The decision by China's Geely to take a majority stake in Lotus Cars is great news for the unprofitable British sports-car maker.
Geely is already making positive noises about revitalizing the underfunded company, saying in a statement that it "aimed to unleash the full potential of Lotus Cars and bring it into a new phase of development by expanding and accelerating the rolling out of new products and technologies."
Lotus badly needs money to finance a new version of its core Elise sports car, which can trace its roots back to the first Elise launched in 1996. It also needs to expand its range beyond its three sports car models to possibly include the SUV that Lotus has previously said it was developing but seems to have stalled.
Under its CEO Jean-Marc Gales, formerly of PSA Group, Lotus has worked hard to inject new life into its aging range, but sales stood at 1,607 cars in the 2015-16 financial year, the last year records are available for, down from 2,015 the year before.
Geely is perfectly positioned to help. It has revived Volvo Cars and also owns the London Taxi Company, which recently started production of a long range electric hybrid black cab that borrows a lot of the technology used by Volvo.
Despite the vast differences between a six-seat London taxi and a two-seat Lotus sports car, the two share a common goal in keeping weight as low as possible. To this end, both Lotus cars and the new black cab are built on a bonded aluminum chassis. In fact the chassis for the new black cab and forthcoming hybrid van was developed by Lotus's former commercial director, Andy Tempest.
Pooling suppliers, technology and even some chassis elements would bring down the cost of developing a new platform for Lotus hugely.
Like the taxi, Lotus could also benefit by tapping into Volvo's supplier network for less money than Lotus could negotiate independently. Volvo's four-cylinder and three-cylinder turbo engines could replace Lotus's current Toyota supply and Lotus could quickly electrify future vehicles by using Volvo's suppliers for batteries, electric motors and e-axles. Lotus could also use Volvo's electrical platforms to incorporate the latest infotainment and safety technology, much like Aston Martin does with Daimler.
The partnership could work well in the other direction. Lotus has a long history as a supplier working with manufacturers to improve vehicle dynamics among other attributes, something that could hugely benefit Volvo and other Geely brands as they work to establish themselves as global players.