Lotus’s path to profitability is proving rocky

Lotus is pitching itself as the coming electric performance luxury car brand ahead of its public listing later this year, but the Geely-owned company is facing a series of headwinds that has already forced it to pull back on its near-term ambitions.

Lotus last week brought to the UK its new Emeya electric saloon, a rival to the Mercedes EQS, and in meetings with journalists projected outward confidence that the company was on course to achieve its long-term target of 150,000 cars per year by 2028.

Deliveries for the Emeya start next year and follow those of the Lotus Eletre large electric SUV, which have already begun in China. However, it’s the smaller SUV, codenamed Type 134 – aimed at the Porsche Macan and scheduled for launch in 2024 ahead of deliveries in 2026 – that is targeted to account for the bulk of the 150,000 annual sales at a planned 80,000-90,000 a year from 2027. That suggests it’ll be as popular as the Macan itself, which last year reached 86,724 sales.

But this ambitious plan has already run into problems, with sales figures revised downwards twice. As part of its initial pitch to investors in its share offering, Lotus Technology (essentially the Chinese electric vehicle arm of the company) forecast that Lotus would sell 21,500 cars this year, of which 18,000 would be the Eletre SUV. 

In June, however, that figure was lowered to 12,000 (including 8000 of Eletre), according to Lotus’s October filing to US financial authority the SEC. Last month, it was revised downward again to 9000, of which 6000 would be the Eletre.

Lotus blamed a “prolonged custom clearance process” for the delays, while Lotus Tech chief commercial officer Mike Johnstone (pictured below) told Autocar that a shortage of semiconductors had also affected the roll-out of the Eletre.

Lotus also faced slow progress in getting its much-praised Lotus Emira combustion-engine sports car to customers in the key market of the US, with dealers still waiting for deliveries into autumn this year, almost a year later than initially promised. Up to the end of September, Lotus said it had shipped 4800 of both the Eletre and Emira globally this year, without breaking down the numbers.

Viewed one way, those numbers are amazing, given that they break all previous Lotus sales records. In the decades before Geely took over in 2017 and in the years after too, breaking 2000 sales in a year was cause for much celebration.

However, Geely is looking for a return on its £1.5 billion investment in the company and the further £900 million sunk into a dedicated factory in Wuhan, China, to build the saloons and SUVs. It also wants to raise funds by drumming up support for its US stock market listing via the SPAC (special-purpose acquisition company) method that has been promised before the end of the year.

What Lotus Tech should be valued at was the subject of some wrangling between Lotus and the executives backing L Catterton Asia Acquisition Corp, the listed ‘blank cheque’ company that Lotus will take over as per the SPAC playbook. 

The original discussions between the two last June arrived at an ‘enterprise valuation’ of $10bn, after Lotus pitched for $12bn. By October, that had dropped to $7bn “due to growing concerns around volatility of global capital markets and the general economic outlook”, according to the SEC filing. In December, L Catterton representatives pushed that to $5.5bn, this time citing “the pricing of recent IPO and deSPAC [post SPAC merger] transactions in the automobile sector”. 

No reference was cited, but given Polestar’s acrimonious SPAC listing last year and Vietnam’s VinFast rise and subsequent plummet in value following its stock market debut in August, also via the SPAC method, we are clearly a long way from the heady days of 2021.

The market is much more wary of pre-profit automotive companies and Lotus is losing big money right now as it develops the models it wants to reinvent itself with. The company posted a loss of $353m to the end of June on revenue of $130m.

Then there’s the unsure demand for high-end electric vehicles. The Eletre starts at £89,500 in the UK and the Emeya is guided to start at a similar level, but established premium brands such as Mercedes and BMW have had a tough time persuading customers over to luxury EVs so far.

However, Lotus is confident its strategy is the right one. It quotes consultants Oliver Wyman, who predicts the global luxury car segment will outpace that of the overall market, with 10% gains every year on average to 2031 and the luxury EV market growing even faster at a 35% average annually up to 1.9 million cars by 2025, driven by “regulatory tailwinds and increasing sustainability awareness”.

The buyers seem to be there. Lotus already had orders totalling 19,000 for both the Eletre and Emira by the end of September, the company revealed in its filing. And while it dialled back expectations of sales this year, it has only slightly revised its 2024 predictions to 47,000 sales, rising to an expected 73,000 in 2025, of which China is the biggest market at 32%, with both Europe and North America at 28%. 

The year after, in 2026, as we’ve seen, Lotus says the Type 134 Porsche Macan slayer kicks in an extra 80k-90k, allowing the company to hit that magic 150k mark by 2028. Lotus’s guided price point of $70,000 for this smaller SUV will certainly help that goal by offering something close to attainability. 

By 2025, the company says it’ll be in profit, even if its margin target is now 4%, down from 5% after the June and October rethinks. 

As investors ponder the chances of Lotus’s long-term success, the fact that Eletres are already in customer hands thanks to the heft of a parent company with a track record in producing desirable cars shows that, despite the volume revisions, Lotus is in a very different category from SPAC start-ups such as Nikola, Lucid and Arrival that fell well short of investor hopes.