LOT | Lotus Technology Inc. | earnings call 2026-09-04
Verbatim transcript (source: faster-whisper-small.en)

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 First Half of 2026 Earnings Call. My name is Michelle Ma, the Head of Investor Relations here at Lotus. With me today are the CEO Mr. Ching-Fung Fong and the CFO Dr. Daxia 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 US Private Security Dislegation Reform Act of 1995. Forward-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 risks presented certainties is included in Lotus Tech's relevant following with the US Security and Exchange Commission. The company annotates no obligation to update any forward-looking statements except as required under Article 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 retranslation of receivers in the press release available on our investor relations website at IR.GookHeisenLotus.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 of the 2020 earnings release. Again this is Dr. Wang, Chief Financial Officer of Lotus. I'm excited to brief you the unaudited financial results of the company. In the first half of the 2020, the company delivered 3,904 units, representing like a 39% year-over-year increase, outperforming the referenced traditional premium and luxury segments. This solid delivery performance reflects the company's growing market presence and competitiveness, producing in the high-end automated in-sector. Strong delivery growth directly drove revenues up 23% year-over-year to $268 million for the first half of 2076, with 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 electronics. Growth profit rose 47% year-over-year to $26 million, while growth margin expanded 1.6% to 10%. This improvement was supported by a favorable product mix following the successful launch of the ElectroX, the first ever PhDV in its 78-year history, making the early validation of our multi-power trade strategy, to maintain our discipline cost management trajectory. Drop region loss, 963% year-over-year, so 97 million US dollars in the first half of 2076. This improvement stems from rigorous financial management, better operating leverage, and a one-off licensee refund into the product pipeline adjustments, excluding this one-off items. The operating loss made 26% year-over-year to $195 million, demonstrated the commonest ongoing focus on driving operational efficiency and upholding the strict financial discipline. In May 2026, we unveiled our Focus 2030 strategy, which Ms. Fong will address in his remarks. It improved financial outcomes, so as a tangible proof of our progress against co-pillars of Focus 2030, namely our multi-power trade 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 ElectroX 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 markets and 164% growth in RW. European deliveries file 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. ElectroX opened for third orders across mainland Europe on June 3, with customer deliveries commencing in the fourth quarter. UK launches will follow in mid-2027. They expect this new model to fill 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 the 2016 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 of the 2016 stood at $242 million of 21% year-over-year. As a result, gross profit reached $26 million, a 47% year-over-year increase. Our pre-tax expenses during the period came in at $127.5 million, 46% year-over-year, primarily comprising the following. Our de-expans stood at negative $1 million in the first half due to the aforementioned one-off items. Shaping out of this specific special one-time adjustment, our de-expanses totaled $96 million, a modest 4% year-over-year increase versus 92 million in the first half of 2075, driven by technology investment for the electoral acts. Shaping out of the 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 electoral acts launched in China and the pre-launch campaigns in overseas markets. General acts' administrative expenses decreased to $46 million, down 27% year-over-year. As a way types can control travel, agency, and other costs, and optimize our organizational structures. Based above, even excluding one-off effects, the operating expense to revenue ratio improved from 107% in the first half of 2075 to 84% in the first half of 2076, reinforcing our priority to lift operational efficiency and maintain strict cost controls. Accordingly, operating loss and net loss for the first half of 2076 narrowed 63% and 52% respectively. Our non-GAAT adjusted basis adjusted e-beta loss for the first half of the year narrowed 57% to $104 million compared with $240 million loss in the same period last year. Beyond high-line metrics, I would like to emphasize that we have delivered a sustained operating expense reduction through the wide-driven initiatives. This reflects our continued focus on cost optimization and operational efficiency. 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-Ching Feng, CEO of Lotus Tech. Thank you for joining us in the Lotus Tech's first half of the 2026 earnings call. In the first half of the current year, we believe the improvements across all our core operating metrics and steadily rolled out the Focus 2030 strategy unwelled 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-bred 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 hit the Canadian market and representing a significant milestone in the Lotus efforts to expand its North American footprint. Our first hybrid offering this year, the ElectraX, known in China as ForMe, has received an EZS response since its domestic release. The model has helped lift the Lotus market share in China from passenger week or segment price above RMB 500,000 to nearly 2% in the second quarter. In June, we opened orders for the ElectraX in the EU market, with deliveries scheduled 