Lotus Technology Q4 2024 Earnings Call Transcript

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April 22, 2025

There are 9 speakers on the call.

Operator

Thank you for standing by, and welcome to the Lotus Technology Inc. Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. I would now like to hand the conference over to Ms. Demi Zhang, Head of IR. Please go ahead.

Speaker 1

Thank you, Dorsey. Good morning, good afternoon and good evening, everyone. Thank you for joining LotusTech's fourth quarter and the full year twenty twenty four earnings call. This is Emmy Zhang, the Head of IR at LotusTech. I'm very honored to introduce company management with us today, CEO, Qing Feng Feng and CFO, Dashie Wang.

Speaker 1

On today's call, we'll start with prepared remarks from CFO and the CEO first and then kick off the Q and 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 and forward looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the views expressed today.

Speaker 1

So 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 non audited GAAP financial information as well as unaudited non GAAP financial measures.

Speaker 1

Please refer to our press release, which contains a reconciliation of non GAAP measures to comparable GAAP measures, which you can find at ir.groupmotus.com. With that, I'd like to turn the call over to our CFO, Mr. Wang, please.

Speaker 2

Thank you. Hello, distinguished shareholders, analysts and members of the press. Thank you very much for joining our Q4 and full year 2024 learning's release. My name is Ashu Wang, Chief Financial Officer of Lotus. I would like to take this opportunity to brief you the financial results of the company.

Speaker 2

In 2024, the company delivered over 12,000 vehicles, reflecting a year on year increase of over 70%. For the fourth quarter, over 4,500 vehicles were delivered, representing a 20% year on year increase. We consider this as a remarkable growth considering the global trade uncertainties and economic slowdown. As for the revenue, although the fourth quarter results was narrowed by 12% year on year to US272 million dollars the company gained an increase of 36% year on year increase to $924,000,000 the full year. Another achievement we want to highlight is we have achieved a reduction in operation expenses for five quarters in a row.

Speaker 2

The rigid execution of efficiency enhancement plans. Now, I would like to further break down our sales by category and by region. It turns out that the lifestyle vehicles increased by 57% year on year and accounted for 57% of the total deliveries as well. By region, Europe, the home of Lotus brand, continued to expand with a year on year increase of some 180% and contributed nearly 40% of the total deliveries. China, and the second largest market, Volotis, contributed one quarter of the total deliveries.

Speaker 2

North America, mainly The United States, should by 415% in 2024, making up 21% of the company's total deliveries. And the rest of the world regions represented 15% of the total with nearly 90% year on year growth. For your attention, in the fourth quarter, we started to deliver EMEA in Malaysia, Thailand, Singapore, UAE and Philippines. For the key financial indicators, deliveries and revenues are being reported. I will now repeat here.

Speaker 2

The cost of revenues increased to $395,000,000 and $3.00 $1,000,000 for the full year and for the fourth quarter respectively. As a result, the gross profit margin was lower to 3% for the full year and back to 11% for the fourth quarter. We reported an operating loss of $736,000,000 for the year and $189,000,000 for the fourth quarter. Net loss was accrued to $11.00 $7,000,000 for the full year and $441,000,000 for the fourth quarter. For your information, adjusted net loss adjusted under the non GAAP measures were not much too different.

Speaker 2

Then I'll first stop here and hand over the speaker to Mr. Feng.

Speaker 3

Hello, everyone. I'm CEO of LotusTech, Feng Qingtong. Allow me to share our key achievements in the year of 2024. Our performance overall is better than the broader luxury market. We have ranked the top among British luxury car brands with over 12,000 vehicles delivered in 2024, a 74% better compared with our performance in 2023.

Speaker 3

Currently, we have four models under delivery. We have one SUV, one sedan or rather GT, and two sports car, including a mirror and also Last year, we keep exploring our international footprint. We have entered into more than 10 countries in GCC region, Asia and Oceania. In addition to that, we have also been keeping cost reduction and also efficiency improvement, And we've been achieving operating expense reduction for five consecutive quarters. Besides, we have also launched our theory one concept car. This is a revolutionary concept car

Speaker 3

made with sustainable materials to redefine luxury, and we have gained wide recognition from our press friends. For this particular vehicle, it has defined our direction for our future models, particularly on its design language and also its sustainable principles. As for our progress on ESG, we were honoured as highly commenced at Ruta's Sustainability Awards twenty twenty four, leading the EV industry within Rooter's Vision 02/1945 campaign. Lotus was the winner of the 2024 EUCCC Sustainable Business Award and the Green App Award for Outstanding Environmental Practices. Our sustainable supply management case was also included in Shanghai Climate Week twenty twenty four Climate Tech In Focus report, and this report was also released at COVID-nineteen.

