Good day and thank you for standing by. Welcome to Lotus Technology Inc First-H alf and Second Quarter 2025 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'll need to press star one one on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Michelle Ma, Head of Investor Relations at Lotus Technology. Please go ahead.
Thank you, Maggie. Good morning and good evening, everyone. We appreciate you joining us as we review Lotus Technology's Financial Results For The First-H alf and Second Quarter 2025. Our financial results and conference call materials were published earlier today and are available on our Investor Relations website. We are also broadcasting this call via webcast. Joining us today are CEO Mr. Qingfeng Feng and the CFO Dr. Daxue Wang. 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, forward-looking statements involving 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 statement except as required and applicable. 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 reconciliation of these figures in the press release available on our Investor Relations website at ir.lotus.com. With that, I'd like to turn the call over to our CFO, Dr. Wang, please.
Morning, good day, and good evening, all our shareholders, analysts, and friends from the media. Thank you very much for joining our First-H alf and Second Quarter 2025 Earnings Release. My name is Daxue Wang, the Chief Financial Officer of Lotus. It's my privilege to briefly walk you through the company's audited interim financial results. In the second quarter, the company delivered over 1,400 vehicles to distributors, a decrease of 49% year-on-year. As a result, total deliveries for the first- half of the year exceeded 2,800 units, down by 43% compared to the same period last year. These figures reflect a scheduled transition period as upgraded models began deliveries in Q2, the impact of the U.S. tariff policies, as well as ongoing restocking activities of the company.
Revenue narrowed to $126 million in the second quarter and $218 million for the first- half, down 44% and 45% year-on-year respectively. Gross margin for Q2 stood at 5%, down 4 percentage points from the same quarter last year. Although quarterly gross margin decreased by 5 percentage points on a year-on-year basis, we achieved the first half's gross margin of 8%, remaining us safely in the positive territory. Now, let me break down our sales by category and by region. By category, lifestyle vehicles accounted for 83% of the total deliveries in Q2, up from 56% in Q1. As a result, they contributed 68% of total deliveries in the first- half of the year. By region, deliveries in China showed notable growth following the start of the deliveries of the upgraded electro-hyper-SUVs in the second quarter.
In fact, it has become a leading model in China's premium battery electric SUV segment during this period. In the U.K. , our battery electric lifestyle vehicles demonstrated significant year-on-year improvement. Deliveries of the Emira to North America were disrupted in Q2 due to tariff disputes, but already resumed in July. In terms of sales channels, the total number and regional composition of our retail stores remained stable throughout the first- half of the year. Now, turn to the key financials. I've already covered deliveries, revenues, and gross margin. Now, let me move to other financial metrics. The cost of revenues decreased by 42% year-on-year, $299 million in Q2 and $200 million in the first- half of the year. This resulted in a gross profit of $7 million for the second quarter, and $80 million for the half.
We reported operating loss of $160 million in Q2, a 22% improvement year-on-year. Net loss for the quarter was $130 million, down 36%. For the first- half of the year, operating loss was $263 million, a 40% year-on-year decrease, while the net loss narrowed to $313 million, down by 32%. For reference, on a non-GAAP adjusted basis, net loss for the quarter was $2 million lower, primarily due to the impact of share-based compensations. Beyond these numbers, I would like to emphasize that we have now reduced operating expenses for seven consecutive quarters, underscoring the company's strong commitment to enhancing operational efficiency and continuing to deliver values. Our first- half operating expense has lowered by 42% year-on-year. Despite challenges posed by market volatility and policy uncertainties, we have achieved several key milestones. Our CEO, Mr. Feng, will elaborate on these shortly. With that, I will now turn the floor over to Mr. Feng. Thank you.
[Foreign language]
Hello, everyone. This is Qingfeng Feng, CEO of Lotus Technology. Let me brief you on the latest achievements and recent developments.
[Foreign language]
First, let me begin with the new funding arrangement of the company. On August 19, 2025, we have entered into a security purchase agreement with ATW Partners, pursuant to which the company agrees to issue and sell convertible notes for up to an aggregated principal amount of $300 million. Pursuant to this agreement, Lotus has issued already notes in the original principal amount of $10 million on the date of August 19.
[Foreign language]
On the other side, we have also secured funding commitments from our strategic partner, Geely. On July 28, 2025, Lotus has also entered into a master credit facility framework agreement with Geely.
