The company was formed as Lotus Engineering Ltd. by engineers
Colin Chapman and Colin Dare, both graduates of
University College, London, in 1952. The four letters in the middle of the logo stand for the initials of company founder, Anthony Colin Bruce Chapman. When the logo was created, Colin Chapman's original partners Michael and Nigel Allen were led to believe that the letters stood for Colin Chapman and the Allen Brothers.
The first factory was situated in old stables behind the Railway Hotel in
Hornsey, North London.
Team Lotus, which was split off from Lotus Engineering in 1954, was active and competitive in
Formula One racing from 1958 to 1994. The Lotus Group of Companies was formed in 1959. This was made up of Lotus Cars Limited and Lotus Components Limited, which focused on road cars and customer competition car production, respectively. Lotus Components Limited became Lotus Racing Limited in 1971 but the newly renamed entity ceased operation in the same year.
The company moved to a purpose built factory at
Cheshunt in 1959
 and since 1966 the company has occupied a modern factory and road test facility at Hethel, near
Wymondham. This site is the former
RAF Hethel base and the test track uses sections of the old runway.
In its early days, Lotus sold cars aimed at privateer racers and trialists. Its early road cars could be bought as kits, in order to save on purchase tax. The kit car era ended in the late 1960s and early 1970s, the
Lotus Elan Plus Two being the first Lotus road car not to be offered in kit form, and the
Lotus Eclat and
Lotus Elite of the mid-1970s being offered only in factory built versions.
After the elegant but delicate
Lotus Elite of the 1950s, Lotus found critical and sales success in the 1960s with the
Lotus Elan two seater later developed to two plus two form. Lotus was notable for its use of fibreglass bodies, backbone chassis, and twin cam engines, initially supplied by
Coventry Climax but later replaced by Lotus-Ford units (
Ford block, Lotus head and valve gear). Lotus worked with Ford on the
Lotus Cortina, a successful sports saloon.
Another Lotus of the late 1960s and early 1970s was the two seater
Lotus Europa, initially intended only for the European market, which paired a backbone chassis and lightweight body with a mid mounted Renault engine, later upgraded to the Lotus-Ford twin cam unit as used in the Elan.
Lotus Seven, originating in the 1950s as a simple, lightweight open two seater continued in production into the early 70s. Lotus then sold the rights to produce the Seven to
Caterham, which has continued to produce the car since then.
By the mid-1970s, Lotus sought to move upmarket with the launch of the Elite and Eclat models, four seaters aimed at prosperous buyers, with features such as optional air conditioning and optional automatic transmissions. The mid engined line continued with the
Lotus Esprit, which was to prove one of the company's longest lived and most iconic models. Lotus developed its own series of four cylinder
DOHC engines, the
Lotus 900 series, and later a
turbocharged versions of the engines appeared in the Esprit.
Variants of the 900 series engine were supplied for the
Jensen Healey sports car and the Sunbeam Lotus "hot hatchback". In the 1980s, Lotus collaborated with
Vauxhall Motors to produce the
Lotus Carlton, the fastest roadgoing Vauxhall car.
Financial troubles, death of Chapman
By 1980, Group Lotus was in serious financial trouble. Production had dropped from 1,200 units per year to a mere 383. The combined reasons were that the world was in the middle of an economic
recession, sales in the key United States market had virtually collapsed and there had been limited development of the then model range.
In early 1982, Chapman came to an agreement with
Toyota to exchange intellectual property and applied expertise. This initially resulted in Lotus Engineering helping to develop the Mk2
Toyota Supra, also known as the
Toyota Celica XX. Secondly, it allowed Lotus to launch the new
Lotus Excel to replace the ageing
Lotus Eclat. Using drivetrain and other components from Toyota enabled Lotus to sell the Excel for £1,109 less than the outgoing Eclat.
Looking to re-enter the North American market, Chapman was approached by young law professor and investment banking consultant, Joe Bianco, who proposed a new and separate United States sales company for Lotus. By creating an unprecedented tax-incentived mechanism (wherein each investor received a specially personalised Lotus Turbo Esprit),
 the new American company, Lotus Performance Cars Inc. (LPCI), was able to provide fresh capital to the Group Lotus in the United Kingdom. Former
Ferrari North America general manager John Spiech was brought in to run LPCI, which imported the remarkable
Giugiaro-designed Turbo Esprit for the first time. US sales began to quickly jump into triple digits annually.
Chapman died of a heart attack on 16 December 1982 at the age of 54, having begun life an innkeeper's son and ended a multi-millionaire industrialist in post-war Britain. At the time of his death, the car maker had built thousands of successful racing and road cars and won the
World Championship seven times.
At the time of his death, both Chapman and Lotus were linked with the
DeLorean Motor Company scandal over the use of
UK Government subsidies for the production of the
DeLorean DMC-12, for which Lotus had designed the
chassis. Chasing large sums of money which had disappeared from the DeLorean company, Lotus was besieged by
Inland Revenue inspectors, who imposed an £84 million legal "protective assessment" on the company.
 Chapman died before the full deceit unravelled but, at the subsequent trial of Fred Bushell, the Lotus accountant, the judge insisted that had Chapman himself been in the dock, he would have received a sentence "of at least 10 years".
With Group Lotus near bankruptcy in 1983,
David Wickins, the founder of
British Car Auctions, agreed to become the new company chairman, through an introduction from his friend
 Taking a combined 29% BCA/personal stake in Group Lotus,
 Wickins negotiated with the Inland Revenue, and then brought in new investors:
Bermudian operating company Benor (14%);
Sir Anthony Bamford of
 Wickins oversaw a complete turnaround in the company's fortunes, which resulted in him being called "The saviour of Lotus".
Despite having employed designer
Peter Stevens to revamp the range and design two new concept cars, by 1985 the British investors recognised that they lacked the required capital to invest in the required new model development to production, and sought to find a major motor manufacturing buyer.
 In January 1986, Wickins oversaw the majority sale of the Group Lotus companies and 100% of North American–based LPCI to
General Motors, with engineer
Bob Eaton a big Lotus car fan.
 After four months of controlling but co-owning Group Lotus with Toyota, the Japanese company sold out to GM. By October 1986, GM had acquired a 91% stake in Group Lotus for £22.7 million, which allowed them to legally force the company buyout.
On 27 August 1993, GM sold the company, for £30 million, to A.C.B.N. Holdings S.A. of
Luxembourg, a company controlled by Italian businessman
Romano Artioli, who also owned
Bugatti Automobili SpA. In 1996, a majority share in Lotus was sold to
Proton, a Malaysian car company listed on the
Kuala Lumpur Stock Exchange.