Life In The Fast Lane: Interview With Mike Flewitt, CEO Of McLaren


Life In The Fast Lane: Interview With Mike Flewitt, CEO Of McLaren

WEALTH speaks with McLaren CEO Mike Flewitt about his company’s rich motorsport heritage, his strategy for building the McLaren brand in Asia, and the impact of Brexit on the business.

Published on 20 September 2017

McLaren has become a global name. You’ve probably heard of them from their long history in Formula One to the infamous F1 supercar of the 1990s and their recently launched 720S (pictured throughout). We sat down with the CEO of McLaren Automotive (head of the supercar manufacturer) Mike Flewitt during the Singapore Grand Prix last weekend to discuss business, Brexit, and of course supercars.

WEALTH (W): How do you plan to grow the McLaren brand in Southeast Asia? The brand is recognisable now having been around for almost six years, however maybe not as much so as some Italian and German competitors.

Mike Flewitt (MF): That is just time. Some other brands are celebrating 70 years or more. I think what we’ve done in six years is pretty incredible. We obviously had a great brand from the motorsport heritage and we built on that brand with the road car. I think the road cars have really accelerated the visibility of McLaren and in six years we have now grown as a company delivering nearly 13,000 cars across the world with 84 dealerships in 30 countries. If you look at our exposure, it’s growing. We do a lot of customer events almost every weekend. Most of the marketing in our regions is by our regional offices and by the retailers locally.

W: What are your key marketing principles?

MF: I’m not a marketing guy, I’m an engineer, but my principles of marketing are very simplistic. My first one is that people need to be aware of the brand. I always say you have to be on the shopping list. If they don’t know about you, you don’t start. We’re trying to raise that awareness.

The second part is getting people to choose you. I think this part is relatively straightforward. I always say to people: “Just go drive the cars.” If you love driving, our cars are very compelling. If you are just buying a status symbol then it’s a different choice. Our cars are aimed at drivers. So the challenge for us isn’t so much selling the car to people that are aware, it’s making people aware of McLarens. So everything we can do to build that awareness is very important to us. I think in six years we’ve done a pretty good job and these areas will grow. And they don’t grow in a linear way; they grow exponentially as you develop.

W: How is Asia different than your other markets?

MF: Asia is quite a unique market as it’s actually a lot of individual markets. You go into North America and it’s almost one big market, 300 million people and while there are differences between east and west coasts, it’s much more homogeneous then say Asia where in many cases it’s a case of when we go in.

Taiwan and Japan are great markets for us. We went into South Korea about 18 months ago and that’s also turned out well. We’re looking at entering new markets like the Philippines, into Manila.

W: Does it vary from market to market within Asia?

MF: Market to market can be very different. In Singapore, the duty is the highest of anywhere we sell cars, but we still have a great market here given the size of the country. If you take the price of the duty here, it’s 180%. If you go to the UK, it’s 20%. There are other places in Asia that are high duty markets and that obviously makes a difference as it pushes the price point to a different level.  But Asia is the fastest growing part of our business. There are a lot of HNW (high net worth) individuals here. It’s growing quicker than the US. Right now if I include China it’s probably 25-27% of our business, which is pretty significant.

W: There’s been a lot of changes at McLaren recently with Ron Dennis leaving the business. What does McLaren look like as a company in the next 12 months? Will the Automotive and Technology Group be housed all under one entity?

MF: Ron Dennis was 70 years old on the first of June and he had always planned to stand down from the business when he was 70, so we bought his shares back. Ron now has two focuses: he works for the UK government and runs a charity. Previously there were two companies, McLaren Automotive and McLaren Technology Group (Formula One team and a technology company). There were three shareholders of the technology group and seven shareholders of the automotive company. What we did was create a company at the top called McLaren Group. We still run the two companies as separate businesses though, because the business models of them are so different. Designing, building and selling road cars like we do is a very different business than running a race team which is essentially building two cars to go race competitively and your revenue comes from sponsorships and wins. It’s a business to business relationship. The automotive company is very much a business to customer relationship. What we try and do at the holding company level is look for the synergies around things like brand, marketing activities, people, partnerships that we have and some levels of technology that we can also share.

W: Is there the possibility for an initial public offering (IPO) in the future?

MF: I would use the word “possible”. We are building this company and if we just take the automotive part of it, it is five times the size of the technology group, just by the nature of the business. The company is growing very significantly and we’ve been profitable for the past four years. This will be our fifth year of profitability. Our shareholders have been very loyal, but at some point, they’ll probably want to realise some or all of that value and then there are different ways to do it. A public offering would be a fairly obvious option, but there’s no defined time-scale. However, it’s good, to be honest and say that’s a possibility. What we want to do is create the right financial framework so McLaren can continue to grow and be successful. A public structure when we grow to a certain size may be a very appropriate ownership structure for us.

W: It was reported recently that you are planning on building a carbon fibre chassis facility in Sheffield. How do you see Brexit affecting your business and what other plans do you have in regards to it?

MF: We had planned this factory before Brexit. It will go into production in 2019. Brexit is a difficult one because we don’t actually know what it is yet. There are probably three things I think about with Brexit though:

1) Duties

There could be duties on components coming into the UK and duties on cars going out. We buy about 50% of our components from outside of the UK. With the carbon fibre tub coming in, it will be down to about 40%. However, what it will do is make it more competitive to source more in the UK. There will be a financial cost in the short-term, then it will balance out as we look at sourcing. We sell about 20% of our cars in the EU zone. Those cars will become slightly more expensive. If you just take trade tariffs, it’s about 10%. The cars becoming more expensive will make them slightly less competitive. Albeit there are couple things we can do and we wouldn’t lose 20%, but we might lose a few percent. I think it will have an impact but it’s a manageable impact from a duty point of view.

The other thing we see with duties is that the impact is relatively short term. Even look at Singapore, when duties or credit regulations change they have an immediate impact because it’s a bit of a shock. Then the market gets used to it and it slowly comes back, because people’s tastes don’t fundamentally change.

2) People

About 50% of our engineers come from outside of the UK today, primarily from the Eurozone. If they restricted mobility that would be something we’d have to manage quite carefully. With my career, I spent 12 years outside of the UK and it’s a great experience, so I’d be really disappointed if there are regulations around that.

3) Technical regulations

Right now we homologate to Europe, US, China and then there are some individual countries like South Korea and Taiwan that have small differences. If we end up with different regulations for the UK and Europe, it will cost us. It will also cost all the other manufacturers money. I believe the country that will suffer the most is Germany. The UK is either the second or third biggest market for most of the manufacturers. If the EU tries to penalise the UK by putting penalties on, the ones that will suffer the most will be the EU. I think when people voted for Brexit, they didn’t want a political union with Europe. I think we want a trade union; that to me is the way the whole world should progress over time. But what we didn’t want was a European parliament running the UK any more than most countries do and that’s what people voted against. At the moment there’s too much emotion, the EU feels rejected and you’ve got this emotion overlaying what should be a rational conversation.

W: Which car series is the most important for McLaren in its six-year “Track22” business plan?

MF: The way the business works, we need all three series. They have different volumes, different price positions, and they’re very complementary. To me, it’s the Super Series that defines McLaren. It’s where we started with the MP4-12C and we ran that range through the 650S and the 675LT. We completed that range and launched the 720S in Geneva this year. It’s a big step on and the first time we’ve replaced a model series. Our heartland, our most defining car, is the 720S.