Lotus Tech’s debut on the public market hasn’t unfolded as smoothly as Geely anticipated. Within just two weeks of its listing on Nasdaq, shares have plummeted nearly 40%, dropping from $13.80 at the time of listing on February 23 to $8.37 at the time of this publication, hitting as low as $5.75 last week.
This decline marks the latest setback for the Chinese automaker, which has experienced similar outcomes with previous IPOs.
The downward trend in share prices for Volvo Cars, Polestar, and ECARX, preceding Lotus Tech’s IPO, likely influenced potential investors’ decisions regarding Lotus. For Geely, this downturn may signal concerns as the conglomerate endeavors to take more brands public to secure funds amidst the costly electric car landscape.
The next entity in line for an IPO is Zeekr, a new electric vehicle manufacturer, with Nasdaq listing documents already filed. Yet, according to Shaun Rein, managing director of China Market Research Group, a consultancy based in Shanghai, Geely’s immediate prospects appear uncertain.
“They don’t have a strong strategy internationally or in China,” Rein remarked to the Financial Times. “They [Geely] have too many overlapping brands that just don’t make sense.”
The lukewarm reception towards Lotus, a renowned brand transitioning into electric-focused automotive production, can also be ascribed to mounting apprehensions regarding EV demand in Western markets. Moreover, other EV manufacturers have witnessed post-IPO declines, notably Rivian and Lucid.
Although other Chinese automakers may not share Geely’s level of concern, the company founder Li Shufu’s ambitions for global expansion underscore the importance of fund generation.
Shufu aims to elevate his company to a top-10 position, necessitating substantial investments beyond China. Unlike other EV manufacturers subsidized by the Chinese government, Geely’s investment strategy emphasizes building plants primarily within the country.
Nonetheless, indications suggest that Geely is playing the long game. Mirroring its patient approach with Volvo, Geely seems to be adopting a similar strategy with Lotus. This long-term vision may not yet be reflected in current share prices. “These are not flip stocks,” remarked an individual with close ties to the company.
Meanwhile, Lotus’ transformation is still in its nascent stages. Chief Financial Officer Alexious Lee remains optimistic about the brand’s market segment, predicting it will become cash-generative by next year, buoyed by substantial investor funding.
Mike Johnstone, Lotus’ commercial head, highlights investor interest in the brand’s rich history and hopes that its motorsport success will set it apart in the rapidly expanding EV market.
Lotus plans to produce new SUVs, including the Eletre, in Wuhan, China. The company aims to achieve sales of 150,000 units by 2028, a significant increase from its current output.
Despite short-term fluctuations in share prices, insiders at Geely maintain confidence in the company’s trajectory. They anticipate a notable transformation by the end of the decade.
However, this commitment to global expansion through flotation means managing an increasingly intricate portfolio comprising Volvo Cars, Polestar, Lotus, Zeekr, ECARX, Proton, Smart, LEVC, Lync & Co, Aston Martin, Volvo Group, and Mercedes-Benz.
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