Creating a car company from scratch — the story of Zenos Cars

By Christopher A. Sawyer
The Virtual Driver

(September 29, 2014) “I’m a mechanical engineer by first degree,” says, Zenos Cars CEO Ansar Ali “and a pretty bad one at that. So, like any engineer who realizes he’s not going to be a good one, I went and got an MBA." What happened next set him on his present course.

While I was in business school, I was recruited by Ford, and I joined the company in 1991, and had seven great years.” That’s when Ali became involved in the family business, something he calls a “cardinal mistake”. According to Ali, “My uncle had a very large cheese making business, and he asked me to join with a view of taking over. We made 10 tons of cheese per day, and this caused me to lose any desire I ever had to eat the stuff. After a couple of years, I decided this wasn’t for me.”

Recruited by Lotus in early 2000, Ali was general manager of the U.K. and Europe, and thought he was joining the company at one of its high points when Managing Director Chris Knight suddenly put him charge of cleaning up after the M250 sports car program was canceled.

“There was quite a lot of fallout with the dealers, customers and PR, and from 2000-2005 I went through three MDs, Chris Knight, Victor Kiam and Kim Olgaard-Nielsen. (Olgaard-Nielsen’s reign often was referred to by Lotus insiders with a Star Trek mindset as the “Wrath of KO-N.” He was not well liked.)

Ansar Ali. Ex-Ford, ex-Lotus, ex-Caterham and reluctant cheese magnate turned CEO of Zenos Cars.

It was at this point that Ali crossed paths with Mark Edwards, who would later help run the show at both Caterham and Zenos Cars. “He was sort of Chris Knight’s righthand man, and we got to know each other when Chris was putting together various cost-down, cash flow and other firefighting teams to stem the bleeding. Mark, a production engineer by degree, was pulled out of one of these task forces, and became Knight’s go-to troubleshooter. If there was a problem, he would parachute in.” Like Apple’s legendary CEO and co-founder Steve Jobs, Edwards is a binary, all black or white, manager who shakes things up by drilling down to the essentials. “We complement each other very well,” says the loquacious, always smiling Ali.

Edwards was headhunted by a consultancy Knight had brought in to stop the bleeding and reverse the damage at Lotus, and joined them as a consultant and business investment analyst once their Lotus work was complete. Not long after, Ali received a call from his former colleague.

“He rang in 2004 to say that he had identified Caterham Cars as a buyout property, and it took me all of 30 seconds to respond affirmatively.”

Mark Edwards, Zenos Cars Chief Operating Officer, and the man who combined carbon fiber, extruded aluminum and a car restoration blog to come up with the E10's architecture.

They soon approached the Nearn family — Graham Nearn had persuaded Lotus founder Colin Chapman to sell him the rights to the Lotus Seven in the 1970s — and hammered out a deal in January 2005. Ali was CEO and shareholder, Edwards was COO, and they were joined in the front office by a third person they had recruited from Lotus. A couple of high net worth venture capitalists put up the money, neither of whom was interested in car making; a good thing according to Ali. They never got hung up on being car makers.

“We were 100% powered by Rover, and in April of 2005, Rover went bust,” he says with a laugh. “We tore up our business plan and worked out a new one, something that wouldn’t be possible today. The bank extended us one hell of an unsecured credit line, and we were able to secure stock (powertrains) from the Rover administrators. It wasn’t quite the M250 experience,” he says with a wry smile, “but it wasn’t far off it.”

The years 2005-2010 were dedicated to a total turnaround of Caterham’s fortunes, and to setting the stage for future growth. “We saw the 2008 downturn coming, and we took the time to bring down headcount, stock, cost and everything by August, because ours was a discretionary purchase that would be hit hard by the recession,” he says from behind  dark-rimmed glasses.

“That was done purely out of the fear that we would not be able to manage the cash otherwise, and was the best decision I ever made.” This choice not only insured the company’s survival, it set the stage for modest growth in 2009, record volumes in 2010, and record profits in 2011. It was not all candy and roses, however. As Caterham generated cash and profits, the investors began to ask about the team’s exit strategy. “I didn’t have one. I had no idea,” he says with just a trace of residual terror. “There’s no intellectual property, no technology… there’s only heritage, provenance, and support from a great group of customers. It’s not like this was going to entice Toyota to buy us.”

The troubles at Lotus had not gone unnoticed, and Ali and Edwards watched as Tony Fernandes and Dany Bahar battled over the right to the Team Lotus name in F1. According to Ali: “I stumbled upon Tony with what he was doing with Team Lotus, and discovered that he was interested in more than race cars. I saw that he was in litigation with Lotus, clearly wanted a brand — a car company — and I cold called him to see if he was interested. It’s not that I have great timing, it’s… I was desperate for Caterham to survive and grow. I didn’t have the personal funds, and my investors had no interest in reinvesting in the business. That was the desperation.”

