By Brian Lantier, CFA
NASDAQ: LOT
READ THE FULL LOT RESEARCH REPORT
Lotus Earnings Preview
In mid-June, Lotus Technology (NASDAQ: LOT) announced that, to focus its resources on the acquisition of Lotus UK, the company would temporarily suspend reporting its first- and third-quarter earnings for 2026. The company will still report first-half and full-year 2026 results, but this shift in reporting periods may have caught some investors off guard, as most auto manufacturers report quarterly data and shifts in market demand can be identified quickly by investors. We anticipate that the company will likely report its first-half results by the end of August, and we will provide a full update at that time.
We remind investors that Lotus remains in the midst of a major repositioning of the brand and its products that will likely unfold over the next 5 years, and thus individual results in any single reporting period are less important than steady progress toward lasting profitability, which remains elusive for Lotus Technology.
Model Adjustment:
We are taking this opportunity to adjust both the presentation of financial data in our estimates and our expectations for 2026 based on the current luxury vehicle market in China and Europe (and to a lesser degree the US).
We are now forecasting sales of $241 million for the first half of 2026, down slightly from our previous forecast of $253 million ($113 million in Q1 and $140 million in Q2). The bulk of the adjustment comes from our assumption that the auto market in China remains hypercompetitive and demand for foreign luxury brands has been sharply impacted by strong demand for domestic luxury brands.
Our full-year revenue for 2026 is now $515 million, as a result of lowering our forecast for PHEV deliveries in the second half of the year from our previous forecast of $570 million for the year. Our EPS estimates are adjusted to reflect the suspension of quarterly reporting in June, so our first half EPS forecast is now ($0.34)/share and ($0.36)/share in the second half.
A more successful launch of the Eletre X in Europe or the Eletre BEV in Canada provides upside to these estimates, but given the challenging operating environment in China today, we think these estimates may have to be fine-tuned further.
For the time being, we are leaving our 2027 model unchanged with quarterly revenue and EPS estimates, as we assume the company will resume quarterly reporting after the closing of the Lotus UK acquisition.
The company has indicated that the Lotus UK acquisition remains on track for a 2026 closing, and we will further update our model to reflect the Lotus UK business when the acquisition is completed.
We encourage investors to review our full updated report which includes a detailed analysis of China’s luxury car market.
INDUSTRY UPDATE
The global luxury auto market remains relatively resilient in the face of persistent high interest rates and weakening consumer confidence in several markets, but the underlying market dynamics and brand preferences are worth discussing.
Luxury EVs in China - Perhaps the biggest shift in the auto market in 2026 has been the rapid emergence of Chinese luxury brands in China.
The perception that Chinese luxury vehicles offer a better relative value and contain superior technology has led to a meaningful shift in market share so far in 2026. While European brands like Porsche, BMW, Audi, and US-based Tesla are still major players at the high end of the luxury market, demand for domestic nameplates has led to sharply lower demand for the legacy brands.
Sales for Porsche were off 32% in the first half, while Audi and BMW both slumped close to 20% in the first six months of the year.
The prioritization of technology in the cabin, autonomous driving capabilities, media and connectivity options has driven much of this shift, where the domestic brands appear to have an advantage, while European brands remain largely focused on performance, which appears to be less important to the Chinese consumer. The overall luxury market (both domestic brands and foreign) saw shipments fall close to 20% in the first half, so while the shift in consumer preferences played a role, we also have to acknowledge that demand in general has weakened.
Even though Lotus is part of the Geely ecosystem and the majority of its cars are manufactured in China, we do not believe it is considered a domestic brand by most Chinese consumers. The fact that the company sells a high-end luxury vehicle likely insulates it a bit from this market shift, but we think it could be impacting BEV sales in China for Lotus.
Ultimately, it appears that the shift among luxury car buyers in China has been to place greater emphasis on the technology suite and less emphasis on the hood emblem or brand of a vehicle. This is a fairly significant shift and will require careful thought from leadership at Lotus to navigate this change. We feel that the technology offered by the Lotus line-up is very strong, but overcoming market perceptions may be challenging.
Within the Chinese market itself, several independently traded companies have seen their share prices underperform in the past 3 months, and the weakness of these stocks has likely had some impact on Lotus. Shares of XPeng, Li, and Nio have all fallen by 15-20% in the last 3 months as expectations for growth in the Chinese market have been tempered and margin pressure, particularly at the low end of the market, remains intense. The shift from a high-growth market to a more mature market with lower margins has likely impacted all of the companies’ shares in the space.
Another factor that could have impacted sentiment around Lotus’s shares in the past three months was the news that Polestar (NASDAQ: PSNY), another company in the Geely ecosystem (majority controlled but the Geely founder), would exit the US market after the US Commerce Department did not grant the company the ability to sell vehicles beyond 2027 due to the company’s use of connected vehicle technology developed in China. While Polestar has begun efforts to refocus its strategy on Europe, the impact on the company’s shares was meaningful, and we believe some investors have concerns that Lotus could also receive the same ban. Given that Lotus is not selling any of its China-made vehicles in the US (with the exception of a handful of Eletres), we do not view this as a real risk for Lotus, but it could have impacted the company’s share price.
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