Ben Oliver’s essay in Automobile Magazine might be the best one I’ve read on Lotus and their existential predicament. While my own pieces are full of vitriol and cursing, Ben’s eloquent prose outlines the brand’s biggest problem; lacking the necessary volumes, they need to take advantage of economies of scale and high margins to survive as an auto maker. Sports cars that compete in the Porsche Cayman’s price range and performance envelope aren’t popular with buyers nor do they generate the volumes or profits necessary to keep an independent sports car maker afloat. The proposed option, a series of high-end sports cars built off a modular platform (similar to the Lotus-derived Aston Martin VH architecture) was met with little fanfare. The economic principles were sound, but the proposal alienated the faithful. Over to you, Best & Brightest.
57 Comments on “Automobile Magazine’s Must-Read Essay On The Future Of Lotus...”
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They’ll probably go to the Chinese or the Koreans just for their engineering knowledge. A British (again) car company that is built in the modern equivalent of a shed can’t survive. My apologies to those who kept the faith.
Funny that you mention that, for two reasons. Firstly, Lotus is owned by Proton, a Malaysian car company. Secondly, Morgan, the epitome of a “backward, built in sheds, British car maker” is doing fantastically. Like they have a waiting list for their vehicles and are making mad profits
But Morgan knows how many pounds are in the cigar box at the end of every day ;)
For built in sheds operators like Morgan, actually selling a vehicle during any given period, is likely to mean they are doing fantastically. If Lotus had Morgans’s sales, they’d be gone a long time ago.
Also, part of the Lotus mojo, is to be technologically relevant. They want to be leading edge in some objective measure. Which necessitates some R&D. As in money up front. Morgan can pretty much go down to it’s steel vendor and buy the metal it needs for a car, after the car is ordered. All necessary r&d was completed and paid for in by 1945.
It looks like a simple decision: they have to sell to the 1%, or they have to make low cost, high volume vehicles.
As far as selling to the wealthy: I actually thought the Bahar strategy could have worked. It was horrifying to watch the enthusiast community attack what might have been the best hope to revive the company. At this point, I think the suggested tie-up to Aston was not a bad idea. The companies could share prestige – and both need the new motor Lotus is/was developing.
Selling in volume is not easy, as cars like the Miata, 370Z, and S2K have not sold particularly well recently, and the FR-S still has to prove that it has legs. Modern platforms are now way too expensive for a small manufacturer. Heck, even Mazda can’t do the Miata on its own. I don’t see how Lotus could do this alone. Sure, Lotus could get into non-sports cars, but the brand doesn’t have much value there. I would love to see Honda buy Lotus to restore its mojo, but I don’t see it happening.
This is definitely a tricky situation and a huge shame. The new V6 Exige is one of the most desirable supercars out there to me, but 1) it’s not available in the US, 2) I do not, unfortunately, represent a large market, 3) it’s hard to get a non-enthusiasts to buy one over the excellent Boxster/Cayman (which also does not sell in dramatic numbers). As far as the “light weight and low power” formula – the Elise and Exige are perfect representatives of that philosophy and their sales have been pitiful. I have to say, I blame the buyers for not valuing joy in driving, while admitting that modern traffic is making it increasingly difficult to really appreciate a sports car.
I don’t know where Lotus should go. Whatever happens, I just hope their chassis engineering lives on in future vehicles. It may be up to Mazda and Caterham to keep alive the lightweight philosophy.
Add the Alfa Romeo 4C to the lightweight team but we still have to wait to see what they really end up bringing to market.
How is KTM doing with the X-Bow? I think it is too expensive and limited in utility, but I suppose it could take over for the Elise and Exige in Europe.
The trouble with the Elise is the cost of US certification. It wasn’t that expensive in Europe. Bringing it here cost a fortune and priced it about 60% more than where it really made sense. Its hard to believe that an old Corolla motor cost $20K more than the Rover K-series it had when it was a $30K car. The price delta must have been in redundant crash tests and long term emissions tests.
I think those are called “non-tariff barriers” whenever imports to Japan are discussed here …
The Elise saw hikes in it’s initial MSRP due to demand. It saw another MSRP hike of $5k since 2009. I think it’s close to $54k MSRP right now and it started off a few grand shy of $40k in 2002.
I could be wrong, but I think the price differential has more to do with the depreciation of US currency.
