The Lotus eaters
In this issue, Andrew examines that British institution Lotus, and muses on where it might go from here
Published: 16 May, 2022
Lotus is currently a niche market player with luxury brand pricing. This reflects the inability of a relatively poorly funded small-scale manufacturer to match the quality or durability of bigger automotive companies. Despite this, the essential traits of excellent road handling combined with a compliant ride, Lotus hallmarks, remain.
The company is a long, long way from where it could be, and the hope is Geely will one day give Lotus a special place within its operations. Outwardly this has not happened, yet, inwardly there is a lot of serious competition from other members such as Volvo and Polestar, let alone other Geely operations.
Lotus is not the only brand to be afflicted by this conundrum. Even Bugatti, in a far more expensive area of the market, is presently struggling. The best niche players at the most expensive end of the market, such as Koenigsegg and Rimac, use limited tooling budgets very effectively, knowing a build line of 20 units or less might be the total potential for any single edition of their product.
Lotus needs to stop thinking only about volume, or, if that’s what it really wants, to return to developing special versions of mass production vehicles. Lotus Omega is a good example of this, and was profitable for Lotus too. However, within Geely, Polestar sits in this place with Volvo as well being as a stand-alone brand. Lynk & Co is effectively a China-only brand. LCEV is an unlikely target, being taxis and vans, while Proton continues to do next to nothing. Awkward.
Vauxhall VX220: A shot in the dark?
It worked elsewhere, in another life. The Opel Speedster, otherwise known as the Vauxhall VX220 in some markets, was a re-engineered Lotus Elise that enabled GM Europe to produce a ‘halo’ sports car with minimal investment. The contract was for a fixed number of vehicles powered by a GM Europe powertrain, and the only extension saw the addition of the turbocharged engine edition.
This was the second such programme, after the aforementioned Opel Lotus Omega/Vauxhall Lotus Carlton, which was closer to existing GM Europe products. Lotus sought to create more niche vehicles, but GM and GM Europe were not willing to repeat the experiment.
The main challenge is this: A low tooling investment programme with relatively low production numbers is going to struggle to match the panel gapping, durability and functionality of the mainstream mass market model programme. So, it’s harder to sell a vehicle which is a Lotus to either Vauxhall or Opel customers who expect lots of mundane things to be present, when they were not. Stellar ride and handling were not enough.
The quality demands made for the GM Europe vehicles were much more stringent than for Lotus, which means enthusiasts know the better buy is a Speedster or VX220. Vauxhall/Opel then did not follow up with anything, so allowed this project to stand alone. If GM Europe had been more serious, they would have repeated the project at least twice more, and made a fortune with the third generation. Nothing like the Speedster/VX220 existed in the range, so this was in effect building a new market segment for GM Europe.
However, GM Europe was on the ropes, not selling enough mainstream models, had excess production capacity and needed to cut costs. So, once the Lotus contract was complete, it was not renewed - even though the money saved was insignificant in terms of the overall GM Europe operation costs.
- Synchronise your branches! New standardised hours mark completion of GSF Car Parts rebrand
GSF Car Parts has completed its rebrand, with new signage, vehicle liveries and uniform branding in place across all branches, distribution centres and support offices, and standardised opening hours too.
- June new car sales: Weakest since 1996
New car sales fell by 24.3% last month, making it the weakest June since 1996, according to the latest figures from the SMMT, with ongoing parts supply issues along with additional pandemic restrictions in China being blamed for impeding the industry’s ability to meet demand. Just 140,958 new vehicles were registered, during the month.
- Plug-in car grant shutdown sends “wrong message”
The government’s decision to end the plug-in car grant (PICG), with funding being instead funnelled into electric vans, taxis and motorcycles, as well as towards charging infrastructure sends the “wrong message,” the car industry has warned.
- Second hand car market goes digital?
A traditionally fragmented and localised market, the UK second-hand car sector has undergone a pandemic-fuelled boom pushing up prices and, more recently, a sharp slump in actual sales, as would-be buyers get fed up paying a high premium for a used car, particularly when a new one is cheaper for those prepared to wait.
The UK car market was characterised by supply shortages for most of 2021 and that continues to be the case, thanks to an overall shortage of cars, new and old. Demand for electric cars is particularly acute, while the average cost of a second-hand car has risen by about £3,000 in the past year. In the US, it is a similar tale with second-hand car prices rising sharply. In September prices were up almost 25% on the year before. Against a backdrop of rising demand and prices, the disjointed nature of the UK market means that motorists are not purchasing vehicles in the most efficient or cost-effective way. However, the days of relative market disfunction may be numbered. Change is afoot within the industry, change that will benefit distributors, sellers and consumers.
