New Lotus Cars boss Phil Popham has launched a major turnround after a cash injection of several billion pounds into the lossmaking brand from new owner Geely.
With losses mounting, the industry veteran, who took over last October, is facing a significant challenge, despite the group’s rich motoring heritage as a pioneer of Formula One racing cars and the use of its vehicles in James Bond films.
Losses at the company in the 12 months to March 2018 grew to £36.3m following several writedowns, with accounts for the nine months to December last year expected to show a further £16m of pre-tax losses.
“I’d seen the potential comeback of Lotus before. I wanted to make sure there was substance behind it [before taking the job], and it was very clear that there was,” Mr Popham said in the first interview since starting the post back in the autumn.
It has been a lack of investment and poor sales that have hit the company in the past, which Mr Popham hopes can be rectified with the help of new Chinese owners Geely that took a majority stake in the company last year.
The group, which will invest “billions” into the business over the next five years, poached Mr Popham, a former Jaguar Land Rover executive, from Sunseeker Yachts to spearhead the revival.
The Geely investment will allow Lotus to refresh its sports car line-up, expand into new vehicle types, launch electric cars, hire more engineers, and revamp its ageing factory in Hethel in Norfolk, Mr Popham said.
The scheme will see Lotus’ output rise from 2,000 cars a year to about 5,000, with additional manufacturing facilities needed in the future as the company widens its portfolio to include sport utility vehicles, grand tourer cars and saloons.
“At some point, we will need to manufacture outside of Hethel,” he said. Options include a new UK site, extending Hethel, or building elsewhere in the world.
While rival carmakers cram more and more technology into their vehicles, Lotus remains stubbornly analogue — its cars do not have keyless ignition, while two of its three mainstream models lack power steering, to allow greater engagement with the road when driving.
Yet the result, a visceral dynamism to its vehicles that comes alive on undulating country roads, is too niche, conceded Mr Popham.
“It’s fair to say, I think, that we need to broaden the appeal of the brand,” he said, adding people should be comfortable using the vehicles every day.
His role as chief executive of Lotus Cars sees him run all aspects of the business other than the engineering, which belongs to Feng Qingfeng, who is chief executive of Lotus Group and the chief technical officer of the wider Geely group.
The deepening pre-tax losses to £36.3m to March 2018 compared with from £12.2m in the previous year were due to writing down the value of tooling used to build current models. The company also had to pay back a previous government grant because it did not hire sufficient number of people.
However, revenues rose from £83.7m to £100.3m in the 12 months to March, while underlying earnings before interest and other measures rose to £2.2m from a loss of £1.5m a year earlier.
Geely is not focused on making a quick profit from the business, with no plans to extract dividends from the unit for the duration of the plan, though Mr Popham is keen to stem the losses in order to use Geely’s funds to invest in new technologies rather than prop up the current business.
Lotus will automate parts of its plant, which currently hand builds many parts of its cars, as well as refurbishing much of the site and buildings that have sat part-constructed on the site for years because of under-investment by past owners.
A key question for Lotus is how quickly the group embraces electric vehicles, which seem inevitable as the future of motoring but goes against the company’s core skills of building lightweight vehicles.
“At the end, you can build a fairly light-ish car”, Mr Popham said, explaining that heavy batteries are compensated for by losing heavy parts of the internal combustion engine.
The other advantage is that electric cars, with batteries built into their base, have low centres of gravity, improving their handling, he added.
The company did make the first electric sports car, collaborating with Tesla to fit a battery to the shell of a Lotus Elise to make the Roadster in 2010, but since then has sat out of the technology race.
Access to Geely, which is planning a suit of electric vehicles through its Volvo, Polestar, Lynk & Co and Geely brands, allows Lotus to use battery technology from the wider family, reducing its development costs.
It also has access to a wide pool of engineers, including 20,000 at Geely’s headquarters, but will also double the number of engineers on its site to about 500 this year, compared with 180 that were employed when Geely bought the company at the start of 2018.