A triple-digit increase in sales this year hasn’t managed to save millions of dollars in lost profits, but for the first time in a long time, Aston Martin could be on the upswing.
In its 108-year history, the company has a long tradition of habitual mismanagement that led to seven bankruptcies, most recently in 1974, and barely in 2014. Just a few years ago, the product portfolio switched between boring and garish (for example the Aston Martin DB11 Volante around 2018).
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The company’s association with James Bond only goes so far – it sells fewer than 5,000 vehicles worldwide each year, a tiny fraction of the many hundreds of thousands sold by Mercedes-Benz and Porsche AG. Aston Martin sold 4,150 vehicles worldwide in 2020, 32% fewer than in 2019.
But this year is already stronger. In July, the company announced a 224% increase in sales for the first half of 2021. The company sold 2,901 vehicles worldwide in the first half of 2021, more than half of which were the DBX SUV for $ 189,000. Aston Martin says it is on track to sell 6,000 vehicles by the end of 2021.
“It’s a complicated journey,” said CEO Tobias Moers during an August 14 interview in Carmel, California. “But it’s been a really bad year.”
Since taking office in August 2020, the taciturn German has presented the planned rejuvenation of the Lagonda house; closed the paint shop in Gaydon, England to cart cars back and forth to Wales; led a greatly reduced workforce; sunk plans for a V6 engine for the Valhalla and Vanquish; and the planned production of the $ 3 million Valkyrie hypercar moved from a large, bespoke room back to the main factory.
“That was very sensible,” he said with the concise manner that gives Germans who grew up in the Black Forest a reputation for being tough. Workers “who see a Vantage and a Valkyrie next to them – that gives them more energy”. And it could be the bitter tonic Warwickshire pride needs.
Gaining momentum
Things started to improve at Aston Martin when Canadian fashion billionaire Lawrence Stroll acquired a 16.7% stake in the company last year. In August 2020, Stroll hired the former Mercedes-AMG boss and two decades old Daimler veteran Moers as his top deputy; he in turn persuaded some of his best lieutenants from AMG to join him. A technology sharing agreement from 2013 with 5% shareholder Mercedes-Benz was boosted to 20% when Stroll bought in.
On March 3, Stroll informed Bloomberg TV that the brand’s sports cars would be sold out by September and that incoming orders for the new DBX were above expectations. The corona virus also helped, said Moers. “That helped us to stay focused. We didn’t have any distractions. We only stayed 14 hours a day, 14 hours a day. It’s a different perspective on a pandemic, I know, and it sounds strange, but it’s the truth. “
Not here yet
Analysts noticed. In January, Citigroup’s head of European automotive research upgraded Aston Martin from neutral to buy. In July, Goldman Sachs’ crunchers told buyers that Aston Martin was seeing “the amortization of last year’s hard work”. A July 28 market report by Deutsche Bank stated: “Aston Martin set the stage for building a track record and took it step by step to meet its annual targets.”
In August, Gillian Davis, an automotive analyst with Bloomberg Intelligence, also found Aston Martin on track to eventually compete financially with Ferrari SpA and Porsche. “Few brands have the ability to sell high-margin, limited edition supercars valued at over $ 1 million, and that club includes Aston Martin,” she wrote.
Michael Dean, Senior European Automotive Analyst at Bloomberg Intelligence, was more reluctant to give an ardent approval, criticizing the less-than-revolutionary technology in the DBX, noting that the company needs to provide more details and milestones to achieve the goal his new financial goals. But the inclusion of Moers and his team is like “day and night” compared to the previous management.
“You are certainly not out of the woods and it was painful to cut inventory and switch to a demand-driven model,” he said in an email. “You need a complete overhaul of the sports car range that will take a few years. And in the meantime [that] makes them even more dependent on DBX and limited models. “
Aston’s free cash flow is expected to remain negative in 2021, despite turning positive in the first quarter. But if the company follows its plan, free cash flow will be positive through 2023, Dean said.
Profitability planning
This plan provides for an expanded product portfolio with at least two upcoming mid-engined sports cars – the Valhalla supercar and the Vanquish sports car. (These stand out from Aston’s traditional front-engined sports cars like the DBS, DB11 and Vantage.) There is also an EV line developed through partnership with Mercedes and a multi-million dollar investment to make the infotainment systems for each of the new models.
At the beginning of this summer, the company presented the revised production version of its 950 hp Valhalla that Moers had ordered. The plug-in hybrid super sports car will go into production in 2023. The price is expected to exceed $ 700,000.
There will also be more powerful new engine variants for the most important part of the Aston Martin portfolio, the DBX. By the first quarter of 2022, according to Moers, Aston Martin will introduce DBX engine variants, including a hybrid and a high-performance version, which in theory would compete with the best-selling Lamborghini Urus.
He even insists that the Valkyrie will start deliveries by the end of 2021 – after a two-year delay. “It’s always a journey to change a culture,” says Moers. “We’re more open-minded. We have to be a little more competitive, but we have a chance. “
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