n n n ‘. concat(e. i18n. t(“search. voice. recognition_retry”),’n
Demi Zhang; RI; Lotus Technology Inc.
Alexi Lee; Chief Financial Officer and Director; Lotus Technology Inc.
Qingfeng Feng; executive director and director; Lotus Technology Inc.
Edison Yu; Analyst; Deutsche Bank AG
Ming Yang Lin; Analyst; Zhong of Values
Daniel Lau; Analyst; UE Capital Pte. Ltd. Limited.
Operator
Have a great day and thank you for being here. Welcome to Lotus Technology Inc. ‘s fourth quarter and full year 2023 earnings conference call. (Operator’s Instructions). Please note that today’s convention is being taped lately. Now I’m excited to turn the floor over to the Head of Investor Relations, Ms. Demi. Zhang. Please come forward.
Demi Zhang
Thanks Amber. Hello, smart afternoon, smart night everyone. Welcome to Lotus Tech’s fourth quarter and full year 2023 earnings conference call. This is Demi Zhang, head of external relations at Lotus. I am joined today by our CEO, Mr. Qingfeng Feng; and CFO Alexious Lee. On today’s call, CFO Alexious will begin with ready remarks, while CEO Mr. Feng will sign up for the Q&A session. Before continuing, please note that today’s discussion will involve forward-looking statements pursuant to Safe Harbor. provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent dangers and uncertainties. As such, the Company’s actual effects would likely differ materially from the views expressed today. Further information regarding dangers and uncertainties is included in Lotus Tech’s filings with the U. S. Securities and Exchange Commission. The Company assumes no legal responsibility to update any forward-looking statements, except as required by applicable law. Please also note that Lotus Tech’s earnings press release and this convention call will include disclosure of unaudited GAAP monetary data as well as unaudited non-GAAP monetary measures. Please see our press release, which includes a reconciliation to unaudited non-GAAP data. measures to comparable GAAP measures. Lotus Tech is a pioneering luxury BEV manufacturer under the iconic British Lotus brand, with 76 years of motorsport heritage and world-class research and development. capabilities, a unique asset-light style and a well-balanced global distribution network. We offer everyone a portfolio of high-performance and environmentally friendly products, as well as strong expansion and a healthy monetary margin. This is the first earnings release since we became a public company. We are very grateful for everyone’s attention and beyond. On today’s call, CFO Alexious will guide us in reviewing Lotus Tech’s operational and monetary effects over the next year and the outlook beyond 2024. I will now turn it over to our CFO, Alexious. Please come forward.
Alexis Lee
Demi Zhang
Thank you Alexious and thank you all. Operator, Amber, we’re in a Q&A position.
Operator
(Operator Instructions) Edison Yu, Deutsche Bank.
Edison Yu
Hello, thank you for answering our questions. The first considers the rules for this year. How do we think about the combination of models and also the quarterly cadence to achieve this?
Demi Zhang
Thank you, Edison, for your question. And I’ll accept. . . I’ll invite CFO, Alexious, to answer your question. Alexious, please.
Alexis Lee
So, the first one is about the combine in 2024?
Demi Zhang
Yes, the models in 24.
Alexis Lee
So thank you for the inquiry and thank you for your participation today. In 2024, lifestyle vehicles, which are a combination of the Eletre E-Class electric SUV and the Emeya, the E-Class electric sedan, will contribute. more than 80% of the total volume. And the rest. 20% comes from sports cars. Therefore, on that side, the combine shows one expansion at a time: BEV segment and also sports car segment.
Demi Zhang
Edison also asked what the quarterly outlook was for the year, if there was any comment on this year’s quarterly performance.
Alexis Lee
So, based on the first quarter, we are already in line with our outlook and forecasts. We believe that, as a logo that cuts across more outlets and offers more models at the same time in more markets, the quarter’s expansion will grow quarter over quarter. -quarter, similar to what we have experienced in 2023. As I mentioned earlier, the second part of 2024 is a crucial era where we will not only have access to the U. S. market, but it will also involve our access to other global markets. markets. In this way, we are in a smart position to achieve this year’s goals. Thank you.
Edison Yu
Second question, can we get some updates on the backlog?I think the last time he revealed it was at the end of the third quarter. Do we have an updated figure by the end of the fourth quarter or even the end of March?
Demi Zhang
Yes, thank you, Edison, and I will invite the Executive Director, Mr. Feng, to answer your question. Mr. Feng, please.
