Lotus Technology Inc. (LOT) Q2 2026 Earnings Call Transcript

Good day and thank you for standing by. Welcome to the Lotus Technology First Half 2026 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 will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Ms. Michelle Ma, Head of Investor Relations. Please go ahead.

Thank you, operator, and welcome to Lotus Tech's first half of 2026 earning call. My name is Michelle Ma, the Head of Investor Relations here at Lotus. With me today are the CEO, Mr. Qin Songfeng, and the CFO, Dr. Da Ji 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. First went to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Four looking statements involve inherent risks and uncertainties. As such, the company's actual future results may be materially different from the views expressed today. For the information regarding risk present uncertainties, it is included in noted text relevant following 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 find a reconsolation 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.

Thank you, Michelle. Good morning, good day, and good evening. Distinguished shareholders, analysts, and media friends, thank you for joining our first half 2026 earnings release. Again, this is Dachi Wang, the chief financial officer of Lotus. I'm excited to brief you the audited financial results of the company. In the first half of 2026, the company delivered 3,904 units, representing a 39% year-over-year increase of performing the reference traditional premium and luxury segments. This solid delivery performance reflects the company's growing market presence and competitiveness producing in the high-end automotive sectors. Strong delivery growth directly draws revenues up 23% year over year to $268 million for the first half of 2026, with a strong momentum in the China market. Average selling price dropped slightly by 3% year-over-year, attributable to an increased sales mix of the lower-priced ElectraX. Gross profit rose 47% year-over-year to $26 million, while gross margin expanded 1.6% to 10%. This improvement was supported by a favorable product mix following the successful launch of Electro-X, the first-ever PHEV in its 78-year history, marking the early validation of our multi-power trade strategy. To maintain our discipline cost management trajectory, the operating loss narrowed 63% year-over-year to 97 million US dollars in the first half of 2026. This improvement stems from rigorous financial management, better operating leverage, and a one-off license fee refund linked to the product pipeline adjustments. Excluding these one-off items, the operating loss narrows 26% year-over-year to $195 million US dollars, demonstrated the company's ongoing focus on driving operational efficiency and upholding the strict financial discipline. And in May 2026, we unveiled our Focus 2030 strategy, which Ms. Fung will address in his remarks. These improved financial outcomes serve as a tangible proof of our progress against core pillars of Focus 2030, namely our multi-power training strategy and commitment to financial discipline, which are translating into measurable operational and financial advancement. In the first half of 2026, lifestyle vehicles deliveries made up 77% of companies' total vehicle deliveries for the period, driven largely by the successful market introduction of the Electro-X in China. China market deliveries grow 60% year-over-year, keeping China as the company's largest market and accounting for 58% of total deliveries during the period. Deliveries outside China rose 17.4% year-over-year, including 45% growth across the Americas, and 164% growth in ROW. European delivers 5 or 70% year-over-year amid intensifying competition in the luxury BEV segment. In Europe, we will continue to refine inventory management, enhance product value, and enforce pricing discipline to protect residual values and rebuild momentum. Electrolux opened for orders across mainland Europe on June 3, with customer deliveries commencing in the fourth quarter. UK launches will fall in mid-2027. We expect this new model to fuel delivery growth over the upcoming quarters. China market deliveries expansion outpaced overall growth across China's premium passenger vehicle segment. This result underscores the strong inherent competitiveness of the Lotus full product portfolio, even amid mounting competition across the border for the auto industry. Now let's move to the half-year financials. Overall, our first half of 2026 financial performance improved meaningfully versus the prior year period. As already covered deliveries, revenues, and gross margin, I will not repeat them here. In line with revenue, costs of revenues for first half 2076 stood at $242 million of 21% year-over-year. As a result, gross profits reached $26 million, a 47% year-over-year increase. Operating expenses during the period came in at $127.5 million U.S. dollars, about 46% year-over-year, primarily comprising the following, and the expense stood at negative million U.S. dollars in the first half due to the aforementioned one-off items. Shipping out of this specific special one-time adjustment, R&D expenses totaled $96 million, a modest 4% year-over-year U.S. versus $92 million in the first half of 2025 driven by technology investment for the Electra X. Selling and marketing expenses increased to $83 million, up 5% year-over-year. The uplift reflects higher sales commissions tied to rising vehicle volumes alongside marketing activities for the Electro-X launch in China and pre-launch campaigns in overseas markets. General administrative expenses decreased to $46 million, down 27% year-over-year, as we tightly controlled travel, agency, and other costs and optimized our organizational structures. With above, even excluding one-off effects, the operating expense to revenue ratio improved from 107% in first half 2077 to 84% in first half 2026, reinforcing our priority to lift operational efficiency and maintain strict cost controls. Accordingly, operating loss and net loss for the first half 2026 narrowed 63% and 52% respectively. Our non-GAAP adjusted basis adjusted EBETA loss for the first half of the year narrowed 57% to US$104 million, compared with the US$240 million loss in the same period last year. Beyond highland metrics, I would like to emphasize that we have delivered such pain operating expense reductions through the value-driven initiatives. This reflects our continued focus on cost optimization and operational efficiency. By looking ahead, we aim to advance towards profitability and create long-term shareholder value by maximizing product positioning, expanding margins via optimized product mix, and executing rigorous cost reduction actions. With that, I will hand over to Ms. Feng. Thank you very much.

