"The Fallen Aristocrat" Lotus Tech, easy to change name, hard to change fate

Editor | Yang Bocheng

Caption | Wenxin Yige

Just as Lotus, which saw a second spring in sales in the first half of 2024, encountered a series of troubles in the second half of the year.

For example, the brand that had been called "Lotus" in the Chinese market for seven years suddenly changed back to "Lianhua" overnight, causing all the previous brand promotion investments of billions to go down the drain. It was then rumored that Lotus's global technology headquarters under construction in Wuhan had been abandoned, prompting Lotus to refute the news, stating that all work was steadily progressing according to plan.

In the first half of 2024, Lotus showed strong growth in sales, reaching 4,873 units, directly driving total revenue up by 206% to $398 million. Lotus CFO Li Kunlong frankly stated that both of these figures are record numbers in the brand's 76-year history. However, Lotus's adjusted net loss was $424 million, a 20% increase year-on-year, still in a significant loss state.

It is worth mentioning that Lotus's growth momentum seems difficult to sustain in the second half of the year. Lotus had predicted in its prospectus that sales in 2024 would reach 47,000 units, but in April 2024, Lotus adjusted its sales target for 2024 to 26,000 units. By August 2024, the sales target was further reduced to 12,000 units, while the sales target for 2026 of 50,000 to 60,000 units was changed to 30,000 units.

In response, Lotus Global CEO Feng Qingfeng admitted that tariffs in North America and the European Union have made it impossible to achieve sales targets in the U.S., with overall sales in Europe expected to be affected by 30%. At the same time, luxury car sales in the Chinese market have dropped by 50%, impacting Lotus's sales in the Chinese market as well.

Although Lotus has successfully entered the capital market, no car company in the luxury electric vehicle sector has yet been able to meet market expectations. Lotus, which has been unable to achieve profitability, is destined to face a challenging road ahead.

01.

Uncertain Future

In February 2024, Lotus successfully went public on the Nasdaq, with an opening price of $17.99 per share and a peak market value of $12.5 billion, surpassing Nio ($9.114 billion) and XPeng Motors ($8.142 billion). By the end of the first day of trading, Lotus's stock price was $13.80 per share, corresponding to a total market value of $9.294 billion.

Although Lotus went public quickly, taking only 13 months from the official launch to successful listing, its performance is concerning. The prospectus shows that in the first nine months of 2023, Lotus had a net loss of $530 million, while in 2021 and 2022, the net losses were $110 million and $720 million, respectively After going public, the situation did not improve. Lotus Tech reported a net loss of USD 750 million in 2023, continued to lose USD 258 million in the first quarter of 2024, and the net loss in the first half of the year increased by 20% year-on-year to USD 424 million. The continuous high losses undoubtedly cast a shadow over Lotus Tech's future development.

However, Lotus Tech seems to think otherwise. In August 2024, it launched the "Win26" plan, which aims to achieve positive EBITDA (earnings before interest, taxes, depreciation, and amortization) and operating cash flow by 2026, reach a sales target of 30,000 vehicles with a 20% gross profit margin. Additionally, it plans to accelerate its globalization process by expanding its market coverage through a network of over 200 dealerships worldwide, especially in markets such as Southeast Asia, the Middle East, New Zealand, India, and Egypt.

In fact, Lotus Tech faces significant challenges in achieving the "Win26" plan.

In the first half of 2024, Lotus Tech's gross profit margin was 13%, a significant improvement from 5% in the same period of 2023. However, it should be noted that Lotus Tech's gross profit margin was 15% in 2023, with the fourth quarter of 2023 reaching 19% and the first quarter of 2024 at 18%. A comparison shows that Lotus Tech's gross profit margin is on a downward trend. Furthermore, the uncertainty in its globalization process is evident from Lotus Tech's downward revision of its 2026 sales target.

Although not as strong as its competitors in terms of hard power, Lotus Tech has a long-term vision and is the first luxury supercar brand to fully transition to electrification.

In October 2018, Lotus Tech launched the "Vision80" brand revitalization plan, announcing a comprehensive transformation to electrification and intelligence. In 2019, Lotus Tech introduced its first all-electric hypercar, the Evija, and has since been advancing its electrification process, aiming to achieve a 100% all-electric vehicle product lineup by 2027.

However, transitioning to full electrification and intelligence requires a strong financial foundation. Taking Mercedes-Benz as an example, to electrify all its brands, it plans to invest over 40 billion euros in pure electric vehicle models from 2022 to 2030.

With the support of Geely, Lotus Tech is not at risk of shutting down due to a lack of funds. However, many Geely-backed brands, such as ZEEKR, which is also listed on Nasdaq, have suffered significant losses and urgently need Geely's support. The extent to which Geely can support Lotus Tech remains uncertain.

As of the US stock market closing on October 23, Lotus Tech's stock price was only USD 4.48 per share, a 75.1% drop from its opening price on the first day of trading. The low stock price inevitably weakens Lotus Tech's financing capabilities in the capital market. These circumstances indicate that Lotus Tech's future is still uncertain

Changing the Name Doesn't Change the Fate

During the 2024 Chengdu International Auto Show, Feng Qingfeng stated that "Lotus" will become the official Chinese name for Lotus Tech.

