Lotus Technology Inc. (LOT) Earnings Call Transcript & Summary

Hello, and welcome to the Deutsche Bank Virtual Investor Conference, dbVIC. This is [indiscernible] from the Deutsche Bank team. I'm pleased to welcome our next presentation by Lotus Technology from China. Before I introduce our speaker, a few points to note. Please click on the questions box to ask the question. [indiscernible] presentations, recorded and can be accessed by the Deutsche Bank website, adr.db.com. I'm happy now to hand over to Lotus.

Hello, investor friends. Thanks for joining today and also today [indiscernible] goes to DB colleagues for inviting us. I'm the CFO of Lotus. My name is Daxue Wang. Today, I'm going to give you a quick presentation of product company so that you can learn us better. So Lotus is a brand founded in 1948. It's a British brand, and we have a pretty prestigious name in the Formula 1 history. And regarding the current dynamics in the market, so we are early mover in the luxury UAE market. In that case, today, this year, we are going to incorporate one company strategy, incorporating the Lotus British brand plus the EV brand. So we are going to integrate today the 2 companies by the end of this year, to integrate all the business and operations under the one Lotus and [indiscernible] we are still honored to be one of the world's most famous OEMs in terms of the research and development capabilities. We are renowned with our world-class aerodynamics and lightweight philosophy, and we implement 800 voltage electric performance architecture years ago. And next generation, we are going to issue the 900 Hybrid EV technologies. So -- and also we are honored to be developing the self-developed intelligent driving systems. So far, like we cover all the global distribution networks with our over 200 stories globally and we are even distributed across the globe. So this is the main things like we are going to like to know today as investment highlights for the company. So next, I'm going to go into some more details. As you know, we are a prestigious like brand with a lot of heritage starting from 1948 when the Colin Chapman founded this company. And throughout the years, we have so many recognitions from the industry, especially in the sports car/racing car sector. We were 7 times champions for the Constructors' Champions in the Formula 1. And also, we won 6 Drivers' titles for the Formula 1 and got 81 times of Grand Prix winners for the FE Formula 1 activities. And also, we won the numerous Grand, including the [indiscernible], including the Monte Carlo, these kind of things. So you can tell from the Lotus Phase 3, I think that's Phase 3 regarding the -- everything regarding the sports car and the current years regarding the lifestyle, so which is what we say as our local, we are doing everything for the drivers. As a brand, we used to be a brand focused a lot on the racings and on the sports and we are pretty well known with our philosophy regarding the lightweight, regarding the chassis tuning. And so far, facing the new era of the industry, we are the first mover in the luxury lifestyle segment, and we are leading in the advanced technology associated with the current electrification. And next, we have the full lineup covering both the battery, electric products and also the plug-in hybrid. So all in all, we are performing -- perform [indiscernible] -- by the philosophy of high performance, good design and world-class engineering. So that's the evolution of this brand. We keep the eye on the new development of the industry without losing our heritages. Regarding the brand, the other thing I wanted to highlight to you is about the integration. We used to have 2 Lotuses. A Lotus is what we have in the U.K. It's a sports car heritage and famous for engineering excellence with the current shareholder of Geely and Etika. And we have another Lotus brand. Actually, it's the listed companies. And so we focus on the lifestyle EV focused platform, and we have a global distribution and also is a listed company in the NASDAQ. And starting this year, the shareholders of the Lotus company in the U.K., they exercise their production, meaning that by the end of this year, hopefully, we are going to integrate both Lotuses into one. So that what we call one Lotus strategy. Saying that, we can realize the unified governance, streamlined management framework and further realize the cost synergies. So you're going to see this going to happen by the end of this year or early next year. This slide gives you the brand positioning regarding our Lotus brand. We are a pioneer in the transformation to the electrification period. And also, we remain one of the super luxurious brand. So next our -- so this is a brand positioning you are going to see through our branding and also our product portfolios. And next slide, I'm going to let you know about the technology of the Lotus. We used to be very good at the aerodynamics and lightweight that's our philosophy. I think this contribute a lot to the industry development of auto industries. We still remain committed to