Good day, I am Feng Qingfong, CEO of Lotus Tech. Thank you for joining us in the Lotus Tech's first half 2026 earnings call. In the first half of the current year, we delivered improvements across all our core operating metrics and steadily rolled out the Focus 2030 strategy unveiled earlier of this year. I will now walk you through the details. We will start with recent development highlights, rooted in our British heritage of track-bride performance. We continue to strengthen our brand DNA while seizing new opportunities in emerging markets and product segments. Following its official launch in the Canadian market, The all-electric hyper-SUV Electra arrived in the country in July, marking the first time Chinese-made luxury EVs in the Canadian market, and representing a significant milestone in the Lotus efforts to expand its North American footprint. Our first hybrid offering this year, Electro-X, known in China as for me, has received an ESS-3 response since its domestic release. The model has helped lift the Lotus market share in China. Passenger vehicle segment priced above RMB 500,000 to nearly 2% in the second quarter. In June, we opened orders for the Electro-X in the EU market, with deliveries scheduled to commence in the fourth quarter. We continue to refine and roll out limited edition sports cars in May. For instance, we introduced the Emira 420 sports edition, widely held by enthusiasts at the Kornikin. With a power boost and a 25kg weight reduction, the emira 2420 delivers even sharper cornering points in july we launched the emira scura limited edition in china attributed to exige scura from 17 years ago with only nine units allocated to china and 60 to north america the entire run sold out immediately under the focus 2030 strategy we will unveil the Type-135 mid-engine V-8 hybrid hypercar in 2028. In July, EMEA set a new EVO lab record at Malaysia's SeaPine International Circus, surpassing the previously publicly recorded Foddy's EVO lab by a significant margin. Yet another testament to Lotus Performance Credentials. Besides, we have published our 2025 sustainability report. underscoring our ongoing commitment to global sustainable development.

Meanwhile, we have signed MOUs with the Web5 platform Finloop and the leading payment institution FormalPay to jointly explore compliance applications of on-chain payments and reward access to organization within the luxury mobility space. 莲花的核心战略,四大战略支柱,包括一,锚定莲花78年赛道架控基因强化品牌传承,二,多动力总成战略,灵活应对全球用户需求差异,三,依托 OneLotus整合和极力生态协同进一步降本分效,优化财务表现,达到年效3万台即可盈利,实现小而美的可持续发展。

Now, let me turn to the recently unveiled Focus 2030 strategy, designed to adapt to an evolving external landscape. This strategy redefines Lotus core strategic positioning, which rests on four pillars. First, anchoring our brand heritage in 78 years of track-hound driving dynamics. Second, adopting a multi-powering strategy to flexibly address diverse global customer preferences. Third, leveraging the One Lotus integration and Gillis ecosystem synergies to further drive cost efficiencies and operational effectiveness, both optimizing financial performances to achieve profitability at an annual sales volume of 30,000 units, delivering a lean-yet-productive sustainable growth model. Focused 2030 Pillar 1, strengthening and passing on our brand heritage.

Lotus is rooted in a British racing pedigree and powered by Italy's global leading technology, together enabling the pureest driving engagement for enthusiasts. 多动力产品组合 强化品牌影响力 在中国 我们把握高端新动员的消费需求 将莲花打造为豪华电动细分市场中 且兼具高性能和智能的代表品牌 在美洲 我们以跑车产品为主 通过Eletra在加拿大上市

