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China’s Geely to take controlling stake in Lotus

Takeover is part of a deal to invest in historic carmaker’s parent company Proton

YESTERDAY by: Peter Campbell and Richard Milne
China’s Zhejiang Geely will take a majority stake in Lotus as part of a deal to invest in the historic British sports car maker’s parent company, according a statement put out by the Hangzhou-based company.

The Geely holding company, which owns the listed carmaker Geely, will take a 49 per cent stake in struggling Malaysian carmaker Proton according to the deal announced Wednesday morning.

Part of the deal will include the Chinese company also taking control of Proton’s Norwich-based subsidiary, Lotus, with a stake of 51 per cent.

Lotus, which made a loss of ￡27.6m in the 12 months ending on March 31 2016, is a leader in composite materials and lightweighting technology, which Geely will look to deploy across its vehicles to help them meet stringent emissions targets in China.

The takeover of Lotus will aim to breathe new life into the brand, whose sales last year fell by 242 to 1,584 vehicles. Lotus also includes an engineering division that sells sports car technology to other businesses.

Daniel Donghui Li, chief financial officer of Geely holdings, said: “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.”

Yale Zhang, director of Shanghai-based consulting company Automotive Foresight, said Geely would likely use the acquisition as a jumping off point into large Asia markets such as Malaysia and Thailand. “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 is a well established brand in Asia, and Geely wants to get a brand and sales channels into Asia.”

The deal with Proton was subject to regulatory approval and the signing of the definitive agreement, expected in July, according to the Geely statement.

DRB-Hicom, which owns Proton, issued a notice to the Malaysian stock exchange on Tuesday evening saying its shares would be suspended on Wednesday pending an announcement.

The move will extend the global reach of Geely, which already owns the Volvo car brand and The London Taxi Company.

Geely is hoping to break into the right-hand drive market in Southeast Asia, and plans to use Proton’s plant, which has a capacity to make right-hand drive cars.

While Geely’s premium Volvo brand makes right-hand drive vehicles, the Chinese marque only manufactures left-hand drive vehicles in its title brand.

Proton has been looking for an international partner to help it expand its range of products and improve the quality of its cars amid falling market share in its home territory.

PSA, the owner of Peugeot and Citroën, was also in the running to take a stake in Proton, but has lost out to Geely’s parent group.

Founded in 1983 by former Malaysian prime minister Mahathir Mohamad, 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.