the founder's vision and employment concept lightweight and aerodynamics of our new products. And we enable the fast, streamlined acceleration and extraordinary maneuverabilities of the 12 abilities of the cars and they will provide a lot of [indiscernible] and fabric materials in the current products. So that's the -- that means like we keep the product heritage and we will keep the philosophy of the branding. We manage the -- our flow management very well, so to make our products stand off in the -- from the peer companies. And meanwhile, we take advantage of the current development of the technology. We are a pioneer in electric performance architecture in our current products. We have the digitally integrated chassis control system and also we have this dual-speed transformation and motor with strong power motor, and we have very strong battery management system plus the advanced electric architecture. So all in all, this provides our current products very advanced even like the standard, although we actually launched the product 3 years ago. And for the next generation, we're going to see we are going to develop the product by early of next year. Actually, we are going to unveil the product by the end of this year. So you're going to see it's a new platform with 900 Hybrid platform. The combined driving range will be over 1,000 kilometers composed of 7 kilometers -- 300 kilometers for the pure battery plus the remaining with gasoline. And it's going to be an industry-leading dual hypercharging technology composed of Ultra-Fast Plug-In Charging and Ultra-Fast On-The-Drive Charging. The Ultra-Fast Plug-In Charging allows us to be as speed as the battery swap. I mean On-The-Drive Charging allows us to charge the power 5x than the power consumption of the typical work driving conditions. So as I just mentioned, we are going to unveil this product this year, and we are going to hope to -- we hope to deliver this product by the early of next year and later on, we are going to launch this product global-wide. On top of the vehicles, we also specialize in the current like the intelligent driving. As you know, like we have a wholly 100% owned subsidiary, which provide intelligent driving across the globe, not only for the Lotus brand, but also to the other global OEMs in the industry. And we provide only the software but also the hardware. So it's integral solution, one stop. And we apply the leading algorithm and L2 plus other software upgrades. So currently, we are operating global-wise. We are providing the solutions to one of the leading European big companies plus Japanese companies and others. And you can tell from our press release, we signed -- in the middle of this year, we signed a memorandum of understanding with Saudi company, which is -- in that we are going to provide the robotaxi service and also, we are going to have the autonomous driving technology applied in the Saudi through the collaboration with Saudi companies. So that's -- we are going to have a global presence, not only with the cars, but also with our autonomous driving capabilities. On next page, we are going to show you the products, current products in our portfolio. As you know, we have this Evija. It's the world's first all-electric British built hyper car. It's a first Lotus with electric powertrains. So this is -- I think it's a very bad year 2019, when we first released this one, it's an industry surprise. And next product is also produced in the U.K. It's Emira. It's [indiscernible] to be the last one of the Lotus family with a pure powertrain with ICE and that means electric. So it features all the automotive world that comes to it from the Lotus with a striking design, with a thrilling dynamic performance and best-in-class ride and handling and outstanding aerodynamics. So this car weighs a lot of honors from the industry. And the next 2 products is about our electric products, which are produced in China. The first one is the one we released in 2022. It's -- I think it creates a lot of first for the Lotus family. It's the first time we have a hyper production car and the first model outside the sports car segment and it's the first lifestyle EVs. And however, it remains a true Lotus packed with pioneering technology, sports performance and simplicity of purpose. And 1 year later, we released this Emeya. It's a pinnacle of electric hyper-GT. So this is -- I think it provides some benchmark for the later car models. And this is also a lot of honors from the industry [indiscernible] recommendation from the end users across the globe. And this page shows us the -- shows you the current global coverage of our global distribution network. As you can tell, we're pretty unique in the sense that we have [indiscernible] balance global coverage, including China, including Europe and including North America. So roughly like we count like our product portfolio in China is about [indiscernible] 1/3 and Europe 1/3 and the rest of the world 1/3. In China, our sales network is still expanding. Right now, we have 36 cities. And by the end of this year, hopefully to