As China’s Geely acquires a controlling stake in Lotus, we ask whether this could mark the end of the sportscar maker’s struggles?
Last year, we reported on Jean Marc Gales’ progress at arresting Lotus’ decline following the Bahar debacle. At the time, the auguries were positive, if somewhat finely balanced. If not entirely profitable, losses had been stemmed and Lotus’ order book was looking a bit less bare, but real financial health still looked some way off.
Since then, events have moved rather swiftly with several larger motor companies showing an interest in taking Proton and therefore Lotus Cars off private equity firm, DRB-Hicom’s hands – PSA initially believed to have been favourite to do a deal. But with PSA acquiring GM’s Opel, it stretched credulity that Carlos Tavares would try to incorporate another car business simultaneously, so having previously denied an interest, Geely quietly put another piece of the automotive consolidation jigsaw together last month.
Subject to regulatory approval, later this year will see the Chinese car manufacturer control 51% of the Lotus business, with DRB-Hicom retaining the rest, although it is said they are looking to divest themselves of the remainder. Now while it’s clear that Geely has sound expansionist reasons to acquire Proton, the reason for their interest in Lotus is less obvious.
Several businesses have owned Lotus in the past, and few if any have returned anything apart from losses and bruised knuckles. What makes Geely different? Well for one thing, they are buying Lotus at a point when they are no longer loss-making, Jean-Marc Gales having ruthlessly cut costs and streamlined the business so that the Hethel sportscar maker is about as lean and fighting fit as it’s ever been.
Geely also has a track record of non-interventionist management. In the case of Volvo, it does appear that having ensured that a strong management was in place with a clear plan for the future, they provided the financial security Volvo required and allowed the Swedes get on with it. Assuming Gales’ plan holds water, it seems feasible Geely will do likewise. Donghui Li, Geely’s executive vice-president told journalists a few weeks ago, “Reflecting our experience accumulated through Volvo Cars’ revitalisation, we also aim to unleash the full potential of Lotus Cars and bring it into a new phase of development by expanding and accelerating the rolling out of new products and technologies.”
If nothing else, the tie-up will potentially allow Lotus to borrow in order to fund its new model programme. Work on a new Elise is believed to be under way, and with Chinese support, this programme may well be accelerated. Leaving aside what one may think about such a project, the Lotus SUV is said to have stalled with insufficient resources to go ahead with it. (Gales told journalists there is a styling mock up, but little else at present). Being part of Geely’s empire could see a Volvo-derived platform being sent Lotus’ way (a la Lynk & Co), which again could see this programme gaining momentum, if not necessarily further skilled employment in Norfolk.
This vehicle horrifies enthusiasts, but it’s clear Lotus needs a car they can sell outside of their core market of track-day aficionados. It’s also worth recalling that amongst the Great Bahar’s fabled unicorns there was an oft-forgotten three door city car proposal, a car that appeared to obtain a pass from Lotus traditionalists amidst the feverish excitement in 2010, so in some ways a precedent has been set. Lotus-tuned Volvos? It isn’t beyond the bounds of imagination to envisage a more hardcore variant of their Polestar line, but is this really Volvo’s end of the market?
Another positive from this announcement is that it could help halt the flow of engineers who have departed Hethel for more secure berths elsewhere. Lotus, if it is to survive will need to rebuild its engineering strength, not only for its own projects, but for the consultancy work it will likely be doing for Geely’s growing automotive empire and for the Far East clients their acquisition could possibly attract.
There remains a sticking point however: Toyota. Having been rudely rebuffed by the Great Bahar in his pomp, the relationship with Lotus’ engine supplier has been painfully rebuilt under his successor. But surely it would make more sense to source engines and drivetrains from Volvo, once they become part of the same family? Especially as the Swedes are well advanced in hybrid and electric drive. A sticking point here could be the fact that Volvo doesn’t make a suitable engine to power the upmarket Evora, so in the near term at least, the relationship with Toyota will have to be maintained. As for autonomy, Lotus would be well advised to stay aloof. Even a semi-autonomous Lotus misses the point entirely.
However, for now, this all remains purely within the realm of the theoretical. Until the ink is dry on the contracts and until such time as a clear path is formulated for Lotus’ future, it will have to remain business as usual for Jean-Marc Gales and his shrunken team at Hethel. However, for now at least, the first light of dawn has perhaps never held so much promise. We await developments.