dot Awards for product design and other achievements to add to the model's desirability with our customers. Business sustainability-wise, the company was nominated as the finalist in the Reuters Sustainability Award 2024 in two categories.
Number one, for business transformation, and number two, for operations transformation. Last but not least, our wholly owned subsidiary, Lotus Robotics, started to capitalize on years of investments by providing end-to-end intelligent driving solutions and R&D services to multiple leading OEMs. Next slide, please. Besides embracing on electrification, Lotus is also the pioneer among traditional luxury OEMs to spearhead into digitalization and smartification. While we understand the fun in driving any past and present Lotus models, we also want to insert the right level of technologies to enhance road safety for our drivers and their passengers, the riders. As flagged previously, our customers can opt for level four ADAS hardware on their new orders of electric SUV model and the Emeya GT sedan model. With that, they can subscribe to highway NOA or the urban NOA to enjoy the ride after a tedious day.
More importantly, program updates are done through OTA, and they are hassle-free. As announced recently, our wholly owned subsidiary, Lotus Robotics, started to deliver end-to-end intelligent driving solutions and R&D services to leading OEMs for both the passenger vehicles and commercial vehicles segment, such as the heavy-duty trucks for interstate logistics and vans for intracity dispatch services. Sales revenue from this high-margin business was slightly more than $10 million in the first half this year, and is likely to fall between $30 million-$50 million for this year. Future growth of our business will be driven by income from more paid subscriptions of our ADAS across the world. We value... Next slide, please. We value our For The Drivers brand mission and put them into action.
We not only launched the Chapman Bespoke in the first quarter, which offers personalization and customization services, but also began the production of the pinkish Emeya Blossom limited edition model. This collection features rare gradient painting and 42 natural sapphires on the instrument panel, which gotten a lot of attention from our customers. We also began the production of the one-off Evija Fittipaldi model to celebrate race legend Emerson Fittipaldi's 50 years of achievement, and hope to reconnect the F1 passion with tens of millions of fans across the world. Next slide, please. Coming to our guidance, we revised our FY 2024 full year guidance delivery target to 12,000 units to reflect the latest assessments of the market conditions and trade uncertainties posed by the new tariffs in the U.S. and the EU region.
Our latest target pointed to more than 70% year-over-year growth, making Lotus potentially the fastest growing heritage luxury car brand in the market. We aim for 3,000-4,000 units of quarterly deliveries in the second half of this year, a step up versus the 2,200 and the 2,700 units achieved for first quarter and second quarter, respectively. This said, the company will keep price discipline to protect our brand equity value and desirability. More importantly, the resale value of our past and present models, and to ensure quality customer experiences. We are also in the process of recalibrating our product strategy to explore ways for faster and easier go-to-market globally, which we will share more details later. To your left, our recent updates on our model delivery.
Most notable is the up-and-coming delivery to the GCC region, which used to be one of the most popular destination, given our F1 heritage and racing DNA. Our customers from key markets such as Korea and Japan, should also receive their electric SUV model in the quarter this year, while others can make reservations for the Emeya GT sedan model. Next slide, please. Management team initiated on the Win26 plan, which targets positive operating cash flow and EBITDA in 2026. The plan includes more than 30,000 units of annual deliveries in 2026, with more than 20% gross profit margin. In order to achieve this target of better profitability and stronger balance sheets, the company will not only adopt price discipline, but also increase blended ASPs through mix of more limited edition models and bespoke services.
Given the maturity of our ADAS, our AI, our SaaS business, our Lotus Robotics subsidiary will undertake more high-margin IP licensing and R&D services. Given the number of OEMs we partner and their model launch plan, the number of cars equipped with our ADAS are expected to more than double every year. As the car pool expands, the higher take-up rate of paid subscription for our ADAS means potentially more income for the company. Coming back to the operations side, streamlining for better efficiencies will support our cost measures, especially through waste reduction, to generate profitability. Achieving our Win26 is the base case for the company and the management to deliver our commitments, such as dividend payouts to our shareholders and investors. Next slide, please. Coming back to our product pipeline, it's important to flag that four models are currently available.
Two more models will be launched in twenty twenty-five and twenty twenty-six respectively. These models will begin delivery in twenty twenty-six and twenty twenty-seven respectively, from PRC to U.K., EU to rest of the world, then followed by the U.S. The plan is to work with our global retail network for our customers to test drive after the launch and to make reservations for future deliveries. To your right is the progressive volume expansion, of which the yellow highlight marks 100% availability. Both models of sports car, Evija and the Emira, are available in 100% of the markets today. Only 80% of the markets will be able to receive their electric SUV deliveries this year, while 50% of the markets will receive their Emeya GT sedan deliveries this year.