Speaker 3

As for our recent development in 2025, we have already delivered more than 12,000 vehicles in the first three months, and as for the cells at the end, we have already delivered more than 2,000. In the past, the LOTUS in China was called the English pronunciation of LOTUS, hence we have to use NYO as part of our logo. But in January 2025, we have successfully reclaimed the proprietary rights of LOTUS iconic logo, LOTUS wordmark and the Chinese character of Lotus Lianghua in China, ensuring consistency in terms of its trademark across the world. In addition to that, we have also made a model facelift for our ELETRA and EMEA. Specifically in February, we have refreshed the lineup of those two models with upgraded configuration and competitive pricing.

Speaker 3

In China, the vehicle has been delivered starting from February, and in quarter two, the delivery will also commence in EU and the rest of the world. Besides, we have also launched the MATLAB urban NOA navigation on autopilot in 16 cities across China in February. The system can effortlessly achieve lane changing seamless transition between highways and city roads use and factor intersections, intelligent lane selection, and smart obstacle avoidance. Starting in February, we have also started our OTA to push this function to our end customers. This is then can make our vehicle to be able to deliver door to door intelligent driving.

Speaker 3

Starting from quarter two, this function will be available in more than 100 cities in China through OTA. In March, Lotus Intelligent Driving Arm, Lotus Robotics, has also established a strategic partnership with Taosao Mobility to launch an innovative intelligent mobility platform for robotaxi. We have also started a pilot operation in the city of Hangzhou and the city of Suzhou. In addition to that, Lotus Technologies Natural Capital Assessment project was also included in World Economic Forum report, which demonstrated our ambition and also our progress in sustainable development, particularly among luxury vehicles. On 04/14/2025, we have received the exercise notice from Chile requiring Lotus Tech to purchase 61% of the equity interests in Lotus UK, according to the put option agreement dated 01/31/2023 between the parties.

Speaker 3

If we can exercise this put option, we will be able to operate on two factories, Hatho factory in The UK and Wuhan factory from China. Those two factories can cover four regions, Middle East, APAC, Europe, China and North America. As per the exercise of a put option from Geely, Lotus expects to acquire 50% of equity interest in Lotus UK through a non cash transaction based on pre agreed valuation methodology. Upon completion, Lotus will gain control over Lotus UK and consolidate its financial results. The strategic transaction will enable the company to integrate all global businesses under Lotus brand.

Speaker 3

Subject to potential regulatory approvals, the acquisition is expected to be completed in 2025 this year. As for our product pipeline, Evaya, this is our hypercar, it has a limited offering of 130 vehicles globally. We have already started the delivery of this hypercar. And moving on to our Emera sports car. The US market is the biggest market for Emera, and this vehicle has also been available for global other markets.

Speaker 3

This year, we are going to launch a model year '26 for EMERA. It will be dedicated to The US market and also meets the compliance requirements for other markets. In 2027, we are planning a major uplift for EMERA. It will have more horsepower. It will also be compliant to EU seven emission requirements.

Speaker 3

As for our lifestyle vehicles, Electra and EMEA, previously, I briefly mentioned about it that we have already commenced the delivery in China for model year '26, and the delivery for EU, UK, and the rest of the world will also start in quarter two. At the end of this year, in other words, at the end of twenty twenty five, we are planning to launch a PHEV. We would call it a hyper hybrid model. This model will start delivery first in China in quarter one next year. In 2027, we are also planning another new model.

Speaker 3

And by adding this new model together, we would be able to deliver our vision of a Vision 80 strategy. In other words, we will have six models in total. And that's all I'd like to share with you. Thank you.

Speaker 1

Well, thank you, and CFO. Darcy, we are ready for Q and A, please.

