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Lotus Cars Return

Lotus cars are back! Complete with a BEV SUV model this year and rosy projections. Feedback is pretty good, but it's in the early days. The $6B valuation is a little full right now.

The Lotus Esprit - MotorTrend Car of the Year.

After completing its de-SPAC IPO last week, the venerable Lotus Cars $LOT is a public company. The brand joins Volvo $VLVCY, Polestar $PSNY, Lynk, and Zeeker in the Geely $GELYY Auto brand constellation. Geely also has a stake in Daimler and a JV around them with the Smart brand.

Geely has been busy building its portfolio over the last 20 years, but it has yet to translate into durable gains in its stock price. After two runs to over $70/share, they are back to 2015 levels of $20/share. The auto market, in general, has been difficult, and EV supply/demand has become unfavorable in major markets like the US.

There are just too many BEV luxury models and units in the market where consumers are not eager to buy them - at least not yet. The problem looks like it's going to get worse instead of better over the next 12-18 months as brands continue to add to production volumes. They all fail to consider the aggregate increase in supply vs anticipated demand.

Once we get all the numbers, adding up the production estimates for the players and comparing them to the annual projections on luxury BEV sales will be easier. I guess that we will be at 200,000-250,000 units in 2024.

Setting aside the BEV aspect, there have been some notably successful reboots in the US market, like Alfa Romeo and Maserati.

Lotus still has cachet.

I wouldn't call Lotus an "early mover" here, despite all claims to the contrary. What they do have is a storied brand name in British sports cars that can still create intrigue and excitement.

This year's big launch is the Eletre, which is their entry into the BEV SUV market. It's a luxury item with an ASP that will be $100K.

The lead entry for Lotus this year.

Early reviews of the vehicle are pretty good while acknowledging some quirkiness and surprises. The specs are good, and there is always a segment of the market looking for "something different." The success of Hyundai's new Genesis brand is an example.

The company claims 19K orders, over 200 retail distribution points, and a 150K unit product capacity. Not many units are available now to test drive, but I am being told that they are scheduled to appear in "the next few weeks" at my local dealer. The order requires a $2500 deposit, suggesting that the book is fairly real compared to others (like Vinfast).

Lotus plans to offer a sedan version of this vehicle called the Emeya soon. After that, plans are for a smaller SUV in 2025 and a more mass-market edition sportscar in 2026. The main unit driver is expected to be the small SUV coming in 2025.

They have a shot at selling 40-50K units this year, but it's hard to see beyond that in terms of volume. Consumer reactions to the Eletre will inform projections for 2025 and beyond.

The EV Market is Changing

The industry has acknowledged that they have hit the limits of consumer demand for BEV units due to price, range, ADAS, and convenience concerns. There are plenty of clear use cases, and adoption will continue but be more measured.

As an investor, there are more interesting near-term cases in industrial applications, fleets, and specialized transport like school buses.

BYD has captured the EV unit crown with low-cost, more affordable models in China and emerging economies. They are now a major exporter.

Having a "fully electric portfolio" isn't what consumers are looking for. The strategy of a company like Renault - a combination of hybrid and BEV models- makes more sense. Pure ICE will be a big market segment for a long time for various reasons, including the lack of reliable electricity in many areas of the world.

One thing Lotus has going for is manufacturing in China, where they should achieve attractive costs per unit. That said, there are geopolitical risks. Notably, BYD is moving to build capacity in Mexico.

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