Car maker Lotus reveals vision for mass-market SUV
09:47 05 June 2015
Archant Norfolk 2015
Iconic car-maker Lotus has unveiled plans to expand into a new market. Business editor Ben Woods reports.
Profitability is the golden egg for any chief executive looking to turn around a company. Lotus is no exception.
Jean-Marc Gales may have had to administer the painful medicine of job cuts and efficiency-savings since taking up his post in May 2014, but now the focus is firmly on growth in order to achieve year-on-year pre-tax profits.
So far, the plan has centred around growing Lotus’ global footprint by expanding its dealer network and – in turn – creating a springboard in which to sell more cars internationally.
To date, production has grown – albeit from a relatively low base – from 1,296 to March 2014 to 2,015 to March this year, with clear targets to produce 3,000 cars per year by March 2016.
But when you introduce a new SUV into the mix, production rockets.
If Lotus can seal the licensing agreement, and navigate a smooth road to production in 2019, the amount of cars it will be producing will sit between 10,000 and 20,000 per year – a significant rise driving more revenues into the business which help to underpin the further growth of the sports car-making business in Norfolk.
But why try to break into a new market in the first place? The explanation is simple: the SUV is becoming an increasingly dominant player within the motor industry.
It is predicted that SUV market share will increase to 23pc by 2020, with 110 million cars made by 2020 compared to 58 million in 2000.
Sales of SUVs have increased by 21pc in the last year to more than 2.5 million cars, according to data from JATO Dynamics.
Research suggests that profitability and margins on SUVs tends to be better than average passenger cars. It has certainly worked for Porsche, which now sees SUVs accounting for 60pc of its car sales.
Despite the vibrancy of the market, Lotus will still have a challenge on it hands. Because of the growing demand, market competition is high. BMW is to launch the X7 next year, while Bentley will unveil the Bentayga SUV.
Lotus could risk rolling out its SUV into a saturated market with little room to manoeuvre.
The Norfolk firm will have to hope that sticking to its unique principles of delivering light-weight responsive cars will be enough of a draw to make it stand out as the SUV of choice in the coming years.
Sports car manufacturer Group Lotus said it was on course to swing into profit as it unveiled plans to launch a mass-market car.
The company wants to capture the growing global demand for sports utility vehicles (SUVs) by creating a light-weight rival to the Porsche Macan.
Designed at Lotus’ headquarters in Hethel, the new model will begin production in China at the end of 2019, if the company’s manufacturing licence is approved.
It comes as the firm reinforced its commitment to the county by stating that it would create 200 new jobs within the next two months as it begins producing the new Evora 400 and increases production of the Elise and the Exige.
The business has been rapidly expanding its dealerships across the world in recent months, helping to boost car sales from 1,296 to March 2014, to 2,015 to March this year. It expects to produce 3,000 cars per year by March 2016.
Chief executive Jean-Marc Gales said producing a lightweight SUV would bring new customers to the Lotus brand and provide more income to invest back into the sports-car business.
“The idea behind SUV was born because there is no lightweight SUV right now,” he said. “All the SUVs are big boxes, heavy cars. As a manufacturer you cannot ignore the trend towards SUVs; about 20pc of the world market is an SUV market.
“We want to launch a car that is in the Porsche Macan segment, but lighter and faster – a real Lotus in that segment.
“We have signed the agreement with our Chinese partner, but what we are now doing is developing a running prototype in the next 12 months which is necessary in order for us to get a manufacturing licence.
“Our partners and ourselves are confident that we will get that licence and we are currently choosing between four clay models which we will then develop two full-scale models and the choice of the final design for this car will be made by the end of July and then we will build a prototype which will be ready by February 2016.” He added: “We plan to build between 10,000 and 20,000 of these SUVs. It’s a big jump from the current number of cars because this year we want to achieve 3,000 Lotus sports cars. And at the end of 2019/early 2020 depending when we get the licence we will get the jump from over 10,000 to maybe 20,000 cars.”
Mr Gales also confirmed that Lotus will embark on a major recruitment drive – on top of the 100 staff recruited since the start of the year – which will bring total employment back up to 1,220 worldwide. Staff numbers fell from 1,215 to 930 last year as Lotus moved to secure its future by making staff redundant to cut costs.
It means the Norfolk workforce – which stood at 1,032 before 252 staff were made redundant – will now grow from 780 to 1,082 by the end of August.
And Mr Gales said the company could even take on another 200 staff if it reaches its production target of 4,000 cars per year by 2017/18.
He said the car-making business was on track to record its first monthly profit in its history this November. He expects the company to be cash-flow positive by the end of this year.
But the financial turnaround will only be complete if he meets his target of putting the business back into a yearly profit by the end of March 2017. Lotus has already cut its losses from £167.8m to £71.1m to the end of March 2014.
Mr Gales said the Lotus position in Norfolk was vital to the future of the company and an integral part of its brand identity.
“Our customers associate us with Norfolk in the UK, but outside of the UK much more. Sometimes we overlook the attractiveness of East Anglia to our foreign customers. We have so many nice villages in Norfolk. Sometimes we show a car in a studio, but [the cars] belong to Norfolk.
“We are going to use much more of the Norfolk landscape and the Norfolk heritage of our cars.
“You are going to see much more references to Norfolk in the communications and pictures that we will send out to press.” Mr Gales said the company will also look to grow the number of dealerships it has in East Anglia; adding sites in Suffolk and Cambridgeshire to its Norfolk dealership in Long Stratton.
The expansion would bring further muscle to its dealerships worldwide which have grown from 138 to 186 over the last year, with new sites in London, Paris, Milan and Abu Dhabi.