Operator

Thank you. Your first question comes from Kevin Kolelo from Tier one Systems. Please go ahead.

Speaker 4

Hey. Good morning, everyone. Thank you for taking my call. I'm calling as a Lotus investor, as someone who opened an exotic car dealership here in California about eleven years ago, and most of all as a car enthusiast. And basically, really my question is, is there any plan?

Speaker 4

It seems like you have a really amazing opportunity with the Emera to create something that would be highly in demand here in The U. S. Market, which would be something that's lighter weight than currently exists right now in the Emera, maybe adding carbon ceramic brakes, carbon bucket seats, some other things to remove a couple hundred pounds. And also increasing, the horsepower and red line on the v six, which is an amazing engine. It sounds great.

Speaker 4

If you look at Porsche, they really have kind of created the recipe that everyone else, I think, should follow. If you look at what the GT3s and the GT3 RSs sell for, mean, they're going for a hundred thousand over MSRP right now. They're almost impossible to get. I'd be curious to know, do you have any plans of creating just really like a hardcore, maybe an Emera R with a high revving V six manual transmission, lightweight? I think that would do amazingly well here in The US market.

Speaker 3

Thank you for your question. I think it's a brilliant suggestion and intact. US is the largest market of MIRROR. Almost 50% of MIRROR cells are all coming from The US, and particularly our Abasix model very much preferred by our US consumers. Well, we are very clear that our US consumers would prefer engine or model with a higher horsepower and higher RPM.

Speaker 3

As a matter of fact, we have another model available in The US market, the two point zero turbo model. It has also a relatively high horsepower. At the very beginning, we were quite concerned about our US consumers that they may only prefer the V six model instead of the two point zero turbo model. However, after our consumers testing drive the two point zero turbo model with also 400 horsepower, Our consumers have really liked it, particularly with its power consistent ACT transmission and a very fast response. As for V six, we, to be honest, do not have the plan to further increase its power because this engine will not be compliant for EU7 emission.

Speaker 3

However, we are investigating a new powertrain system, which is a V eight. It will have a bigger horsepower and we are currently investigating the feasibility of a V eight. And actually, this year in Europe, we have launched some limited edition with less weight like the suggestion that you mentioned that we put more carbon fiber materials on it. And we will consider to see if we are going to launch similar models in The US market. Thank you for your passion for Lotus.

Speaker 3

Also, thank you for your great suggestion.

Speaker 4

Thank you very much. Appreciate it.

Operator

Thank you. Your next question comes from Laura Lee from Deutsche Bank U. S. Please go ahead.

Speaker 5

Hey. Well, thank you for taking my question. So my first question is about the ADAS revenue. So what's this like contribution over the last year? And any update on the guidance?

Speaker 5

Any new design win you're working on? Yeah, that's my first question.

Speaker 1

Thank you, Laura. I will invite CFO to give your answer. Our first question is on the revenue guidance.

Speaker 2

So you mean for the 2025, right? Yes. Okay. So if you're like, we have data plan, which is going to be, you know, like we have improvements compared to the 2024. Let's say we are waiting for further approval from the board of directors.

Speaker 1

Thank you. And Laura's second question, I remember the question on the revenue on the RobomTX.

Speaker 2

Okay. So for the robotics, actually we achieved improvement compared to the one year before. And we gained not only the internally we got the revenue from the Lotus, we also gained some customers from the outside of the company and also outside from the GD Group. So overall, it achieved like $22,000,000 the customers outside the Lotus. So that's something like meanwhile, our gross profit margin, I think we have a pretty high margin compared to the sales of goods.

Speaker 2

I mean, we are going to be able to keep this number in this year. So that's basically the revenues from the robotics side.

Speaker 5

Okay. Okay. Got you. My second question is around like the margin trajectory, as you mentioned for this year and '26. Are there any like hard win or tail win on a year on year basis we should consider?

Speaker 5

And also thinking about the tariff situation, are there any like changes on production arrangements that you're considering?

Speaker 1

Yeah, thank you, Laura. Her first question is on the margin trajectory for this year and the next year. And also considering the tariff situation, is there any changes? Okay.

