Lotus is the last bet for the Chinese automaker. Geely has acquired the 51% stake from the Malaysian company Proton, which bought Lotus in 1996. The sale of the English automaker to the Chinese one has now been officialized for a reported price of approximately £100 million, according to the DRB-HicomMD Syed Albar, including in the deal both the car production department and the Lotus Engineering firm specialized in management consulting for car-makers. Jean-Marc Gales, the current CEO of the English company, has welcomed the deal stating that this has been the most important thing that could have happened to them. He will remain the CEO of the company, but he will be accompanied by a new five-person Board of Directors composition, comprehensive of three members from Geely and two members of Etika, the company which purchased the 49% of the stake left in Lotus.
Mr. Daniel Donghui Li, Executive Vice President and Chief Financial Officer of Geely Holding Group, said:
“With proton and lotus joining the geely group portfolio of brands we strengthen our global footprint and develop a beachhead in south east Asia. Geely holding is full of confidence for the future of proton. we will fully respect the brand’s history and culture to restore proton to its former glory with the support of Geely’s innovative technology and management resources. Reflecting our experience accumulated through Volvo car’s revitalization, we also aim to unleash the full potential of lotus cars and bring it into a new phase of development by expanding and accelerating the rolling out of new products and technologies”.
This acquisition has been completed in a positive financial momentum for the English carmaker. In fact Lotus, after quarters of losses, has reported a £2m EBITDA (earnings before interest, tax, depreciation and amortization) profit for the 2016/17 financial year, improving the financial performance of the previous financial year, which witnessed a £16.3m EBITDA.
Profits before taxes has also improved reporting a £11.2m loss in 2016/17 depicting improving financial figures when compared to the £41.2m loss in 2015/16. Even though we are not facing groundbreaking financial results, it is possible to observe a positive trend that could be likely magnified by the new financial possibilities available through the funds of the Chinese group.
Rationale:
Geely has completed the acquisition in order to increase the market penetration in the mature markets and exploit the potential synergies with Volvo, bought in 2010. Since then, the Swedish car producer has flourished thanks to new investments backed funded by the Chinese Holding. This capital injection helped Volvo’s operating margin to follow a positive trend, confirmed also by the latest Q2 financial results which reported an increase of the operating margin by 6.8% YoY. The independent management of Volvo has not been operatively impacted by imposed rules and strategies made by the Chinese holder but, conversely, have had the possibility to further expand technological know-how to become the leader of the car electrification, setting the aim to produce only electric and hybrid cars from 2019. At the same time, the expertise in the production of electric cars could be exploited by Lotus, leveraging on the English ability to produce excellent chassis that are eligible to perfectly incorporate a fully electric engine (like the Tesla Roadster based on the Lotus Elise). Investing in the prestigious Hethel brand could, in turn, make the entering into the European market smoother, leveraging on the brand awareness and reputation of both Volvo and Lotus and creating the preconditions for becoming the leader of the electrification wave of cars.
Alessandro Bonetti
Mr. Daniel Donghui Li, Executive Vice President and Chief Financial Officer of Geely Holding Group, said:
“With proton and lotus joining the geely group portfolio of brands we strengthen our global footprint and develop a beachhead in south east Asia. Geely holding is full of confidence for the future of proton. we will fully respect the brand’s history and culture to restore proton to its former glory with the support of Geely’s innovative technology and management resources. Reflecting our experience accumulated through Volvo car’s revitalization, we also aim to unleash the full potential of lotus cars and bring it into a new phase of development by expanding and accelerating the rolling out of new products and technologies”.
This acquisition has been completed in a positive financial momentum for the English carmaker. In fact Lotus, after quarters of losses, has reported a £2m EBITDA (earnings before interest, tax, depreciation and amortization) profit for the 2016/17 financial year, improving the financial performance of the previous financial year, which witnessed a £16.3m EBITDA.
Profits before taxes has also improved reporting a £11.2m loss in 2016/17 depicting improving financial figures when compared to the £41.2m loss in 2015/16. Even though we are not facing groundbreaking financial results, it is possible to observe a positive trend that could be likely magnified by the new financial possibilities available through the funds of the Chinese group.
Rationale:
Geely has completed the acquisition in order to increase the market penetration in the mature markets and exploit the potential synergies with Volvo, bought in 2010. Since then, the Swedish car producer has flourished thanks to new investments backed funded by the Chinese Holding. This capital injection helped Volvo’s operating margin to follow a positive trend, confirmed also by the latest Q2 financial results which reported an increase of the operating margin by 6.8% YoY. The independent management of Volvo has not been operatively impacted by imposed rules and strategies made by the Chinese holder but, conversely, have had the possibility to further expand technological know-how to become the leader of the car electrification, setting the aim to produce only electric and hybrid cars from 2019. At the same time, the expertise in the production of electric cars could be exploited by Lotus, leveraging on the English ability to produce excellent chassis that are eligible to perfectly incorporate a fully electric engine (like the Tesla Roadster based on the Lotus Elise). Investing in the prestigious Hethel brand could, in turn, make the entering into the European market smoother, leveraging on the brand awareness and reputation of both Volvo and Lotus and creating the preconditions for becoming the leader of the electrification wave of cars.
Alessandro Bonetti