In years gone, by the automotive industry stood out for its reluctance to embrace digitalisation, but that is no longer the case. The current market pressures are encouraging a more rapid transformation towards digital tools for pricing and purchases. This is in the form of online B2B marketplaces, which are driving the evolution of the second-hand car market, enabling greater competition and liquidity, wider distribution networks, and easier price discovery, as well as powerful data driven recommendations that benefit buyers, sellers and marketplace owners alike.
The need for change is clear. Research by AA Cars, comparing second-hand cars between 2019 and 2021, showed that demand for some models was so strong that prices are increasing in value with age. The price of a three-year-old Mini Hatch in 2021 was 57% higher, with Audi A3 models up 46% and Ford Focus prices up 43%.
The reason for the price pressures lies with a V-shaped sales recovery amid component shortages in the industry, ranging from semiconductors to steel, and because of the just-in-time nature of supply chains. Consulting firm AlixPartners forecasts that these supply chain problems will cause automakers to build 7.7 million fewer vehicles globally than they would have if they could get all the parts and raw materials they need. One consequence of the price rises in the UK is a discernible decline in sales, which have dropped to their lowest levels in six years. Many people are holding off on their next car purchase.
Buyers should not have to delay though. More efficient and transparent marketplaces can help mitigate the impact of the shortages and disruption. The onus is on operators of B2B marketplaces to provide solutions that loosen up the markets downstream that impact consumers. The benefits should cascade rather than trickle. Imagine being able to go online to one centralised digital marketplace offering transparency, speed and recommendations on alternative models if the desired one is not available.
As an example of what’s possible, take a look at CarNext, the online platform for vehicle sales and auctions. CarNext sought a solution capable of serving thousands of concurrent bidders, and hundreds of internal users across Europe, available to trade on a 24/7 basis all year round.
It now uses a digital B2B marketplace developed by NovaFori. Benefits of the marketplace include wider distribution networks, greater competition and liquidity, and easier price discovery by using various auction methodologies. Normally, buyers compete for goods by bidding incrementally rising prices in a bidding process that can be open or closed. As with auctions anywhere, the goods are normally sold to the highest bidder if the bid is greater than the reserve price set. The marketplace gives access to a pool of thousands of vehicles rather than just a handful, making it possible for professional buyers to browse and purchase vehicles that most suit their needs and offer best value for money, rather than simply having to take what is available at the garage. Data science deployed by NovaFori enables CarNext’s B2B marketplace to recommend vehicles based on previous buyer behaviour. The recommendations can be refined based on user actions on the platform, such as searches, bids, substitutions and won lots, resulting in tailored recommendations boosting trade volumes.
More profit-making opportunities
As a result, suppliers can access a wider range of buyers and trade volumes are higher, giving suppliers more profit-making opportunities. Professional traders are able to bid on a wide variety of CarNext cars in 24 languages and across multiple countries in Europe. Crucially, the marketplace can show that the highest price has been achieved across its portfolio, thanks to a combination of auction mechanisms and cross-border trade capability. NovaFori's recommendation engine contributes to the volume of vehicles sold on the platform, with a significant increase observed in average sales prices.
This technology is already driving marketplaces in other industry sectors as diversified as insurance, IPv4 address trading, derivatives trading, art and antiques. These B2B markets are able to incorporate data science in the form of machine learning in such a way that markets have the capability to make meaningful recommendations. The algorithms used are also powerful tools for a marketplace owner, because they allow for adjustments to be made to auction methodologies to get the best price for a vehicle, based on a combination of past auction performance and predictive analytics.
Creating a comprehensive online system would help ease demand for vehicles creating a centralised marketplace, thereby making it easier to provide alternatives. NovaFori designs marketplaces so that they can offer alternative options if a particular model is unavailable. So, for example, if a Toyota Auris was not available, it may suggest an alternative such as a Volkswagen Golf R or Vauxhall Astra or Hyundai Ioniq, based on key features between vehicles. But it goes beyond recommending similar alternatives to include actual car specifics, add-on features, type of engine, miles on the clock, delivery time, price and more. The algorithms offering recommendations are not just powerful tools for buyers and sellers, they help marketplace owners fine-tune sales channels to foster marketplace optimisation. Using the valuable user-activity data captured, it is possible for marketplace owners to retain and re-engage buyers to optimise the marketplace. As digitalisation mixes with the disruption caused by the pandemic and a rapidly changing dynamic in the automotive sector, there is an inevitability about the trend towards automotive marketplaces. Their efficacy and benefits are obvious, and while it may involve investment, and even a radical rethink, car sales businesses that are willing to take the plunge will position themselves well to drive the future of the industry and reap the rewards digital transformation offers.
- May new car sales: Second weakest since 1992
Continuing supply issues helped to make May’s new car sales the second lowest since 1992, beaten only by May 2020, with a 20.6% drop compared with last year, according to the latest figures from the SMMT.
