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Why McLaren Automotive is pumping up the volume

7 McLaren Production Centre

Polished white floors, white panelled walls and strip lights stretch into the distance in the four subterranean corridors that lead 1,000 employees into the McLaren Technology Centre each day.

Ron Dennis, chairman of McLaren Group and McLaren Automotive, wanted the entrance to its Woking base to “cleanse the minds” of his team before they start work each day, as well as creating an environment that was odourless and near-silent. The ability to showcase the brand’s 52-year racing heritage and incorporate the resident Formula One team’s 145-metre wind tunnel, which employs a neighbouring lake to cool its turbines, were also key priorities.

McLaren Automotive, built out of the same obsession for engineering excellence, fits well within the space age, cutting edge surroundings – in June of last year it announced it was reinvesting 20% of its £475.5 million annual turnover, about £92m, into research and development.

Now, less than five years since its first franchise opened, the supercar specialist is gearing up for an explosion of activity with its new, entry-level Sport Series range – the 570S and forthcoming 540C coupés.

McLaren 570S











MCLAREN 570S
The entry level to the McLaren
Automotive line-up ahead of the
launch of the 540C this summer,
the 570S is priced from £143,250.
Delivering 562bhp and 443lb-ft
from its 3.8-litre twin turbocharged
V8, the Sports Series model will
reach 62mph in 3.2 seconds and
a 204mph top speed.


 

The new range is priced from £126,000 (for the 540C), less than half the price of the £285,000 675 LT Spider, which recently sold out of its 500-unit production run in two weeks. So far,  McLaren Automotive has sold about 7,000 vehicles in total, from its Super Series, which regularly exceed £200,000, and Ultimate Series cars, such as the £866,000 P1 hypercar.

Jolyon Nash, McLaren Automotive’s executive director, sales and marketing, told AM McLaren’s success so far was “unprecedented” in the luxury sector.

The manufacturer was profitable three years after its formation and had record registrations in 2015. It is aiming for a self-imposed production ceiling of about 4,000 cars a year. UK registrations reached 171 cars in 2015, up from 121 in 2014. The US is the brand’s largest market, with 519 sales in 2015.

Nash, who joined McLaren from Rolls-Royce in June 2014,  said: “McLaren is a very young company in automotive terms. It has been in business four years and such a great deal has been achieved in that short space of time.

“Look at how the model range has been received by customers and the media in general and it is up there with the very best. Along with that, the company is profitable. I cannot think of another automotive company that has been profitable from its third year onwards.”

In 2015, McLaren Automotive sold 1,654 cars through its global dealership network of 80 retailers across 30 markets. By 2017, Nash expects that figure to almost double.

“Last year, we did 1,654 cars, this year we expect some growth of that and next year should be upwards of 3,000-ish cars with the new Sports Series on the market and the 675LT Coupé and Spider as well as the 650S Coupé and Spider.”

The dealer network will see its sixth UK retailer – McLaren Bristol – open in Q2 of this year. Based at The Laurels, Cribbs Causeway, the site will be operated by Rybrook Holdings and joins existing outlets in London, Birmingham, Manchester, Glasgow and Ascot.

Nash said: “Our network is very young. The majority of our dealers are in their third year now and for the majority I see 2016 being an excellent year with many, I think, expecting to double what they do at the moment.”

Expansion at that scale will require the recruitment of 250 staff and a second shift at the Woking production facility.

However, Nash is in no doubt about the potential effects of the rapid growth at dealer level and said an increasing emphasis on aftersales and the McLaren Qualified used car programme was inevitable.

Nash said one of the reasons for this was that the Sports Series would attract “a different customer” to the brand.

McLaren 675LT Coupé











MCLAREN 675LT COUPÉ
The fastest and most powerful
model in McLaren Automotive’s
Super Series, the £259,500 675LT
delivers 666bhp and 516lb-ft from
its 3.8-litre, V8 twin turbo. Making
use of carbon fibre to keep weight
at a minimum, the Coupé will reach
62mph in 2.9 seconds and a
205mph top speed.

 
 
 

“Anecdotally, the Super Series owner will have four or five cars. For many, the Sport Series could be their daily driver or a weekend runaround, but they will probably not own three or four cars. It’s a different sort of customer. They’ll be more focused on the practicality of the car, the usability of the car.

“These are customers who have experienced other premium brands in a segment which offers very high levels of customer service so the pressure is on ourselves and our dealer network to ensure that we offer the appropriate level of service.

“With a Super Series car, when the car is in the workshop, that owner might have several other cars to drive. With the Sports Series, that might not necessarily be the case, so we have to work as quickly and efficiently as we possibly can.”

McLaren has put processes in place this year to make sure dealers can meet this level of service, said Nash.

“In each region, our aftersales managers have gone up and made sure dealers have the right volume capacity, the right standard of technician and the right number of servicing bays.

“Aftersales is an area in which we are growing absolutely exponentially. Our parts sales last year demonstrated significant growth, in line with the car parc growth.

“When you look ahead five years, that will probably triple and that’s all potential revenue for our retailers.”

Nash said an increase in how much the average McLaren owner used their cars would also make aftersales a priority.  

“Many brands have a strong retailer network simply because they have such a large car parc,” he said.

“Our evidence is that McLaren drivers use their cars far more than drivers of other vehicles in the segment. We actually had a letter from a German McLaren owner thanking us for a 12C that had done 100,000km. Once we get into Sports Series, we expect that trend to continue and, from a dealer perspective, that means more and more time in the workshop.

