After decades of ups and downs, British carmaker Aston Martin Lagonda is charting a more efficient and profitable way forward, leaning on technology from shareholder Mercedes-Benz to make the costly leap to electric vehicles (EVs). Less than two years after billionaire Lawrence Stroll drove to the rescue of James Bond`s car brand of choice, Aston Martin has undergone a manufacturing makeover to lift margins and help it become more like rival Ferrari.
Some question its ability to generate Ferrari-like sales to fund the vast cost of electrification. “It’s precarious and this company can go bust,” said Redburn equity research analyst Charles Coldicott. “I don’t think it’s a controversial thing to say even though Aston wouldn’t like to hear it.” Asked to comment on perceptions of a shaky future, an Aston Martin spokesman reiterated Stroll’s view that the carmaker is well on the way to long-term profitability and that it has adequate access to cash.
Stroll, Aston Martin’s largest shareholder and executive chairman, who is also an avid fan of Ferrari, says after vehicle sales jumped 82% in 2021 the carmaker’s transformation to long-term profitability is well underway, with new cars coming and funding secured through 2025. But analysts say, Aston Martin, which has gone bust seven times since it was founded in 1913 and has flirted with death as often as Agent 007, is still burning through piles of cash.
On a tour of the carmaker’s Gaydon factory, Tobias Moers, formerly head of Mercedes’ high-performance AMG brand and Aston Martin chief executive since August 2020, rattles off a list of moves including cutting one of two assembly lines and bringing more bespoke items like seats in-house. Perhaps the biggest shift has been to focus on higher-value customer-driven and customized orders – a big part of Ferrari’s success – rather than over-producing and churning out sports cars wholesale, which then had to be discounted.
Stroll said the company is targeting gross margins per vehicle of at least 40%, and in some cases, 50% for new vehicles. Analysts put Ferrari’s figure at 55% more than his. By 2025, Aston Martin aims to sell 10,000 cars a year, which is nearly 40% more than he did in 2021 and closer to Ferrari’s production base. Aston Martin will benefit from a deal signed with Mercedes-Benz in October 2020 that will give it access to the German automaker’s latest engine and electric vehicle technology, Stroll said. As part of the deal, Mercedes now owns almost 12% of Aston Martin, and by 2023 he plans to increase it to 20%.
“When I came in, the company was manufacturing-dominated instead of engineering-led, which for an auto luxury business is insane,” Moers said. “A company of this size requires maximum flexibility and agility.” Moers has reduced Aston Martin’s inventory from 2,000 to 600. The cars sell for an average of about £150,000 ($195,750). , now account for 50%.At the time, automakers were in a bind after a disastrous stock market listing in 2018.
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