The Chinese conglomerate that owns Sweden’s Volvo Cars is now planning to breathe new life into its latest acquisition, famous British sports car brand Lotus.
Geely’s holding company has bought a 49 per cent stake in Malaysian carmaker Proton, which owns Lotus. Part of the deal will include Geely taking a majority 51 per cent share in Lotus.
The takeover will allow Geely access to Lotus’ innovative engineering division, which develops and sells technology worldwide. Geely wants to use Lotus’ know-how to meet tightening emissions targets in China.
Daniel Donghui Li, chief financial officer of Geely holdings, told news agency Reuters: “Reflecting our experience accumulated through Volvo Car’s revitalisation, 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.”
Lotus has been losing money for years. Its global sales last year fell by 242 to 1584 vehicles. Jean-Marc Gales, who became Lotus CEO in 2014, has been trying to return the company to consistent profit after two decades in the red.
It was effectively locked out of the United Staets in 2015 when its airbags failed to comply with new car safety regulations, but Lotus returned to the US market last year.
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The deal will also give Geely access to Proton’s sales and distribution network in large Asia markets such as Malaysia and Thailand.
“Malaysia and ASEAN (Association of Southeast Asian Nations) countries are very good potential markets for us, said Geely chief financial officer and vice-president Daniel Donghui Li.
“Our target is to produce three millions cars by 2020. We will have potential of half a million cars in Malaysian and ASEAN markets by working with Proton.”
Yale Zhang, director of Shanghai-based consulting company Automotive Foresight, said: “Proton is a well established brand in Asia, and Geely wants to get a brand and sales channels into Asia.
“These are big markets and they are growing pretty fast. But they are very difficult markets because the Japanese entered early and set very high standards.”
Proton owner DRB-HICOM said it expects to sign the deal off in July, after which Geely will take a leadership role in areas including production, manufacturing, sales and marketing.
Proton has been looking for an international partner to help it expand and improve the quality of its cars amid falling market share in its home territory.
Geely, which also owns the London Taxi Company, is aiming to break into the right-hand drive market in Southeast Asia.
Geely makes right-hand-drive Volvos but only makes left-hand-drive vehicles under the Geely badge. It plans to use Proton’s plant to make right-hand drive cars.
Proton was once dominant in its native market with three-quarters of all car sales, but by last year its share had fallen to 15 per cent due to fierce competition from cheap imports.
In 2013, the brand set a target of producing 500,000 cars a year by 2017. Last year it made just 150,000 vehicles.