During an interview at the Chengdu Auto Show, Lotus Group CEO Feng Qingfeng voluntarily dropped a "bombshell": Lotus Automobiles will become the official Chinese name of Lotus. However, after this information was released, it did not generate much buzz, and insiders also expressed uncertainty about whether this move by Lotus is "good or bad".

After being called "Lotus" in China for seven years, the sudden change back to "Lotus" means that hundreds of millions of dollars invested in branding over the past seven years will suddenly return to square one. Next, Lotus will launch a wave of brand communication around the "return of Lotus," but will all of this be able to evoke Chinese people's feelings towards "Lotus" and boost sales?

7-year "Lotus" to switch back to "Lotus"

Feng Qingfeng also explained the backstory behind the decision to switch back to "Lotus" during the interview. The previous change of Lotus' Chinese name to "Lotus" was due to the fact that when Lotus entered the Chinese market, the name "Lotus" had already been registered by another automotive parts company. After more than two years of effort, Lotus will finally regain the Chinese name "Lotus."

The reason for changing Lotus back to "Lotus" is that Chinese consumers still have a profound impression of "Lotus." While "Lotus" is a transliteration of Lotus, mentioning "Lotus" evokes stronger emotions. Currently, the name "Lotus" is in the public announcement period for trademark registration at the Trademark Office and is expected to officially return next year.

The new Chinese name is primarily targeted at Chinese users and the market, with the goal of further enhancing brand awareness and boosting sales in the Chinese market. However, this move has also sparked controversy, which is not without reason.

After all, Lotus' glory primarily dates back to the 1970s and 1980s. Since the 1980s, Lotus has been sold and acquired multiple times due to operational difficulties in achieving profitability. Finally, in June 2017, as part of Geely Holding's acquisition of a 49.9% stake in Proton Holdings, a 51% stake in Lotus was essentially given to Geely as a "gift."

In fact, Lotus has not released any new models since 2008. Therefore, for Geely, working with Mercedes-Benz to create smart is somewhat similar, as it leverages the brand's reputation to rebuild a new product line.

Therefore, most Chinese consumers' impressions of Lotus have been limited to niche supercar brands, and many may not even be able to name a Lotus model. It was only after Geely took over that the brand gradually gained recognition among consumers through the successive release of four models under the Lotus name.

At this point, Lotus is changing its name back to Lotus, which may create some buzz or packaging points, or perhaps the name has "better connotations." However, it remains questionable whether Chinese consumers have a deep understanding or emotional connection to this name.

"Excellent" financial report with declining share price

For Lotus, the main reason for its frequent changes in ownership has been its inability to achieve profitability as a luxury brand. Although Lotus has successfully gone public, the pressure to achieve profitability has also increased.

In November 2022, with Mao Jingbo officially joining Lotus as a founding partner and serving as President of Lotus China, along with the launch of two relatively affordable new models, Lotus sales were significantly boosted. However, this did not alleviate Lotus' losses.

In February of this year, Lotus went public in the United States through an IPO on the Nasdaq stock exchange in New York. The financial reports revealed the company's operating conditions. From 2021 to 2023, Lotus reported net losses of $111 million, $725 million, and $743 million, respectively, with losses continuing to widen.

The latest half-year report for 2024 shows that Lotus delivered a total of 4,873 new vehicles in the first half of the year, representing a year-on-year increase of 239%. Total revenue for the first half was $398 million, up 206% year-on-year. While these growth figures are undoubtedly higher than those of other luxury brands in the industry, they are still insufficient for Lotus.

According to the data indicators of the listing commitment, Lotus has launched the Win26 plan, aiming to achieve positive EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and operating cash flow by 2026. This means that to achieve this goal, Lotus will need to reach an annual sales volume of approximately 30,000 vehicles and a gross margin of 20% by 2026.

Achieving these two goals seems challenging. On the one hand, Lotus' gross margin in the first half of the year was 13%, significantly lower than that of other luxury brands and comparable to that of XPeng Motors. It is worth noting that Lotus' gross margin reached 18% in the first quarter of this year but dropped to 9% in the second quarter.

On the other hand, although Feng Qingfeng stated that Lotus' major expenses have peaked in the past two years, and the bill of materials (BOM) cost for vehicles will decrease by another 8% this year, the net loss for the first half of the year was still $424 million, with no significant signs of reduction. While the cost per vehicle has decreased, selling expenses have doubled, and R&D expenses have increased by 73% year-on-year. In the next two years, Lotus plans to launch two more pure electric models, coupled with brand renaming campaigns, which will undoubtedly further increase the company's financial pressure.

Due to Lotus' small sales base and lack of cost reduction, its share price has fallen from nearly $14 since going public. Despite the impressive growth figures in the first-half financial report, the share price has not stopped declining and has fallen to around $5.

Will the name change "change the fate" of the Chinese market

As the world's largest automotive market, China is crucial for Lotus' growth. However, even after Mao Jingbo became President of Lotus China, market performance still fell short of expectations, leading to downward revisions of sales targets for both domestic and global markets.

According to official information from Lotus, the company's sales target for this year has been reduced from 26,000 to 12,000 units, and the sales plan for 2026 has been revised from 50,000-60,000 units to 30,000 units.

Data shows that Lotus sold 6,970 vehicles globally in 2023, with 46% (or 3,206 units) sold in the Chinese market. In the first half of this year, while Lotus achieved a significant sales growth of over 200%, sales in China were only 1,208 units, accounting for 25% of total sales and lagging behind Europe and North America. Based on current trends, there is even a possibility of negative growth in the Chinese market, which may be one of the reasons why Lotus is considering a name change in China.

To achieve the goals of the Win26 plan, Lotus is launching new models, selling smart technologies, offering high-end configurations, and providing racing license services. These initiatives are currently being synchronized in the Chinese market, with a focus on high-level autonomous driving as a new growth point for consumers.

It is understood that Lotus' autonomous driving technology differs from that of other Chinese automakers in that it offers a global solution. In the field of high-level autonomous driving, Lotus has officially announced partnerships with Lynk & Co and Geely Remote. However, facing fierce competition in the domestic autonomous driving market, Lotus' capabilities remain to be proven.

In conclusion, based on the sales trend of smart after its rebranding, the return of the Chinese name "Lotus" may not necessarily boost Lotus' sales significantly. While the "King of Corners" attracts a niche audience with its handling capabilities, its luxury features and experience cannot compete with domestic automakers. Therefore, whether it's Lotus or Lotus, expanding the market at current pricing will require offering more compelling reasons for consumers to purchase.