Lotus Technology (LOT) Q2 2026 Earnings Call: H1 Revenue Rises 23%, Margin Reaches 10%

Key Takeaways

• First-half 2026 vehicle deliveries rose 39% year over year to 3,904 units, driving revenue up 23% to USD 268 million.
• Gross profit increased 47% to USD 26 million, while gross margin expanded 1.6 percentage points to 10%, supported by product mix, supply-chain synergies and lower per-vehicle manufacturing costs.
• Reported operating loss narrowed 63% to USD 95 million. Excluding a one-off license fee refund linked to product pipeline adjustments, operating loss narrowed 26% to USD 195 million.
• China deliveries increased 60% and represented 58% of total volume. Europe deliveries fell 70% amid stronger competition in the luxury battery-electric vehicle market.
• Management said the For Me PHEV had accumulated 2,200 orders in China and delivered more than 1,800 units as of June 30. European deliveries are scheduled to begin in the fourth quarter.
• Under Focus 2030, Lotus Technology targets annual sales of 30,000 units, gross margin above 20% and positive EBITDA, supported by portfolio expansion, Lotus UK integration and cost discipline.

Core Financial Data

Business and Operating Performance

China remained Lotus Technology’s largest market, accounting for 58% of first-half deliveries. Deliveries in the country increased 60% year over year, and management said Lotus reached nearly 2% share of China’s passenger-vehicle segment priced above RMB 500,000 during the second quarter.

Deliveries outside China rose 17.4%. The Americas grew 45%, while the rest of the world increased 164%. Europe declined 70% as competition intensified in the luxury BEV segment. Lotus plans to tighten inventory management, protect residual values and improve dealer execution in the region.

Lifestyle vehicles represented 27% of first-half deliveries. Management attributed much of the increase to the Chinese launch of its first PHEV. For the model discussed in the Q&A as For Me, 63% of buyers were new to Lotus and more than 70% selected the highest specification.

The Eletre X opened for orders in mainland Europe on June 3, with customer deliveries scheduled for the fourth quarter. Management also plans to launch the PHEV in the Middle East by year-end. Brazil, described as Lotus’s third-largest volume driver in the Americas after the U.S. and Canada, is expected to begin deliveries during the second half.

Lotus completed its acquisition of Lotus UK on August 21. Management expects the One Lotus integration to combine R&D, manufacturing, supply-chain and commercial functions. Emira sales in the U.S. will be recognized as gross vehicle revenue after consolidation, while Lotus UK service revenue will also enter the group’s results.

Management Guidance

Focus 2030 targets annual sales of 30,000 units and sustainable profitability as the product portfolio matures. Management expects sales volume to grow at a 36% compound annual rate from 2025 through 2030.

The company is targeting gross margin above 20% by 2030. Planned drivers include stronger brand positioning, higher-value models, customization revenue, Geely procurement scale, platform sharing and economies of scale.

Lotus also aims to reduce combined SG&A and R&D expenses to below 25% of revenue by 2030, which management said would support positive EBITDA.

The Type 135 high-performance hybrid sports car is planned for 2028. Management described it as a flagship model intended to bridge the gap between Emira and Emeya, strengthen brand pricing and support profitability. The company is targeting more than 1,000 horsepower and a weight of about 1.5 tonnes, although the vehicle remains under development.

For the second half of 2026, management identified the European rollout of the Eletre X, sustained For Me sales in China, delivery launches in Brazil and the Middle East, and new Emira variants as the principal volume drivers.

Risks and Watchpoints

• European deliveries fell 70% in the first half as competition intensified in luxury BEVs. Inventory discipline and residual-value protection remain priorities.
• Average selling price declined 3% because of a greater contribution from the lower-priced Eletre X.
• PHEV production and deliveries remain in the ramp-up phase. Management expects margins to improve with scale, but the timing depends on reaching steady-state volume.
• Chip-price volatility created cost pressure during the first half. Management expects supply and demand to rebalance around late 2026 or early 2027, but this remains dependent on upstream capacity expansion.
• Consolidating Lotus UK’s R&D, administrative and other expenses could widen the group-level loss in the near term before integration savings emerge.

