Lotus Technology - Earnings Call - Q3 2025
November 24, 2025
Transcript
Operator (participant)
Good day, and thank you for standing by. Welcome to Lotus Technology Q3 2025 earnings conference call. At this time, all participants are in 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 one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Ms. Michelle Ma, Head of Investor Relations. Please go ahead.
Michelle Ma (Head of Investor Relations)
Thank you, Amber. Welcome to Lotus Tech's Q3 2025 earnings call. My name is Michelle Ma, the Head of Investor Relations here at Lotus Tech. With me today are CEO Mr. Qingfeng Feng and CFO Dr. Daxue Wang. Our conference call materials were issued today and are available on our Investor Relations website. We are also broadcasting this call via webcast. Before we continue, please be reminded that today's discussion will contain forward-looking statements referring 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 statements except as required under applicable law.
Please also note that our earnings press release and this conference call will include disclosure of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. You can also find a reconciliation of these figures in the press release available on our Investor Relations website at ir.group-lotus.com. With that, I'm delighted to turn the call over to our CFO, Dr. Wang. Please.
Daxue Wang (CFO)
Good morning. Good afternoon, and good evening, honored shareholders, analysts, and friends from the media. Thank you for joining us for Lotus's Q3 2025 earnings release. I'm Daxue Wang, Chief Financial Officer for Lotus, and it's my privilege once again to present the company's audited financial results. In the third quarter, the company delivered nearly 1,800 vehicles to distributors. This represents a 35% decrease year-on-year, but a 28% increase quarter-on-quarter. As a result, total delivery of the first nine months of the year reached 4,612 units, down 40% compared to the same period last year. These figures reflect a transitional period characterized by the impact of tariffs, gradual destocking activities, and the phased commencement of the gradually upgraded module deliveries. Revenue for the third quarter was $137 million, down 46% year-on-year, but up 10% sequentially. Revenues for the first nine months totaled $356 million, down 45% year-on-year.
Gross margin improved 8% in the third quarter, up 3 percentage points from the previous quarter and 5 percentage points from the same period last year. This improvement was driven by a favorable shift in our sales mix towards upgraded models, reflecting healthy inventory dynamics and a continued recovery in our underlying profitability. The gross margin for the first nine months remained stable compared to the same period in 2024, safely in a positive territory. Now, allow me to break down our sales by category and regions. By category, lifestyle vehicles accounted for 77% of the total deliveries in Q3, down from 83% in Q2. Consequently, they contributed 72% of the total deliveries for the first nine months of the year. In terms of regions, deliveries in the U.S. sports car market began a gradual recovery in the third quarter.
This improvement came after the initial U.S.-U.K. tariff disruptions were resolved, with U.K. vehicles ultimately securing a favorable tariff rate of 10%. Overall, deliveries in the first nine months of 2025 were primarily driven by China and Europe. It's worth noting that our delivery growth in China for the first nine months outpaced the broader premium auto segment in the country. This underscores the competitive strength of our product portfolio in an increasingly challenging environment. Now, let me turn to the key financials. As I have already covered, deliveries, revenue, and gross margin are perceived through other financial metrics. The cost of revenue decreased by 35% year-on-year to $126 million in Q3 and a total of $327 million for the first nine months of 2025. This resulted in a gross profit of $11 million for the quarter and $29 million for the first nine months.
We reported an operating loss of $95 million in the third quarter, a 41% improvement year-on-year. The net loss for the quarter was $65 million, a 68% improvement year-on-year. For the first nine months, the operating loss was $357 million, narrowing by 40% year-on-year, while the net loss narrowed to $378 million, down 43% year-on-year. At four-year reference, on a non-GAAP adjusted basis, the net loss for the first nine months was $2 million lower, primarily due to the impact of the share-based compensations. Adjusted EBITDA under the non-GAAP for the same period narrowed by 48% year-on-year to $294 million. Beyond these numbers, I would like to reiterate that we have now reduced operating expenses for eight consecutive quarters through value-added measures. This underscores our strong commitment to enhancing operational efficiency.
Our efforts in cost discipline and inventory optimization are reflected in the significantly narrowed loss for both the quarter and the year to date. We remain focused on prudent resource allocation and margin enhancement while also preparing for a more dynamic operating environment in the quarters ahead. During the third quarter, we achieved several key milestones amid challenges posed by the fierce market competition. We will be unveiling our new PHEV model in the coming months to further expand our electrification product roadmap and address consumer demand in diversified powertrain segments. Our CEO, Ms. Feng, will elaborate further on these developments. With that, I will now turn the floor over to Ms. Feng. Thank you.