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 enthusiastic staff for coordinating. With a power boost and a 25-kilogram weight reduction, the Emira 420 delivers even sharper cornering points. In July, we launched the Emira Scura limited edition in China, a tribute to the Exige Scura from 17 years ago, with only 9 units allocated to China and 60 to North America. The entire rung sold out immediately. Under the Focus 2030 strategy, we will unveil the Type 135 mid-engine with eight hybrid hypercar in 2028. In July, Emira set a new EVO lab record at the Malaysia CPINE International 30th, surpassing the previously publicly recorded Fartis EVO lab by the significant margin, yet another testament to Lotus performance credentials. However, we have published our 2025 Sustainability Report, underscoring our ongoing commitment to global sustainable development. Meanwhile, we have signed MOUs with the website platform Finloop and the leading payment institution FormalPay to jointly pull compliance applications of on-chain payments and real-world assets to organizations within the luxury mobility space. Now, let me turn to the recently unwelled Focus 2030 strategy, designed to adapt to an evolving external landscape. This strategy redefines Lotus core strategic positioning, which rests on four pillars. First, strengthening our brand heritage in 78 years of track-hung driving dynamics. Second, adopting a multi-powertrain strategy to flexibly address diverse global customer preferences. Third, leveraging the one-loaded integration and the various 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. Focus 2030 pillar 1, strengthening and passing on our brand heritage. Lotus is rooted in a British racing category and powered by the latest global leading technology, together enabling the purest driving engagement for enthusiastic. On this very foundation, we have tailored brand activation strategies for each of our core global regions. In Europe, we are capitalizing on Lotus Trackport, brand premium, reinforcing our presence through a multi-powertrain product portfolio. In China, we are tapping into the rising demand for premium new energy vehicles. Positioning Lotus is a brand that embodies both high performance and intelligence in the luxury EV segment. In America, our focus remains on sports cars. While the Electro launch 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 30, 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. 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 pure electric, hybrid, and internal combustion pathways in parallel. Every one of our products remains uncompromisingly driver-centric. Our first hybrid model, for me, made its Chinese debut this March, with European delivery scheduled for the fourth quarter. Looking ahead, we are focused on developing our next-generation hypercar, the Type 135, and also a hybrid available in both V6 and V8 powertrain variants. The Type 135 will fill the gap between the Emira and the Evia, preserving the emotional connection Emira owners have with Lotus's mechanical handling. While leveraging V8 hybrid technology to approach the technical benchmarks set by the Evia, this creates a natural 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 postcards. We envision this model as our flagship, one that will enhance the company's overall profitability. The Type 135 has already generated tremendous excitement among Lotus fans worldwide. After 22 years, we are bringing back a mid-end engine V8-powered model with over 1,000 horsepower, 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, always in 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 1 technology to bring it down to just 20 kilograms. We are also co-developing an 8-speed DCT with force, designed to handle high torque while keeping weight to a minimum. On the sports car front, as mentioned earlier, we have introduced the IMIRA 420 and special editions such as the IMIRA scooter. We will continue to roll out new IMIRA springs going forward, reinforcing its value as Lotus final pure combustion sports car. In the lifestyle week category, we are also introducing the Electro 9-hand Gold Edition and IMIRA 9-hand Gold Edition, available for pre-order starting August. We will keep refining the product competency in this segment. The launch of the Electro X has given the mainstream luxury vehicle buyers more choices and will further expand the Lotus market reach and customer coverage. Focus 2030 pillar 3, deepening ecosystem synergies with partners. Our ecosystem synergies are viewed on two core pillars, Lotus integration and the deeper collaboration with the dealer ecosystem. Last Friday on August 21, 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 distinctive positioning in the luxury automotive space. We are committed to the one Lotus strategy on three fronts, brand. 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 investment and fragmented resource allocation, delivering a dual uplift in brand value and operational efficiency. We will also continue to deepen synergies with the building ecosystem. The building 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, Jilis platform enabled us to stay at the forefront of electrification and smart technology while reducing cost and shortening the gold market duration for new technologies. By leveraging Jilis' shell platform, Lotus can concentrate its R&D efforts on signature technologies such as lightweight engineering, aerodynamics and chassis tuning. Maturing supply chain, with access to Jilis' 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 risks. Flexible manufacturing, Jilis' global distributed flexible production system helps Lotus to accelerate product launches, scale up operations and build costs of the languages. Such collaboration is bidirectional empowerment. Lotus proprietary know-how, extreme