Despite a 39% increase in deliveries, Lotus Sports Cars still suffered a loss of $151 million in the first half of the year.

Lotus's sales finally rebounded after the hybrid model was launched.

On August 27, Lotus Technologies released its 2026 interim report. In the first half of the year, it delivered 3,904 vehicles, a year-on-year increase of 39%; revenue reached $268 million, an increase of 23%; and gross margin rose from 8% to 10%. Net loss remained at $151 million, narrowing by 52% compared to the same period last year.

The reported operating loss was $97 million, a 63% decrease year-over-year. However, this figure includes a one-time licensing fee rebate related to product planning adjustments. Excluding this rebate, the operating loss would still be $195 million, narrowing by only 26%.

This money also altered the accounting results for research and development expenses. In the first half of last year, Lotus's R&D expenditures were $92.31 million; in the first half of this year, this item was reversed by $1.57 million. Lotus's comparable figures given at its earnings conference were approximately $96 million in R&D expenditures excluding the rebate, representing a 4% year-over-year increase.

The first hybrid vehicle, For Me (known as Eletre X in the European market), was the main driver of this growth. In the first half of the year, SUVs and sedans delivered 3,008 units, a year-on-year increase of 57%, accounting for 77% of total deliveries; sports cars delivered 896 units, an increase of only 1%.

Lotus Group CEO Feng Qingfeng stated in a conference call that as of the end of June, the For Me had accumulated 2,200 orders in China, with over 1,800 delivered. 63% of buyers were first-time Lotus purchasers, and over 70% opted for higher-spec versions.

He also stated that the For Me's battery pack is smaller and cheaper, resulting in a higher gross margin than Lotus's all-electric models. The company did not disclose specific gross margins, but this is closer to achieving profitability than simply increasing deliveries.

Growth was clearly skewed towards China. Deliveries in the Chinese market reached 2,248 units, a 60% increase, with its share rising from 50% to 58%. Deliveries in Europe totaled 716 units, a year-on-year decrease of approximately 17%, with its share falling from 31% to 18%.

The model has already been delivered in China and six overseas markets, but deliveries in Europe will not begin until the fourth quarter of this year, and in the UK, it will be mid-2027. The incremental growth brought by hybrid technology in China has not yet been replicated in Lotus's traditional markets.

It's no longer news that ultra-luxury brands are adjusting their electrification strategies. Porsche's "Strategy 2035," announced this year, retains the three routes of gasoline, hybrid, and pure electric vehicles, with hybrids being the long-term choice. According to Focus 2030, Lotus's mid-term product structure will also be adjusted to approximately 60% hybrid and 40% pure electric.

The multi-powertrain approach itself is not surprising; the question Lotus needs to answer is how the sales volume generated by hybrid technology can be converted into book profits.

In the first half of the year, Lotus's gross profit was only US$26.29 million. During the same period, sales and marketing expenses reached US$82.93 million, more than three times the gross profit; administrative expenses were US$46.18 million, also exceeding the total gross profit. This gross profit was insufficient to cover R&D, sales, and organizational expenses.

There has been some improvement on the expense side. Sales and marketing expenses increased by only 5%, far lower than the delivery growth rate, while administrative expenses decreased by 27% year-on-year.

The profitability threshold set by Focus 2030 is 30,000 vehicles. Lotus plans to steadily increase its annual sales to 30,000 vehicles by 2030 and achieve sustained profitability. Feng Qingfeng previously stated at a media briefing that Geely's platform, supply chain, and manufacturing resources can reduce Lotus's break-even point from the past 50,000-80,000 vehicles to 30,000 vehicles.

During the conference call, Lotus CFO Daxue Wang elaborated on the cost reduction strategy: over 50% of the components for lifestyle models are shared with Geely, and developing the entire vehicle architecture independently would require an investment exceeding $1 billion. Sharing platforms, procurement, and manufacturing systems is the cost basis for whether 30,000 vehicles can become profitable.

Lotus only completed the integration of its UK operations on August 21, and the One Lotus cost reduction measures were not included in the first-half financial statements. Lotus Cars pointed out that after the consolidation of the UK operations, Emira sales in the US will be recognized on a full basis instead of net, and service revenue will also be included; R&D, administrative, and other expenses will be consolidated in the short term, which may increase the group's losses. Subsequent revenue and gross margin may initially increase due to the scope of consolidation, but cost reduction may not be implemented simultaneously.

At its latest earnings conference, Lotus gave two more specific targets: a gross margin exceeding 20% by 2030 and a sales, administration, and research expense ratio reduced to below 25%. In the first half of 2026, these two targets were 10% and approximately 84%, respectively.

To break through the profit threshold, Lotus Cars needs to accelerate its progress toward its sales target of 30,000 vehicles.

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