Analyst Q&A Highlights

PHEV demand and margins: Management said the For Me recorded 2,200 cumulative Chinese orders and more than 1,800 deliveries by June 30. Its smaller battery pack, platform sharing with Geely and lower associated costs are expected to support a higher gross margin than Lotus’s pure-electric vehicles.

Gross-margin improvement: CFO Daxue Wang attributed the increase from 8% to 10% primarily to a higher share of more profitable models, Geely supply-chain support and declining per-vehicle manufacturing costs. Cost optimization offset pressure from higher chip prices.

Type 135 strategy: CEO Feng Qingfeng said the hybrid sports car would restore a mid-engine V8 offering after 22 years, reinforce Lotus’s performance identity and support entry into GT3 competition. Further specifications will be disclosed as development progresses.

Lotus UK consolidation: Management expects gross revenue recognition for U.S. Emira sales and the addition of Lotus UK service revenue to increase reported revenue. The company has begun retrospectively restating its 2025 consolidated financial statements and expects disclosure no later than the release of its 2026 annual report.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Good day, and thank you for standing by. Welcome to the Lotus Technology First Half 2026 Earnings Conference Call. [Operator Instructions] 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.

Michelle Ma

Thank you, operator, and welcome to Lotus Tech First Half of 2026 Earnings Call. My name is Michelle Ma, Head of Investor Relations here at Lotus. With me today are the CEO, Mr. Qingfeng Feng; and the CFO, Dr. Daxue 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 pursuant to the safe harbor provision of the U.S. Private Securities Litigation 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. Further information regarding risks and uncertainties is included in Lotus Tech's relevant filings 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 reconciliation 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.

Daxue Wang

Thank you, Michelle. Good morning, good day, and good evening distinguish shareholders, analysts and media friends. Thank you for joining our first half 2026 earnings release. Again, this is Daxue 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 like 39% year-over-year increase outperforming the reference traditional premium and luxury segments. This solid delivery performance reflects the company's growing market presence and competitive mix producing in the high-end automotive sectors. Strong delivery growth directly drove revenues up 23% year-over-year to USD 268 million for the first half of 2026 with strong momentum in the China market. Average signing price dropped slightly by 3% year-over-year, attributable to an increased sales mix of the lower price Eletre X.

Gross profit rose 47% year-over-year to USD 26 million, while gross margin expanded 1.6 percentage points -- 1.6% to 10%. This improvement was supported by a favorable product mix following the successful launch of Eletre X [indiscernible] first ever PHEV in a 78-year history, market -- making the market [indiscernible] transition of our multi-power [indiscernible] strategy. We maintain our disciplined cost management trajectory.

The operating loss narrowed 63% year-over-year to USD 95 million 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 narrowed 26% year-over-year to USD 195 million, 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. Feng will address in his remarks. This improved financial outcomes so as [indiscernible] proof of our progress against core pillars of Focus 2030, namely our market powertrain strategy and commitment to financial discipline, which are translating into measurable operational and financial advancements. In the first half of 2026, lifestyle vehicles deliveries made up 27% of the company's total vehicle deliveries for the period, driven largely by the successful market introduction of the Eletre X in China.

China market deliveries grew 60% year-over-year, keeping China as a 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 filled 70% year-over-year amid intensifying competition in the luxury BEV segment. In Europe, we will continue to refine inventory management. It has product value and [indiscernible] discipline to protect residual values and rebuild momentum.

Eletre X opened for orders across Mainland Europe on June 3, with customer deliveries commencing in the fourth quarter. U.K. launches will follow 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. As a result underscores the strong inherent competitiveness of the Lotus full product portfolio, even amidst mounting competition across the broader auto industry.