handling, aerodynamics, lightweight engineering and chassis tuning fits back into the ecosystem in return, driving technological advancements across the broader group. Our Lotus Engineering Division, in particular, covering top 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 Jilis but also the wider industry. We maintain ongoing joint development programs with Jilis' 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 sustainable profitability. Our path to achieving these objectives rests on three key drivers, first, delivering study volume growth through brand building and portfolio expansion, with the launch of the ElectroX in 2026 and Type-135 in 2028, where fully leveraging the flexibility of our multi-powertrain 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 25 to 30. Second, driving sustained growth margin improvements, with the target of exceeding 20% by 2030. On the revenue side, we will raise average selling price and margin through brand strengthening new model launch rates and customization offerings. On cost side, we will leverage Lotus' integration, Jilis' line chain and product synergies and economic scale to effectively optimize cost control. Third, adopting strict, advanced detailing based on the first two drivers, we are implementing rigorous cost control growth at GNA and R&D, with the goal of reducing the combined share of revenues to below 25 by 2030, enabling our ability to turn positive. In summary, Focus 2030 provides a clear and actionable profitability roadmap, platform growth through product extension, lift growth margin through brand premium and cost discipline, and deliver positive earnings through integration synergies and link operation. Our first half-2026 business performance already reflects our firm commitment to moving point 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 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 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. Thank you for taking that question. Firstly, I want to talk about the Lotus Formula E, the PHEV model. Since it was launched in March, could you discuss the order intake, delivery, and the initial market response and the custom profile? And what are your expectations for four-year sales and margin? At present, FOMI deliveries are primarily concentrated in China as of June 30. Cumulative orders of FOMI 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, FOMI comments the higher growth margin than our pure electric vehicles. In addition, the model benefits from deeper collaboration with Vili, leveraging platform sharing and economic scale, which further support 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 increase steady-state volume. In the first half of 2026, the Chinese passenger vehicle market priced above RMB 500,000 recorded sales of 185,000 units, down 12.8% year-on-year. However, new energy penetration in this settlement climbed to 40.2%, driven primarily by a sharp rise in rehab penetration. From 0.9% in 2025 to 21.6% in the first half of 2026, we have self-searched more than 24 year-on-year to 40,000 units, overtaking range extended at the largest new energy sub-segments. Using this opportunity, Lotus launched FOMI in late March, leaving our market share in China's above RMB 500,000 passenger vehicle segments to nearly 2% in the second quarter. The customer profile of FOMI has also been highly encouraging. To date, 63% of buyers are new to the Lotus brand and over 70% of customers have opted for the highest stock variant. In the second half, we were sustained momentum through integrating the 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 plans of storage in the northeast and northwest opening up new markets for future sales growth. In Europe, we formally comment the order taken for the electro act in the first half, adding a fresh growth driver for the second half and beyond. In the first half of 2026, EU-SUE sales above 70,000 euros reached 160,000 units, with new energy penetration remaining high at 52%. Within that, P-HAB-SUE 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 to roll out. In parallel, we have been advancing our digital marketing strategy across Europe, leading a customer pipeline to support all the conversion in the second half and further expanding our cross-factor base. Our EU marketing strategy will gradually shift from brand awareness to self-conversion, leveraging diverse in-depth experience events and sustain the digital engagement to strengthen customer relationships and improve conversion rates. The introduction of the electro act has effectively enabled us to access market segments and niches that our pure electric offerings alone could not have. As such, we are equally confident in the incremental volume that the electro act will deliver following its European launch and delivery. Thank you. Appreciate the color. Secondly, I want to talk about the Type 1 35 hybrid sports car that you are planning to launch. Could you provide any update or could you introduce a bit like the strategic rationale or logic behind this model? The Type 1 35 is a critical high-performance hybrid product for Lotus in the next phase of our development. As mentioned earlier, the Type 1 35 marks the return of a mid-engine V8 model after 22 years. Leveraging Lotus' expertise in aerodynamics, lightweight engineering, and chassis tuning, the Type 1 35 will establish a new technical benchmark for high-performance sports cars reaffirming to the market our ability to translate track-bred engineering into extraordinary software-in-driving experience. And the first solidifying the Lotus brand's assets and image. The Type 1 35 will bridge the product gap between the IMERA and the EVIA, creating a complete sports car portfolio that spans the IMERA at the engine-level combustion sports car, the Type 1 35 as a hybrid flagship hybrid