Mike_FlewittIn a free-wheeling interview with Frost & Sullivan’s Sarwant Singh, the CEO of McLaren Automotive, Mike Flewitt, touched upon a range of topics from the future of the internal combustion engine in an age of electric powertrains; the role of millennials in the company’s strategic plans; the impact of digital and autonomous technologies on the driving experience; and how small, niche players like McLaren manage to remain independent and profitable amidst increasing competition.

What is your vision for McLaren Automotive?

The defining theme running through the three companies—Formula 1 racing, Automotive and Applied Technologies—of the McLaren group is the concept of technology. In automotive, especially, our mission is to build a luxury product that is the best driver’s car in the world.

We are not actually interested in cars that would, for instance, be the fastest, if they weren’t a pleasure to drive. We want you to come back from a journey or a lap of the circuit having enjoyed the thrill and experience of driving a McLaren. And ultimately, it’s this—creating a connection between the driver and the car, and crafting the best drivers’ car for road and track—that really informs our vision for McLaren.

Tell us a little bit about your business plan Track 22 and the thinking that has gone behind it.

Our business plans have evolved over the years. In 2013, it was largely a product and financial plan. Our second plan, in 2015, was labelled “Track 22” in order to be able to communicate to the outside world the direction in which McLaren was headed. The plan we presented to the board in December 2017 was the third iteration of that plan. We are very aware that in order to deliver successfully on this plan, we need to have a clear understanding of our market and our products, and, just as importantly, the technology, engineering, distribution structures, supplier base, and internal organisation needed to support it.

At the time of rolling out the business plan, we thought our volume cap would be about 5,000 cars. We wanted to keep our cars very exclusive, focusing much more on quality, and the value proposition we offer customers, rather than on volumes. A three-model range – Sports Series, Super Series, and Ultimate Series – teogether with critical volumes, has driven our financial performance. Two years ago, we generated enough cash to launch new products and take them forward.

We are going to invest about 25% of our revenue this year back in new model development, which is a staggering percentage. Ultimately for us, this isn’t about returning money to shareholders, it’s about reinvesting into building the asset for shareholders.

What are your plans for building new models?

Back in 2015, when we announced Track 22, we had about £1 billion to be invested over a 7-year period, with the plan to build 15 new cars. We’ve launched 3 to 4 of these new cars so far. All 15 will be launched by 2022.

When we develop products, we weigh them up against three things: the market, the customer, and the brand. “Does this product fit with the vision of McLaren?” “Does it fit with what the customer is looking for from us?” And “Is it enhancing our brand?” So that defines us in one direction. We also evaluate whether we have the technological, engineering, and production capabilities to build the best car in that class. Finally, we weigh the financials and whether the car is going to make us money. This isn’t about producing a supercar that reflects well on the rest of the range. Every single car needs to make a return.

We believe that what defines our cars is the quality of the driving experience. But nearly 5 years ago, we also recognised that this is a market where people like new and fresh ideas. So, we don’t launch a car into a segment and sell it for a decade, knowing that it will affect both our brand and the price we can command. Instead, we have relatively short model cycles. We don’t facelift the vehicle. Rather we “do” a new vehicle. Typically, therefore, we have fairly limited volume around any particular product or variant that comes into the market.

You made a bold statement: “Every car in future will be electric or hybrid.” How will you create the same driving pleasure for someone who is used to an ICE engine?

Powertrain is one of the most interesting, exciting and challenging elements in the automotive space today. It is particularly important for us because it is integral to the appeal of our cars. We believe that some of the pleasure of the driving experience is driven by the powertrain of the car. But there are many practical issues—technical, customer and brand related—that we need to consider because they exhibit such significant global variations. What we are satisfied with is that the development in hybrid technology can bring about a better driver’s car. Put simply, the driving characteristics you can develop through a hybrid powertrain can bring an even more engaging, exciting product to drive. The extreme example of this is the P1 launched in 2013. So we are very satisfied as we go forward, post 2020, and start launching hybrid cars into the market, that we will have a powertrain that will present an even more appealing McLaren.