Now let's move to the half year financials. Overall, our first half 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 the revenue, cost of revenues for first half 2026 stood at USD 242 million, up 21% year-over-year. As a result, gross profit reached USD 26 million, a 47% year-over-year increase. Operating expenses during the period came in at USD 127.5 million, up 46% year-over-year, primarily comprising the following. R&D expense stood at negative [ USD 2 million ] in the first half due to the aforementioned one-off items. Shipping out of this specific special onetime adjustment, R&D expenses totaled $96 million, a modest 4% year-over-year in rise versus $92 million in the first half of 2025 driven by technology investment for the Eletre X.

Selling and marketing expenses increased to USD 83 million, up 5% year-over-year. The uplift reflects higher sales commissions tied to rising vehicle volumes alongside marketing activities for the Eletre X launch in China and the prelaunch campaigns in overseas markets. General and administrating expenses decreased to USD 46 million down 27% year-over-year as [indiscernible] control travel agency and other costs and optimize our organizational structures. Based on above, even excluding one-off effects, the operating expense to revenue ratio improved from 107% in first half 2027 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.

On a non-GAAP adjusted basis, adjusted EBITDA loss for the first half of the year narrowed 57% to USD 114 million compared with USD 240 million loss in the same period last year. Beyond hardline metrics, I would like to emphasize that we have delivered sustained operating expense reductions through the wide driven initiatives. This reflects our continued focus on cost optimization and operational efficiency. And 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'll hand over to Ms. Feng. Thank you very much.

Feng Qingfeng

[Interpreted]

Good day. I am Qingfeng Feng, 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 unwelded 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 [indiscernible] performance, we continue to strengthen our brand [indiscernible] new opportunities in emerging markets and product segments following official launch in the Canadian market all electric hyper SUV Eletre arrived in the country in July, marking the first time Chinese make 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, the Eletre X in China [indiscernible] has received a [indiscernible] response in its domestic release, the model has helped lift 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 Eletre 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 Sport edition, widely held by enthusiastic as the [indiscernible] and the 25-kilogram weight reduction, the Emira 420 delivers even sharper [indiscernible]. In July, we launched Emira Scura Limited Edition in China attributed to [indiscernible] Scura from 17 years ago with only 9 units allocated to China and 60 to North America, the entire round sold out immediately under the Focus 2030 strategy, we will unveil the Type 135 mid-engine with 8 hybrid hyper car in 2028.

In July, Emeya set a new EV [indiscernible] record at Malaysia Sepang International Circuit, surpassing the previously publicly recorded [indiscernible] as a significant margin is 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 website platform [indiscernible] leading paying payment institution FOMO Pay to jointly co-compliant applications of [indiscernible] payments and real-world assets tokenization within the luxury mobility space.

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 4 pillars. First, entering our brand heritage in 78 years of [indiscernible] driving dynamics; second, adopting a multi-powertrain strategy to flexibly address diverse global customer preferences; third, leveraging the One Lotus integration and the [indiscernible] ecosystem synergies to further drive cost efficiencies and operational effectiveness; fourth, optimizing financial performance to achieve profitability at an annual sales volume of 30,000 units, delivering a line productive sustainable growth model.

Focus 2030 Pillar 1, strengthening and passing on our brand heritage. Lotus is rooted in the British racing category and [indiscernible] 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 Tech 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 as a brand that embodies both high performance and intelligence in the luxury EV segment. In Americas, our focus remains on forecast. While the Eletre X 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 that are 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 key core volume contributors, while North America stands at 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 powertrain in parallel. Every one of our products remains uncompromisingly driver-centric.

Our first hybrid model, the For Me, made in China -- made its Chinese debut this March with European delivery scheduled for the fourth quarter. Looking ahead we are focused on developing our next-generation hybrid car Type 135 and also hybrid available in both V6 and V8 powertrain variants.