As for why Lotus Tech is being changed back to "Lotus," Feng Qingfeng believes that Chinese consumers have a deep impression of "Lotus," and mentioning "Lotus" will evoke more emotions.

Founded by Colin Chapman in 1948, Lotus Tech is best known in Chinese as "Lotus Racing Cars." Since its first participation in the F1 championship, Lotus has won 7 F1 constructor championships, 6 driver championships, and 81 F1 race wins, full of legendary colors, and is often referred to as one of the "world's top three luxury supercar brands" alongside Ferrari and Porsche.

Subsequently, Ferrari and Porsche have become top luxury supercar brands, while Lotus has gradually declined, even facing financial crises and having to frequently change ownership. From 1983 to 1996, Lotus was owned by various entities including Toyota, General Motors, Italian businessman Romano Artioli who acquired Bugatti, and Malaysian group DRB-HICOM.

In June 2017, Geely acquired 51% of Lotus from the Malaysian group DRB-HICOM, thereby officially gaining control of Lotus, which became a brand under Geely. Despite Geely's significant efforts and an initial capital plan of up to 26.3 billion RMB for Lotus, the sales of Lotus still struggled.

Changing Lotus Tech's Chinese name back to "Lotus" is mainly aimed at boosting sales.

In 2021, Lotus sold 1,566 cars, which dropped to 576 in 2022. Although sales increased to 6,970 cars in 2023, setting a new annual delivery record since the brand was founded, there is still a considerable gap compared to Ferrari and Porsche, which used to be on par.

From 2021 to 2023, Ferrari sold 11,200 cars, 13,200 cars, and 13,700 cars respectively, while Porsche sold 301,900 cars, 309,900 cars, and 320,200 cars. In the first half of 2024, although Lotus continued its growth momentum with a 239% year-on-year increase to 4,873 cars, it still failed to revive. In comparison, Ferrari and Porsche sold 7,044 cars and 155,900 cars respectively.

Furthermore, Lotus also significantly lags behind in gross profit margin among the three. In the first half of 2024, Ferrari had a gross profit margin of 39.1%, Porsche did not provide specific data but had a gross profit margin of 23.4% in the first quarter of 2024, while Lotus's gross profit margin was only 13%.

An industry expert in the new energy vehicle sector told DoNews that changing Lotus back to "Lotus" may help increase the brand's awareness in the Chinese market and to some extent promote sales growth. However, in the fiercely competitive Chinese new energy vehicle market, Lotus needs substantial changes in product performance, pricing, technological innovation, marketing strategies, sales channels, etc. Relying solely on a name change will not significantly boost sales It's also difficult to change fate.

03.

Hard to Survive in the High-End Market

Lotus Tech has successfully entered the high-end market, but surviving in the high-end market is not easy. With more and more players entering the high-end market, standing out in the fierce market competition is a challenge that Lotus Tech must face.

Currently, Lotus Tech has four models under its belt: EVIJA, EMIRA, ELETRE, and EMEYA. Among them, EVIJA, ELETRE, and EMEYA are all pure electric models, with prices ranging from 668,000 yuan to 1.368 million yuan.

However, in the price range of 600,000 to 1.3 million yuan, Lotus Tech faces many competitors. For example, Nio ET9, starting at 800,000 yuan, is expected to start deliveries in the first quarter of 2025; Aito M9 Ultra Pure Electric Edition, priced at 569,800 yuan, has been the champion of luxury vehicles priced above 500,000 yuan for six consecutive months in the Chinese market. The more expensive Aito M9 will also be officially launched in the spring of 2025; Byton's U8, priced at 1.098 million yuan, sold 5,500 units in the first half of 2024, and the Byton U9, priced at 1.68 million yuan, has also started deliveries...

In fact, for all luxury electric car brands, including Lotus Tech, the high-end market is a tough nut to crack, with some luxury electric car brands already falling.

In February 2024, HiPhi announced a six-month suspension of production and was embroiled in public opinion whirlpools such as salary cuts and overdue payments to suppliers.

HiPhi focuses on the high-end market, with models including HiPhi X, HiPhi Z, and HiPhi Y, priced between 570,000 and 800,000 yuan, 510,000 and 630,000 yuan, and 339,000 and 459,000 yuan, respectively, overlapping to some extent with Lotus Tech's price range.

Poor sales are a major reason for HiPhi's predicament. After the launch of HiPhi X in 2021, the company sold 4,237 units that year. After introducing the second model in 2022, sales remained at 4,520 units. In 2023, HiPhi did not disclose its sales figures, but the company insured 7,886 units domestically in 2023, with an average monthly sales volume of around 650 units. According to data from Autohome, in January 2024, HiPhi Y, HiPhi X, and HiPhi Z sold 136 units, 75 units, and 21 units respectively, totaling 232 units.

For the car industry, which relies heavily on economies of scale, HiPhi's monthly sales volume in the three digits means it is on the brink of survival. In comparison, Lotus Tech's situation is also not optimistic Despite Lotus Tech being backed by Geely, the high investment is driven by high expectations and high returns. If Lotus Tech fails to revive for a long time, with its severely insufficient cash flow, how long Geely, under tremendous pressure, can continue to invest remains a huge question mark