Speaker 2

So I think the margin is good. It might improve this year compared to last year. Last year, first there is a trade in uncertainties. And also like we have the stock so we're so we're facilitating, you know, the stock clearing plans, so which cost our profit margin, you know, to lower compared to the one year before. But this year, I think the first day they I mean, where the stock plan is going to be much is over and we no longer have this stock, you know, clearing requirements.

Speaker 2

I mean, well, we have a much better product cost structure. So that means probably the gross profit margin is going be much better So that's my expectation for the year 2025.

Speaker 1

Excuse me. Do you mind repeating your last question on the tariff? Sorry, your voice was very far away.

Speaker 5

Oh, yeah. Yeah, so the second part is around, like to the impact of tariffs and any like mitigation you're considering, like changes on production arrangement or this sort of solution.

Speaker 1

Thank you.

Speaker 3

Well, currently we have been affected by The US unbelievably high tariff, particularly for our lifestyle vehicle, which is produced in China. As our lifestyle vehicle have already stopped its export into The US market. However, our sports car, which is produced in The UK, has not been affected yet. We're still investigating the market and also we are still doing analysis.

Speaker 5

Okay. Got you. Yeah, that's helpful.

Speaker 1

Thank you, Laura.

Operator

Thank you. Your next question comes from Eunice Yang from MSIM China. Please go ahead.

Speaker 6

Hi, thank you for taking my question. I have two questions actually. First one is, what are the contributing factors behind the significant decline in gross profit in the fourth quarter of twenty twenty four? And how much did the intelligent driving and the bespoke service contribute to the service revenue and the gross profit in this fourth quarter?

Speaker 1

Thank you, Roy. I will invite CFO, Mr. Wang.

Speaker 2

Yeah. So basically the fourth quarter performance, as do tell, has some decline. It's because we clearly, you know, the stock. And meanwhile, like the I heard that this is from the tariff. I mean, while for the intelligent driving business, there's accounting rules exchange change because of the they changed the booking policy from the cash basis to the accrual basis in the fourth quarter.

Speaker 2

So this results in some adjustment, accounting adjustment in the figures. So you can tell from the for the fourth quarter of the sales, the revenues from the services, you can see the change. So basically, about starting from this year, we already under the new accounting policies. The gross margin is going to be recovered. And meanwhile, in the service sector, we're going to align the driving business with the industry benchmark.

Speaker 2

So thank you.

Speaker 3

Okay. Thank you. And also, I'd like to comment that in 2025, our gross margin is going to be greatly improved due to our launch of model year '26. As I previously elaborated, the model year '26 will be launched in Europe, including EU and UK in quarter two, and those are two markets that actually accounted for more than 40% of our total sales. So, by launching model year '26, it can help us to improve our gross margin.

Speaker 6

Okay, thank you. I have a second question is, what is the revenue and profit margin of the Intelligent Driving business in the past year 2024? And any guidance for this following year '20 '20 '5 and midterm revenue and profit margin for vehicles and or the comprehensive service respectively, what is the plan to improve the margin? Yeah, that's my final question. Thank you.

Speaker 2

Yeah. The benchmark margin for the intelligence driven business is about like 30%. So it's in line with the industry standard. So starting from this year, we are going to not only to improve the margin also, are going get more clients, more business from the market. So I think they are going to further lower the cost thereby increasing the profit margin.

Speaker 6

Okay. Thank you.

Speaker 1

Thank you, Roy.

Operator

Thank you. Your next question comes from Tom Lu from Capital Sunrise. Please go ahead.

Speaker 7

Thank you for taking my questions. Up to you. The first one is, what's the cash burn rate now and how long is the runway? Is there any significant financing we can expect in the next six months?

Speaker 2

Yeah. As you can tell from like our financial performance, we do have, you know, the gap in terms of the cash. And also, we are making the cash gap, you know, field through the operation, through the investment plan, through the financing. And we are being closely contacting the in the market. So please take a close look at our announcement and also the company release.

Speaker 2

Thank you so much.

Speaker 1

Tom, you have another question, Yes.

Speaker 7

My second question is about the management capabilities. So, we've noticed the recent management shifts. And would you mind to share the rationale behind? And what makes the current management team the right one to turn around a luxury company? Thank you.