That said, 100% of the markets will receive the electric SUV model by 2025, and 100% will receive the Emeya GT sedan model by 2026, instrumental to our achievements of the Win26 plan. The two new models will start to contribute in FY 2026 revenue, but they will be major contributors to the company's profitability and growth towards our 80th anniversary in 2028. Next slide, please. Vision80 starts from 2018 till 2028, and by then, management's view is for 4% market share in the luxury segment, which is priced above $80,000 per unit. This is done through product lineup expansion from previously a niche sports car segment player, to the full range of SUV GT sedan models.
Revenue profile will expand from just traditional car sales, new and used options, aftermarket, to new high revenue, high-margin revenue streams such as technology, IP licensing, ADAS solutions, Chapman Bespoke customizations, charging services, and potentially in-car purchases through our operating system, OS. The company aim for 30% gross margin and targets more than 10% EBITDA margin. Management team is committed to the growth and plan to deliver cash and profits to our shareholders. Thank you for staying with me, and we appreciate your attendance today. We look to deliver our cars to Lotus drivers and dividends to our shareholders. I'll pass it over to Demi to host the QA session. Thank you.
Demi Zhang (Head of Investor Relations)
Thank you, Alexious. Operator, we're ready for QA.
Operator (participant)
Thank you, management. At this time, as a reminder to ask a question, please press star, one, one and wait for your name to be announced. Please stand by while questions are being collected. Your first question comes from the line of Edison Yu of Deutsche Bank. Please go ahead.
Edison Yu (Director)
Hi. Thank you for taking our questions. Have quite a few. Wanted to start on the guidance, the volume guidance. How much would you say of the reduction is related to tariffs, and how much is related to other factors?
Qingfeng Feng (CEO)
[Foreign language]
Hello, it's from the CEO of Lotus who would answer this question. Based on the original plan, the U.S. sales is 100% related to the tariff hikes of the U.S. market, and for the E.U. market, about 30% of our sales is related to the tariff hikes.
Because of the tariff policies from the U.S. market, it dramatically, dramatically affects our sales forecast. We are now planning to have a repositioning of our product in the U.S. market. Next month, in September, we are planning on launch of our Eletre in the U.S. market. For such a launch, the product will have a slight contribute to 2024 sales, and more of the contribution will come in 2025.
[Foreign Language]
After the launch event in September in the U.S., Eletre will enter the U.S. market at the end of this year, or roughly at the end of December, and the product will contribute our 2025 performance mainly.
[Foreign language]
For Europe, we are also contemplating to relaunch or reposition our product in quarter four.
[Foreign language]
Specifically in Europe, we are thinking about to plan to launch different variants in this particular market.
[Foreign language]
Besides that, there were also other elements affecting luxury premium vehicle segment. For example, in China, in the luxury vehicle segment, it has been affected by 50% downwards. But for Lotus, we maintained our growth momentum.
[Foreign language]
However, it does not necessarily mean that it tallied our expectation.
Yeah, thank you. Thank you for the-
Edison Yu (Director)
All right, sorry, keep going. So follow up to that, I noticed in the press release, you know, the company mentioned that the average selling price still is above $100,000. But can you just remind us the sort of accounting behind that? Because obviously if you just take the automotive revenue and divide it by the units, it's not over $100,000. So can you just run us through the mechanics behind the ASP again?
Qingfeng Feng (CEO)
[Foreign language]
Alexious Lee (CFO)
Yeah, thank you. So, this is on accounting side, because on the U.S. side, all the Emira is actually accountable with our, the gross margin rather than the full ASP of the cost. So as we said that we want to make sure the market is clear, that the company is protecting the price integrity and not involve itself with, discounting measures to the market. That would be detrimental to the brand equity value and the broader resale, resellability of the market. Yes. But from accounting side, yes, we do not, we treat it in a way whereby the U.S. sales is only on the margin side rather than is the full car sales revenue.
Edison Yu (Director)
Gotcha. On the service revenue, I know it had gone down a bit sequentially, quarter-over-quarter. How do we think about the service revenue for the rest of this year? And I think you had mentioned that longer term, it should be what, $30 million-$50 million from ADAS?
[Foreign language]
Qingfeng Feng (CEO)
[Foreign language]
Because currently in the luxury premium EV segment particularly, we are facing or encountering headwinds, so we have to find the second or the third channel to help us to boost their revenues.