The only reason why I know this is I wanted one in the worst way 10 years ago.
I agree with Ben’s essay.
Unless some larger, healthy car manufacturer** buys Lotus, it’s all over. And that would be a shame. Lotus has contributed so much to motoring and racing history. It’s unfortunate that Danny Bahar’s mismanagement and excessive optimism caused the “crunch” to come. Without those absurd grandiose plans and diverse investments spread over for 5-new models, they might have hung on long enough to re-establish financial credibility, using just 2.
** BMW, I’m looking at you.
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It didn’t help when GM owned them.
Since when did being owned by GM help anyone?
D
One thing that I think is missed: they didn’t actually waste that much money on the 5 models. They just presented a vision of a 5-car company using the same platform, which actually made a lot of sense. Concept cars don’t cost that much.
Other Bahar investments, like the investment in Porsche-grade interiors, were actually a great idea. The motor looked like it might have been great. His hires were generally excellent.
I’m not saying all of it was sustainable. The massive racing strategy was probably overdone, and the celebrity endorsements should have waited until they had the Esprit done.
The real mistake for Lotus – and I have seen almost no one bring this up – was the Evora. Its styling was lackluster and it didn’t have the interior or the horsepower to justify its price. Lotus needed a winner in the Evora, and it just hasn’t gotten it. Even an Elise-level success would have helped them bridge the gap to the Esprit.
If the Evora had looked like that Elan concept, and had 400 horsepower and a quality interior from the get-go, I’ll bet this whole discussion would be different.
BMW? Great choice, given how wonderfully MG-Rover did under their ownership…
(More seriously, why would they? Lotus does nothing that BMW doesn’t/can’t already do better).
It didn’t help when Toyota owned them.
When did Toyota own Lotus? Who did Toyota buy Lotus from, and who did they sell them to? Sounds newsworthy.
1982, although I don’t know if control was transferred to T. Very hazy on that. Basically from ground level in the early 80s Toyota gave access to Supra parts which went into both Esprit and Excel, and Becker went to Belgium and sorted out the MR2. Whether money or board seats changed hands I am not sure but I’m guessing yes.
Then they were sold to British Car Auctions, then GM.
I may have missed some intermediate steps out. CABC and Fred got up to all sorts of shenanigans reputedly.
I think in this day and age, every brand has to have at least one “soccer mom car” in order to survive. Pride and ego alone won’t make sales.
No matter how much stick-driving, SUV-hating, internet-soapbox people like me might cry foul, the kind of cars I love and buy don’t sell in volume.
Is that a Honda Accord in your avatar up there?
Yeah, 6-speed manual V6. Sure it was FWD, but damn if Honda doesn’t make some of the best and smoothest manual shifters on earth! :P
Need to change the photo though. I sold it a month ago and got a 2006 TSX, since putting food on the table > new car smell.
That’s exactly it. I for one, do not mind mommyboxes coming out of Lotus or any other car manufacturer, so long as they are a sales success like the Cayenne was.
Bahar’s modular five car platform and suggested use of Toyota engines to power it, was a very wise decision as far as I am concerned.
My cousin was married to a Buick-Olds-Pontiac dealer. He (the dealer) told me “I’ll get you a Trans-Am at a GM auction, but I make my money selling 4-door family sedans, every day”. A mommy missile would make the dealers happy too.
If Morgan can be successful so can Lotus. They make good money on their Engineering work as well. Too many folks are interested in profits and not enough about the cars.
Morgan survives only because it is profitable, but then could Lotus survive making replicas of the Elan? Ben Oliver titled his piece This Cars Is Killing Lotus, the car being a 1960s era Elan roadster pictured in the article.
Being one of 75 people who bought a elise last year I guess I am one of the faithful. When I visited the lotus factory a few years back, they were pretty clear that what had sunk them previously was making their own engine, especialy fort he esprit. I think we can see that making their own powerplant also sank a previously sucessful TVR.
The flaws of the elise, its kit car build and the fact that it has been around since the early 90’s are probably what now keeps volume low.
Its virtues in terms of drive and smiplicty, off the rack powerplant, could be repackaged for the modern era.
Imagine a CF tubed elise, built well, new design and whatever is the great dujour 4cl or V6 engine. Such a car for 50K would sell a few thousand per year, cant be a fortune to develop and is profitable. Is this not exactly what Alfa is doing with the 4C, which I bet will sell well.
