Geely's backing feeds big ambitions for Lotus

It started with free coffee. During six years of painful budget austerity at Lotus, employees at the sports-car company's headquarters in eastern England had to pay for their own.

Then in 2017, Geely bought the company and installed machines that dispense coffee for free. Posh ones that grind the beans before each serving. "It's jolly nice," one employee told Automotive News.

Free coffee was the precursor of a tsunami of investment, the initial sum of which could run close to $2 billion, Bloomberg reported in August.

China's Zhejiang Geely Holding Group — which also owns Volvo — has not formally laid out its plans, but signs are emerging that it wants Lotus to become a major player in the luxury market. One that that will take on Porsche, Maserati and even break into the ultraluxury space to poach customers from Bentley, Aston Martin, Ferrari and McLaren.

"Our ambition for Lotus is huge," said a Geely spokesman. He also said the U.S. and China were key to those plans.

Before Lotus CEO Jean-Marc Gales was replaced in September, he spoke of the company getting "substantial amounts" of investment from its new owner. "It's what I need to develop two new cars that are world class," he told Automotive News a year ago. He subsequently hinted that Lotus was planning a hypercar costing around $1.2 million. That halo car, reported by Autocar magazine in December as being electric, would head up a range including an SUV to challenge the Porsche Cayenne and almost certainly a revival of Lotus's iconic Esprit supercar, likely to arrive in 2020.

Twelve months ago, Gales put the sales targets at 10,000 vehicles a year. They almost certainly have risen since then. "There's an element of sky's the limit," said Tim Urquhart, a United Kingdom-based principal analyst for IHS Markit who is closely following the Lotus transformation.

The company is on a hiring spree.

A search on UK jobs site Glassdoor uncovered 129 mostly management-level openings, including chief engineers for electrical systems ("must have experience with hybrids and battery electric vehicles") and driver assistance systems ("including autonomous driving capability of Level 3 and higher"). Also needed: a manager responsible for VIP sales.

Staff are being recruited from across the UK's luxury and ultraluxury brands. The new CEO of Lotus Cars, Phil Popham, cut his teeth at Jaguar Land Rover and was recruited from Sunseeker, the British ultraluxury yacht company. The new product strategy chief is former Bentley executive Uday Senapati. The new commercial director, Marcus Blake, was Aston Martin's global marketing director.

Among the biggest indicators that Bentley, Aston and other superpremium brands are being targeted is Lotus' development of Hethel, its hometown, into a pilgrimage site for potential buyers worldwide. An old bomber airbase on the flatlands of England's East Anglia has been Lotus' headquarters since 1966 when founder Colin Chapman shifted it from the London suburbs. A dramatic new visitor center and museum under construction is straight from the playbook of Aston Martin, McLaren and Rolls-Royce: Lure your customers, by helicopter if they wish, then soak them in an intoxicating brew of brand heritage, champagne and leather swatches before opening the order book. Lotus even has its own, onsite test track — something Aston Martin, McLaren and Bentley can't boast.

Of course, this has been tried before. Lotus' previous owner, the Malaysian automaker Proton, decided that the residual strength of the Lotus brand was powerful enough to transform the company into a global Ferrari rival, and in 2009 it hired a former commercial director of Ferrari, Dany Bahar, to oversee the transformation. It ended badly.

In a mirror of what's happening now, Bahar assembled a dream team, including Ferrari's former head of design, Donato Coco, and the former head of production at Daimler's AMG performance brand, Stephan Pathenschneider. The dramatic reveal came at the 2010 Paris auto show, when Bahar threw the covers off five new sports cars. The world gasped, and then basically laughed.

Bahar was fired in 2012 and the construction of a new production hall conceived to build the cars was halted. The steel skeleton has loomed over Hethel ever since, a reminder of the hubris that nearly killed the company.

This time, however, it's different, Urquhart believes. Asked by a friend about pursuing a job at Lotus, Urquhart was encouraging. "If there was anyone other than Geely involved, I would have said no," he said.

Geely brings to Lotus an impressive track record in turning around Volvo, massively expanding its own brand in China, and successfully delivering seemingly impossible projects such as the plug-in hybrid London taxi under the LEVC brand.

But Lotus poses a far tougher challenge, despite surviving to celebrate its 70th anniversary last year. GM, which bailed on the brand in 1993 after seven years of ownership, would agree.

A surgical approach to cost cutting allowed Gales to stabilize Lotus' losses during his reign post-Bahar, but it wasn't easy. "Lotus has basically never been profitable on the car side," Gales said when he started in 2014.

The Evora — its only road-legal Lotus currently offered in the U.S. — might be universally praised for its handling, but the global market for midrange sports cars is vanishingly small, and Lotus currently sells only around 1,600 sports cars a year.

There are question marks over the brand power globally, too. The problem is not Lotus' impeccable historical credentials. Colin Chapman was a visionary, and his hard-charging approach to Formula 1 and sports cars has a parallel in Elon Musk and Tesla today. Both were unafraid to push boundaries, sometimes glossing over safety and reliability concerns, earning them a reputation that swings between adulation and revulsion. There's a physical connection too: Lotus built Tesla's first car, the Roadster.

But Chapman's glories were a long time ago. Aside from a short-lived F1 rebirth in 2012 that resulted in just two wins, Lotus' reign as one of the leading racing manufacturers ended in the mid-1980s.

"People can see the margins that Ferrari and others are making and that's pretty attractive, but you're starting from such a marginal place," Max Warburton, an analyst with AllianceBernstein, told Automotive News. "Apart from a few F1 fanatics, brand awareness of Lotus is low."

Geely has direct knowledge of the volume luxury market through Volvo, but that experience won't necessarily translate to Lotus.

"What I can say from my own experience is that the step up between luxury and ultraluxury is just bloody enormous," said Aston Martin CEO Andy Palmer, a former chairman of Infiniti. "The difference in behavior around the stewardship of your brand, of your pricing, of the experiential work you need to do with your customers, of your customer interface [dealers], is a long way from what I experienced with Infiniti."

Geely has the budget, nearly double the £770 million ($972 million) that Bahar had, if reports from China are accurate. But there are a lot of question marks.

Can the synergies that worked between Volvo and the London taxi company — the taxi makes extensive use of components from the XC90 SUV — really work with a sports-car brand such as Lotus? Can Lotus still use Toyota six-cylinder engines? And if not, can Lotus convince customers that specially tuned versions of hybridized four-cylinder Volvo engines are worth swapping six or eight cylinders for? And can Chapman's memorable recipe for sweet-handling cars — simplify, then add lightness — really be applied when reusing modules from non-sports car brands?

As with a slew of other rebirths and startups, time will reveal the answer. "We seem to be in a particular moment in history where there's a huge crescendo of products and enthusiasm," Warburton said. "It's great fun, but a lot of it is going to have to come into contact with the harsh reality of the market at some point. It's bloody difficult, the car industry."