And will you have hybrids standard across the whole range?

We will progressively consider hybrid across our range as we develop technologies and apply them across our vehicles. When we launch, 30 miles will be a target. The definition for the 2050 strategy, as I best understand it, is that an electrified vehicle has to have a 50 mile range. I am very certain that we can do that with a hybrid. Also, while there will be a plug-in capability, our cars will not really need to be plugged in because I think charging infrastructure is still unpredictable and inadequate.

I have always believed that full electric is going to be the end game, and that the internal combustion engine will sadly either die away or become an incredibly niche activity, maybe in motorsports but not on public roads. But that’s probably quite a long way away with an extended transition period through petrol engines, hybrid engines, micro hybrids, full hybrids and electric. I am really interested in hydrogen in terms of its driving characteristics, although we are not experimenting with it. Similarly, synthetic fuels would be very appealing if we could retain many of the driving characteristics that we have, but with zero emissions solutions. But, again, these need to be adopted effectively on a global basis and that’s asking a lot.

A full EV can be incredibly fast. But, for us, the focus is on vehicle characteristics and the sense of engagement. In that context, electric motors are a little anodyne. How can an EV have the same appeal as a P1, a 675 LT, or a 720S? That’s the big challenge we have to solve.

We have got an EV mule running. But my view is that we won’t be full electric even by 2050. We will probably meet the criteria of the EV range but I still think there will be ICEs in cars going forward. I think we will see some amazing cars, a variety of solutions before we all align around one solution.

What does digital mean to you in McLaren ?

The vehicle has to be competitive in the market in terms of its digital offering. But fundamentally people are not going to choose a McLaren because of its digital offering. However, we do realise that there are many things you can do once you have digital capabilities. So, we are already looking into enhancing track performance, mapping ourselves against Formula 1 drivers, and having coaching elements. This plays into our core mission of taking something we feel we have to do, blending it into the direction in which we are headed as a company, and creating a product that engages the customer.

What about autonomous? Most OEMs have talked of a two pronged strategy: pilot/ co-pilot or chauffer/driver as it is variously called. Does your customer want autonomous?

At the moment, we are trying to understand where the market and legislation is going to take us with autonomy. There are undoubtedly factors that enhance the driving, safety, and efficiency of the cars. These will gradually become normal features in cars. For instance, there are already cars with very effective Adaptive Cruise Control, lane monitoring and correction, and city braking capabilities. The technologies, therefore, are very complementary to the driving experience and we will progressively incorporate them into our new models. But the concept of autonomy that people think about in terms of opening one’s iBook to read while the car drives one to work… I don’t think that’s going to be a McLaren.

Personally, I think that’s still another 10-15 years away. I think we might jump from Level 2 to Level 4. Some companies like Audi have put Level 3 out there.

I can grasp Level 1 and Level 2 autonomy but the step I am struggling with is where the driver is no longer in control. I wouldn’t be surprised if we stepped back from Level 3. We do have other cars—the 570S, particularly—where I can see that you could have the choice to either drive the car or have the car be driven autonomously. I can envision autonomous technologies working in city or motorway environments where there would real advantages to managing traffic flows and mitigating accidents. But that requires all cars to have autonomous capabilities which, in turn, means autonomy is going to have to be legally mandated at some juncture, in certain environments. To me, this just pushes out the time scale for implementation.

We will integrate systems capabilities into the car as an enhancement to driving but replacing driving is something we want to understand in terms of legislation, competitive products, and what customers want in a McLaren.

PART II:

Tell me about yourself as a leader. What is your leadership style like, and how does it work in the auto sector?

That’s always a hard one to answer. My leadership style is based a lot on my personal experiences in this industry over the past 35 years. Part of leadership is to help everyone at McLaren clearly understand our vision and their contribution to this vision, both long-term but also very practically in terms of their individual objectives. Take the objectives of 2,500 people and fit them together like a jigsaw, and you end up with this year’s plan. I feel hugely motivated every single day about making this company a success in terms of the vision we have. And I want everyone feeling like that. One of the dilemmas we have is that we are a small, independent company. So while that means we can’t rely on anyone else, it also means that we can take credit for our successes.