将拓展北美生活用车市场 同时也将进一步拓展南美的销售网络 On this very foundation, we have tailored brand activation strategies for each of our core global regions. In Europe, we are capitalizing on Lotus Track Horn brand premium, reinforcing our presence through a multi-powering product portfolio. In China, we are tapping into the rising demands for premium new energy vehicles, positioning Lotus as a brand that embodies both high performance and intelligence in the luxury EV segment. In America, our focus remains on horse cars, while the Electrolounge in Canada serves as our entry point into the North American lifestyle vehicle segment. We are also concurrently expanding our sales network across South America. In other regions, we continue to broaden sales channels, step up brand building efforts, and reach new customer segments. As of June the 30th, Lotus has established a well-balanced global sales network with 217 retail locations, which break down into 60 stores in Europe, 65 in China, 53 in the Americas, and 39 across the rest of the world. China and Europe remain our two core volume contributors, while North America stands as our largest market for sports cars. Back in 2018, Lotus was the first luxury brand to commit to full electrification. However, we have since recognized that the global transition to electrification is far from uniform. In response, we have adjusted our strategic direction in a timely manner, choosing to pursue a pure electric, hybrid, and internal combustion power trace in parallel. Every one of our products remains uncompromisingly driver-centric. Our first hybrid model, the Fomi, made its Chinese debut this March with European deliveries scheduled for the fourth quarter. Looking ahead, we are focused on developing our next-generation HyperCard Type-135 and also a hybrid available in both V6 and V8 power train variants. The Type 135 will fill the gap between the Emira and Evaya, preserving the emotional connection Emira owners have with Lotus mechanical handling, while leveraging V8 hybrid technology to approach the technical benchmark. set by the Evaya. This creates a nature product upgrade and elevates the brand upwards. Through a combination of lightweight design and chassis responsiveness, the Type 135 will demonstrate that Lotus still has what it takes to be a technical benchmark in the next generation of high-performance sports cars.

We envision this model as our flagship, one that will enhance the company's overall profitability. 它将超过1000匹马力,重量控制在1.5吨级,目前轻量化其实是我们最大的优势,也是挑战,800W的高压平台架构,还要是混动,又加了V8,再加上电机,重量还要控制在1.5吨,这不是一件容易的事情。 举个例子 我们150千瓦的电机通常在75到95公斤 但我们利用F1技术能够把它做到20公斤 我们也会和Hoffer POS联合开发8DCT做到大扭矩的同时 重量还要轻

The Type 1-3-5 has already generated tremendous excitement among Lotus fans worldwide. After 22 years, we are bringing back a mid-engine V8-powered model with over 1,000 horsepower, power, while targeting a total weight of around just 1.5 tons. Lightweight engineering is both our greatest strength and our biggest challenge here. Achieving that target with an 800-voltage architecture, a hybrid system, a V8 engine, and electric motors all within just 1.5 tons is not easy. To put that in perspective, while a typical 150-kilowatt motor weighs between 75 and 95 kilograms, we have leveraged the Formula One technology to bring it down to just 20 kilograms. We are also co-developing an 8-speed DCT with horse, designed to handle high torque while keeping weight to a minimum. On the sports car front, as mentioned earlier, we have introduced the Emura 420 and special editions such as the Emura Skura. We will continue to roll out new Emura springs going forward, reinforcing its value as Lotus' final pure combustion sports car. In the Lifestyle Vehicle category, we are also introducing the Electro 900 Gold Edition and the EMEA 900 Gold Edition, available for pre-order starting August. We will keep refining the product's competency in this segment. The launch of the Electro-X has given the mainstream luxury vehicle buyers more choices and will further expand the latest market reach and customer coverage. Focus 2030, Pillar 3, Deepening Ecosystem Synergies with Partners. Our ecosystem synergizes. These are built on two core pillars, Lotus Integration and Deeper Collaboration with the Gilead Ecosystem. and the and the in the Last Friday on August 21st we formally completed the acquisition of the Lotus UK and we are now accelerating the comprehensive integration process.

This integration combines Lotus UK's track-bred racing DNA with Lotus Technologies cutting-edge technologies further sharpening Lotus's distinctive positioning in the luxury automotive space. 我们将秉承Wall-Lootus szent式 品牌上保持全球统一的 高性能超豪華品牌调整 确保在任何市场 莲花的品牌形象 产品体验和用户感知 都是一致的 智力架构将进一步简化 形成更高效的角色机制 利用灵活调配资源 及时想完成市场变动 并将更多精力投入到 产品开发和客户体验师 提升上 We are committed to the One Lotus strategy on three fronts, brands.