The top end marketplace is already overstocked. We have R8’s Various proches, Aston, Mclaren, Lambo, Ferrari. And where between Aston and Mclaren would lotus fit. I think they have a great niche where they are, what they need is new and exciting product in that Niche. Even if they go more upscale ala evora the formula and usp should be the same. Lighter more feelsome than anything in its class with great off the rack motor. Imagine an evora thet weighed less than 3000lbs with a lexus V8 for under 150K, that would take the cake.
If morgan can survive and prosper with inspired products so can lotus. Bahar was just trying to do a sort of mee too ferrari, porche playbook clone for poseurs, which is what he was. It never would have worked.
Honda I do feel would be a great tie up. The company still makes better 4 cyl engines at least in some countries than the toyota unit. Honda has an independant streak, they understand vehicle dyanmics, never really went for size and are looking to rebuild engineering and sproting image. A lotus elise would slot below a NSX. Honda has a great race winning tradition, not to mention an ability to engineer really really great motors.
The only car that I have driven, that drives in a similar manner as an elise is a GT3 porche, which may be better in many ways but also tripple the price. A boxster is not even close.
The recent Proton + Honda deal may be an indication of what may happen to Lotus. Clearly, Lotus does require a large car company to achieve its necessary economies of scale. While the Honda-DRB Hicom deal is still early, before Lotus, they have to think about Proton’s future first.
However, I don’t really think Honda would be a good match for Lotus. They no longer produce high-revving engines, they don’t make anything more than a V6, and they already have the NSX in the pipe-line as well.
If the Honda-Proton deal goes through, DRB-Hicom may just sell Lotus to a third-party if Honda doesn’t want to invest billions into keeping it going. Honda could use a little more flash in their luxury division, but I’m not sure of the likelihood of such a tie-up.
On the flip-side, there will always be willing Chinese buyers for Lotus.
OK, flameproof suit is on. . .
If you’re Toyota, and you’re looking to sport up your brand, why not pick up Lotus and channel that sporting brain trust?
Think of a car somewhere in-between the FT-86 and the Exige. Or for that matter, something between the late Esprit and the Supra Turbo. . .
Lotus has been running Toyota engines anyway. Why not take it a step further?
Of course, Lotus is not up for sale, or necessarily ripe for picking. But if Honda and Toyota need some spice, and Lotus needs to figure out how to build larger volumes, it seems natural that a partnership/purchase would benefit both parties.
Sure, the purists want to hang me from a tree right now. But I have to say the whole appeal of the Exige to me is the (illusory?) marriage of Toyota reliability and Lotus verve. I’d buy one in a heartbeat, if I had the money and somewhere to park the thing.
I think you’re absolutely right. Lotus could go to town on the new Lexus IS and they could develop the new sports car.
I hope that Toyoda-san considers it. He is a true car lover and Toyota has the resources to eat some of Lotus’ costs.
Toyota is not in the business of acquiring non-Japanese automakers.
And Lotus doesn’t provide anything that TMC needs. If TMC wants to build a small, expensive sports coupe, then it can do that without any help from Lotus.
None of the Japanese auto manufacturers do that, in fact. The closest is the Nissan-Renault alliance, but that one was tilted in Renault’s favour as well (Renault owns 43% of Nissan, Nissan only 15% of Renault).
The article is accurate. The logic should be obvious, but car fans tend not to understand the business or the profits that are required to keep a company going.
Lotus doesn’t bring much to anyone else’s table, so I presume that it will disappear sooner than later. The brand doesn’t carry enough cachet value to be worth very much to an existing car maker.
Comment of the day
Except that it entirely ignores Lotus Engineering, which does indeed provide value to a wide variety of manufacturers.
In fact, Lotus Engineering would likely even earn a profit if it were to be decoupled from the production group.
Pch101..
Yeah, it sure looks that way. But cachet can be re-depevoped. There was a time when Mini was ailing and ready to pass into the Happy Motoring Grounds in the Sky, …. before BMW bought them and brightened their little lives…
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Pfft, while you are correct that fans don’t get the business, you are otherwise wrong. I am only saying that because if I agreed with you completely some improbability drive might fail and screw up something important.
I know we can all agree that we hope they don’t fail. I love seeing a Lotus drive by, even though I can’t fold into one.
Lastly, if someone actually does make good enough batteries, the whole thing changes, and anything can happen.