The Type 135 will fill the gap between the Emira and Emeya preserving the emotional connection Emira owners have with the Lotus mechanical handling, while leveraging V8 hybrid technology to approach the technical benchmark set by the Emeya. This creates a mature product upgrade and elevates the brand upwards. Through a combination of lightweight design and chassis [indiscernible], the Type 135 will demonstrate that Lotus still has what it takes to be a technical benchmark in the next generation of high-performance sport cars. 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 Emira engine V8 powered model with over 1,000 horsepower. We are 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 motor is always in just 1.5 tons is not easy. To put that in perspective, while a typical 150-kilowatt motorway between 75 and the 95 kilograms, we have leveraged the Formula 1 technology to bring it down to just 20 kilograms. We are also codeveloping the [indiscernible] designed to handle high torque while keeping weight to a minimum. On the sports car front, as mentioned earlier, we have introduced the Emira 420 and special additions such as the Emira Scura, we will continue to roll out new Emira [indiscernible] going forward, reinforcing its value-added Lotus final pure combustion sports car.

In the lifestyle vehicle category, we are also introducing the Eletre 900 Gold Edition and Emeya 900 Gold Edition available for preorder starting August, but we will keep refining the product competency in this segment. The launch of the Eletre X has given the mainstream luxury vehicle buyers provide more choices, and further expanding the Lotus market reach and customer coverage.

Focus 2030 Pillar 3, deepening ecosystem synergies with partners. Our ecosystem synergies are built on 2 core pillars, Lotus integration and deeper collaboration with the [indiscernible] 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 [indiscernible] with Lotus Technology's cutting-edge technologies further sharpening Lotus distinctive positioning in the luxury automotive space.

We are committed to the One Lotus strategy on 3 fronts brands. We will maintain a globally unified premium ultra luxury brand identity, ensuring that the Lotus brand image, product experience and the 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 ships, allowing us to channel greater focus in the 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 will also continue to deepen synergies with the Geely ecosystem. The Geely Group provides Lotus with systematic competitive advantages that other independent luxury brands could find hard to replicate, including advance the technologies across pure electric hybrid and intelligent solutions, Geely's platform enabled us to stay at the front of electrification and smart technology while reducing cost and shortening the go-to-market duration for new technologies. By leveraging Geely's shareholder platform, Lotus can concentrate these R&D efforts on signature technologies such as lightweight engineering, aerodynamics and chassis tuning. Mature supply chain with access to Geely'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. In its global distributed flexible production system helps Lotus to accelerate product launches, scale up operations and build cost advantages. Such collaboration is bidirectional empowerment, Lotus proprietary know-how, extreme handling, aerodynamics, lightweight engineering and chassis tuning [indiscernible] 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 in Geely but also the wider industry. We maintain ongoing joint development programs with Geely'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 sustainable profitability.

Our path to achieving these objectives are on 3 key drivers: first, delivering steady volume growth through brand building and portfolio expansion. With the launch of the Eletre X in 2026 and the Type 135 in 2028, we are fully leveraging the flexibility of our multi-powertrain strategy to capture differentiated demands across different markets continuously expanding product portfolio for [indiscernible] ramp-up. We expect the compound annual growth rate of 36% in sales volume from 2025 to 2030.

Second, driving sustained gross margin improvement with a target of exceeding 20% by 2030. On the revenue side, we will raise average selling price and margin through brand strengthening, new model launches and customization offerings. On cost side, we will leverage Lotus integration, Geely supply chain and product synergies and economies of scale to effectively optimize cost control; third, adopting strict expense discipline based on the first 2 drivers, Web5 are implementing rigorous cost control growth, SG&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 road map [indiscernible] volume growth through product expansion like gross margins through brand premium and cost discipline, and we deliver positive earnings through integration synergies and the [indiscernible] operation. Our first half 2026 business performance already reflects our firm commitment to moving on [indiscernible]. Thank you all.