Speaker 3

As far as recent management change, we do have welcomed a new CFO, Wang Da Xue. He had a rich experience in finance and also capital markets. In addition to that, also had a great performance in Geely. And another thing I'd like to comment is about the change of the head of sales in China. We have introduced a new China Sales President, Qing Pei Chi.

Speaker 3

He had also a rich experience in luxury products, particularly with Volvo. During his time with Volvo, helped the Volvo sales volume increase from 80,000 to 90,000 to more than 180,000 to 190,000 significant jumps. And overall, I just want to say that for our entire management team, we are we have a seasoned and also rich experience when it comes to luxury brand management. As for Ms. Mao Jin Guo, she previously had a really rich experience with Benz and also Lincoln, and now she is responsible for closest coordination of herself and operation and brand and marketing collaboration covering the regions such as The EU, US and APAC.

Speaker 3

The ultimate target is to ensure viral load is consistency. As for our Chief of Brand Officer or Chief of Creative Officer, Ben Payne, he remains at this position, and he created a lot of brilliant content for us and also the sensational concept to car if you rewind that I previously mentioned. He is also created by him. As far as our head of sales in The US, he was COO with Mr. Rasi, so he can bring us a lot of great experiences that he previously gained.

Speaker 3

Thank you.

Operator

Thank you. There are no further questions at this time. I'll now hand back to Ms. Zhang for closing remarks.

Speaker 1

Darcy, do you want to remind everybody how to raise their questions if there's any more? Yes. Sure. Have a couple of minutes left.

Operator

You. We have a question from George Tang from Elson Capital. Please go ahead.

Speaker 8

Hi, good morning. Thanks everybody for your time this morning. I have three quick questions for management. First question is can management kindly give a high level guidance on how the put option will impact the company's financials, you know, such as the balance sheet, cash flow, and p and l? It appears there's pretty high debt asset ratio of over 130% by end of twenty twenty four.

Speaker 8

How will the acquisition change that number? Thank you.

Speaker 1

Thank you, George. I will first invite CFO to give you some color on the question.

Speaker 2

So regarding the execution of the put option, whereas do you do the daily list? I'm talking with the with lot of UK. So I think we are going to release the results in the time if it's done. For funding you just mentioned, it's going to be a noncash deal. So it's not going to bring the cash to the company.

Speaker 2

And overall, I think the answer to your question, we can wait until we finish the investigation and then we get the deal done. So please take a closer look at our, you know, further notice. Thank you very much. Perfect.

Speaker 8

Thank you. And I I have another question perhaps. This this has been burning the back of many people's minds. But I was wondering what is Lotus' US strategy, market strategy, you know, given the current geopolitical tensions and terrorist situation. And having said that, what do you think will be your target sales for U.

Speaker 8

S. Market in this year? Thank you.

Speaker 1

Thanks, George. I will invite CEO to answer your question.

Speaker 3

Yes, in 2025, it is going to be tougher, but particularly we are affected by our lifestyle vehicle remaining affected by the tariff hike. As far as sports car, we were slightly affected, so we haven't actually changed our original plan for our sports car sales in The US. We expect about roughly 200 to 300 sales more because of the tariff in The US. Currently, we're also exploring our paths and the solutions for The US market and because The US market is the biggest market of luxury premium vehicle segment, in addition to that, Salotis also has relatively high brand awareness in The US market. So, definitely US market will be one of our priorities.

Speaker 3

In addition to that, we will also keep exploring our feasibility of exporting lifestyle vehicles to The US market. And at this moment, we will not be able to disclose any details, but please feel free to stay tuned to our future announcements. The only thing that I may add is that manufacturing in The US could be one of our potential solutions.

Operator

Thank you. Once again, if you wish to ask a question, please press 1 on your telephone and wait for your name to be announced. We'll now pause a moment to allow for any final questions to register. There are no further questions at this time.

Speaker 1

Yeah. Thank you, Darcy. Well, given the time constraint, I think we will conclude the call very soon. But everyone, thank you very much again for joining us today. If you have any further questions, please feel free to contact our IR team.

Speaker 1

And this concludes the call. Have a very good day, everyone, and thank you very much again. Bye.

Operator

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

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