McLaren Automotive, the British manufacturer of high-performance luxury sports cars, is navigating rough waters amid reports of financial struggles. In December 2022, news broke that the carmaker was selling off some of its prized heritage cars to fund the development of its latest supercar – the hybrid McLaren Artura.
To be fair, the ‘sale’ was executed under a creative agreement that ensured the cars would remain at McLaren’s Woking HQ. Also, McLaren retains the right to buy back the vehicles as part of a recapitalization plan with shareholders. However, the fact that McLaren even considered this option to raise capital lays bare just how dire the situation has become for the company.
McLaren Automotive’s financial issues have been ongoing for a while
The effects of the COVID-19 pandemic, made worse by global supply chain challenges, reverberated through the automobile sector. Sports car manufacturers like McLaren Automotive were particularly hard hit, especially since they typically do not produce for the mass market. With many countries imposing stay-at-home orders and travel restrictions, demand for luxury sports cars took a significant hit. At the height of the pandemic, McLaren Automotive had to temporarily suspend production at its factory in Woking, UK and furloughed workers in a bid to manage costs.
Sales dwindled as a result. In 2019, the company reported a loss of £68 million, citing, among other things, weak sales in China and difficulties in the rest of Asia. Additionally, McLaren Automotive has invested heavily in research and development, as well as new models and expanding its product line. These investments have proven to be costly, and the company has had to take on significant debt to fund them.
In April 2020, the company applied for a UK government-backed loan of up to £150 million to help get through the pandemic. The request was subsequently denied, forcing McLaren to turn to the National Bank of Bahrain to secure a rescue package worth about $184.5 million. It was a curious decision on the surface but one that becomes much clearer when you consider the fact that the Bahraini Mumtalakat sovereign wealth fund is the majority shareholder of both McLaren and the National Bank of Bahrain.
As part of cost-cutting measures, the company announced that it would reduce its workforce by around 1,200, or roughly 25% of its total staff. The company cited the current economic climate as the reason for the job cuts. Additionally, McLaren has said it will scale back its product line and focus on its core models, the Sports and Super Series.
A year later, McLaren agreed a deal to sell its Woking base to US Investment firm Global Net Lease (GNL) in a deal with about $210 million. As part of the contract, McLaren would remain operational on the premises under a 20-year lease. The deal was below McLaren’s expectations, but it did inject a much-needed cash stream into the company’s operations.
The Artura roll-out has been far from smooth.
As part of efforts to streamline its model line-up, McLaren Automotive discontinued the Sports Series and introduced the all-new hybrid McLaren Artura. It is not an exact replacement. Instead, the Artura is part of a reclassified Supercar category that includes the 765LT and 720S. The Artura is a High-Performance Hybrid supercar. McLaren took a big gamble with this one. Not only is it the carmaker’s first series-production hybrid supercar, but it also debuted with an all-new engine, a 3.0-litre twin-turbocharged V6 instead of the usual turbo-charged V8.
The Atrura was meant to spearhead a new chapter in the company’s history, but things haven’t quite gone according to plan. The car was first introduced in February 2021, and the first customer deliveries were scheduled for June 2021. However, that got pushed out to the fall, with the carmaker citing software issues as the problem. Then the deliveries got delayed again with a new target date of June 2022, and this time, it was the global chip shortage that was the culprit.
Today, Artura deliveries have kicked off in some market regions, but it is still not at the pace McLaren would have liked. It’s early days yet, but it’s clear that the Atrura rollout has not been as smooth as the company had planned.
Looking ahead for the brand
McLaren is not alone in its struggles, as other brands like Aston Martin and Jaguar Land Rover have had their share of financial battles. However, despite these challenging times, the luxury sports car market is not going away anytime soon. There will always be a demand for high-performance sports cars, particularly among automotive enthusiasts and collectors. McLaren Automotive, with its strong brand and loyal following, has the potential to right the ship and sail on into the calmer waters of financial stability.
Despite the delivery challenges, the Artura remains a great car with the capacity to compete favourably with rival offerings from the likes of Lamborghini and Ferrari. The Artura is well-placed to bring in new customers for the brand. That should open up more opportunities for the new models McLaren plans to introduce in the coming years. Also, you can’t discount the institutional backers behind the brand. The vast Mumtalakat sovereign wealth fund (managing assets valued at over $18 billion in 2022) has already provided financial support to the beleaguered carmaker and could be called upon to assist again.
In conclusion, McLaren Automotive, in spite of its challenges, remains a great brand and one that will most likely still hang around for the foreseeable future.
Tolu Akinshete
