Lotus Technology Inc. American Depositary Shares Q3 FY2025 earnings call

• Financials: Third quarter revenue $137M, down 46% y-o-y but up 10% q-o-q; gross margin 8%, up 3 ppt from previous quarter and 5 ppt from same period last year. Operating loss in Q3 was $95M, a 41% improvement y-o-y; net loss $65M, a 68% improvement y-o-y. First nine months operating loss $370M, narrowing by 40% y-o-y; net loss $378M, down 43% y-o-y. - Market strategy: As of September, 213 retail stores worldwide with balanced distribution across regions. Implemented cost control measures like relocating high-cost stores, closing underperforming locations. Relocated European headquarters from The Netherlands back to The UK. Preparing to enter Brazil. - Product portfolio: Plan to introduce two additional hybrid models based on new architecture. First hybrid model to launch in China Q1 next year, with a technology preview event in January and European release. Features ultimate handling, long range, high performance, and inspired design. - Acquisition of Lotus UK: Making steady progress on merger/acquisition, expected to complete in 2026. After acquisition, operate under 'One Lotus' strategy, maintain global identity as high-performance premium luxury brand, streamline reporting lines, drive synergy in R&D, purchasing, logistics, and align channels and systems globally.

In the third quarter, the company delivered nearly 1,800 vehicles to distributors, a 35% year-on-year decrease but a 28% quarter-on-quarter increase. Total delivery for the first nine months of the year reached 4,612 units, down 40% compared to the same period last year. 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 to 8% in the third quarter, up three percentage points from the previous quarter and five percentage points from the same period last year. By category, lifestyle vehicles accounted for 77% of the total deliveries in Q3, down from 83% in Q2, contributing 72% of the total deliveries for the first nine months of the year. Deliveries in the first nine months of 2025 were primarily driven by China and Europe, with China's delivery growth outpacing the broader premium auto segment in the country.

• Full year gross margin expected to remain at a high single-digit range. - Next year gross margin projected to further improve due to factors like launch of PHEV products based on Luoyang architecture reducing per-unit vehicle costs and achieving higher gross margins, BEV fixed-lifted products penetrating global markets increasing sales and boosting gross margins, and implementation of put option with Lotus UK enhancing efficiency through consolidated manufacturing segment gross profit and supply chain and R&D integration contributing to higher gross margins.

• Forward-looking statements involve inherent risks and uncertainties, company's actual results may be materially different from views expressed today. Further information regarding risks and uncertainties is included in relevant filings with the US Securities and Exchange Commission.

Q: 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?

A: First, the hybrid model features three firsts: best energy-efficient engine, best performance high hybrid system, and highest power motor. Strategic rationale: In China, premium vehicle market including plug-in hybrids and extended ranges is large and growing, with competition in premium hybrid SUV segment underdeveloped. In Europe, hybrid models represent a large and growing share of the auto market, with plug-in hybrid sales surging, and Lotus will be the first to introduce such a model in the EU.

Q: Do you have any guidance on your gross margin for this year and next year?

A: 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, gross margin is projected to further improve, primarily due to the launch of the PHEV products, as BEV fixed-lifted products penetrate global markets, and the implementation of the put option with Lotus UK will further enhance efficiency.