Ali’s and Fernandes’ first meeting was worthy of a madcap comedy, however. The two made an appointment to meet at Fernandes’ mansion in the Mayfair section of London on December 23, 2010, and Ali showed up “suited and booted” at 11 a.m. After waiting quite a while after knocking on the door, Ali stood face-to-face with a somewhat haggard-looking, pajama-wearing Tony Fernandes who wasn’t expecting him until 7 p.m. The time difference between England and Malaysia had not been factored into the equation by Fernandes’ personal assistant.

“I was early,” he says in a sentence dripping with understatement. “He had just landed. And, give him his due, he asked if I could do business with a man in his pajamas. ‘Yeah,’ I said, and that was it. I thought, ‘What an amazing guy.’”

Edwards had gone to the meeting with Ali, and the pair had written their plan on one sheet of paper. “I figured this would be a Dragon’s Den style meeting,” Ali recounts with a smile. He listened, loved what we were about, and loved that we were ex-Lotus… there was a certain satisfaction, and I had hoped this would be the case, quite honestly, given what he was going through with Team Lotus and Bahar. We shook hands after 45 minutes! To this day I think the man is astonishing. Everyone has their own view of him, but he was true to his word. We completed the deal in March 2011.”

Ali and Edwards planned to take Caterham from 500 units per year to 1,000-1,500 under Europe’s Small Series Type Approval. Once Dany Bahar announced Lotus would be chasing after Ferrari and Porsche, dump the Elise and Evora, and abandon the lower end of the premium sports car market, says Ali, “I almost fired my entire sales staff that night. I didn’t need them. Bahar had done the work for me by communicating to customers who like fun, affordable sports car that Lotus was no longer going to meet their needs. I had the perfect opportunity for Caterham to fill that void.”

Fernandes, however, had a different idea. “While we were looking to stay under the Small Series Type Approval production limit, he wanted a full Type Approved product, and Mark and I vehemently disagreed with this decision on the basis of the risk it entailed,” says Ali. Though Edwards and Ali were part of the negotiations with Renault to unite Caterham and Alpine, there were philosophical differences over where the engine should be located.

“We were desperately trying to persuade Tony that, if we were to have a unique selling proposition in the marketplace, it would be better to have the engine in the front to stay consistent with the Seven’s DNA, etc. There were technical challenges with this, and the tail started wagging the dog. The engineering was dictating the product, not the market or marketing. At that stage, our use to Tony had probably come to a natural end.”

Edwards left Caterham in May 2012, Ali followed in June. However, the path taken first by Lotus, then by Caterham left an even larger hole in the affordable premium sports car market. Neither could pass up the opportunity to succeed in a market their previous employers had foolishly abandoned. From this came the idea for Zenos Cars.

“The plan is to exploit a market opportunity in a niche sector and make money,” says Ali. “But this is not a VC play. We are fully funded by a mixture of high net worths and the Pembrook Investment Trust fund.” When asked how long the venture capitalists are willing to stay around before exiting, Ali answers: “It is a medium-term play at best, there is no obvious exit strategy, and we hope to have Zenos Cars self sustaining with sufficient reserves for those who wish to have an exit at the medium term.”

As a road-legal track car in Europe, Zenos will have a greater client pool in which to operate as buyers can justify the purchase of the E10 by the fact that it is not solely focused on track day use. It can be used on the road, though it is doubtful many buyers will use it that way. In the U.S., where it will be sold as a single-purpose track day car by by Zenos Cars USA, it will be up against vehicles like the BAC Mono, Ariel Atom and others. Rollers (full vehicles without engine or transmission and and excluding domestic delivery, taxes and the cost of powertrain installation) will begin under $40,000, but Ali believes the Zenos has a major advantage.

The E10 has been designed for low operating and repair costs, and is the only vehicle with a multi-piece carbon fiber tub that easily and cost-effectively can be fixed in case of an accident. Unlike the Caterhams he proposed, it uses transverse front-drive powertrains placed behind the passenger cell, and an extruded aluminum backbone reminiscent of all Lotus models (except for the Seven) conceived and built between the original Elite and the Elise. It is the first step in a plan to move from track day to everyday vehicles built on a modular platform, and using readily available major components.

“The E10 will launch in January 2015, and we will begin work on the E11, which — for lack of a better description — is the E10 with working doors.” The reason for this rollout is that designing and installing doors that fit correctly, seal properly and work every time is not as easy as it might seem. Better, Ali believes, to launch the car without these encumbrances, and get the main production process dialed-in before moving on to things like doors and windshield wipers. “And we will follow that with the E12, which will add a roof and upgraded interior.” All of which suggests little has been left to chance.

“Ours is a modular car and a modular plan designed as a market-led proposition,” Ali explains. “For our entire portfolio, the prices are already defined, based on the market conditions that exist today,” he cautions. “Therefore, we built backwards — a novelty in this business. We know we need to make X as a business, which leaves Y as the manufacturing cost, and Z as the bill of materials. And that last number has to deliver us a fun, affordable sports car.”

It will be interesting to watch how Ali, Edwards and Zenos Cars fare in the coming years, and whether or not their move into the affordable premium sports car sector is successful. However, if all you needed to succeed in the auto industry was infectious enthusiasm, an upbeat attitude and good sense of humor, the folks at Zenos Cars would be laughing all the way to the bank.

The Virtual Driver