Geely-Owned Lotus Tech Narrows Losses, But Concerns Linger

Benzinga_recent_news04-15

The Geely-owned luxury green-car maker reduced its net loss last year even as its sales plunged, highlighting difficulties of operating in a fiercely competitive market Image credit: Bamboo Works For ...

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The fourth quarter was especially good in that regard, as its net loss shrank more than 80% year-over-year to $86 million. In the company's earnings announcement, CFO Wang Daxue touted \"improved margin performance\" on the back of \"cost optimization and operational efficiency.\"\nAnd indeed, Lotus' gross margin swung from a negative 11% in the fourth quarter of 2024 to a positive 10% for the most recent reporting period. Its full-year gross margin also tripled to 9% from 3%. This seems like progress that puts the company on a promising trajectory. But it is progress from a very deep hole, and the path to profitability doesn't look easy.\nLotus' lifestyle sport utility vehicles (SUVs) and sedans, its mass-market proposition, saw deliveries fall 33% last year. Its sports cars, the brand's soul, fell by an even large 62%.\nLotus, despite its heritage and Geely's deep pockets, remains a microscopic player in a global EV race that increasingly demands massive scale. Zhu Jiangming, founder of the much larger Leapmotor (9863.HK) EV brand, said last year that an EV maker requires annual sales of at least 2 million cars for long-term viability – more than 300 times what Lotus sold last year.\nIn Lotus' earnings report, \"tariff headwinds\" are cited as a factor behind the sales slump. That's particularly revealing, since Lotus has touted its European base, including operations in Britian and the EU, as a shield against the duties Brussels has slapped on Chinese-built EVs.\nBut in reality, Lotus relies on its Geely-built factory in Wuhan to make most of its mass-market products. On the company's earnings call, CEO Feng Qingfeng said U.S. and EU tariffs against Chinese-made EVs drove up prices of its cars in Europe, while \"for the U.S. market, basically, it is impossible for us to enter.\"\nLotus also blamed \"gradual\" inventory destocking and a \"phased rollout\" of upgraded models, which basically is an admission that it's making more cars than it can sell, as consumers balk at the higher prices it must charge as a result of Western tariffs for its China-made cars. As U.S. and EU tariffs kicked in, sales from Europe and North America fell to 50% of the company's total last year from 61% in 2024.\nMore fundamentally, demand for luxury EVs has hit a wall globally. Buyers willing to spend more than $100,000 on a battery-powered SUV are no longer as plentiful as they were in the low-interest-rate environment of 2021. Consumers in Western markets, especially the U.S., have also shown less enthusiasm for pure electric vehicles than their Asian counterparts.\nThe pivot does make commercial sense. A hybrid offers a longer range than a pure EV, addressing the primary problem with luxury EVs. On the other hand, though, it muddles the brand message. Lotus is now a luxury EV maker that is selling a hybrid to people who aren't ready for purely battery-powered cars.\nThe state of its balance sheet suggests Lotus didn't have much choice in the shift as it burns through its cash quickly. Its cash holdings shrank nearly 30% to just $73 million at the end of last year from 12 months earlier.\nThe liquidity situation would look potentially life-threatening without the implied lifeline from Geely. The company's total current liabilities of $2.4 billion dwarf its current assets of $911 million. Among its debt, the company had a staggering $784 million in short-term borrowing from related parties alone at the end of 2025, a fourfold increase from a year earlier. Effectively, Geely has become Lotus's bank, writing checks to keep it afloat.\nTo subscribe to Bamboo Works free weekly newsletter, click here\nBenzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.\nTo add Benzinga News as your preferred source on Google, click here.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.42.1","shortVersion":"4.42.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2627287490","isCrawlerRequest":true}