[Foreign language]
For example, we have launched our Chapman Bespoke services and the different models to the China market first, like Emeya Blossom Enchantment and also our Evija Fittipaldi version. They have been a draw of interest from customers from China, APAC and the U.S., and currently we are planning to cover those three markets first.
[Foreign language]
During the Eletre launch event in the U.S., we are currently planning. We will also in parallel launch our bespoke service there.
[Foreign language]
Although such, models or variants or a bespoke service want to give us a huge boost in sales volume, it will give us a strong momentum when it comes to gross margin.
[Foreign language]
Another revenue stream I want to elaborate on is our ADAS or intelligent driving services. As we all know that Lotus Engineering had a long experience of offering services globally, and they have a great caliber in chassis tuning and lightweighting. And currently we are developing another revenue stream through intelligent driving solutions.
[Foreign language]
By the end of this year, we project the revenue from this stream is roughly around CNY 400 million, and it is a business that can give us a greater gross margin.
[Foreign language]
In China, we all know that in this particular area there are fierce competition. For Lotus, we are unique as we can offer this solution globally.
[Foreign language]
Our solution can not only cover China market, but also Europe, Middle East, and APAC, and we have already gained a lot of interests from other OEMs.
[Foreign language]
Besides offering intelligent driving services internally within Geely Holding Group, such as Farizon Commercial Vehicle and also Lynk & Co Z10 vehicle, we are also offering services to non-Geely brands in EU, particularly.
[Foreign language]
Currently, we have already acquired nomination of three models from one of renowned OEMs in Europe, and there are four models by applying these intelligent driving solutions ongoing.
[Foreign language]
I believe this is the unique edges for Lotus. We can offer one intelligent driving solutions to cover global markets.
[Foreign language]
This year, again, as I previously mentioned, we project CNY 400 million revenue. Next year and the year after next year, we believe the revenue will keep growing, and this is another important revenue channel that we are currently exploring.
[Foreign language]
And we will disclose more information regarding the nomination or the collaboration with the particular OEM from Europe.
[Foreign language]
For our intelligent driving solutions, we believe we are very competitive in three markets, including the U.S., Europe, and Japan. And those are three markets will be our current focus, and we will keep explore any potential opportunities with OEMs though in those three markets.
[Foreign language]
At this moment, we are carrying out test driving and riding experiences of our intelligent driving solutions in Frankfurt. A lot of OEMs actually have participated, including Hyundai, Mercedes-Benz, Aston Martin, and Volvo.
[Foreign language]
More OEMs will join this 15-day test driving and test riding experiences.
[Foreign language]
In summary, non-China market will give Lotus and its intelligent driving solutions edges.
[Foreign language]
And those two are extra revenue streams I'd like to share with you. Thank you.
Edison Yu (Director)
...That's a great and very comprehensive overview. Quick follow up on that specific point. How we thinking about the economics? Is it unit based? Is it licensing? How does the $400 million relate to the number of cars those customers would sell?
Qingfeng Feng (CEO)
[Foreign language]
[Foreign language]
[Foreign language]
In summary, it will be 50% of development cost payments, and also 50% through per vehicle licensing costs. To take a Z10 model from Lynk & Co as an example, we have already started to collect the development cost, and we have already provide the support of intelligent driving solutions to freeways in China. And by the end of this year, we are going to cover more cities to about 100 cities and offer NOA capabilities on the vehicle. So development payment and also licensing payment per vehicle would be our common proposal to all OEMs.
[Foreign language]
Edison Yu (Director)
[Foreign language]
Qingfeng Feng (CEO)
[Foreign language]
Edison Yu (Director)
[Foreign language]
And for different, we will also be flexible with our strategies for Z10. In the future, they may have a lot of sales volume, so when it comes to development, cost or development payment, it is relatively less compared with the licensing per vehicle. And for commercial vehicles, the development, payment or the quotation is relatively higher compared with the licensing per vehicle cost.
Qingfeng Feng (CEO)
[Foreign language]
Currently within Geely Holding Group, besides the Z10 that I previously mentioned, we have also acquired the nomination for other three models and also one extra potential nomination or collaborative opportunities with a new brand called Galaxy under Geely Holding Group.
[Foreign language]
But for sure, we are not so solely relying on Geely business. Well, our target is that by 2027, the revenue brought by intelligence driving will, from non Geely side, account for 70%.
Edison Yu (Director)
Yeah, thank you.