Toyota should buy Lotus. Their engines already fit and there is brand recognition with Lotus. Use Lotus as the high end halo sports car division (because NOBODY equates Lexus with Sport) and Scion for the stripped out models*:
Lotus Elise -> Scion MR2
Lotus Elan -> Scion 4000GT
Lotus Esprit-> Scion Supra
*used Toyota names because Scion uses Alpha-bits Cereal to name their cars
mazder3….
Very sensible. But the reasons I was suggesting BMW are:
1) They too are European and have experience with purchase and success with other English brands;
2) Their current Z4 is more a luxury touring roadster than a real sports car (where’s the manual transmission?), and they could use a mid-priced 2-seater as an adjunct to their expensive, 2+2 fat M-cars;
3) Logistically and managerially, they are close by.
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There is no asterisk on cars like the Cayman R and 911 GT3 4.0 because they are made by the same company as the Cayamera. Purism doesn’t make for good business, adaptivity does. Lotus should do whatever it has to to keep the doors open to make cars the purists love.
Plus in any case a lot of times “purists” and “people who buy the cars purists agonize over” are two groups that never overlap in membership. To hell with the god damn purists, they don’t matter. I’d rather an Elise + Lotus SUV than no Lotus at all.
As Ben Oliver’s essay points out, Youngman has been lurking in the weeds of the international M&A seen for a number of years now. Through an agreement with Proton, they are allowed to sell Lotus branded vehicles in the Chinese market, and many will remember their attempts to purchase Saab. In Hong Kong, I had the chance to see some of the Lotus branded vehicles they offer for sale. Frankly, they are not even up to the standards of the better known indigenous Chinese brands.
However, because of Lotus Engineering, the NDRC may look favorably on a Youngman purchase of Lotus. How this would affect Lotus Cars is anyone’s guess. Youngman has enjoyed success in manufacturing buses, but that success has not translated well into cars, an area that Youngman is desperate to conquer. They have very deep pockets, but so far, I’m not sure that they understand how to use the brand in a way that consumers would recognize. The faithful should be nervous.
Maybe they should have acquired the carcass of Saab. They could have shared technology and had a mix of family/sport sedans, CUV’s with Lotus being the sports car, GT division.
Since they can’t profitably design engines for their cars, they need to design the car around the engine
1) Find the 2L and a 4-5L engines with the best power-to-weight ratio they can get their hands on
2) Add enough stuff to them to make them into cars. Possibly even fabric bodies.
3) Have enough design compromise to make them at least marginally practicle (e.g. easier to get in and out). Use active noise cancellation in the head rests to make up for the complete lack of sound deadening and insuulation
4) Offer a stripped down cheapo track-day special, and one with a nice posh interior and a spare tire for a daily driver.
I don’t know, there MUST someone out there just dying to buy a slower, more cramped, less reliable version of a Miata that costs three times more.
On the other hand, I am still hopeful of attracting venture capital for my meat-flavored ice cream idea.
Elise slower than a Miata? Don’t bet your life savings on it.
See for example the Car and Driver Lightening Lap results:
http://www.caranddriver.com/features/lightning-lap-2012-feature-sortable-times-complete-lightning-lap-times-2006-to-2012-page-8
Around VIR Grand West course, Elise 3:09.3, Miata 3:29.3
PS Meat-flavored ice cream is popular in Japan.
Lotus possibly makes sense for a company that is trying to solidify its brand image as a sport or sporty car maker or who is trying to re-position its brand that way. The obvious choice would be Mazda, which unfortunately is in its own battle for survival. The other choice would be someone like Acura which doesn’t have much of an identity at all and could use Lotus as as concept to organize the brand around. Toyota/Lexus has the LFA. Lotus would be redundant for them.
But all of these are reaches to be honest. At this point in time, Lotus does not bring enough to the table to offer much value to anyone. Sad but true.
I am impressed the B&B has made rational suggestions to date. My recommendation is that a mainline automaker buy Lotus, and convert them into an in-house tuner, like AMG or M. An independent line of Lotus cars is not econmically feasible.
Lotus needs a greater reason to survive than ‘add lightness’. That’s a philosophy, but it’s not a raison d’etre. It can’t survive as the maker of a great track-day car, there’s not enough volume. It has to be either a lot smaller (like Cateram) or bigger (like Porsche). Right now it’s neither able or willing to go in either direction.