reach 50. And in Europe, we are still like strategically prioritizing the tariff advantage markets and the premium EV markets with growth potential. So I think with the U.K. brand heritage, it's going to help us to grow healthier in the European markets. And also leveraging the Geely’s global ecosystem entities, we are actively collaborating with multistategic partners to architecture the localized markets for the province for the other countries like North America, like the rest of the world. So our objective is to be evenly distributed our products across the globe. And for our target clients, [indiscernible], we have a very loyal existing customers, which are [indiscernible] seeker and also individualist. And looking at the future, we also have a young generation of high net worth wealthy people. They like the driving like the -- try the new technology. They just want to be unique and they want to find like ESG environment-friendly driving products. So our products, I think, cater to both. This slide lastly show our partnership with mainly with the shareholder Geely, and we are part of the Geely ecosystem. We have strong test with them. And between Lotus and Geely, we have mutual beneficial partnership. Of course, Lotus is under independent management. And Lotus -- we can have like iconic and precious brand among the Geely module brand portfolios. We are a pioneer in advanced auto technology. We can also realize a well-balanced global distribution presence. And also, we are the only Geely affiliated brand with sports car DNAs. So this is our particular branding across the Geely brands. And also with Geely, we benefit from Geely in terms of the procurement, supply chain, manufacturing support and also the human capital support plus the [indiscernible] revenues to the Geely’s Group of companies. So I think we are interdependent, but we remain very independent relations with the Geely Group. [indiscernible] take advantage of the networks of Geely, we realize the [indiscernible] model regarding the manufacturing and U.K. In U.K., like we have the Chapman production center. So we will produce the sports car over there. And in China, we take advantage of the production capacity. We contract with Geely and we use the -- we produce the EV products over there. And so this kind of [indiscernible] model help us to be flexible meanwhile to be able to pursue the mass production. So keep a lot of flexibilities meanwhile to lower the cost -- and also this slide shows us we are committed and devoted to the ESG of the -- our development. We won a lot of awards through the -- in the industry. And we try best to realize ESG company to lower the carbon emission. And so we have -- tried to find -- realize transparent governance, and we try to contribute to the community, so this is our objective. Not only we are business-oriented, but also ESG-oriented companies. Regarding the financials, we are still startup and we are trying the best to improve our performance regarding the -- our operation through the partnership with Geely, for instance, we realize procurement and supply chain optimization through the Geely and also we utilize their production capacity and also with them, we can realize the CapEx efficiency. We are streamlining -- internally, we are streamlining the operations through the production efficiency, improvement and also the organization structure. And also, we are implementing this strict budget control, that will optimize the working capital management. And through the coming like Lotus strategy, we can further realize the synergies through the brand unification and to avoid duplicated investments through the -- we can share the R&D development, also supply chain, these kind of things -- enable us to fully the utilize the Lotus collaboration. This slide shows our financials for the first half of this year. I'm not going to dwell into details. As you can tell, like the -- actually due to the market and also the tariff obstacles in the China -- between China and U.S. and between China -- between U.S. and the U.K. And I think last -- first half of the year actually influenced our sales performance. But I think -- that's something we are trying to work out. On the regional level, China for the first half of this year occupies almost 50% of the market. It's mainly because of the -- I think the slowdown in the North America due to the tariff and this kind of stuff. So overall, I think we are evenly distributed across the different regions. And this page shows you the key numbers in our financial report, and I'm not going to dwell into details. So you can see this from our public announcements like financial report released in the public. And so I think seeing is believing. I look forward to like visiting us either in the U.K. or in China or to meet our management to discuss the possible like the strategic future of the company. So I thank you so much for joining today. And if you have any questions, you can either contact me or my colleagues in the IR team or the company management. So thank you so much for joining today, and thanks a lot.