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Setting up a car manufacturer can't be done on the cheap even for a business with as rich a racing heritage as McLaren. The McLaren Automotive company manufactures high-end supercars and was launched on the back of the brand's success in Formula One. The first cars rolled off its production line in 2011 which was a tremendous achievement but, as Pitpass' business editor Christian Sylt reveals in an article for the Daily Telegraph, it was also a very costly exercise.
Sylt reveals that McLaren Automotive made an after-tax loss of £53.9m in the year-ending 31 December 2011 as its costs accelerated by 177% whilst the business was gearing up for production of its £168,500 MP4-12C supercar. It is new territory for McLaren, not just because the MP4-12C is the first production car with a chassis and engine it has designed, but also because it is more used to its businesses making a profit.
The MP4-12C is produced at the new £50m McLaren Production Centre in Surrey, which was opened in November 2011 by Prime Minister David Cameron. Production started in July 2011 and by the close of the year daily targets were being met. A total of 400 MP4-12C coupés were sold in 2011 driving revenue to £68.9m from £6.4m the previous year.
The production boost was funded through the issue of shares to new investors which generated £150m. In August 2011, Singaporean billionaire Peter Lim bought a significant stake in the company, placing him alongside existing shareholders Bahraini sovereign wealth fund Mumtalakat, Saudi businessman Mansour Ojjeh and chairman Ron Dennis. The shareholders also provided an additional £10m in loan financing, which brought the amount owed to them up to £211.5m.
The financing enabled the development of new vehicles and during 2011 £66.6m was invested in new road car projects, with staff numbers being boosted to 792 from 473 in the previous year. This resulted in the March 2012 launch of the 12C Spider, a convertible version of the MP4-12C. In September, a new sportscar, the McLaren P1, was announced at the Paris Motor Show. Although no technical specifications have been released, the car is expected to be McLaren's flagship model with a price tag in excess of £700,000 and production limited to just 500 vehicles.
McLaren also focussed on building up its dealership network throughout 2011, appointing 36 dealers globally, 27 of which were trading before the year end. Another 13 retail partners were appointed in 2012 as the company pushed into new markets with dealerships launched in key markets such as the United States, Japan, Singapore and the Middle East.
Despite its sizeable loss, McLaren planned to move closer to breaking even in 2012 and expects to make a profit in the near future as its range of cars and its global dealership network expands. The P1 is a crucial part of this plan and is expected to go on sale in late 2013. Time will tell whether it is enough to drive McLaren into the black.
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