Could Lotus be the next Tesla? Thanks to a deal with China, it’s not as crazy as it sounds

Could Lotus, the iconic makers of British sports cars, become the next Tesla – thanks to China?

To many that idea will sound outlandish, and it may be. But Lotus Technology, part of the group, has just signed an agreement with NIO Inc, the Chinese electric vehicle manufacturer, that values it at $2.3bn (£1.6bn). It also announced today (31 August) that it will set up its global headquarters in Wuhan. Lotus is itself controlled by Geely, the large conventional Chinese car marker, which also owns Volvo and the company that makes London’s electric cabs. NIO has been a pioneer in developing electric cars, and while in terms of output it is still small, it has been dubbed China’s answer to Tesla.

So what is happening here is that two Chinese companies are combining to develop the next generation of electric cars, with Lotus’s genius at design and development the secret sauce they hope will make the project fly. You could almost say that the Chinese enterprises feel they need British technology to mount an effective challenge to Tesla. So there is a story about Lotus here, and a story about Britain’s relationship as an economic partner to China.

The Lotus story is really another chapter in the 70-year plus tale of engineering genius coupled with commercial uncertainty. Motoring buffs will know that it was founded by Colin Chapman in 1948, that he produced a string of iconic designs, including the Lotus 7, the Elite and the Elan, and that Team Lotus had huge success in racing in the 1960s and 1970s. But they will also know that the company was never a solid financial success. The company was already in financial difficulties when Colin Chapman died, aged 54, in 1982. Since then it has had a number of owners, with Geely having a controlling interest since 2017.

Its reputation, however, survived the commercial troubles. You can see that in the Mazda MX5, the world’s most successful sports car, which was inspired by the 1960s Elan, or the Tesla Roadster, which set Elon Musk off on his transformation of the global automotive market. The original Roadster was made by Lotus under contract and was based on the Elise.

So having had a hand in America’s first generation of electric cars, Lotus now has a shot at being part of China’s next generation of vehicles. We will have to wait and see how far that goes, but the lessons from Geely’s successful ownership of Volvo and the company that makes the London cabs, LEVC, are encouraging. This could become yet another story of UK technical expertise that needs foreign commercial drive to bring financial success.

That leads to two huge questions. The first is: why is the UK good at inventing things but not good at making money out of them? And the second is: how will we position ourselves between the US and China if the two giants enter a Cold War?

There are no simple answers to either. As far as the first is concerned, my worry is not so much that the UK does not capitalise properly on its creativity, because in some instances we have managed to do so. Rather, Europe as a whole is not creating high-tech giants in the way that the US and China, partly by copying US ideas, have done. If we had been cleverer, maybe Lotus could have become a core partner of Tesla instead of a subcontractor. But that did not happen.

As for the second, finding an independent path that acknowledges the long-term relationship with the US but also recognises the shifting balance of economic weight in the world is a huge challenge. When China becomes the world’s largest economy, as seems likely within 10 years, the UK will need to have built a constructive relationship at many levels. But the US remains the largest investor in the UK and our largest single export market. As our trade shifts away from Europe we will need to trade more with both the US and China. This has to be both/and, not either/or. That will take thoughtful, measured diplomacy at every level.

Meanwhile, let’s celebrate what is happening at Lotus, despite the headquarters of its new technology enterprise being in China. It is a seat at the top table, even if it is one below the salt.