We will maintain a globally unified premium ultra-luxury brand identity, ensuring that the Lotus brand image, product experience, and customer perception remain consistent across every market. Governance. Our governance structure will be further streamlined to enable more efficient decision-making, agile resource allocation, and faster responses to market shifts, allowing us to channel greater focus into product development and customer experience enhancements. Synergy. Through coordinated efforts in technology sharing, supply chain integration, and unified management, we will eliminate redundant investments and fragmented resource allocation, delivering a dual uplift in brand value and operational efficiency.

We also have to further further further, the Giga-style system and Giga-style system, the Giga-style system, the green-style system and other unique and high-quality companies, the system-backed power, including the Giga-style system, including the Giga-style system, and the Giga-style system. 提供极力平台共享,莲花可以更专注于莲花特色的基础发展,包括轻量化、空气动力学、底盘调教等。 We will also continue to deepen synergies with the Gili ecosystem.

The Gilly Group provides Lotus with systematic competitive advantages that other independent luxury brands could find hard to replicate, including advanced technologies. Across pure electric hybrid and intelligent solutions, Gilly's platform enabled us to stay at the forefront of electrification and smart technology while reducing costs and shortening the go-to-market duration for new technologies. By leveraging Gilead's shared platform, Lotus can concentrate its R&D efforts on signature technologies such as lightweight engineering, aerodynamics, and chassis tuning. Mature supply chain. With access to Gilead's global procurement scale and supplier network, we can secure high-quality components at more competitive costs, effectively hedging against the raw material price, volatility, and geopolitical risk.

Flexible Manufacturing Ely's Global Distributed Flexible Production System helps Lotus to accelerate product launches scale up operations and build cost advantages This kind of cooperation is a different direction The Lian花 is in the hybrid management, air conditioning, air conditioning, air conditioning, and air conditioning of the unique know-how is the same as the energy of the network and the entire technology of the community especially in our Lian花工程 covers the design management, air conditioning, air conditioning, and air conditioning Such collaboration is bidirectional empowerment,

lotus proprietary know-how, extreme handling, aerodynamics, lightweight engineering, and chassis tuning beat back into the Zili's ecosystem in return. driving technological advancements across the broader group. Our Lotus Engineering Division, in particular covering 12 service domains including design engineering, vehicle dynamics, chassis, and lightweight solutions, have been providing engineering service to the world since its founding in 1952, empowering not only Julie but also the wider industry. We maintain ongoing joint development programs with Julie's R&D teams to ensure that Lotus' unique driving DNA is fully preserved. FOCUS 2030 Pillar 4 Financial Optimization Under the FOCUS 2030 strategy, we place greater emphasis on quality growth.

As our product portfolio matures, we target annual sales of 30,000 units and the sustainable profitability. 持续优化毛利率,目标2030年超过20%,收入上通过品牌强化新车型上市和定制化产品,提升平均售价和流入率,成本上借助莲花整合极力供应链与生产上的协同和规模化效应,优化成本结构。

Our path to achieving these objectives rests on three key drivers. First, delivering steady volume growth through brand building and portfolio expansion. With the launch of the Electro-X in 2026 and the Type-135 in 2028, We are fully leveraging the flexibility of our multi-part chain strategy to capture differentiated demands across different markets, continuously expanding product portfolio for volume ramp-up. We expect a compound annual growth rate of 36% in sales volume from 2025 to 2030. Second, driving sustained growth margin improvements with a target of exceeding 20% by 2030. On the revenue side, we will raise average selling price and margins through brand strengthening, new model laundries, and customization offerings. On cost side, we will leverage loaded integration, daily supply chain and product synergies and economic scale to effectively optimize cost control. Third, adopting strict expense discipline based on the first two drivers, we are implementing rigorous cost control growth at Gen A and R&D, with the goal of reducing the combined share of revenues to below 25 by 2030, enabling our EBITDA to turn positive. In summary, Focus 2030 provides a clear and actionable profitability roadmap to drive volume growth through product expansion, lift growth margins through brand premium and cost discipline, and deliver positive earnings through integration synergies and integration. operation. Our first top 2026 business performance already reflects our firm commitment to moving points in this direction.

Thank you all. Thank you. We will now begin the question and answer session. If you would like to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. If you are able to, please translate your questions into Chinese. Please stand by while we compile the Q&A queue. Thank you. We will now take the first question. This is from Laura Lee from Deutsche Bank. Please go ahead.

Laura Lee Lee Thank you for taking that question. Firstly, I want to talk about the Lotus for me, the PHEV model. Since it was launched in March, could you discuss the order intake, delivery, and initial market response and customer profile? And what are your expectations for the four-year sales and margin?