Qingfeng Feng (CEO)
[Foreign language]
Good morning, good afternoon, everyone. I'm Feng Qingfeng, CEO of Lotus Tech. Thank you for joining the Lotus Tech Q3 2025 earnings call. Now I'd like to walk you through the company's latest progress across four key areas: recent highlights, market strategy, product portfolio, and the acquisition of Lotus UK.
[Foreign language]
For Lotus, with a 77-year track DNA, it is important to keep enhancing its global image. On September 5, Lotus made a strong appearance at IAA Mobility 2025 in Germany, showcasing the concept car Series One, Electric Emeya, and Himera, demonstrating a seamless blend of brand legacy, cutting-edge technology, and electric strategy.
[Foreign language]
To carry over Lotus' racing track DNA, the 2025 Lotus Cup One Lake Racing Series kicked off in June, featuring an international lineup of drivers. The third round concluded successfully in Chengdu, with the season finale set to take place in Sepang International Circuit in Malaysia this month.
[Foreign language]
On September 14, during the London Design Festival, Lotus served as the official automotive partner and opened an immersive exhibition at her Mayfair showroom, exploring the design DNA of the brand and received positive feedback from the public.
[Foreign language]
On November 16, driver Lu Wenlong and Liu Kai Shun, pilots of the Himera GT4, took name, the first and third place in the Macau Grand Prix Great Bay Area GT Cup. This marks back-to-back podiums for the Himera GT4, following its first and second place finish in the same event in 2023. The Macau Circuit, known for its long straights and tight twisting corners, is regarded as one of the most challenging street circuits. This double podium not only highlights the driver's exceptional skill but also underscores the outstanding performance and reliability of the Himera GT4. It strengthens customers' trust and enthusiasm of our sports car, and also it carries over Lotus' racing track DNA.
[Foreign language]
For market strategy, Lotus continues to optimize our global presence and enhance our retail efficiency. As of the end of September, we had 213 retail stores worldwide, with a well-balanced distribution across four key regions. Europe, we had 70 shops, China 54, North America 49, and other markets 40. Those cover roughly 40-45 markets globally.
[Foreign language]
Besides the retail channel efficiency improvement, we've also explored other measures to reduce our costs and improve our efficiency. For example, we've implemented prudent cost-to-country measures and optimized our store portfolio. This includes relocating high-cost stores, closing underperforming locations, and expanding high-efficiency outlets. It helped boost our conversion rate while reducing operating costs.
[Foreign language]
In addition to that, we've also relocated our European headquarters from the Netherlands back to the U.K., cutting operational expenses and allowing us to focus resources on key markets. Returning to Lotus' birthplace also helped us better tell the brand story and strengthen our reach across Europe and beyond. Such measures further improve our overall efficiency.
[Foreign language]
We are also preparing to enter new markets, starting with Brazil. Brazil is the seventh automotive sales country in 2024. The total sales is roughly around 2 million, with a new energy vehicle penetration rate around 8%. In the first nine months of this year, the total sales reached 1.44 million units, with a penetration rate of new energy vehicle increased to 10.1%.
[Foreign language]
As for our product portfolio, two years ago we had already planned on that. Actually, we've already launched our hybrid technology, and we believe all of you will soon see the fruits. For Lotus, we currently offer two models globally, including Himera Electric and Emeya, all of which were updated in 2025. The new version has all been well received, with a share of total sales continuing to grow.
[Foreign language]
We plan to introduce two additional hybrid models based on our new architecture. The first hybrid model is set to launch in China in quarter one next year, with a dedicated technology preview event in January. A European release will follow.
[Foreign language]
The new hybrid also carried over and inherited Lotus DNA in the following areas. The first is its ultimate handling. Thanks to Lotus' tune engineering, it is also equipped with a dual-chamber air suspension and a standard 48-volt active stabilizer. It can be capable of a long range and also high performance. It is enabled by the latest architecture, delivering over 1,000 km of range and 952 horsepower. It also inherited the inspired design, featuring the sensational width to height proportion of our [audio distortion], staying true to Lotus' design DNA.
[Foreign langauge]
The introduction of the hybrid models offers more choice for luxury vehicle buyers and will help us to expand into broader markets, including regions with slower EV adoption, such as Italy and Spain and Saudi Arabia. It will also help us to attract new customer segments.
[Foreign language]
For the acquisition of Lotus UK, we are now making steady progress on the merger of the acquisition of Lotus UK, which we expect to complete in 2026.
[Foreign language]
After the acquisition, we are going to operate under our One Lotus strategy. We plan to maintain a consistent global identity as a high-performance premium luxury brand to strengthen worldwide recognition and maximize our heritage.
[Foreign language]
We are also streamlining reporting lines to enable faster, clearer decision-making. A globally aligned governance model, global standards with regional adaptation, it will improve oversight and support medium to long-term strategy execution.