[Foreign language]
On the marketing front, in July, we have proudly announced our official return to Goodwood Festival by unveiling the Emira Cup race car at the event. We have also exhibited our concept vehicle, Theory 1, with the full lineup, including the Hypercar Iberia, the Hyper GT Emeya, the Hyper SUV Eletre, and our proud sports car, Emira, as well as several legacy race cars to numerous Goodwood visitors. We have also seen a positive result in terms of our U.K. market sales.
[Foreign language]
On the AI side, Lotus Robotics, a wholly owned subsidiary of the company which focuses on AI and autonomous driving, has entered into a MOU with a strategic partner in the Middle East to pursue a strategic collaboration in terms of AI and autonomous driving technologies, including the exploration of a Robotaxi in Saudi Arabia.
[Foreign language]
A few words on the product pipeline, beginning with our sports car, Emira. We are rolling out the Model Year 2026 next month globally. In terms of our future plan for Emira, we're going to upgrade our powertrain in 2027 to comply with EU 7. That includes also the potential consideration of a V6 engine and also alternative plug-in hybrid electric vehicle solutions.
[Foreign language]
The Model Year 2026 Eletre and Emeya are being delivered to the market globally.
[Foreign language]
As most of our friends are concerned, the plug-in hybrid vehicle, we are in good progress. We're going to start our production of that model end of this year and then begin to market entry deliveries quarter one next year, beginning with China market, and for the future, we'll also roll out to Europe and some other markets.
[Foreign language]
We have also a new model, an internal project code we call Vision X. That project, we are foreseeing to launch into the market in 2027.
[Foreign language]
A brief introduction of the Hyper-b ybrid technology which Lotus possesses.
[Foreign language]
Some highlights of the 900 V Hyper-h ybrid technology. With this technology, we can deliver the combined driving range of over 1,000 km. The highlights of the technology include the industry-leading dual hypercharging capabilities, meaning that we enjoy the ultra-fast plug-in charging and also the ultra-fast on-the-drive charging. The ultra-fast plug-in charging speed is leading the industry, very similar to a battery swap. Also, on-the-drive charging, we can achieve the rate of 5x the power consumption of the typical driving. We can provide uninterrupted electric driving performance in any of the situations, including acceleration at very high speeds and also in extreme cold weather. With this technology, Lotus will be unveiling this technology into our first plug-in hybrid model this year. The deliveries of the model which I have previously introduced will be beginning in 2026 quarter one.
[Foreign language]
I would like to mention a few words on our intelligent chassis system, which will be also equipped in our first plug-in hybrid model launching end of this year. With this technology, we are able to achieve a dual mode of driving function, driving mode. In a comfort mode, we are tuning this vehicle to allow the comfort of the daily use. We can tune to the performance mode while the drivers, our users, can enjoy in extreme conditions, extreme performance.
[Foreign language]
Without this technology, previously, that comfort and performance is always hard to balance. With this technology equipped in our vehicle and with the fine-tuning of our chassis performance team, we'll be able to elaborate, we'll be able to perform the vehicle of two very different driving modes. We can enjoy the comfort in daily use, and also we can enjoy the performance in the performance driving mode.
[Foreign language]
Our global market strategy in the China market is that the sales network has also planned to strategically phase out some of the underperforming outlets while we continue to broaden our urban coverage.
[Foreign language]
We also developed a very customized and tailor-made pricing and product strategies aligned with every single market and every single user demand that we enter into across the globe. Whilst we are strategically prioritizing the tariff-advantaged markets and then the premium EV markets with growth potential. This is supported by a U.K.-anchored brand hub for expansion into Europe.
[Foreign language]
We're actively collaborating with multiple strategic partners to architect a localized market entry solution, leveraging the Geely's global ecosystem synergy.
[Foreign language]
According to our plan, the regional share of our deliveries is balanced. North America enjoyed 20%, Europe enjoyed 38%, ROW 13%, while China enjoyed 29%.
[Foreign language]
A few words on our AI front. As we previously introduced, Lotus Robotics does not only provide intelligent driving solutions to Lotus, but also to other global leading auto partners.
