The company was formed in 1952 as Lotus Engineering Ltd. by engineers Colin Chapman and Colin Dare, both graduates of University College, London, but had earlier origins in 1948 when Chapman built his first racing car in a garage. 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.[citation needed][clarification needed]

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 Oneracing 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.