At present, 4Me deliveries are primarily concentrated in China as of June, the 30th cumulative orders of 4Me in China stood at 2,200 units, with deliveries exceeding 1,800 units, largely in line with company expectations. EU deliveries are scheduled to commence in the fourth quarter, with markets in the Middle East and other regions to follow in December. As a hybrid model featuring a smaller battery pack and lower farm cost, Bumi combines a higher growth margin than our pure electric vehicles. In addition, the model benefits from deeper collaboration with Philly, leveraging platform sharing and economic scale, which further sports a healthy margin profile.

Production and self-performing are still in the ramp-up phase, and we are confident that margins will continue to improve as we treat steady-state volumes. 提升至21.6% 销量同比增长超20倍 达到了4万两 取代增程成为最大新能源细分类型 莲花抓住这个机遇三月底推出了4me 这莲花在中国50万以上乘车市场占有率第二季度提升近2% 4me的用户结构表现也很亮眼 截至目前全新增量客户占比63% In the first half of 2026, the Chinese passenger week market the price above RMV 500,000 recorded sales of 185,000 units, down 12.8% year-on-year.

However, new energy penetration in this segment climbed to 40.2%, driven primarily by a sharp rise in PHAF penetration, from 0.9% in 2025 to 21.6% in the first half of 2026. PHAF sales surged more than 24th year-on-year to 40,000 units, overtaking range extenders at the largest new energy sub-segment. Seizing this opportunity, Lotus launched the 4Me in late March, lifting our market share in China's above RMB 500,000 passenger vehicle segments to nearly 2% in the second quarter. The customer profile of the 4Me have also been highly encouraging. To date, 63% of buyers are new to the Lotus brand, and over 70% of customers have opted for the higher spec variant. In the second half, we were sustained momentum through integrated test drive experience events and ongoing word-of-mouth marketing to maintain product bias and sales cadence. With the addition of hybrid models, Lotus dealership footprint in China has been further optimized, particularly in the northern region, with trends in the northeast and northwest, opening up new markets for future sales growth.

2026 年上半年欧洲70万以上的SUV销量为16.4万辆 新能源渗透率维持在52%的高位 其中擦混SUV销量5.8万辆 占新能源的占比近70% 欧洲上半年已完成多轮营销的预热 取得积极正面的市场反馈 为产品上市建立市场基础 同时我们在欧洲持续推进数字化营销策略 为下半年订单转化建立客户储备 进一步扩大潜客规模 欧洲营销策略将由品牌曝光逐步转向销售转化 通过多元深度体验活动和持续的线上传播 加强客户运营 提升客户转化力 Electro-X的推出还是有效帮助公司打开了纯电产品无法覆盖的部分市场与细分赛道

所以我们对Electro-X在欧洲上市交付后带来的增量同样充满信心 In Europe, we formally commenced the order taken for the Electro-X in the first half adding a fresh growth driver for the second half and beyond In the first half of 2026, ESUV cells above 70,000 euros reached 160,000 units, with new energy penetration remaining high at 52%. Within that, PHFSUVs accounted for 58,000 units, representing nearly 70% of the new energy mix. We conducted multiple rounds of marketing pre-launch activities in Europe during the first half, generating positive market feedback and establishing a solid foundation for the product rollout. In parallel, we have been advancing our digital marketing strategy across Europe, building a customer pipeline to support order conversion in the second half and further expanding our prospect base. Our EU marketing strategy will gradually shift from brand awareness to self-conversion, leveraging diverse in-depth experience events and sustained digital engagement to strengthen customer relationships and improve conversion rates. The introduction of the Electro-X have effectively enabled us to access market segments and niches that our pure electric offerings alone could not cover. As such, we are equally confident in the incremental volume that the Electro-X will deliver following its European launch and deliveries.

Thank you.

Okay, God, I appreciate the color. Secondly, I want to talk about the type 1 certified hybrid sports car that you're planning to launch. Could you provide any update or could you introduce a bit like the strategic rationale or logic behind this model?

Thank you very much. The Eugenia system has been in the Sien card for the Eugenia, Vaya, and Sierras and Giant Charges. With some surprise, In the Dimitri we will take a GT4 in the GT4. Here we will discuss the GMAT-7 race. Type-135, we will take number GT3 on top of the GT3. We will also take a drive on GT3 in the GT4, and we will move to the GT3 series.

