Aston Martin’s strategy shift is in high gear
ASTON Martin’s car crash debut on the London Stock Exchange in 2018 has seen the stock lose more than 80 per cent of its value to date.
The carmaker was struggling to maintain its top-tier brand image as cars piled up in dealer showrooms.
So, it spent the past year running down dealer inventories and cutting costs under a new strategy dubbed “Project Horizon”. That means 2021 should be somewhat of a rebirth for James Bond’s vehicle of choice.
The group is now making its cars to order, which it believes will cement its position as a premier luxury brand.
Plus, a demand-led operation should make it cheaper and easier for Aston Martin to see which models are resonating with customers.
It was a necessary but expensive change that’s left the group with an uncomfortably large £723million debt pile. Management is committed to lowering that figure, but it’s a burden that will make it harder for the group to navigate the road ahead.
The results coming out of the first quarter paint an encouraging picture. Triple-digit sales growth in the Americas and Asia Pacific region helped sell 1,353 vehicles – up from 578 in 2020.
More than half of the cars sold were the group’s newly launched SUV, the DBX. That bodes well for the launch of a DBX variant later this year.
But there’s one big roadblock – profitability. The first quarter saw losses narrow significantly, but Aston Martin is still years away from turning a profit.
The group hopes to report underlying cash profits of £500million in 2024/25. That assumes Aston Martin is selling roughly 10,000 vehicles per year, an ambitious goal. This year’s sales are expected to come in at less than two thirds of that. The case for Aston Martin rests on four years of near perfect execution and a buoyant economy.
While this is possible, it’s unlikely. A lot can happen over that time, particularly with the uncertainty caused by the pandemic. Aston Martin’s rebuilding efforts are commendable, but we’re not convinced there’s a smooth road ahead.
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