Release Date: November 21, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Lotus Technology Inc (NASDAQ:LOT) delivered over 7,600 vehicles in the first nine months of 2024, with a significant year-over-year increase in deliveries.
• The company reported a 36% year-over-year increase in third-quarter sales revenue, reaching $255 million.
• Lotus Technology Inc (NASDAQ:LOT) has introduced a new high-margin revenue stream from its ADAS technology, contributing $11 million in the first nine months with a 450% year-over-year growth.
• The company has secured a $130 million contract for its intelligent driving business, expected to contribute to future revenue and gross profit margin expansion.
• Lotus Technology Inc (NASDAQ:LOT) is expanding its market presence with new models and technologies, including the launch of a 900-volt hyper hybrid EV technology, positioning itself as a leader in luxury electric vehicles.

Negative Points

• The gross profit margin for the first nine months was only 9%, a decline from 11% in the same period last year.
• Third-quarter gross profit margin dropped to 3%, primarily due to inventory management challenges and macroeconomic uncertainties.
• The company reported a net loss of $667 million for the first nine months, including share-based compensation expenses.
• Lotus Technology Inc (NASDAQ:LOT) faces challenges in achieving its annual sales target of 12,000 units, especially with the holiday season affecting major markets like Europe.
• Sales in the Chinese market have declined compared to the previous year, indicating challenges in maintaining growth in this key region.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with LOT.

Q: Could you provide more details on the $130 million contract value for intelligent driving solutions? When will these models be launched, and will there be any payments before the launch? A: The contract value is divided into two categories: NRE (Non-Recurring Engineering) and licenses. NRE is based on project milestones, from the KCO stage to the SOP stage, and full payment is received upon vehicle delivery. License revenue is calculated per vehicle. The first vehicle equipped with our solutions, the Lynk & Co V10, has launched with highway NOA capabilities. More models will follow, including commercial vehicles next year. (Answered by CEO Mr. Feng)

Q: Regarding the hybrid product to be delivered in 2026, will it be a new model or a PHEV version of current offerings? A: The PHEV technology will cover all future models, offering both EV and PHEV versions. Specific details about the 2026 model will be shared later. We aim to be the first luxury premium brand to launch this technology. (Answered by CEO Mr. Feng)

Q: The gross margin in Q3 was about 3%, a significant decline. What caused this, and what is the future trajectory for vehicle margins? A: We plan to launch our model year 26 products in Q1 next year in China and Q2 in Europe. Before this, we aim to reduce inventory levels to ensure a smooth transition to new models. Once inventory levels are healthy, gross margins should improve. (Answered by CEO Mr. Feng)

Q: Will operating expenses continue to decline in Q4, and what is the expectation for 2025? What are the major factors driving this decline? A: We have implemented a strategy to streamline operations, focusing on efficient, smaller shops and targeted R&D investments. We aim to leverage GLI resources for cost-effective technology development. Future expenses will focus on technology, product development, brand awareness, and market exploration. (Answered by CFO Alexis Z)

Q: Is the company confident in achieving the annual sales target of 12,000 units, and what are the drivers for boosting deliveries in the coming months? A: The 12,000 target is challenging but achievable. We see promising delivery progress in China and the UK and are accelerating deliveries in the EU. New markets like Japan and South Korea have also commenced deliveries. The launch of model year 26 products in Q1 next year will further drive sales. (Answered by CEO Mr. Feng)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.