The Type-135 is a critical high-performance hybrid product for Lotus in the next phase of our development. As mentioned earlier, the Type-135 marks the return of a mid-engine V8 model after 22 years. Leveraging Lotus' expertise in aerodynamics, lightweight engineering, and chassis tuning, the Type 135 will establish a new technical benchmark for high-performance sports car, reaffirming to the market our ability to translate track-bred engineering into extraordinary jogging driving experience. And the first thought, delineating the Lotus brand air source and image. The Type 135 will bridge the product gap between the Emira and the Evaya, creating a complete sports car portfolio that spans the Emira as an engine-level combustion sports car. the Type 135 as a hybrid flagship hypercar and the Evaya as a collectible ultimate performance hypercar, positioning the Lotus brand for its decisive upvorder. On the motorsports front, the Emira already competes in GT4 events where we have achieved notable results including podium finishes at the Macau Grand Prix Greater Bay Area GT Cup. With the Type 135, we will take the next step forward and enter GT3 competitions. Beyond its brand-boosting effects, the Type 135 will also elevate our lifestyle vehicle line-up, complementing the Electro-X luxury hybrid SUV, the all-electric electric enterprise sedan EMEA.

This multi-power-train strategy coverage will influence brand recognition and appear across our lifestyle vehicle portfolio. 负荷增长率为7%-9%, 2025年全球市场总销量达到了15万台,预期2028年市场容量最高可达到19万台,2030年可达到22万台,美国60万以上跑车市场逐年增加,且欧洲60万以上高端跑车混动化趋势明显, 2026年上半年混动跑车占比从2025年的26% 进一步提升到35% 欧美核心跑车全层高度认可内燃机声浪 机械驾驶质感 纯电超跑受电池重量 不能约束 难以打动传动性能买家 而Type135的混动V6加V8的方案 既能满足全球碳排放法规

From a market demand perspective, sales of our poor sports car competitors have been impressive, with a compound annual growth rate of 7% to 9% from 2022 to 2025. Global sports car sales reached 150,000 units in 2025, with the addressable market expected to pick up at up to 190,000 units in 2028 and 220,000 units by 2030. In the United States, above U.S. 600,000 sports car segments have shown 30-year-on-year growth. The premium above U.S. 600,000 sports car market in both Europe and the U.S. we've seen a clear trend towards hybrid transition. With the hybrid share rising from 26% in 2025 to 35% in the first half of 2026, cool sports car in Europe and the US place high value on the risk of appeal of internal combustion engine sound and the mechanical driving televisive. Pure electric supercars constrained by battery weight and the charging infrastructure have structured to win over traditional performance buyers. The Type-135 hybrid V6 plus V8 approach offers the ideal solution, delivering compliance with global emission regulations while preserving the essential Lotus DNA of lightweight engineering, aerodynamics, and extreme track-focused driving dynamics, filling a clear gap in the market. On the technique chronology front, our Lotus With over Lotus more than seven decades of history, limited in-house power train capabilities have been our most significant handicap. We have traditionally relied on outsourcing. This time, with Gilead's strong support and technology enablement, we are co-developing a high-performance power train with course. This collaboration allows us to leverage Lotus's core strength in lightweight engineering, aerodynamics design, and sophisticated chassis tuning while tapping into Gilead's resources, global supply chain, and scale advantages, meeting the Type-135's power requirement while balancing R&D investments and per-unit cost. This technology will be applicable to future generations of the ElectroX. The Type-135 will continue to be the most fundamental principles of the Lotus brand. As the product remains in the development phase, further technical and product details will be disclosed at an appropriate time in the future.

Okay, got it. That's very helpful. If I can sneak one more question in, how do you plan to sustain the growth momentum in the second half of this year? How should we think about the growth drivers? Thank you.

NERA 420 SPOTS和莲花 ELECTRAL EMAIA 双黄金900系列 通过高性能新产品的推出 拉升品牌的知名度和价值标签 提升市场关注度 加强用户运营 提升用户转介绍率 通过混动 加强北方销售渠道布局 对部分高潜力渠道进行经销商迭代 把市场机会转变为销量结果