Operator

[Operator Instructions] We will now take the first question. This is from Laura Li from Deutsche Bank.

Question-and-Answer Session

Xinran Li

So 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 the initial market response and the cost in profile? And what are your expectations for the full year sales and margin?

Feng Qingfeng

[Interpreted] At present, For Me deliveries are primarily concentrated in China as of June, 30, cumulative orders of For Me 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 market in the Middle East and other regions to follow in December as a hybrid model featuring a smaller battery pack and lower [indiscernible] costs, [indiscernible] a higher gross margin and our pure electric vehicles. In addition, the model benefits from deeper collaboration with Geely leveraging platform sharing and economies of scale, which further supports a healthy margin profile. Production and [indiscernible] For Me are still in the ramp-up phase, and we are confident that margins will continue to improve as we see steady-state volumes.

In the first half of 2026, the Chinese passenger [indiscernible] priced above RMB 500,000 recorded sales of 185,000 units, down 12.8% year-on-year. However, energy penetration in this segment climbed to 40.2% driven primarily by a sharp rise in [indiscernible] penetration from 0.9% in 2025 to 21.6% in the first half of 2026. We have [indiscernible] more than [indiscernible] year-on-year to 40,000 units overtaking [indiscernible] at the largest new energy subsegment. Using this opportunity, Lotus launched the For Me in late March, leading our market share in China's above RMB 500,000 passenger [indiscernible] segment to nearly 2% in the second quarter. The customer profile of the For Me 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 highest [indiscernible].

In the second half, we will sustain momentum through integrated test drive experience events and ongoing word of mouth marketing to maintain product buzz and sales cadence. With the addition of hybrid models, Lotus dealership footprint in China have been further optimized, particularly in the northern region with [indiscernible] in the Northeast and Northwest, opening up new markets for future sales growth.

In Europe, we formally commenced the order taking for the Eletre X in the first half, adding a fresh growth driver for the second half and beyond. In the first half of 2026, PHEV SUV sells above EUR 70,000 reached 16,000 units with new energy penetration remaining high at 62%. Within that, PHEV SUVs accounted for 8,000 units, representing nearly 70% of the new energy mix. We conducted multiple rounds of marketing prelaunch 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, leading 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 sales conversion, leveraging diverse in-depth experience events and sustain the digital engagement to strengthen customer relationships and improve conversion rates. The introduction of the Eletre X has effectively enabled us to access market segments and [indiscernible] that our pure electric offerings alone could not happen. As such, we are equally confident in the incremental volume that the Eletre X was delivered following its European launch and deliveries.

Xinran Li

I appreciate the color. Secondly, I want to check about the Type 135 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?

Feng Qingfeng

[Interpreted] The Type 135 is a critical high-performance hybrid product [indiscernible] 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, light weight engineering and chassis tuning, the Type 135 will establish a new technical benchmark for high-performance sports cars reaffirming to the market our ability to translate [indiscernible] engineering in the extraordinary [indiscernible]. And the first is [indiscernible] the Lotus brand [indiscernible] and image. The Type 135 will bridge the product gap between the Emira and Emeya, creating a complete sports car portfolio that spans the Emira as the engine level combustion sports car, the Type 135 as a hybrid flagship hybrid car and the Emeya as a collectible ultimate performance hybrid car, positioning the Lotus brand [indiscernible]. At the motor sports 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 [indiscernible]. With the Type 135, we will take the next step forward and into GT3 competition. Beyond its brand boosting effect, the type 135 will also elevate our lifestyle [indiscernible] lineup, complement in the Eletre X luxury hybrid SUV, the old electric Eletre [indiscernible] Emeya, this multi powertrain strategy coverage will enhance brand recognition and appear across our lifestyle vehicle portfolio.

