Lotus teams up with Renault in F1

The Renault F1 Team will be renamed Lotus Renault GP (LRGP) for the 2011 season (and beyond) with Group Lotus' acquisition of an equity stake in Genii Capital, the company which has had a major stake in the Renault team since December 2009. Renault, the French carmaker, has sold its remaining share in the team to Genii Capital so in effect, the F1 team will now be co-owned by Genii Capital and Group Lotus (not to be mistaken for the 'Team Lotus' of Dato' Sri Tony Fernandes & Friends).

Genii Capital is a Luxembourg-based investment firm which specializes in new technologies, brand management and motorsport and while the initial association sees Lotus as a ‘title sponsor’, a more comprehensive strategic alliance between the two organizations is envisaged. The partnership between Lotus and Genii brings the ability to quickly incorporate new technologies from F1 cars into Lotus roadcars including hybrid technology, the Kinetic Energy Recovery Systems (KERS), aero advancements and lightweight materials. Genii also brings non-F1 technologies such as lightweight braking systems, variable compression engine technology and on-board software systems to the partnership.

Business aspects aside, the return of Lotus to the F1 world in association with Renault team brings to mind the highly successful partnership between the two companies in the 1980s in the same motorsports arena. Older fans and followers of F1 will recall the black-and-gold John Player Special (JPS) racing cars which streaked around the circuits with famous drivers like Nigel Mansell and the late Ayrton Senna behind the wheel.
 

For 2011, the LRGP cars will have the same iconic colours as those JPS Lotus F1 cars of the 1980s. Apparently, the deal has been in discussion since October as the first official press release of LRGP states that the design ‘has been on the drawing board for over two months in order to reinterpret its iconic graphic signature to suit modern media requirements’.

While Renault will no longer be a co-owner of the F1 team, it will still be heavily involved in providing engines and technology. It has established Renault Sport F1 which will be a division responsible for F1 activities and interact with LRGP as well as Red Bull Racing and 1Malaysia Racing Team which will also use Renault F1 engines. The new division will put forward Renault’s technological response to the challenge raised by the new F1 regulations on engines. It will be a ‘laboratory’ for developing environment-friendly technologies applicable to internal combustion and electric powertrains as well as to production models. One of the big changes in F1 will be the switch from the present 2.4-ltre V8 engines to 1.6-litre 4-cylinder turbocharged engines.

With this decision to supply engines to three teams next season, Renault is returning to its core expertise in engine manufacturing and getting ready to meet the challenges of the future, particularly the new engine regulations to be introduced over the next few years. Although details of the regulations are still under discussion, it is clear that the cars will have to serve progress in production vehicles, to showcase technologies that better respect the environment, to limit budgets, and still put on as spectacular a “show” as possible!

“2011 opens a new chapter in our historical involvement in Formula 1 racing. The victory in 2010 with Red Bull Racing showed the potential of the engine specialists and underlines Renault’s credibility as a supplier of engines and technologies. We intend to build on this victory over the coming years and to achieve further success with our partners. Renault will adopt a proactive approach with other manufacturers and sporting bodies to meet one of the main strategic challenges of this sporting discipline: to develop an engine with technologies that will herald those applied to future production vehicles,” said Carlos Ghosn, President and CEO of Renault.

On the new partnership between Lotus and Genii, he said: “This multi-partner alliance will bring a new dynamic to the team and enable it to compete with the sport’s best from next season.”
 

As for the drivers of LRGP, the entry list for the 20-round 2011 championship announced by the FIA earlier this month names only Robert Kubica as one of the two drivers. Team principal Gerard Lopez has so far said that Vitaly Petrov, the Russian rookie who drove for the team this year.

For Malaysians, this news of Group Lotus buying a stake in the Renault F1 team would also raise questions about ‘the other Lotus team’ which has run during the 2010 season, the one managed by 1Malaysia Racing Team which is owned by Dato’ Sri Tony Fernandes and friends. As has been reported earlier, the ‘Lotus Saga’ arose from a dispute over the use of the Lotus name which Group Lotus had said was permitted for use only in F1 racing and with specific conditions. Having urged the 1Malaysia team to conform to all the conditions (which included approval of merchandising activities) and finding that the team did not do so, Group Lotus has withdrawn permission for the team to continue using the Lotus name (which the 1Malaysia team acknowledged and accepted). From what we understand, permission to use the Lotus name was granted without any payment being requested and was done at the urging of Proton (Group Lotus’ parent company) which saw it as a ‘1Malaysia initiative’ since it was a Malaysian-owned team that was involved.