[Foreign language]
It is a one-stop provider of intelligent driving and also providing the R&D and engineering solutions to our customers. It provides intelligent driving software and hardware R&D, including the procurement services. We're leading one model algorithm and then also providing the L2 and L2+ ADAS software and its upgrades over the year. We have the global coverage. To date, the ADAS and PAS solution fully delivered across Europe, Asia, GCC, North America, ASEAN, and so on, with the latest highway assist functions upgraded in Europe and well received by the market.
[Foreign language]
Our clients include multiple brands from the Geely ecosystem, but also to emphasize as well as other clients, external clients such as the leading European conglomerate, a top Japanese Tier 1 supplier, and a few others.
[Foreign language]
On the future growth, in the next two or three years, we are planning to equip, to provide the services to another 10 different models, including the passenger vehicles and also the commercial vehicles.
[Foreign language]
We are actively seeking an upgrade of our technology solution using the large model algorithm to be able to enable the company to deliver a level four or level five solutions to the globe. We also introduced previously, we have entered into a strategic partnership to allow us to explore the Robotaxi project expansion in Saudi Arabia.
Thank you.
Thank you, Mr. Feng and Dr. Wang. This concludes our opening comments. We will now move to the Q&A portion of the call. Operator, please.
Thank you. As a reminder, to ask a question, please press star one and one on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star one and one again. As a reminder, if you ask your question in Chinese, please translate to English afterwards. Thank you. Just a moment for our first question. First question comes from Edison Yu from Deutsche Bank, U.S. Please go ahead.
Hey, this is Laura for Edison. Thanks for taking our question. Could you share more details about the company's product roadmap and the future business outlook? How should we think about the upcoming product launches and the growth trajectory, etc.? Thank you.
[Foreign language]
As we introduced earlier, the powertrain technology, I will say a few more on the powertrain technology. We will actively promote our Hyper-h ybrid technology. The first vehicle to equip will be an SUV, launching into the market, begin delivery to the customer starting from quarter one next year. Also, you can see in the presentation deck that we have another vehicle. It's a new type of vehicle. Also will be equipped with the Hyper-h ybrid technology. It will have the strong embedded Lotus DNA inside with the performance-targeted product definition.
[Foreign language]
As a global brand, every single product that we develop, we are developing into global standards and global compliance. Basically, that's for Eletre and Emeya. We have the homogeneity of the majority of the markets, including the U.S. However, we have seen the U.S. tariff fluctuations throughout this year. We expect that if the tension is eased, then we will be hoping to deliver those vehicles into the United States again.
[Foreign language]
In terms of our proud Emira sports car, we are having a facelift in the model in 2027 due to the EU 7 kicking in. For that, we are planning to have an upgrade on our V6 engine and also a plug-in hybrid as an alternative.
Thank you.
Thank you. Just a moment for our next question, please. Next, we have Eugene Hsiao from Macquarie Capital. Please go ahead.
[Foreign language]
Thank you management for taking my question. I'd like to ask about the Put Option that was exercised, I think, in early July and the expected merger with Lotus U.K. Could you please help explain the One Lotus strategy and then how you plan to integrate this business and any expected synergies? Thank you.
[Foreign language]
On the One Lotus, as per current status, we have Lotus Cars in th U.K. who develop and manufacture sports cars, and we have Lotus Tech to develop and manufacture the lifestyle vehicles. In terms of a consolidation plan, we see big room for efficiency improvements while we consolidate a lot of the functions together, including the technology synergies. Basically, we introduced the Emira. Once we have done the consolidation of One Lotus, Lotus Cars U.K. will also be enjoying Lotus Tech's Hyper- hybrid plug-in hybrid solution.
[Foreign language]
We have also ambitious goals for the Lotus Cars U.K. operation in the future. We will focus on the very high performance attributes and also the high performance engineering services that we can seek external clients. As per the Lotus Tech operation in China, we will focus on the intelligence and also electrification engineering and development in China while we have the synergies between both.
[Foreign language]
Because the company has delivered all the prerequisites of the Put Option in 2024, and the consolidation plan has been officially approved by the board, we are now in the process of closing. We are targeting to close the deal by the end of this year, no later than by quarter one next year.
Okay, thank you.
Thank you. Due to time constraints, we will conclude the Q&A session. I will now pass back to Michelle for closing remarks.
Great. All right. With that, I think we're all done for today. If you have any questions, please feel free to contact our IR team through the contact information on our website. We look forward to talking to you next quarter. Thank you very much and goodbye.
This concludes today's conference call. Thank you for participating. You may now disconnect.