We have developed different strategies and plans for different regions. For example, for China market, first, we are going to maintain the market momentum and launch cadence over the four weeks through an integrated test drive experience program, sustaining the sales cadence established in quarter two. Second, we have also introduced the Lotus EMEA 420 Sports and the Lotus Electra and EMEA 900 Gold Edition. These high-performance new products will elevate brand awareness, reinforce our value proposition, and motivate market engagements. Third, strengthen customer engagements and increase the customer referral rate. And fourth, leverage hybrid models to enhance our sales network footprint in northern China, upgrading distribution network in high potential markets to convert market opportunities into tangible sales results. In Europe, we will first start with the launch of Electro-X, which will progressively unlock initial market demands. And second, in the second half, our marketing strategies will shift from brand exposure to sales conversion, with a sharpened focus on high conversion channels and customer relationship management. Lastly, we will continue advancing channel development in key markets, further optimizing the dealer network and retail operational capabilities. As for the American region of Brazil, our third largest volume driver in the American region after the U.S. and Canada will officially commence deliveries in the second half. Besides, with the introduction of the EMEA 424 and the Model Air 27, we will reinforce the EMEA driver-centric positioning centered on driving engagements, capture demands created by the discontinuation of the Porsche 718, and accelerate the order conversion at the dealers while generating new pre-orders. for the rest of the water market, the most significant milestone for the second half is the official market launch of the PHAP product in the Middle East, with the Electro-X scheduled to arrive in the region by year-end to drive water growth. Additionally, as the EMEA 420 rolls out to global markets, we expect it to contribute incremental sales in the Middle East, Australia, and other countries and regions. We will also work on continued network expansion, including the Caucasian regions and the Middle East regions.

Thank you.

Okay, good.

I appreciate the call. Thank you. We will now take our next question. And this is from the line of Jiang Xiao from Barclays. Please go ahead.

Thank you for your question. 这个联化因果,然后能否跟我们更新一下交割后的财务影响,然后大概什么时候会发布一个合并后的财务数据。 I'll translate it myself. So my first question is about focus 2030. We guided towards a steady ramp up to 30,000 degrees. Over 20% growth from origin and positive EBIT under the plan. Can management comment on your thinking when setting up these goals? What gives you the confidence and progress you've seen so far? And second is around our Lotus UK acquisition, can management give us an update on financial impact and guidance post-efficient closing of the transaction, and when the company will start to disclose consolidated results?

Thank you. 经营目标具备充分的信心 支撑逻辑分为四层 首先在品牌段呢 通过全球赛事的运营 比如Lutus Cup 莲花这个驾驶培训 混动起见超宝泰TB13 推出动活动 持续夯使莲花78年的性能基因 加强品牌价值提升 那么渠道端呢 6月30日 截止6月30日 欧洲、中国、美洲及世界其他国家合集217家零售门店,新进入巴西、巴拉圭、厄瓜多尔等南卫市场,我们将持续全球的渠道持续扩张,对现有渠道持续优化迭代,加强用户运营,提升用户转化力。 in the範点 of 2020, the crash has burned into整achte come-in- Daha round X , the損滑, and gleichzeitig in loador is fully flexible to travel. It provides authentic driving, which promotes electric sports market, now the主ise competitive operator�ities in the lies of sixty- likasку built in one economy in the solar power.

I will take the privilege to answer your first question and leave the second question to our CFO. We have strong confidence in our medium-to-long-term operating targets underpinned by the following pillars. First, the brand. Through global motorsports events, for example, Lotus Cup and Lotus Driving Academy and the launch of the hybrid flagship HyperCard Type 135, we will continue to reinforce Lotus' 78 years' performance DNA and elevate brand value. Next, channels. As of June the 30s, we operated a total of 217 retail stores across Europe, China, and the Americas, and the rest of the world, with new market entrants into Brazil, Paraguay, Eldora and other South American countries. We will sustain global channel expansion, continuously optimize and upgrade our existing network, strengthen customer engagement, and improve conversion rates. Finally, product, by 2030, we will establish a comprehensive product portfolio covering the entire luxury performance spectrum with both plug-in hybrid and pure electric high-volume models to address diverse customer needs across different markets. Our sports cars will showcase loads of driving DNA running through tracks to roads and in-house brand premium. We have already launched Electro-X, with deliveries underway in China and six overseas markets. EU market entry is scheduled for the fourth quarter, Middle East deliveries by year-end, and the EU market launch planned for mid-2027, all of which will contribute to world inflows. In 2028, we will also introduce the flagship hybrid hypercar type 135, providing an additional boost to the sales hype.

Thank you.