[Foreign language]
For our business integration, we are driving synergy across key areas. On R&D, we consolidate global engineering under one team to improve efficiency, share technology, and accelerate new vehicle development. On purchasing, we leverage shared sourcing to reduce costs across lifestyle vehicles and sports cars. On logistics, we will optimize warehousing and parts distribution to further lower costs. We have also aligned channels and systems globally to eliminate duplication and boost brand value and operational effectiveness.
[Foreign language]
Thank you. We will now open the line for your questions.
Operator (participant)
Thank you. We will now begin the question-and-answer session. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one 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 away. We will now take our first question from Laura Lee from Deutsche Bank. Please go ahead, Laura.
Laura Lee (Analyst)
Hey, thank you for taking my question. Could you elaborate a little bit more about the key highlights of the upcoming PHEV models and maybe talk more about the strategic rationale behind those products?
Qingfeng Feng (CEO)
[Foreign language]
Thank you for your question. First, allow me to elaborate on the highlights or the features of our hybrid model. It features three firsts. It has the best energy-efficient engine and also the two best performance hybrid systems and also the highest power motor. Those three features demonstrate Lotus' DNA from both a handling and also performance perspective.
[Foreign language]
As for the details about how to further enhance its handling and performance, as well as the details of our hybrid architecture, please stay tuned to our tech preview event in January.
[Foreign language]
Also, we would like to elaborate on the strategic rationale behind our hybrid model, but first I'd like to start with the market. For China market, the premium vehicle market in China, including plug-in hybrids and extended ranges, makes up a large and rapidly growing segment. Among new energy vehicles priced above CNY 400,000, about 70% are plug-in or extended range models, and their growth is a major driver of the broader new energy vehicle expansion. The penetration rate of new energy vehicles in this price bracket has also risen quickly, reaching over 40% from January to September. Within that, plug-in and extended ranges accounted for more than 30%.
[Foreign language]
The competition in China's premium E-segment hybrid SUV is still relatively underdeveloped. The premium E-segment hybrid SUV means the price over CNY 500,000, and the development is relatively underdeveloped compared to the battery electric E-segment SUV space. Most current models also lean heavily toward business or off-road use. This creates a clear opening for Lotus to introduce our hybrid models.
[Foreign language]
In Europe, hybrid models represent a large, faster growing share of the auto market. As emission standards tighten, new energy vehicle adoption is accelerating in Europe, just as it is in China.
[Foreign language]
From January to September this year, NEVs, including battery electric vehicle, plug-in electric vehicle, and hybrid electric models, reached 59%-60% of the total market. Among those NEVs, PHEV and HEV together accounted for about 73%.
[Foreign language]
Notably, plug-in hybrids, the PHEV sales, have surged in Europe. As of September this year, PHEV sales have grown year over year for seven consecutive months, with EU-wide sales up 65% in September alone.
[Foreign language]
In the premium hybrid segment, Lotus will be the first one to introduce such a model in the EU. Last week, I visited the EU, and I heard the positive feedback from our dealers when they know about this hybrid model. In the successive phase, we are going to invite dealers and also medias to have an in-depth test of our new models.
[Foreign language]
Laura Lee (Analyst)
Okay. Appreciate the color. Yeah, looking forward to the launch.
Operator (participant)
Thank you. Our next question comes from Dan Lin from CICC. Please go ahead, Dan Lin.
Dan Lin (Analyst)
Hello. This is Dan Lin from CICC Auto team. Thanks for taking my call and congrats on your sequential improvements. I have one question about your gross margin. Do you have any guidance on your gross margin for this year and next year?
Daxue Wang (CFO)
Hi, Dan Lin. Thank you so much for your question. With the recovery of the vehicle gross margin in the second half of the year, our gross margin for the full year is expected to remain at a high single-digit range. Looking ahead, our gross margin is projected to further improve, primarily due to the following factors. First, the launch of the PHEV products, which is based on our loyal architecture, will further reduce the per-unit vehicle costs and achieve higher gross margins. Second, as the BEV facelifted products penetrate global markets, their sales are expected to increase, thereby boosting the gross margins. Third, the implementation of the put option with Lotus UK will further enhance efficiency. For instance, the manufacturing segment's gross profit will be consolidated into the listed companies.
The economies of scale resulting from the integration of the supply chain and research and development will contribute to higher gross margins. I think for the next year, we have confidence it's going to be higher than this year. Thank you so much.
Laura Lee (Analyst)
Thank you. That's all from me. Very clear. Thank you.
Operator (participant)
Thank you. I am showing no further questions at this time. With that, I'll now turn the conference back to Ms. Michelle Ma for her closing comments.
Michelle Ma (Head of Investor Relations)
Thank you all again for joining us today. We will conclude the call soon. The investor relations team remains available to answer any further query you have. Please feel free to contact us through the contact information on our website. Have a great day. Thank you.
Operator (participant)
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.