Operator (participant)
Thank you for the questions. Our next question comes from Lin Zhou from UE Capital. Please ask your question.
Ling Zhou (Equity Research Analyst)
[Foreign language]
Qingfeng Feng (CEO)
[Foreign language]
[Foreign language]
So, the question is for those intelligent driving solutions that we offered for Lotus and also other OEMs. Is there any differences? And Mr. Feng answer is that, the software is actually the same, based on the one same model. The difference is on the hardware. But we let the intelligent driving hardware be adaptive to different OEMs. For example, for Lotus ourselves, we are leveraging two Orin chips and four lidar, and for our solutions to Z10, we are using one Orin chip and one lidar. So we have three different levels of solutions from high, medium to low, and based on those solutions, they can be adaptive to Orin-X, Y, and N. In addition to that, we have also come up with the solutions that can be adaptive to Qualcomm solutions.
Ling Zhou (Equity Research Analyst)
[Foreign language]
Qingfeng Feng (CEO)
[Foreign language]
The question is, for Lotus owners or customers, what's the demand and how is the take rate for ADAS function or intelligence driving, solutions? Mr. Feng says that for our Lotus owners, they actually use this function quite a lot. In our Lotus App, there's a dedicated session to show the take rate or the use frequency of this particular function, and we have also received a positive feedback from our customers.
[Foreign language]
I can elaborate with a specific number for ADAS ranking currently on our Lotus App that you can categorize based on the range of ADAS and also based on the monthly data. Currently, what I can see on this app is that there's intelligent driving solutions used by one of our customers with no human interruptions for 533 kilometers. In other words, you charge the vehicle once, and you don't have to interrupt it, and the vehicle run by itself for 533 kilometers.
Alexious Lee (CFO)
I'll just add a little translation on that. Actually, what Mr. Feng mentioned was the non-intervention mileage maximum was 533 km. Yes, for one of the customers, 533 km.
Qingfeng Feng (CEO)
[Foreign language]
Alexious Lee (CFO)
Yes。
Qingfeng Feng (CEO)
[Foreign language]。
Alexious Lee (CFO)
L3 non-intervention distance.
Qingfeng Feng (CEO)
[Foreign language]
We believe that such a performance will be the benchmark, whether in China and other markets.
Ling Zhou (Equity Research Analyst)
[Foreign language]
Qingfeng Feng (CEO)
[Foreign language]
Alexious Lee (CFO)
[Foreign language]
Qingfeng Feng (CEO)
[Foreign language]
The question is, from the previous presentation, we know that Lotus projection of ADAS revenue this year is roughly CNY 400 million. What's the long-term vision for gross margin and its revenue? And Mr. Feng answers that, "In the future, the gross margin is expected at 60%.
Ling Zhou (Equity Research Analyst)
[Foreign language]
Qingfeng Feng (CEO)
[Foreign language]
Operator (participant)
Thank you for the questions. One moment for the next question. Next question comes from Royce Young from Morgan Stanley Investment Management China. Please go ahead.
Royce Young (Analyst)
Hi, thank you for taking my question, and congrats on all successful delivering this year. But my question is about stock trading. I have noticed that trading volume had been relatively low ever since the company's listing. And I was wondering if there's any actions gonna be taken regarding this liquidity issue? And what are the capital needs to fix this problem regarding this liquidity issue? Yeah, that's my only question. Thank you.
Alexious Lee (CFO)
OK, thank you, this is CFO Alexious Lee. I think, you mentioned it right, trading turnover or liquidity for the stock is actually very low. Given that the unlocking of the restricted shares actually happened only 23rd of August, which is about just last week or this, probably yeah. So after in which we'll start to be able to see investors other trading activities broadening. Now on one end, there is on a timeline basis. On the other hand, we have very rigid IR plan to go to market. We also work with various institutions in terms of our coverage and also communicate, having more deployment into the retail market. So I think those are fundamentally some of the actions that we are actually working on in terms of moving up our liquidity, broadening our coverage, and also assessing the capital market, yeah, with our institutional investors and both retail and institutional investors.
Operator (participant)
Thank you for the question.
Royce Young (Analyst)
Ok thank you, I'm looking forward for the improvements. Thank you.
Operator (participant)
Thank you very much. One moment for the next question. Our next question comes from Mengyang Ling from Shenzhen Yiku Asset Management Company. Please go ahead.
Mengyang Ling (Analyst)
[Foreign language]
Qingfeng Feng (CEO)
[Foreign language]..