From a market demand perspective, sales of our core sports competitors have been impressive with a compounded annual growth rate of 75% 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, about 600,000 sports car segments have shown steady year-on-year growth. [indiscernible] 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 enthusiastic in Europe and the U.S. place high value on [indiscernible] internal combustion engine [indiscernible], pure electric supercars constrained by battery weight and charging infrastructure have structured to win our traditional performance buyers.

The Type 135 hybrid V6/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 technology front, our Lotus -- more than 7 decades of history, limited in-house powertrain capabilities have been our most significant handicap. We have traditionally relied on outsourcing. This time with Geely's strong support and technology enablement, we are codeveloping a high-performance [indiscernible]. This collaboration allows us to leverage Lotus core strength in lightweight engineering, aerodynamic design and the sophisticated chassis tuning while tapping into Geely's resources, global supply chain and scale advantages.

Meeting the Type 135 power requirement, we are balancing R&D investments and per unit cost. This technology will be applicable to future generations of the Eletre X. The Type 135 will continue to be on 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.

Xinran Li

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

Feng Qingfeng

We have developed different strategies and plans for different regions. For example, for China market, first, we are going to maintain the marketing momentum and launch cadence of the For Me through an integrated test drive experience program, sustaining the sales cadence established in quarter 2. Second, we have also introduced the Lotus Emira 420 Sports and the Lotus Eletre and Emeya 900 Gold Edition. These high-performance new products will elevate brand awareness, reinforce our value proposition and multi-waste market engagement.

Third, strengthen customer engagement 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 marketing opportunities into tangible sales results.

In Europe, we will first start with the launch of Eletre X, which will progressively unlock initial market demand. And second, in the second half, our marketing strategies were shifted 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, Brazil, our third largest volume driver in the America region after the U.S. and Canada will officially commence deliveries in the second half. Besides, with the introduction of the Emira 420 Sports in model year '27, we will reinforce the Emira's driver-centric positioning centered on driving engagement, capture demand created by the discontinuation of the Porsche 718 and accelerate order conversion at the dealers while generating new preorders.

For the rest of the world market, the most significant milestone for the second half is the official market launch of the PHEV product in the Middle East. With the Eletre X scheduled to arrive in the region by year-end to drive volume growth. Additionally, at the Emira 420 [indiscernible] 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 [indiscernible] regions and the Middle East region.

Operator

We will now take our next question, and this is from the line of [ Jiong Shao ] from Barclays.

Unknown Analyst

I will translate it myself. So my first question is about Focus 2030. We guided towards a steady ramp up to 30,000 deliveries, over 20% gross profit margin, a positive EBIT under the plan. Can management comment on your thinking when setting out these goals, what 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, both efficient closing of the transaction and when the company will start to disclose consolidated results?

Feng Qingfeng

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 motor sports events, for example, Lotus [indiscernible] and Lotus Driving Academy and the launch of the hybrid flagship hybrid Type 135, we will continue to reinforce Lotus 78 years performance DNA and elevated brand value.

Next channel, as of June 30, 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, [indiscernible] and other South American countries. We will sustain global channel expansion, continuously optimize and upgrade our existing network strengthen customer engagement and improved 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 showcased Lotus driving DNA running through [indiscernible] and enhance brand premium. We have already launched the Eletre X with deliveries underway in China and the fixed 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 flows. In 2028, we will also introduce the flagship hybrid Type 135, providing additional boost to sales hike.

Daxue Wang

Thank you, Michelle, for your questions. I will complement the first question is my views on the financial part, and then we will answer your second question. For the first question [indiscernible] on the financial side to lower the cost, we will focus on revenue synergies across the market for stakeholders. First, [indiscernible] collaboration and manufacturing scale with Geely for lifestyle vehicles, [indiscernible] components are share with Geely. Leveraging Geely's centralized procurement and scale advantages to gain access to a broader pool of high-quality global suppliers deliver meaningful cost reductions; and second, [indiscernible] in-house development vehicles architectures by the company alone may require over USD 1 billion investments. [indiscernible] technologies, we can materially lower the R&D expense.

