By Brian Lantier, CFA
NASDAQ: LOT
READ THE FULL LOT RESEARCH REPORT
Lotus Reports First Half 2026 Earnings and Closes the Lotus UK Acquisition
The results in any one period are less important than the overall trend as Lotus (NASDAQ: LOT) repositions its brand and builds out its product portfolio in a rapidly evolving global auto market; however, we were very encouraged by several aspects of the company's first-half results for 2026.
Total sales for the first half were $268 million, roughly 11% above our forecast of $241 million that we updated in early August. Our concerns about the strength of China's luxury auto market appear to have been offset by domestic enthusiasm for the new PHEV version of the Eletre.
The company's total gross margin continued to improve, rising to 9.8% in the first half, exceeding our forecast of 9.7%, while gross margins on auto sales continued to inch upward, reaching 9.6% in the first half of 2026. We have been encouraged by Lotus's approach to pricing its models in 2026, which mirrors that of other premium auto manufacturers such as Lamborghini, Ferrari, and Porsche, who offer base models but several highly profitable option packages to boost overall auto margins.
Vehicle Updates:
- In the first half of 2026, the company launched its Eletre BEV model in the Canadian market, making it the first Chinese-built luxury EV sold in Canada.
- In May, Lotus introduced the Emira 420 Sport, which has been very well received by the automotive media. Our conversations with local dealerships indicate that this vehicle has led to an uptick in dealer foot traffic, but it is too early to say if it is translating to increased sales.
- The company provided further color on the goals for the T-135 Supercar, to be launched in 2028. Building a 1,000-HP vehicle with a gross weight under 1.5 tons will be a challenge, but the company appears to be laser-focused on making it its signature sports car. Management noted that a typical 150 kW motor might weigh between 75-95 kilograms (165-210 lbs.); the company has leveraged Formula 1 technology to bring that weight down to just 20 kilograms (45 lbs.). That will certainly be music to the ears of Lotus purists.
- The company has begun accepting orders for the Eletre X PHEV in Europe and targets deliveries in Q4 2026.
Lotus UK acquisition
As a result of this acquisition, the historic sports car manufacturing facility in Hethel, responsible for producing the Lotus Emira, will now be part of Lotus Technology.
This is part of management's broader strategy to build "One Lotus", which will combine the sports car and British engineering operations with the EV expertise and technology platform of the Chinese operations.
We look forward to a complete update on this transaction, including more details on Lotus UK's recent financial performance, current staffing levels, and the combined company's vision going forward.
Focus 2030 Goals:
The company reiterated that its annual sales volume target is 30,000 vehicles, and that hitting that goal by 2030 would imply more than 35% growth in vehicle deliveries from 2025 to 2030. The company also said it is still targeting gross margins above 20% and total SG&A and R&D costs below 25% of sales by 2030, which would make the company EBIT positive.
Valuation:
One of the key aspects of our investment thesis in Lotus Technology is the belief that 2025-2026 represented the bottom of the cycle for Lotus. Based on the latest financial report, the company appears to be well on its way to making that a reality. It will be important for the company to maintain momentum in the luxury market in China in the second half of 2026, successfully launch the Eletre X in Europe, and begin to penetrate the Canadian market with the Eletre BEV, but the signs are that the company is off to a very good start.
Given the significant debt on the balance sheet, we believe enterprise value-to-revenue may be a more prudent measure, and that a consolidated EV/Revenue of 3.0 may be appropriate. The average of our revenue multiples and EV/Revenue calculations yields a 12-month price target of $1.80/share.
With regard to the stock price, Lotus’s shares have performed exceptionally well over the past three weeks since our earnings preview and are now trading at roughly their highest valuation since early June. We continue to think that long-term holders can be opportunistic when building positions in Lotus, as the shares are likely to remain volatile during this transition period.
We encourage investors to review our updated research report for a more complete overview of the first half results for Lotus.
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