Why McLaren can be profitable without an SUV

McLaren Automotive CEO Mike Flewitt says the supercar maker doesn’t need an SUV to generate the cash required to keep renewing its range.

Flewitt made the point when asked by reporters at the Geneva auto show last week whether McLaren needs to follow fellow British brands Aston Martin, Bentley and Rolls-Royce into the growing niche for ultra-expensive SUVs.

CEO Andy Palmer said last week that Aston Martin would join the segment because its needs to be “less dependent on a narrow product portfolio.”

McLaren, like Italian rival Ferrari, will forgo entering the niche because Flewitt says having a narrow product portfolio is not a problem if you focus on three things. The first is is to avoid being too dependent on one region. McLaren sells 20 percent of its current two-car range in Europe, 35 percent in North American and 30 percent in Asia. “We need to keep that spread,” Flewitt said. “For example, China is very volatile. If we overcommit to China, we’ll lose a load of sales.”

The second key that Flewitt sees is to keep tight control over costs. One way to do that is to cleverly re-packed and re-use already-developed technology. For instance, the entry-level Sports Series variant, which is expected to start at 170,000 euros, that McLaren will debut at the New York auto show next month will use a variation of the carbon-fiber platform and V-8 engine found in the more expensive the 650S and the P1.

The third key to success is to spend money to make money, Flewitt says. Supercar customers are impatient. They move onto the next new thing quickly so model replacement cycles are fast. “The fresher you keep the produce the more you can keep your price up,” he said. So the 650S, which underwent a major refresh last year, is likely to be replaced next year. Flewitt aims to spend 300 million pounds (415 million euros) a year on new model development.

It’ll be long a time before McLaren hits Ferrari’s profit margin of 14 percent, but Flewitt said the firm has surpassed the 1,400 annual sales figure need to make a profit and next year will sell about 3,300, boosted by the Sports Series. By following its own rules, Flewitt predicts the company can stay on track without needing to go off-road.