A £10.44m grant from the UK government is the latest cash injection funding Lotus’s rise from the ashes of the Dany Bahar era. Business secretary Vince Cable visited the marque’s Hethel headquarters yesterday to formally announce the grant, provided by the Regional Growth Fund.
The money will be used to develop new models, and train the 313 new staff projected to join Lotus in the coming years – as long as the overseas sales lifeline continues to surge.
It’s the latest in a string of refreshing good-news stories from Lotus, following the announcement of a 100-strong graduate hiring programme, and a £100m investment from overlords DRB Hi-Com to keep the sports car maker afloat. It’s a stark turnaround from the turmoil Hethel’s seen in the last couple of years alone…
Why is this government investment so important for Lotus?
Because of just how close the company came to total ruin. Almost two years ago, Lotus advisor Tom Purves stood up at London’s RAC Club, and listed the ex-AMG and Ferrari talent launching an exciting new era at Hethel. ‘Whether it’s Wolf firing up an original Lotus engine for the first time, Donato in his [design studio] or Claudio with his aggressive motorsport programme, this company is heading in the right direction.’
A month later, DRB Hi-Com, a Malaysian contract car maker, took control of Lotus’s owner Proton. Six months on, Lotus CEO Dany Bahar – the architect of the five-cars-in-five-years transformation plan – was sacked. Since then, an eerie corporate silence has descended on Lotus.
So, what’s happening behind the scenes at Lotus?
CAR has been inside Hethel to piece together the Malaysian owner’s strategy, and to look for signs of recovery. In August, Lotus announced the plan to recruit 100 new staff: engineers and graduates to develop the existing cars, and manufacturing operatives to build them.
With demand primarily from overseas markets, sales are recovering. In 2011, Lotus sold 2675 cars; this crashed to 963 in 2012. This year, the projection is to make 1300 cars, and at the current rate of 44 cars a week the total could reach 2000 units in 2014.
Are we likely to see some new Lotus models any time soon?
Esprit development was the most advanced: its V8 had been tested in Evora and Ferrari 458 mules, and the detailing on the show cars had been completed. Originally set for launch this year, the project is now ‘on hold’.
Instead, the Malaysians have committed to a development plan based on variants and facelifts of existing models. While UK registrations are up 38% in 2013, 90% of sales are overseas. Lotus is hoping to increase sales in the US and Japan, while a new ad campaign should drive interest in China and India.
But what are the Malaysians’ plans?
DRB Hi-Com executives are not prone to staggeringly ambitious public pronouncements, unlike ex-CEO Bahar. Initially, they were open to selling Lotus, which has lost money every year bar one since 1996, and Volkswagen was one company which looked at the books. But the new owners have now committed to a three-year turnaround plan, investing £100m to ‘clean up’ and stabilise the business.
Lotus’s accounts for the last financial year are overdue; in the previous year ending 2012 the car making and engineering consultancy lost £115million. That suggests DRB’s £100million injection will have been used to keep Lotus alive, not invested in new models. ‘We were effectively bankrupt,’ one insider told us.
Speaking to the Malaysian press, DRB Hi-Com executive chairman Datuk Seri Mohd Khamil Jamil said Lotus was aiming for financial break-even by 2015 on sales of around 3500 per year. That’s half the volume Bahar anticipated from his full portfolio: Esprit supercar, Elan 911 rival, new Elise, a limousine and a luxury cabrio.
What about the company’s sporting exploits?
Motorsport is claimed to be profitable, with full grids for its one-make series around the world and the Evora GT4 racer proving competitive. The motorsport division expects to sell 120 cars next year, and has sold five of the £500,000 T125 F1-style track cars.
All well and good, but Lotus’s modest plans don’t answer the dilemma posed by analysts and Dany Bahar: how can the firm become profitable, without launching new cars in new markets? Lotus has missed out on the spectacular growth enjoyed by other iconic British brands like Aston Martin, Bentley and Rolls-Royce.
‘Lotus’s rivals are all expanding their line-ups, and saying there are only so many two-seat sports cars we can sell,’ says Erich Hauser of Credit Suisse, ‘so they’re expanding into SUVs and into four-doors. It’s almost archaic of Lotus to say we’ll make this work based almost entirely on sports cars.’
So Lotus isn’t out of the woods yet?
Problem is, that was the conclusion of Dany Bahar, which led to his failed moon-shot. He boosted quality and flexibility so that the Elise/Exige and Evora could be built on the same line. He ramped up the global expansion, and invested heavily in brand-building motorsport. Ironically, DRB Hi-Com is continuing this strategy but with more rigorous cost control. This may stabilise the firm, but what’s the game-changer? The Malaysians may have the answer, but after Bahar’s over-promises, they’re not even hinting at what it might be.