Aston Martin Has a Few Problems
Keen to expand into new segments and redefine itself as an auto brand, Aston Marin is now a publicly traded company with a crossover vehicle on the horizon. The plan, established by CEO Andy Palmer and about as novel as dirt, was due for a checkup last week. Sadly, the automaker was not released with a clean bill of health. Aston reported a pre-tax loss of £78.8 million ($92 million) in the six months ending in June.
Speaking with the media, Palmer argued that the company had done well in the first quarter but claimed economic conditions and dwindling dealer interest had hurt the business in Europe, the Middle East and Africa. The United States performed comparatively better — possibly due to the marque bringing on Tom Brady as a brand ambassador, even though at least two of the cars built with the athlete’s name on them have already passed through the secondhand market $100,000 below sticker. Unfortunately, minor victories weren’t nearly enough to keep the firm’s share price from tumbling downward like an allegedly deflated football.
According to Reuters, Aston Martin Lagonda shares have fallen by around three quarters from their 19-pound float price to just below 5 pounds. “We are disappointed that our projections for wholesales have fallen short or our original targets, impacted by weakness in two of our key markets as well as continued macro-economic uncertainty,” Palmer said, skirting the stock issue.
It would be unfair to claim Aston’s problems as unique, though. It’s suffering from the same economic downturn that’s hampering mainstream automakers. It’s trying to expand by building an SUV factory in Wales and dabbling with electrification, which isn’t cheap. But its smaller scale places it in a more precarious position than most volume manufacturers. Aston Martin is lucky to sell more than 2,500 ultra-expensive cars in Europe each year, making every delivery count all the more. By that metric alone, the automaker is doing decently. Retail sales were up roughly 26 percent in the first half of the year before things soured.
However, the company is having trouble coping with Brexit and its numerous investments into what it hopes will be a thriving future. In the short term, it says it wants to keep its vehicles in demand and has reduced its global sales forecast from over 7,000 units to roughly 6,500 as dealers get skittish. While this makes sense for a high-end nameplate, Aston being publicly traded complicates things. Any chink in the amor can send investors heading for the hills and, when you’re a low-volume, ultra-premium British brand, problems are bound to arise.
Palmer has done a pretty good job with Aston Martin thus far, but the growth being promised has yet to manifest. The business may have gone public a little prematurely, but don’t presume the latest financial losses are a death sentence for the brand. This will likely come down to how the business navigates the UK’s leaving Europe and the success of its new products, especially the all-wheel drive DBX crossover. The model is slated to go on sale early next year.
[Image: Sibuet Benjamin/Shutterstock]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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IMHO, Aston Martin has an established reputation as the maker of seriously sporting cars, like the one that everybody knows, the DB-5, and its modern equivalents. They play in a niche market, and should stay where they are. Small automakers should not try to be everything to everyone. My advice to them is the same advice that I would give to ALL small automakers- stick to what you are good at. Make the kinds of cars that your customers want and expect. And since the market has spoken about its absolute love for CUVs, make one of those too. BUT- make it conform to the type and style of your CORE ESSENTIAL product. If your thing is total luxury, make sure that your CUV exudes total luxury. If your thing is speed with class and elegance, make sure your CUV says speed, class, and elegance. If your core customers expect utility and practicality, make that the first thing that people see when looking at your new offering. "I have lots of ideas. I just ain't in charge."- Gallagher Maybe Tom Brady should have a part in the new James Bomb...er...Bond film.
It is very hard to be a niche car maker with a volume of 7000 cars and make money. You usually have to be part of a bigger company to survive and be profitable. As far as Subaru goes, they are going to bypass autonomous driving by having dog chauffeured cars.