McLaren 650s Coupe











MCLAREN 650S COUPÉ
Demand for the 650S spelled the end
for the 12C after its unveiling in 2014.
Now 641bhp (and 500lb-ft), the 650S
Coupé is the stalwart of the Super
Series. Priced at £198,000, it
boasts a three-second sprint to
62mph and a 207mph top speed.

“A lot of effort has gone into making sure we have robust systems in place to cater for parts demand over the past 18 months. We’ve worked to ensure that there are good levels of first-pick availability and a sufficient number of stock orders to our network to ensure that we can respond very quickly.”

Nash said McLaren Automotive offered retailers “a big support structure” to provide technical assistance from Woking and would also send “flying doctors” to assist

technicians in the regions, if necessary. However, he said “the vast majority of issues we would expect to be dealt with at the dealership”.

 

The growth of the dealer network

McLaren Automotive opened its first dealership, in partnership with Jardine, at One Hyde Park, London, in June 2011 and had about 30 retailers on board by the end of that year. That number remained stable until 2014/15 when the network expanded by about 40% globally.

The vast majority are extensions of businesses already operating in the luxury automotive segment, which have invested in an incremental facility for McLaren – with separate showrooms, but a shared back office, and perhaps workshops.

Nash said: “It’s essential that the low volume dealers have other dealerships, other revenue streams to ensure that they can make a reasonable return. Multi-franchised dealers, we would hope, would be in a position to generate a profit relatively quickly, getting not too far off profitable numbers by their second year.

“Our main concern is giving our retailers sufficient volume for them to make a return. They are businessmen; they need to make a return in this business, not just because they love McLaren, but because they want to be profitable.”

McLaren P1











MCLAREN P1
The 375th and final P1 rolled off
the production line in Woking in
December, leaving McLaren
Automotive’s Ultimate Series
bereft of a flagship offering.
The £866,000, 903bhp hybrid
powered hypercar featured
active aerodynamics and could
reach 62mph in 2.8 seconds.

 

While there are currently no plans to further increase the size of the McLaren Automotive dealer network, Nash explained that retailers who appeal to the brand are those who can tap into a very exclusive, premium customer base.

Moving in influential circles and not flinching at the prospect of selling £25,000 worth of options on a single vehicle are a must. As one McLaren insider said: “The option of a roof air intake basically represents the price of a well-specced Mondeo, but these are discerning customers who want to stamp their own mark on the car.”

Among the promotional exercises carried out at McLaren dealerships are tie-ups with luxury watch manufacturers and visits by designers and engineers from the McLaren Technology Centre.

After potential customers have engaged with the brand at a retailer – or through one of 1,300 invitation-only tours of the McLaren Technology Centre each year – many are ready to purchase.

Demand for bespoke vehicles has led to the creation of an array of personalisation options courtesy of McLaren Special Operations (MSO).

Once a specialist department charged solely with the maintenance of McLaren’s original road car, the legendary McLaren F1, MSO can now personally tailor customers’ cars on the production line at Woking.

Motorsport-loving McLaren Automotive customers craving exclusivity also recently snapped up the opportunity to own one of 50 track-only, 986bhp P1 GTR hypercars at a price of £1.98 m as part of a package that included fully supported track driving sessions at six events throughout the year.

 

Even millionaires use car financing

Despite the sums involved, Nash said finance penetration among McLaren Automotive retailers is surprisingly high and something he expects to increase with the introduction of the 540C and the increasing popularity of the Sports Series.

“You’d be surprised. Even with Super Series and a 650 or a 675 we still see a high percentage of financing. Our customers may be very wealthy, but they don’t like taking cash out of their asset base, they’d rather use somebody else’s liquidity. I wouldn’t be surprised if around a third of the cars in certain markets were purchased on finance.”

Used McLarens will increasingly be backing up the new Sports Series as an entry level to ownership, further broadening the brand’s appeal, along with aftersales and finance penetration opportunities for retailers.

Nash said the original batch of 12Cs produced in 2010 were an “extremely desirable” used proposition and revealed a desire to keep cars within the company fold through its McLaren Qualified programme, with cars traded, bought and sold at a retailer level, but inspected and updated, if necessary, to brand new car levels with a full manufacturer warranty.

He said the programme would help to maintain the brand’s residual values, which he expected to continue to improve as its market prominence and reputation grew.

No matter whether McLaren Automotive’s customers are investing almost £2 million or £126,000 on a vehicle, Nash made it clear that exclusivity would remain key to the brand’s philosophy, with no plans to compete with rival products from the likes of Porsche in volume terms.

 

"Our intention and ambition is that McLaren remains highly exclusive"Jolyon Nash, McLaren Automotive’s executive director, sales and marketing

“Exclusivity is what our customers like. Our intention and ambition is that McLaren remains highly exclusive, so if we can get up to 4,000 cars, in the long term, that would be very satisfying and would offer up a very healthy return to our shareholders.

“It also means that we’re in a position to be robust enough to weather any economic downturns. We know that we can be profitable producing 1,400 cars annually and that’s probably one of the most important elements of our business. We have the resilience to weather the ups and downs.

“In our product plan we’ve planned a nice mix of product to allow our business to be profitable and we have positioned ourselves in a way that means the vast majority of our cars have sold out before building and that helps the dealer in terms of retaining margins and being profitable.

“Looking into this year, we’re producing 750 LTs and they have all sold out.

“Very few prospects have driven the Sport Series, but we have enough orders to keep us going until June. From a dealer perspective, that means that they should be in a very healthy position in terms of margins for as long as we’re in a position to manage demand.”



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