car, and the EVIA as a collective automatic performance hybrid car, positioning the Lotus brand for decisive up-water. On the motorsport front, the IMERA already competes in GT4 events, where we have achieved notable results including podium finishes at the Macau Grand Prix's Greater Bay Area GT car. With the Type 1 35, we will take the next step forward and enter GT3 competitions. Beyond its brand-boosting effect, the Type 1 35 will also elevate our lifestyle week lineup, complementing the Electra X luxury hybrid SUV, the all-electric Electra and the Prime City in May, this multi-part-training strategic coverage will encompass brand definition and appear across our lifestyle week of portfolio. For a market, among perspective, sales of our core sports car competitors have been impressive, compound annual growth rate of 7 to 9% from 2022 to 25. Global sports car sales reached 150,000 units in 2025, with the addressable market expected to pick up up to 190,000 units in 2028 and 220,000 units by 2030. In the United States, above 600,000 sports car segments have shown steady year-on-year growth. Beyond the prime level above, US 600,000 sports car market in both Europe and the US is seeing a clear transfer of hybrid transition, with the hybrid share rising from 26% in 2025 to 35% in the first half of 2026. Core sports car enthusiastic in Europe and the US plays high value on the risk or appeal of internal carbon engine sound and mechanical driving activity. Pure electric supercars constrained by battery weight and 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 focus driving dynamics filling a clear gap in the market. On the technical knowledge front, our Lotus more than seven decades of history limited in-house powertrain capabilities have been our most significant handicap. We have traditionally relied on outsourcing. This time, with Gilly's strong support and technology enablement, we are co-developing a high performance powertrain with tools. This collaboration allows us to leverage Lotus core strength in lightweight engineering, aerodynamics design, and sophisticated chassis tuning while tapping into Gilly's resources, global supply chain, and scale advantages, meeting the Type 135 power requirement while balancing R&D, investments, and per unit cost. This technology will be applicable to future generations of the Electro X. 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. Thank you. Okay, got it. That's very helpful. If I can make one more question. How do you plan to sustain a growth momentum in the second half of this year? How should we think about the growth drivers? Thank you. We have developed different strategies and plans for different regions. For example, for the China market, first, we are going to maintain the market momentum and launch cadence for the form of the FOMI through an integrated test drive experience program, sustaining the self-cadence established in Quarter 2. Second, we have also introduced the Lotus Emira 420 sports and the Lotus Elezra and Emaya 900 Gold Edition. This high performance new product will elevate brand awareness, reinforce our value proposition, and multi-way market engagement. Third, strengthen customer engagement and increase the customer referral rate. And fourth, leverage hybrid models to enhance our self-network footprint in northern China, upgrading distribution network in high potential markets to convert market opportunities into tangible self-results. The Lotus Elezra X is the first product to improve customer engagement. The Lotus Elezra X is the first product to improve customer engagement and increase customer engagement. This product is the first product to improve customer engagement and increase customer engagement. In Europe, we will first start with the launch of the Elezra X, which will progressively unlock initial market demand. 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 advanced channel development in team 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 US and Canada were officially common deliveries in the second half. Besides, with the introduction of the E-Mira 424 and the Maudier 27, we will reinforce the E-Mira's driver-centric positioning centered on driving engagement, captured demands created by the dis-communiation of the Porsche 718, and accelerate order conversion at the dealer while generating new products. For the rest of the world market, the most significant milestone for the second half is the official market launch of the P-HAB product in the Middle East, with the Elezra X scheduled to arrive in the region by year-end to drive world growth. Additionally, as the E-Mira 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 continuing the network expansion, including the Caucasian regions and the Middle East regions. Thank you. Okay, got it. Appreciate the call. Thank you. We will now take our next question. And this is from the line of Jiang Shao from Barclays. Please go ahead. I will translate myself. So my first question is about Focus 2030. We've guided towards a steady ramp-up to 30,000 deliveries. Over 20% growth profit from the origin and positive impact under the plan. Can management comment on our thinking when setting up these goals will give 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. 