You can’t just slap the Lotus badge on a brand new line… there’s no history. It wouldn’t work for Toyota to re-badge their how sports car line as ‘Lotus’, the narrative just isn’t there.
(Also, I find it a tremendous shame that because of their tortured corporate history, they have long since been forgotten of as one of the pioneers of automotive active suspension).
Except for a loose (and confusing) branding exercise in F-1, it doesn’t meaningfully race against other marques, but that’s what Lotus ought to be about. Race on Sunday, sell on Monday. Ferrari understands this tremendously, and going back to il Commedatore, has never been too shy about which came first, the road cars or racing.
Porsche backed away from all out competitive racing. They were strong in Group C, but terrible in F-1 and only dabbled in CART. They’re no longer about the competition (racing against yourself in a Porsche Cup series doesn’t build a marque), but can sustain themselves trying to bleed customers off of Mercedes and BMW.
Lotus can’t just position in the high-end anymore. The market is tightening up and there’s no room for a company without a clear purpose. Whatever they do, it has to be about racing, or it just wouldn’t be Lotus.
Porsche has been engaged in sportscar racing pretty consistently for almost 15 years, in Le Mans, ALMS, Grand Am and FIA GT.
Incidentally, Porsche’s first foray into F1 did produce two victories in 1962, before the company withdrew at the end of that year due to the high cost of the program.
@th009: Porsche does not race at the highest levels of sports car racing, i.e. prototype racing, they have ceded that ground to Audi. At the current pace Audi will have more Le Mans victories than Porsche.
@stuntmonkey: Lotus does race the Evora in the ALMS, but your point is well taken, their racing program is a shadow of what it should be.
In other sad news, Lola has gone bankrupt…
The obvious buyer is Nissan/Renault. They already call their factory F1 team Lotus, and they could seriously use a lesson in making sports cars that weigh less than Richard Petty’s old Superbird.
That’s the former Renault team (former former Benetton, former former former Toleman). It’s currently owned by Gerard Lopez’s Genii Capital.
Oops. I thought Renault changed the name without selling the team, not that it made much sense.
Thou shalt not blink if thou intends to keep track of F1 team ownership!
Hyundai shall buy Lotus.
Honda is perhaps the best possible fit for Lotus. Lotus can do suspension and chassis engineering for Honda, and Honda can provide off-the-line engines for limited Lotus sportscars.
Whatever you may say about where Honda is now, they still produce exceptionally sweet motors like the K-seeries. The lightweight R-series engines would be a good fit for “basic” Elises, too.
In the end, Lotus will eventually become nothing but an engineering armand perhaps a trim line for whichever big dog buys it. All because people didn’t want a Lotus minivan. Yes, I thought the idea was brilliant.
And, oh… TTAC did an article on how great another automotive publication’s writing is. Suck on that.
niky…
“And, oh… TTAC did an article on how great another automotive publication’s writing is. Suck on that.”
TTAC staff may often be opinionated and spicy, but they have also been insightful and largely objective (even in honoring someone else’s work), —- which is maybe why we all keep coming back here…
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I didn’t think the writing involved was stellar. Derek liked it because Oliver opened by questioning the manhood of people who disagree with his failed point of view, dismissed concerns about Danny’s hip hop absurdity, and avoided the fundamental fact that spending a billion and a half of anyone’s dollars on Lotus trying to compete with Ferrari is as sensible as Canada trying to assert military strength against the US. Lotus trying not to be Lotus turns them into vaporware, just like almost countless other operations with visions of grandeur. The deck is stacked against Lotus successfully selling another Elise or Elan, but the odds are at least as bad for them becoming a quasi-independent super car builder. Eight thousand cars a year doesn’t amortize the R&D, and it’s probably as realistic as Fiatsler putting eight million annual cars on its three year plan.
Oliver started out by pointing out that Bahar’s plan was overambitious, that he spent too much money, and that most of the proposed model line-up was vaporware. I’d hardly call that being dismissive over concerns about Bahar’s direction.
Instead, he points out that Lotus needs to head in that direction to survive. Which is true. Lotus is the last independent sportscar maker left. The only other non-luxury sportscar marquee left, TVR, is dead. Lotus fans can protest as loudly as they want, as Porsche fans did many moons ago with the release of the Cayenne (as did I), but you can’t build a car company purely on fan-service.