Qingfengfeng
(interpreted) Like Alexious, our CFO, discussed above, we are more or less in line with our goals for the first quarter of this year. In addition to this, our company is currently expanding into sports cars. We have already started delivering our E-segment SUV, Eletre, to the US markets. It will open its order channel in the United States in the second quarter of this year. And our electric GT in the E segment, Emeya, already opened the order channel in the EU last March. In the United States, we have expanded our retail channels and now have the Eletre check vehicle ready for our consumers to try. And at the beginning of the second quarter, we will have more clarity on our performance. This year our most important indicator will be the number of deliveries, especially to regions where we have already started, than orders. To date we are quite confident and satisfied with the current performance. So far this year, we will begin deliveries to North America, Japan and South Korea. Therefore, the e-order book is not just our metric, and we are: we will focus on the delivery of orders that we have already purchased.
Edison Yu
Yes, thanks.
Operator
[Ming Yang Lin, Zhong of Values].
Ming Yang Lin
Merci. Ma is: what is the strategy of the foreign market in 2024?And what’s the market plan in the U. S. ?Is there a U. S. economy?
Qingfengfeng
(interpreted) In terms of delivery and sales figures, the non-Chinese market will account for 60% of our total sales. And for the U. S. market, it’s surely vital for us that the sports car has already performed well in its market. numbers, and you can meet our annual targets this year. For lifestyle vehicles, we have already acquired the registration of the American manufacturer. And in the later phases, we will move forward based on the certification plan. Next April, when we open the order channel, we will take a look at the evolution of orders and follow them closely. And in the second part of this year, we’ll begin deliveries to U. S. markets. U. S. However, we have not opened the order channel at the moment. However, we have already obtained positive feedback from the testing activities organized in the market. I’m sure that once we open the order channel in the U. S. market, we will be able to get the order channel. In the U. S. , the functionality will be excellent. Feel free to stay tuned. Thank you.
Ming Yang Lin
(Spoken in one language)
Operator
Daniel Lau, EU Capital.
Daniel Lau
Hello! Can you hear me?
Demi Zhang
Yes, Daniel.
Daniel Lau
Thanks to the control for answering questions. My call is Daniel from UE Capital. I have two questions for control, and the first is about the geographical distribution of volumes, especially since the company has achieved ordinary effects in 2023. So how do you see the evolution or evolution of the market as a percentage of total deliveries in 2024 or before your Vision 80, 2028?
Demi Zhang
Yes, thanks. We’ll invite CFO, Alexious, to answer that question. Alexius?
Alexis Lee
Thank you, Daniel. So you asked a very smart question. As discussed in my presentation, 2023, the contribution of the Chinese market was about 30% of the volume and about – more than [40%] of the volume and (inaudible) Now, this figure is slightly distorted basically because other markets around the world will take longer to distribute the products through international shipping overseas. By 2024, China will account for about 40% of models (inaudible), such as Emeya (inaudible). The UK and Europe will account for around 30% of the total volume; the U. S. market, about 20%; and the rest of the world, that is, [the growing impact] as well as the Middle East, will have the remaining 10%. This will favor the [ex-prime] market until 2025, so China will most likely look at expansion. around 20%, 25% around 2025, with the United States and Europe assuming market share. Our internal distribution of profits, in fact, we have the highest contribution from ASP in countries such as the Middle East and others. Generally, ASP is very well controlled through global channels. commerce.
Demi Zhang
Thank you.
Daniel Lau
The timing Merci. Ma has to do with infrastructure, because I found out that this company talked about already having partnerships with some charging stations in Europe and China. And also, can we have more main points about the company’s infrastructure or long-term plans for charging stations?Because we know that the existing infrastructure in Europe and the U. S. appears to be a bottleneck to expanding EV market penetration. Thank you.
Demi Zhang
Thank you, Daniel. I will invite the Executive Director, Mr. Feng, to answer your question.
Qingfengfeng
(interpreted) It is true that charging applies to electric cars as it is very vital for the convenience of customers. In China, we use many faster charging stations ourselves, with 480 kilowatts. So, if you’re charging your vehicle (technical difficulty), we’ve also collaborated (inaudible) with many corporations and public charging services to bring more convenience to consumers who need it. In the U. S. market, we have already collaborated with Tesla and other potential players in public charging infrastructure to bring convenience to our consumers. In the EU markets, our strategic partner is Bosch, which operates more than 30,000 charging stations, which can bring more convenience to our consumers. Thank you.
Daniel Lau
Thank you. Okay and congratulations on the FY23 results.
Demi Zhang
Thank you Daniel.
Operator
(Operator Instructions) Edson Yu, Deutsche Bank.
Edison Yu
Salut. Je also to ask about OpEx and CapEx for this year. Can you give us some indication of the trend or, in your opinion, the trend?
Demi Zhang
Thank you Edison. I will invite our CFO, Alexious, to give you an answer on this question. Alexious, please.