The 1Malaysia team has countered by saying that Tune Group (founded and owned by Dato’ Sri Fernandes) has acquired the rights to the name "Team Lotus" from a business formerly owned by David Hunt called ‘Team Lotus Ventures Limited’. As such, it should be able to use ‘Team Lotus' without having to ask Group Lotus for permission. The David Hunt case has been disputed for some time and is now the subject of a court case in UK so both Group Lotus and the 1Malaysia team have refrained from arguing further in public.

[Related stories on 'Lotus vs Lotus Saga': Proton's statement    |    Lotus Racing's statement  ]

In any case, it’s ironic that the 1Malaysian team will be supplied engines by Renault, which will be associated with LRGP. It is likely that Renault would also set its own conditions for the supply of engines so as not to create ‘confusion’ in the racing world. (the transmissions for the 1Malaysia team will come from Red Bull Technology).

In a discussion with Proton’s senior management concerning the partnership with Genii Capital and co-ownership of the F1 team, it was made clear that the cost of buying a stake in the team was done with funding by Lotus and not through an injection of money from Proton. Thus Malaysian taxpayers who may feel that their money would be better spent on other things in Malaysia can rest assured that it won’t be their money Lotus is using.

It was also emphasized that whatever decisions have been made on the degree of involvement in F1 have been totally business considerations. Being a public-listed company, Proton has to be very mindful of shareholder interests and furthermore, it is also a company that is always under scrutiny by the whole country because of its status. The board is satisfied that this deal [to acquire a stake in the Renault F1 team with Genii Capital] is a sound one and “an opportunity that should not be missed’.

Group Lotus won’t reveal just how much the equity stake in the F1 team has cost nor how much it will spend supporting the team but it is known that the company’s annual marketing budget is somewhere between 15 and 20 million Pounds. The thing that must be noted is that Group Lotus is not running the racing team like McLaren or Ferrari; its position (at this time) is more like that of Petronas and Mercedes-Benz so it will be contributing to the huge sum that is needed to operated a F1 team. However, unlike the situation that occurred with 1Malaysia team where Group Lotus had absolutely no participation, with LRGP, Lotus engineers will also be present and technology development shared with the factory in Hethel (the LRGP team’s base is in Enstone, 250 kms away in another part of England).
 

The involvement in F1 by Group Lotus is actually not something that has come about because of the 1Malaysia Team episode. It is in fact something which is part of the business plan to transform the company which was formulated earlier. Given its image as a sportscar company and also its strong heritage in F1, it was felt that motorsports would be a great communication vehicle to showcase the ongoing transformation of Lotus. Over the next few years, the company aims to lift itself higher into the luxury sportscar segment and the new products it showed off at the Paris motorshow are part of this plan which is to come to fruition by 2015. In terms of product pricing and annual volumes, it aims to be positioned somewhere above Maserati and below Aston Martin, but with a segment share comparable to Porsche – and making good money of course.

The Proton board made it clear that business considerations come first and there must be real value to any F1 venture and any participation ‘must not adversely impact the Proton Group’s balance sheet and profits’ but if Lotus goes into F1, there must be benefits to the entire Group. In the latter respect, it is learnt that Genii Capital is offering Proton the ability to leverage on its existing business relationships in Russia and other parts of the world, as a means to expand Proton's global reach. Through Genii Capital, Proton can also potentially access advanced automotive technologies by virtue of Genii Capital’s association with Mangrove, a venture capital group.

Exposure for the Proton brand on the racing cars is believed to be unlikely as it will be a 'Lotus thing' though, inevitably, Proton's name would still get mentioned in every press release from the team as it is the parent company. It'll be interesting to see if Lada (a Russian carmaker) will still have its sticker on the racing cars, which was the case this year. Lada has Renault as a shareholder but will Proton agree to it continuing as a sponsor and having exposure?

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