The deal is done. DRB-Hicom Berhad has signed an agreement for China’s Zhejiang Geely Holding Group (ZGH) to take a 49.9% equity stake in Malaysian carmaker Proton Holdings Berhad (Proton). DRB also sold its stake in Lotus to ZGH (with a minority held by Etika Automotive). Ian Adcock considers the future for Lotus.
With the sale of Lotus, DRB-Hicom has exited the sports car segment. Syed Faisal said the sale allows Proton to focus on passenger cars which is a larger market. Proton had acquired the British marque in 1996 and many of its cars benefited from tuning by Lotus. But now, Lotus Cars and its affiliated engineering consultancy will end up in the Geely automotive product portfolio alongside Volvo, Emerald Automotive, Lynk & Co., The London Taxi Company and its own eponymous brand.
Founded in 1952 by Colin Chapman Lotus has had an armada of owners and investors over the decades following his death in 1982, from a BCA-led consortium to General Motors, arguably its greatest opportunity for long-term survival, through to Romano Artioli’s Luxembourg-based A.C.B.N Holdings S.A., thence to Proton and its parent DRB-Hicom.
Each new investor has been accompanied by a fanfare of promises to make the Lotus marque great again, to boost its global image and ramp up sales, only for them to abandon the brand and leave it to its fate of struggling to survive in an increasingly competitive global market. Automotive small fry are trampled underfoot by arduous and expensive legislation on the one hand and, on the other, by automotive giants who can, and do, produce increasingly broad product portfolios that cover virtually every niche.
Low volume sports specialists like Lotus might be praised to the heavens for their dynamics and performance by the motoring press and the few hardcore aficionados that buy their cars, but that isn’t sufficient to sustain a viable business.
The proposed acquisition by Geely begs a number of questions: Is it a ‘buy one get one free’ deal? The Chinese are getting Lotus as part of the Proton acquisition and, one may well ask, what do they think they’re getting? After all, like Aston Martin in its pre-Ford days, Lotus is best known as the favoured transport of agent 007 in a single Bond movie as well as a stunning Formula One history, but both are fading memories and reputations that are dimming as the years pass by.
Maybe it’s Lotus Engineering (LE) expertise, especially in lightweight structures and vehicle dynamics, that appealed? In which case, why not sign them up as consultants as LE has a Shanghai-based operation?
Third parties are very wary of contracting out research and development to a consultancy owned by a rival OEM.
And there’s another serious issue with Lotus Engineering that has stalked the business for decades: Third parties are very wary of contracting out research and development to a consultancy owned by a rival OEM. Despite all the assurances that there are no glass walls and no fear of details leaking to parent owners – like GM, back in the day, Proton recently – it has proved a consistent uphill struggle for LE to persuade potential customers otherwise. And, no matter how ZGH might protest, the Chinese do not have a particularly good track record when it comes to copying vehicles, components and patents, respect for IPR.
Or is it the ACBC badge? Lotus has form when it comes to exploiting that image most famously on Ford Cortinas, turning them into giant-killing track heroes; the rallying Talbot Sunbeam Lotus and, of course, the Lotus Carlton. The Isuzu Piazza with ‘Handling By Lotus’ badges is rather less memorable, but even that is infinitely better than the Youngman-Lotus that was, basically, a Proton Persona.
Nor does the Lotus name and associated values fit neatly into any of the brands Geely owns. Volvo has Polestar as its performance brand and a Lotus-Geely? I think not.
So, that leaves the model line-up to consider as a source of potential value. There’s plenty of work to do. Since Dany Bahar’s ludicrously over-ambitious plan, announced in 2010, to launch five new Lotuses to rival Ferrari crashed and burned, Lotus has struggled with limited product offerings based on the Evora and seemingly endless reinterpretations of the Elise that dates back to Artioil’s 1996 regime.
Matters are further complicated by Lotus’s close relationship with Toyota. The Japanese giant has always had a soft spot for Hethel that dates back to 1983 and included injecting funds into the beleaguered company. Its ties to Hethel included a minority shareholding it relinquished when GM took control and, still to this day, it supplies powertrains for the Lotus line-up.
Volvo currently has a two-litre four-cylinder tuned to 367hp by Polestar, only 33hp shy of the Evora’s 400. Surely not a gap that the Lotus engine wizards couldn’t fill?
It is probable that Geely would want to unravel this partnership in favour of one that uses its own powertrains. Volvo currently has a two-litre four-cylinder tuned to 367hp by Polestar, only 33hp shy of the Evora’s 400. Surely not a gap that the Lotus engine wizards couldn’t fill?
The biggest challenge facing Geely is developing a coherent model strategy that will carry Lotus through into the 2020s and beyond. There has been much hype about a crossover/SUV Lotus in the Macan mould and, principally, for Geely’s domestic Chinese market.
Commentators are keen to point out that if sports car icons such as Porsche and Lamborghini can enter that sector then so, too, can little Lotus. Except…that both those brands – plus others such as Aston Martin – had a viable and profitable existing line-up, something that Lotus lacks. The sales potential of the luxury/prestige crossover global market is thought to be around 40,000 units a year. Making an impact there would be a stretch for Lotus, but a lightweight challenger to the Macan or the Jaguar F-Pace is an intriguing thought, but isn’t there an argument that Hethel needs to get its core models right, first?
Geely could do worse than take a close look at what Andy Palmer has done at Aston Martin-Lagonda.
Geely could do worse than take a close look at what Andy Palmer has done at Aston Martin-Lagonda. His Second Century Plan maps out a stream of new products until 2020, including a crossover and electric-powered Lagondas. He has convinced the investors to provide long-term capital to realise this ambition, founded on a sound business plan.
Geely has shown in its sensitive management of Volvo that it has allowed the Swedes to flourish and do what they know best when it comes to designing and engineering Swedish cars. Can Geely afford such a hands-off approach with Lotus? It could be argued that on past record the answer is probably not.
However, they do have an Ace card to play in the form of Carl-Peter Forster, an industry veteran who once led GM’s European business. He is now a Volvo Cars director and a non-executive director of Geely Automobile Holdings Ltd. He has the knowledge and expertise that could allow Lotus talents to shine through, whilst implementing a sound business strategy. It will be a fine balancing act for whoever oversees the business.
It would be nice to think that Lotus might, at long last, have found the right partner but, I daresay Zsa Zsa Gabor [married nine times – ed] believed the same thing on more than one occasion.