GADON, England – After decades of ups and downs, British carmaker Aston Martin Lagonda is moving forward in a more efficient and profitable way, with shareholder leaning towards Mercedes-Benz technology to make the expensive leap into electric vehicles (EVs).
Less than two years after the rescue of billionaire Lawrence Strolle’s favorite James Bond car brand, Aston Martin has undergone a manufacturing shift to help raise margins and become a rival Ferrari.
Stroll, Aston Martin’s largest shareholder and executive chairman, who is an avid fan of Ferrari, says the carmaker’s transition to long-term profitability continues after car sales rose 82% in 2021, with new cars coming and funding secured by 2025.
But analysts say Aston Martin, which has been destroyed seven times since its founding in 1913 and often flirted with death as Agent 007, is still burning in a pile of cash. Some have questioned Ferrari’s ability to generate sales for the huge cost of electrification.
“It’s uncertain and the company could be doomed,” said Charles Coldcut, a Redburn equity research analyst. “I don’t think it’s a controversial thing to say even though Aston wouldn’t like to hear it.”
Asked to comment on the prospect of a shaky future, an Aston Martin spokesman reiterated Stroll’s view that the carmaker was on the path to long-term profits and had adequate access to cash.
Tobias Moers, former head of Mercedes’ high-performance AMG brand and chief executive of Aston Martin since August 2020, canceled a list of steps to bring a cut between the two assembly lines and bring more bespoke items into the indoor seat during a visit to the carmaker’s Gaidon factory.
Perhaps the biggest change has been the focus on high-value customer-driven and customized orders – a big part of Ferrari’s success – instead of wholesale production and churning of sports cars, which had to be discounted later.
“When I arrived, the company was manufacturing-headed rather than engineering-led, which is crazy for an automated luxury business,” Moyers said. “In a company of this size, you need maximum flexibility and agility.”
Moers cut Aston Martin’s inventory from 2,000 to 600 sports cars – its cars sold an average of about 150,000 pounds ($ 195,750) – and customized orders now account for 50% to 6% of sales when he joins the firm.
At the time, car makers were in trouble after a catastrophic public listing in 2018.
Stroll says with its new vehicles the company is targeting a gross profit margin of at least 40% and in some cases 50% per car. Analysts put Ferrari’s figure above 55%.
By 2025, Aston Martin aims to sell 10,000 cars annually – about 40% more than by 2021 – near Ferrari production.
Stroll said Aston Martin would benefit from an agreement reached with Mercedes-Benz in October 2020 where it would have access to the German carmaker’s latest engine and EV technology.
Under the deal, Mercedes now owns about 12% of Aston Martin, which will increase to 20% in 2023. German luxury carmaker Aston Martin was relatively tight-lipped about his partnership plans.
“It was really important for a company of this size, especially with the advent of electrification … to have a big brother,” Stroll said. “So I made a really transformative deal with Mercedes-Benz to get their electrical architecture.”
Aston Martin plans to launch its first fully electric car in 2025.
‘Sample Size One’
Carmakers have been focusing on outsourcing for decades, but increased customization Aston Martin has reversed that trend, says CEO Moyers.
Allowing customers to choose their leather, stitching and other interior richness has resulted in options increasing by 20%, increasing the selling price.
But giving 30 different skin qualities and colors means 900 variations. Because each car is unique, it is cheaper to in-house – for example, Aston Martin plans to make its own steering wheel again.
“The Mercedes-Benz change was a nightmare, we wanted to cut it,” Moers said. “But here, that’s our purpose.”
“Our sample size is one.”
Aston Martin has closed its paint shop in Gedden and painted most cars at its Sport-utility car plant in Wales – saving 1,000 1,000 per car, greatly reducing the cost of two paint shops.
But Aston Martin will be hand-painted in any unique color of customers’ choice for an extra cost.
Aston Martin has begun offering a limited edition Valkyrie, a road-legal version of a Formula One car announced by the company’s previous management starting at 2 million.
But the Valkyrie is extremely expensive to develop, so the Aston Martin will not be repeated due to the focus instead of the profitable sports car.
“There are no business lawsuits for this,” Moers said.
‘Mercedes will be the foundation’
Before becoming electric, Aston Martin is launching several combustion engine models, including its powerful V12 Vantage sports car and a new SUV.
In 2023 the carmaker plans its first mid-engine sports car – where the engine sits behind the driver to provide better weight distribution for performance – joining Ferrari, McLaren Automotive and Lamborghini.
For Aston Martin and his peers, going electric is especially difficult because the appeal of luxury sports cars is based on the feeling of a powerful internal combustion engine.
“The more of our customers today, the more petrol heads, the more they want to see, feel, hear and smell a combustion engine for a long time,” Stroll said.
But for the electric to go, “the basis of what we do will be Mercedes,” he said.
Redbush’s Coldcut says Aston Martin lacks Ferrari’s broad appeal and may not be able to maintain the annual production of 10,000 units needed for long-term investment in new vehicles. The company expects to burn through around 125 125 million this year, Coldcut said Aston Martin’s time is limited.
“If you put a gun to my head, I’d say my base case would take over the Mercedes business,” he said. “I don’t know how much it will cost, but I imagine it will be significantly lower than today’s price.”
Mercedes spokesman Tobias Just said in an email that the German carmaker was “very pleased with our existing collaboration with Aston Martin.”
He declined to comment on future plans for a partnership with German carmaker Aston Martin if the British carmaker had a turnaround stall.
Jefferies analyst Philip Houchois said that while Aston Martin has aspired to be a Ferrari for many years, its current management has consistently done the right thing, “leading the brand upmarket by” underpinning and moving towards more content and more customization. “
“They’re talking to Aston Martin right now,” Houches said. “But the question is how long it will take and whether they have the funds to back it up.”