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. Should Global Motorsports even, for example, Lotus Cup and Lotus Driving Academy and the launch of the hybrid flagship Hypercar Type 1.35, we will continue to re-inform the first Lotus 78-year 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 entries into Brazil, Paraguay, Algola, and other South American countries. We will sustain global channel extensions, 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 were showcase loads driving DNA running through track through rows and enhanced brand premiums. We have already launched the ElectroX, 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 volume growth. In 2028, we will also introduce the flagship hybrid hypercar Type 1.35, providing additional boost to the sales height. Thank you, thank you to Michel for your questions. I will compliment the first question, which might be used on the financial part, and I will answer your second question. On the first question, now focus on the 30s, on the financial side, you know, to lower the cost, focus on driving the synergies across multiple stakeholders. First, supply chain collaboration and manufacturing scale with Gidi. For lifestyle vehicles, over 50% of components share with Gidi. Leveraging Gidi's centralized procurement and stable scale advantages, those gains access to a broader pool of high-quality global suppliers, they may lower the meaningful cost reductions. And secondly, R&D platform sharing with Gidi. Full enhanced development of vehicles architectures by the company alone may require over $1 billion investments. But, BUNU R&D's underlying platforms and the inviting lotus-specific technologies may become materially lower than the expanding. And thirdly, the full integration of Lotus UK will allow substantial energy benefits, signature benefits. And in parallel, we will diversify revenue streams through the high-end customization and limit addition models, supporting our target of lifting gross margin about 20%. Currently, we will proceed to refine operational management, other side types, expense control, and further analog operating leverage to deliver the profit positive. And in sum, under the R&D focus 2030 strategy, we will prioritize development quality and profitable growth rather than pursuing the sales model for its own sake. So that's the answer for the first question. And we continue with your second question regarding the synergies with Lotus. And as you know, the combined Lotus brand will preserve its global consistent positioning as a high-performance luxury provider. The HACL UK site will focus on the ICE and PHEV sports car vans, pursuing a differentiated strategy centered on the limited addition modules. The Wuhan China facilities will need BV and PHEV lifestyle vehicles under the volume production strategy. We will also prioritize operational integration, binding shares, R&D manufacturing, and supply chain functions with the goal of building Lotus into a globally competitive high-performance also brand. Integration and synergies across the shared and the capabilities and supply chain competitions will enable the further cost reduction and efficiency gains for the group. And financially, we expect top-line growth for two key reasons. First, e-mirror 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 mixed company, bringing in Lotus UK's vehicle and service growth margins will also improve the group's overall growth margin profile. From an expert standpoint, the neutral foundation of Lotus UK's R&D administrative and other costs may result in wider global level loss. Going forward, we have strengthened the integration across R&D commercial and cost functions teams from both organizations, streamline the organizational structure, adopt lean cost management practices, and lower the operating expense to revenue ratio. The game of this is a business under the combination under the common control pursuant to the financial disclosure rules. The company is required to carry out the suspicious restatement for the consolidated financial statements. This statement for the fiscal year 2035 has been initiated. They expect this stated financial restatement to be disclosed so little than the release date of the 2076 and the report. And for this part, please stay tuned with our announcement and public release. Thank you. Thank you. Very helpful. Thank you. We will now take our next question. And this is from Brian Lanciet from Zacks. Please go ahead. Good evening, everyone. Thank you. Really impressive results considering the challenging operating environment in 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. Thanks. The question, the gross margin improvement was driven primarily by two factors. First, the product needs optimization. The delivery share of the higher margin PhD modules rose significantly. In fact, they lived in the overall gross margin. And secondly, supply chain synergies and economy of scale graduated to effect with a pre-vehicle manufacturing costs continuing to decline, supported by the global supply chain system and a 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 pressing volatility of the chips, my understanding is like this. The cheap price volatility alone drove nearly 2% increase in our bond costs. In saying that, the cheap pricing did give some pressure on the company's gross margin in the first half of the year. In response, common has been actively collaborating with the GED group to expand the supplier base and then navigating through their volatility smoothly. Plus, maintenance required bond cost optimization to offset the cheap driven cost increase. Consequently, the company's gross margin in the first half of 2026 improved compared with the 2025. Regarding the pay-as of chips since the federally pressed stabilization, and we believe the current drivers of this round price increase is caused by the AI's zero capacity, according to the supply of automotive, grid, drum, and net chips. Based on the upstream welfare bond expansion schemes schedule and the ways of editing into our cheap supply chain, they 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 is this, 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. You will come to the call now. 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 concludes today's conference call. Thank you for participating, and you may now disconnect. Speakers, please stand by.