And thirdly, the full integration of Lotus UK will unlock substantial energy benefits -- synergy benefits. And in parallel, we will diversify revenue streams through the high-end customization and limit addition models. On our target on lifting gross margin [indiscernible]. Concurrently, we'll pursue refined operational management, [indiscernible] expense control and further unlock operating leverage to deliver profit positive. I mean some under our Focus 2030 strategy will prioritize development quality and profitable growth, [indiscernible] pursuing the sales volume for its own sake. So that's in the -- remarks for the first question.

I will continue with your second question regarding the synergies with One Lotus. And as you know, the combined Lotus brand, we will preserve its global consistent positioning as a high-performance luxury provider. [indiscernible] U.K. site was focused on the ICE and PHEV sports car lines. [indiscernible] differentiated strategy centered around the limited addition models. [indiscernible] China facilities will need PV and PHEV vehicles under the volume production strategy.

We will also prioritize [indiscernible] integration, binding, shares, R&D, manufacturing and supply chain functions with the goal of building Lotus global capacity, high-performance auto brands. Integration and synergies across shared R&D 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 2 key reasons. First, Emira vehicle sales in the U.S. will be fully recognized as gross vehicle revenue, a preconsolidation such proceeds were only accounted for under the net revenue method. And second, service revenue from Lotos UK will be consolidated into the mix company, bringing Lotus UK's [indiscernible] gross margins will also improve the group's overall growth market profile. From an expense standpoint, the near-term consolidation of Lotus UK's R&D, administrative and other costs may result in wider growth level loss. Going forward, we will strengthen the integration across R&D, commercial and support functions teams from both organizations, streamlined the organizational structure, adopt lean cost management practices and lower the operating expense to revenue ratio.

Again, this is a business under the combination under the [indiscernible] common control. Pursuant to the financial disclosure rules, the company is required to carry out retrospective restatement for the consolidated financial statements. The statement for the fiscal year 2025 have been initiated. We expect the restated financial statements to be disclosed later than the release date of the 2026 annual report. And the following start, please stay tuned with our announcement [indiscernible].

Operator

We will now take our next question. And this is from Brian Lantier from Zacks.

Brian Lantier

Really impressive results considering the challenging operating environment in the domestic market in China. I'm just kind of tightened 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.

Daxue Wang

Brian, I'll take your question. The gross margin improvement was driven primarily by 2 factors. First, the product needs optimization, the delivery share of the higher-margin future models rose significantly, effectively lifting the overall gross margin. And secondly, the supply chain synergies and economies of scale graduate to effect with the per vehicle manufacturing costs continuing to decline, supported by [indiscernible] global supply chain system and flexible production capabilities. And this also marks the first substantive financial valuation since the launch of the Focus 2030 strategy.

Yes. And for your second question regarding the pricing volatility of the chips, my understanding is like this, the chip price volatility along down nearly 2% increase in our [indiscernible] costs. In [indiscernible], the chip pricing give some pressure on the company's gross margin in the first half of the year. In response, [indiscernible] has been actively collaborating with the Geely Group to expand the supplier base and navigating through the volatility smoothly. Last, [indiscernible] cost optimization to offset the chip-driven cost increase. Consequently, the company's gross margin in the first half 2026 improved compared with 2025.

Regarding the pace [indiscernible] since the [indiscernible] stabilization, and we believe the core drivers of this round price increase is caused by the AI server capacity, clouding out the supply and automotive [indiscernible]. Based on the upstream offer expansion [indiscernible] schedule and visibility into our [indiscernible] supply chain, we expect supply and demand to rebalance around late 2026 and early 2027 with price returning to a reasonable range. And as the industry cycle eases, the company's gross margin will have further room to improvement.

Operator

And we have no further questions at this time. So I will hand the conference back to Michelle Ma for closing comments.

Michelle Ma

Thank you all again for joining us today. We will conclude for 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.

Operator

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]