[Foreign language]
The question is,
Mengyang Ling (Analyst)
[Foreign language]
We can see that the gross margin for 2026 is relatively high, and how Lotus are going to deliver this target? And also is for Lotus as a premium luxury brand, we are not going to or we will secure the price integrity. For example, for Emira, currently the demand is much bigger than the supply, so we have a plan to increase the price. In addition to that, we are also controlling the cost. For the BOM cost of our Lotus, this year is expected to reduce 8%. In addition to that, we are also managing other costs from other areas. Besides, we have also proposed a Win26 plan. During in this plan, we projected to deliver 30,000 vehicle sales in that year, and it will give us more revenue.
Qingfeng Feng (CEO)
[Foreign language]
Mengyang Ling (Analyst)
[Foreign language]
Qingfeng Feng (CEO)
[Foreign language] Please，please。
Mengyang Ling (Analyst)
[Foreign language]
Alexious Lee (CFO)
[Foreign language]
Qingfeng Feng (CEO)
[Foreign language]
Mengyang Ling (Analyst)
[Foreign language]
Alexious Lee (CFO)
So sorry, yes, for gross profit margin, we definitely will want to be able to...
[Foreign language]
The question is, for this year and the next year, what's the target of gross margin?
And the answer is that this year we have been affected by many elements, and we are going to deliver our target of product and also price increase. And gradually, we will deliver the gross margin of 20% in 2026.
Mengyang Ling (Analyst)
[Foreign language]
Alexious Lee (CFO)
Thank you。
Operator (participant)
Thank you for the questions. One moment for the next question. The next question comes from Yitong Huang, please ask your question.
[Foreign language]
Qingfeng Feng (CEO)
[Foreign language]
[Foreign language]
The question is, in 2024, how Lotus improve its, cost management and also its, cost structure? And the answer is that in 2023 and 2024, basically, the costs have already peaked and we have already launched four models supported by the platform and technology that we have previously developed. And we will continue to invest in technological development, but the cost is relatively less. In addition to that, in the plan of the Win26, we proposed the idea of a small but effective organization. In other words, the company organizational structure would be less, relatively streamlined and people would be less, relatively less. However, the most important thing is to deliver great quality products and provide, excellent customer experiences, so that we can secure the price integrity. For our staff and employee, at this moment, it is relatively at a stable, balanced status.
It is less than 2,000 people, but they can support when it comes to commercial, R&D and other necessary departments. This is how we keep the cost at an acceptable status. So for a company, the most important thing is to explore more revenue streams, which I previously elaborated. And another approach is to reduce the cost.
Alexious Lee (CFO)
[Foreign language]
Alexious says that, for Lotus, we are operating with an asset-light mode. We don't own any factory, and for the commercial side, only China is operating with the D2C mode. For our non-China markets, they are operating with the dealers with the great experiences in the past. For a company, the most important thing is how to keep a streamline, how to keep lean and light, and how to leverage the existing talent to support our achievements and promise in 2026, so the most important thing is not to, is not about redundancy process. The most important thing is how to establish a good team that can help us to deliver Win26 plan.
[Foreign language]
Qingfeng Feng (CEO)
[Foreign language]
Question is, Mr. Yitong mentioned about revenue expansion and the SaaS cost, and Lotus has also mentioned about targeted to deliver 30,000 vehicles and to achieve positive EBITDA, and how Lotus could deliver that target? Answer or response is that we have a robust product plan besides two revenue streams that I previously mentioned, bespoke service and also ADAS solutions. In 2024, we are also planning to launch a new vehicle model, and this model will go into the market in Q1 2026, and this model is going to be the major volume boost for us in 2026.
[Foreign language]
In 2026, we will have a strong and comprehensive retail channels, unlike when we launched the first and second models years ago, which we didn't have a mature retail channels. So when we launch this new model in 2025 and 2026, it will give us immediate return.
[Foreign language]
Although this vehicle won't be launched until 2025, the technology of this vehicle will be released in quarter four. So stay tuned to Guangzhou Auto Show.
[Foreign language]
Thank you.
Operator (participant)
Thank you for the questions. With that, I would like to hand the call back to management for closing.
Demi Zhang (Head of Investor Relations)
Thank you everyone for your questions and thank you, management. Given the time constraint, we'll conclude the call very soon. If you have any further questions, please feel free to contact our IT team. This concludes the call. Thank you, everyone, and have a great day.
Alexious Lee (CFO)
Thank you.
Qingfeng Feng (CEO)
Thank you.