How would you compare yourself with Mr. Elon Musk?

I probably can’t think of two more different people! I wish I had even half his marketing abilities, his presentation skills, and his ability to script a vision and communicate it to the world so that they buy into it. My goal is less lofty: to be part of a team at McLaren that builds the best cars in the world, and builds a successful company. In terms of inventing a company like Tesla, he has been amazing. I don’t necessarily think Tesla is the future of EVs, since traditional manufacturers who have migrated to electric powertrains will, I believe, continue to be a dominant force. But we wouldn’t be where we are now if Musk hadn’t done what he’s done.

What do you think of the Tesla Roadster? Is it fair competition?

At the moment, we know very little about it. I do think Tesla has got the capability to design a very fast, electric roadster. They are beautiful and have got great design. But I don’t believe it will provide any of the driving sensations that our cars offer; there’s more to it than speed, much more to it.

Tell us something about your current and future customer profile. Are they only middle aged High Net Worth Individuals? What about millennials?

You’d be surprised at the age spread. For instance, in Asia there is a much younger demographic buying our cars. But that’s exciting in itself because that’s a market that didn’t traditionally buy sports cars and supercars, and it has become largely aware through digital communication. It’s a market that is incredibly excited by the idea of supercars, and not just to drive and show off on the road but to race them on track day.

I think there are still a huge proportion of people who still love cars, love driving, and love the sensation of driving a car like ours, especially on the track. We run a huge number of customer events in order to spend time with customers and get them to enjoy their cars. A McLaren is not a car to buy and park in your garage. I want our customers to keep driving our cars and getting pleasure from them.

In terms of volumes you mentioned 4,500. Elsewhere I read 5,000. What is the threshold?

We will be 4,500 this year and will launch the Senna in June. We have got a full year of sports series and super series next year, and variants of all cars, so we should be able to get to 5,000 cars. It’ll stay at this level for a few years. Beyond 5,000, it’s not so much the volumes as putting cars into individual markets. It will be more about new markets developing.

We are probably a little conservative about going into new markets. We are studying India and Russia, and we will go into those markets but just want to make sure we enter at the right time and in the right way. There will be growth as new markets open but it will be a gentle curve so that we don’t dilute our exclusivity.

What part does personalisation play at McLaren?

There are probably some companies like Rolls Royce and Ferrari who are doing more than us on this score. That said, the range of options we offer our customers is so broad that we hardly ever build the same car twice. In the context of luxury, one of the key things going forward is the ability to go bespoke, for the customer to have something that is unique to them, for their tastes to be recognised as part of the design process, and then for them to drive away in something that no one else has.

You need a human element if you’re doing that level of customisation.

To me, there are essentially three reasons to automate. First, efficiency: is it cheaper to have a robot rather than people do the task? Two, ergonomics: there are some operations that either from the ergonomics or safety aspect would be better automated. And the third is quality, particularly in bodyshops where automating things like framing allows you to gain the geometric control you need over that structure.

The only area in McLaren that I sometimes look at in terms of automating is the paint process. The issue here is that we spray many unique paint colours. Just changing the composition of the paint means it can lay down slightly differently each time. So while you may want this repeatability, you also want some human intervention to see how that topcoat is laying down.

Ultimately, I think if people are extremely well trained and extremely motivated then they have the capability to deliver quality work in specified times. People are often the cause of variation, so you’ve got to find ways to manage that by making sure they are well trained, motivated, and have all the necessary aids to help them.

Any final messages?

For me it all starts with core message of building a car that’s exciting to drive. And we achieve that by combining technology and design to create luxury products that are effective and efficient. I hope no one takes my statement “nobody needs to have a McLaren” flippantly. It’s almost a shame if you don’t. It’s our job to persuade you that you want one. They are very expensive, I know, but one can always aspire to have exciting things in life.

Rajalakshmi

Rajalakshmi Rajendran, Content Manager - Frost.com team

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