Lotus Tech’s booth was crowded with Auto Shanghai attendees on April 18, 2023. Credit: Lotus Tech
Geely is taking strides towards becoming a global auto leader as it finally lists an iconic sports car brand after a months-long delay.
Lotus Technology, the electric vehicle division of Lotus, majority-owned by Geely after a financing deal in 2017, began trading its shares on Nasdaq on Friday. The brand appeared under the ticker LOT, achieved via a merger with a so-called blank-check company.
Despite China being Lotus’ largest single market, international markets are set to make a greater contribution to revenue growth and margin expansion, Feng Qingfeng, chief executive of Lotus Group and senior vice president of Geely Holding Group, told a Friday media call.
Once a legend in the racing world with its lightweight and aerodynamic vehicles, UK-founded Lotus was for years fraught with financial trouble due in part to a mismatch between high investment costs and low-volume output.
The $880 million infusion of capital from the deal is expected to fund Geely’s ambitious plan to fully electrify the illustrious 75-year-old racing brand by 2027 and boost its business beyond the super-luxury price segment globally.
Global electrification boom
Around the time Emira – the last Lotus model with an internal combustion engine – was released in mid-2021, Geely set its sights on the booming global luxury EV market set to enjoy double-digit growth over the decade, according to Oliver Wyman, adviser on the deal.
China’s second-biggest automaker by sales is set to expand in the US and South Korea in the second half of this year with the introduction of Coventry-designed, Wuhan-manufactured Lotus EVs featuring German engineering and Tesla-like automated driving features.
Sales of the Eletre, an $115,000 sports utility vehicle and first of the new-age Lotus products, will begin in the US as early as September, followed by the delivery of the similarly-priced Emeya sedan next year, said Feng. Last July, Feng told the Financial Times that Lotus might use an existing plant owned by Geely-backed Volvo Cars in South Carolina, or possibly open an additional new US factory.
The management on Friday did not give any update on the plan but expressed “full confidence” in its expansion, with its regional retail network set to be expanded to 80 showrooms from 47 in North America by 2025, despite rising US-China tensions. Global markets will account for roughly 60% of Lotus’ total sales by 2025, while China is set to contribute the remaining 40%, according to Feng.
Long road to revival
Taken public via a special purpose acquisition company on Friday, the UK-originated and Chinese-backed EV maker now has a market value of roughly $7 billion, less than a sixth of arch-rival Porsche. Yet, Lotus has set an ambitious goal of selling 150,000 EVs annually in 2028, up from 21,500 units last year, including a small number of gasoline-powered cars.
The new phase brings different challenges. In addition to economic uncertainty worldwide, consumer sentiment for EVs is weak overall, especially in Europe, where Lotus is set to operate 105 retail stores by 2025. These challenges are compounded by policy and geopolitical risks for Chinese-backed EV makers selling abroad.
Meanwhile, EV sales in China appear to be shifting into a slower gear this year after years of accelerating growth. EVs now account for only 7-8% of new car sales in the segment priced from $80,000, lower than the “low teens” growth rate baseline estimated by the company, Feng acknowledged. Yet he continued to tout “strong growth potential” in the world’s biggest auto market.
Management believes that a clear sales and marketing message derived from its decades of storied racing history will enable Lotus to stand out from rivals and bring it into closer competition with Volkswagen’s Porsche, which delivered over 40,600 electric Taycans worldwide last year.
Meanwhile, Lotus Tech expects economies of scale from increased volume and competitive labor costs to bring its gross margin to at least 21% in 2025, up from 4.7% as of last June. The company has bet on a strategy similar to that of Porsche, which expanded into more affordable lifestyle luxury, from a pure focus on state-of-the-art sports cars.
With a proven track record of turning around loss-making Volvo in just three years after its 2010 takeover, Geely has shown it can be adept at cross-border moves. The question now is, will it be successful this time?
Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric cars. Connect with her via e-mail: [email protected] or Twitter: @jill_shen_sh
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