Thank you to Michel for your questions. I will complement the first question with my views on the financial part, and I will answer your second question. The first question I will focus on is very on the financial side to lower the costs. We will focus on driving synergies across multiple stakeholders. First, supply chain collaboration and manufacturing scale with GIDI. For lifestyle vehicles, all 50% of components are shared with GIDI. Leveraging GIDI's centralized procurement and scale advantages, those gains access to a broader pool of high-quality global suppliers, they deliver the meaningful cost reductions. And secondly, R&D platforms shared with GIDI. Full in-house development of vehicles' architectures by the company alone may require over $1,000 US dollar investments. By building ITD's underlying platforms and embedding Lotus-specific technologies, we can materially lower the end-expanding. And thirdly, the full integration of Lotus UK will allow substantial energy benefits, signature benefits. And in prior, we will diversify revenue streams through the high-end customization and the limit addition models. Supporting our target of lifting gross margin about 20%. Concurrently, we will pursue refined operational management, exercise tight expense control, and further unlock operating leverage to deliver the profit positive. And in sum, under our focus 23rd strategy, we will prioritize development quality and profitable growth rather than pursuing the sales volume for its own sake. So that's the answer for the first question, and I will continue with your second question regarding the synergies with OneLotus. And as you know, the combined Lotus brand will preserve its global consistent positioning as a high-performance luxury provider. The Hatho UK site will focus on the ice and PHEV sports car lines, pursuing a differentiated strategy centered on the limited edition modules. The Wuhan China facility will need BEV and PHEV last-star vehicles under the volume production strategy. We will also prioritize operational integrations, binding, shares, and these manufacturing and supply chain functions with a goal of building Lotus into a global and capacity high-performance auto brand. Integration and the synergies across the shared and the capabilities and supply chain corporations will enable the flood cost reduction and efficiency gains for the group. And financially, we expect top-line growth for two key reasons. First, E-Mira vehicle sales in the US will be fully recognized as gross vehicle revenue. And pre-consolidation, such procedures were only accounted for under the net revenue method. And second, service revenue from Lotus UK will be consolidated into the listed company, bringing in Lotus UK's vehicle and service. Gross margins will also improve the group's overall gross market profile. From an expense standpoint, the near-term consolidation of Lotus UK, R&D administrative, and other costs may result in a wider group-level loss. Going forward, we will strengthen the integration across R&D commercial and support functions teams from both organizations, streamline the organizational structure, adopt lean cost management practices, and lower the operating expense to revenue ratio. Given this is a business under the combination under the common control pursuant to the financial disclosure rules, the company is required to carry out a retrospective restatement for the consolidated financial statements. This statement for the fiscal year 2025 has been initiated. They expect the stated financial restatement to be disclosed no later than the release date of the 2026 annual report. And for this part, please stay tuned with our announcement on public release.

Thank you. Very helpful.

Thank you. We will now take our next question. And this is from Brian Lancie from Zaxx. Please go ahead.

Good evening, everyone. Thank you. Really impressive results considering the challenging operating environment the domestic market in China. I'm just going to tighten together a couple of questions together into one. Could you talk about some of the drivers behind the gross margin improvement from 8% to 10% in the first half? I have a sense that you've already touched on this. It's probably a shift in mix towards the lifestyle vehicles. So despite a lower average selling price, We're seeing better margins there. And then also, if you could just give me a little bit of an insight into how memory costs are impacting your margins and what your outlook for that is going into 2027.

A question. The gross margin improvement was driven primarily by two factors. First, the product needs optimization. The delivery share of a higher margin BGV modules grows significantly. effectively lifting the overall cost margin. And secondly, the supply chain synergies and the economy of scale gradually took effect, with the per vehicle manufacturing costs continuing to decline, supported by this global supply chain system and the flexible production capabilities. And this also marks the first substantive financial validation since the launch of the Focus 2030 strategy. Thank you. Yeah, and for your second question regarding the pricing volatility of the chips. My understanding is like this. The chip price volatility alone drove a nearly 2% increase in our BOM costs. In saying that, the chip pricing did give some pressure on the company's gross margin in the first half of the year. In response, Combin has been actively collaborating with the GED group to expand the supplier base and navigating through the volatility smoothly. Plus, they identified the bomb cost optimization to offset the chip-driven cost increase. Consequently, the company's gross margin in the first half of 2026 improved compared with 2075. Regarding the pay of chips since the price stabilization, and we believe the car drivers of this round price increase is caused by the AI server capacity, crowding out the supply of the automotive, grid, drum, and net chips. Based on the upstream warfare expansion schedule and the visibility into our cheap supply chain, we expect supply and demand to rebalance around late 2026 and early 2027, with the price returning to a reasonable range. And as the industry cycle eases, the company's gross margin will have further room to improvement. Thank you so much.

Great. Thank you so much for that.

Thank you. and we have no further questions at this time so i will hand the conference back to michelle ma for closing comments thank you all again for joining us today the investor relations team remains available to answer any further questions you may have please feel free to contact us through the contact information on our website have a good day everyone thank you thank you this conclude today's conference call.

Thank you for participating and you may now disconnect. Speakers please stand by.