Since LEVC's successful introduction of the plug-in hybrid TX Taxi in 2017, the UK-based unit of Zhejiang Geely Holding has struggled with costs. As a result, the money-losing producer of the iconic London black cab brought in longtime Audi executive Joerg Hofmann as its new CEO in February. Hofmann's first job was to stabilize the company. Now he is leading a product push that he told Automotive News Europe Correspondent Nick Gibbs will make the Chinese-owned brand profitable within two years.
What has been your main focus since you joined LEVC in February?
Implementing a turnaround strategy in two phases. One is stabilization and consolidation, which we just finished. We cut costs to a reasonable level and put a lot of emphasis on getting processes right. The basics of the business weren't where they should have been. Phase two, which we have just kicked off, is growth based on the new van [the TX LCV] and exporting into new markets.
LEVC is a very young company to have a consolidation plan.
You have to consider the challenge. Since 2014 the whole business model changed from producing a classic diesel taxi to a new electric taxi with new manufacturing techniques. This caused some turbulence, and maybe the turbulence wasn't addressed in the right way. That is what we are doing now. A lesson has been learned.
How did you address the turbulence?
We looked in all areas -- purchasing, supply chain, manufacturing process, sales process, in our dealer network, our import structure, and dealer margin system. Every area had some room for improvement. The sum of all that is paying off significantly.
Are you profitable yet?
No. This is something we clearly have to deliver. Geely invested 500 million pounds (561 million euros) in the brand in 2014, which is a big sign of trust. My job is to pay that back and, sooner or later, to deliver a sustainable, reasonable amount of profit. We will certainly be profitable two years from now at the latest.
Will LEVC's future profitability come down to new models?
The core is our TX Taxi. Now we have the TX Shuttle -- a variant of our taxi with no taxi sign that is a people mover for mobility companies. We expect 90 percent of this product will be exported to Germany, Netherlands, France or wherever. Right now we are 10 percent export, 90 percent UK. In the future we will be 70 percent export, 30 percent UK. The third model is our TX LCV. We plan to start production of the van at the end of the third quarter next year.
Does the TX LCV use the same plug-in hybrid drivetrain as the TX Taxi?
Sixty percent of the van parts will be the same as the taxi. The whole front will be the same, the platform will be the same, so we can create some synergies.
The battery must be the biggest cost. Can that come down?
The battery is biggest cost. It is still too expensive.
The battery currently comes from LG Chem in Poland, have you looked at getting it from elsewhere?
We have a contract with LG Chem together with Geely that we can't walk away from. But, we are in close discussions with LG Chem engineers to define our specifications and ask for cost improvements, which we have already gotten. Long term, there are other options [for suppliers] out there.
There has been talk about the UK getting a battery plant. Would LEVC be interested in this?
We are involved in this as a project. There are some advanced battery cell companies that are trying to build some momentum. We are looking at all options inside the UK for battery cells and battery assemblies. The project probably should have started earlier because it's a bit late, but it's better than nothing.
The TX Taxi is costly at around 53,000 pounds excluding VAT after subsidies in the UK. What will the van cost?
The van has to be cheaper and will be cheaper. You save the whole passenger compartment, but you need other stuff such as applications for the sliding door.
What is LEVC's annual volume and what is the future target?
This year we will sell about 2,500 TX Taxis. Now that we are starting exports to Europe and we expect significant volumes, I believe the combined volume of the taxi and Shuttle will be about 4,000 to 4,500 next year. With the addition of the van, we should reach 12,000 by 2021. The van has the potential to grow to 8,000 to 12,000 a year, easily. That's when we will start to become profitable.
In 2017, LEVC had a plan to build the taxi in China for the local market. Is this still on track?
It has not been decided. It could be a direction that we could go, we license it and they do it under the Geely brand, but nothing is confirmed.
What sort of companies are going to buy the TX Shuttle?
It's our main export product for Europe. We already see big demand from new-mobility companies in Germany that offer on-demand ride-sharing. We have sold about 50 to a company called Clever Shuttle. The car is perfect: six seats and purpose-built for transporting people.
Who are your rivals for the van?
The most serious will be the Ford Transit Custom plug-in hybrid, but there will be more to come. However, we are quite relaxed because the market is huge. The one-ton midsize van segment is about 600,000 in Europe. At the moment these are all diesel.
How big a problem would a no-deal Brexit be to you?
If Brexit is the wish of the people, we can handle it and it will not bring our business to a stop. However, no-deal for us would mean our turnaround and growth plan would be for the waste bin, for sure. With the tariffs, our whole business case will be gone.