Alexis Lee
Yes. Thank you Edison. In 2020, the most productive way to perceive this is, the numbers are like this, in 2023, a lot of investments have been made to expand stores, generate net growth, etc. Now we’ll think that our marketing budget in terms of OpEx for burnout and marketing on the spectrum of expansion at the retail point was the most sensible in 2023. So, from a global point of view, the total budget and SG
Edison Yu
Merci. Et, if I may ask a longer-term question, do we have any goals or ideas?Do we have any idea of trying to get back into F1 in some way?Obviously, the legacy of F1 is there, but I don’t. To know if we are playing a more active role.
Demi Zhang
Yes. Thank you Edison. We are very proud of our racing heritage and our love of speed. I will invite the Executive Director, Mr. Feng, to answer your question. Feng, please.
Qingfengfeng
(interpreted) At the moment, we don’t have any plans to return to the F1 circuit, but we are keeping an eye on those places. In 2023 and 2024, we will work to respond to the GP4 [version]. I think last year, at the Macau Grand Prix, we got first and second place. And this year we’re going to do more GP4 races. And at the same time, we will also be as close to the F1 race imaginable. Thank you.
Alexis Lee
Thank you. [See you in the final. ]
Operator
(Operator’s Instructions)
Demi Zhang
Thanks, Amber. While we wait for more inquiries, I also won the two inquiries from the retailers. So I can communicate to control it better than our curious guests. So, the first query I was asked was about the gross margin, as indicated by the control. , gross margin in 2023 was already very strong and in 2024 it is expected to increase to 17% and 19%. What do you think is driving the strong gross margin growth?I’ll follow here to get some answers. I will invite the Executive Director, Mr Feng, to answer this query first. Mr. Feng, please.
Qingfengfeng
(interpreted) As we mentioned before, in 2023 we have already acquired smart functionality with a gross margin of 16%. In 2024, we expect to see gross margin increase. In particular, the accumulation is attributed to our vehicular lifestyle. And in the Chinese market, as we move towards a direct-to-consumer style, the gross margin will be high. In addition to this, in 2024, we will launch the Chapman Bespoke service globally, which can further increase our gross margin. Another good news is that since we have two other styles for our Eletre, the S style and the R style, the selection of the R style is higher than our expectations. And the R style also allows us to obtain greater benefits. In the long term, in the era of electrification and intelligence, we have already developed cutting-edge technologies, which can help us offer intellectual property licenses that can further increase our gross margins. For example, in our complex autonomous driving technology, we have already provided engineering facilities and licenses to third parties. We have already signed an agreement with some of our partners and are still negotiating with some potential cooperatives in the EU. Continuously improving our gross margins is our ultimate goal, in 2028 we hope to achieve gross margin. up to 30%. THANK YOU.
Demi Zhang
Thank you, M. Feng. The moment I won the inquiry about the price. Since we’ve noticed a drop in costs over the past few months, are you making plans to cut costs or introduce less expensive products?Thank you. I will invite the Executive Director, Mr. Feng, to answer this query, please.
Qingfengfeng
(interpreted) I think it’s a shame that we’re in the segment where we don’t rely on the value score. The most important thing is to offer cost to our consumers and some kind of emotional connection with our consumers to be able to build. our sales volume and increase our margins. And we’re not going to get into the value war, and we’re not going to diminish our value and introduce less expensive models. Thank you.
Alexis Lee
I’m going to go up to that a little bit. Lotus is one of the first players in electrification given our overall commitment to BEVs. We have great opportunities to enter the market with the right products, with the merit of not having much of our competitors. Well, that would create a hole like the one that’s been discussed. We’re moving into more markets, more markets, and at the same time, more stores. The overall outlook of the market remains positive, there is a slowdown globally. Lotus is a small brand. This is not the case with volume expansion: value is not the most important determinant in this specific luxury segment, as explained by our CEO, Mr. We want to continue to improve and maintain our execution to be on time to deliver our cars to consumers and excel in the visitor experience. Thank you.
Demi Zhang
Thank you, Mr. Feng and Alexious. Amber, I’m coming to you.
Operator
Merci. Je don’t ask any more questions. Thank you very much for all your questions. I will now turn it over to Ms. Demi Zhang for any additional final comments.
Demi Zhang
Thank you, Amber, and thank you all for being with us today. And now we’ll conclude the call very soon. If you have any additional questions, please feel free to contact the Lotus Tech infrared team email, call, or online consultation, all of which you can find indexed on our website, ir. group-lotus. com. I wish you all a good day. And with this concludes the call for the convention. Thank you to the control and thank you all.
Alexis Lee
Thank you.
Qingfengfeng
Thank you.
Operator
This concludes the convening of today’s convention. Thank you for participating. You can now log out.