World’s uber-rich help drive progress
In a year of business uncertainty, potential trade wars and Brexit turmoil, one customer segment seems insulated from the volatility: the world’s growing class of high-net worth individuals. Many of these people will converge next week in Monterey, California for the annual car week and Pebble Beach Concours, where they indulge one of their grand passions: rare, historic and beautiful motor cars. Some of them, no doubt, will next month also tour the Monaco Yacht Show, where more than 120 super yachts will be on display. Others visited this year’s Farnborough Air Show to see the latest concepts in air travel – including a three-seater private aircraft concept developed by a brand not normally associated with the skies: Aston Martin.
Aston Martin Lagonda, the company I am privileged to lead, is among the iconic brands benefiting from the continued rise of high-net worth individuals (HNWIS). At next week’s events in California, Aston Martin will entertain these customers alongside the likes of Ferrari, Rolls-royce, Lamborghini and Bentley. Like LVMH or Richemont in luxury goods, or Tankoa and Ferreti among yachtmakers, the market for luxury cars is poised for further global growth.
That is good news for the companies serving a market where customers value scarcity; where beautiful design and breakthrough technologies command high prices.
In our world, small is beautiful and exclusivity comes with a premium. Sergio Marchionne, the chairman of Ferrari who died tragically last month, summed up this importance of scarcity value earlier this year when he told his shareholders: “We remain committed to preserving the exclusivity of the Ferrari brand and upholding Enzo Ferrari’s tenet to produce ‘one car less than what the market demands’.”
Ferrari demonstrated the value of that strategy by reporting a near 18pc increase in underlying annual profits to more than €1bn (£0.89bn), with an enviable 30.3pc margin.
Companies in this market play an important wider economic role, estimated to be worth more than £30bn for the UK economy alone.
They spend heavily on specialist skills and craftsmanship; and reinvest in technologies that have applications for the wider industrial sectors in which they operate. In the automotive sector, this is true of the development of ultra-lightweight materials, of safety systems and of low-emission electric technologies.
Manufacturers in this space are increasingly profitable because they can produce exotic cars in relatively small volumes for customers who can afford that must-have luxury item.
Take Aston Martin: when it unveiled its F1-inspired hyper-car, the Aston Martin Valkyrie, we were significantly over-subscribed for the 150 cars that will be made, each one selling for more than £2m.
In addition, average selling prices for higher-volume super cars are also rising in line with the market overall.
That market is changing, both in gender and geography. The companies serving the HNWI sector are now targeting the estimated 14,000 women with personal fortunes of more than $30m (£23.5m) each who live in the US and China. China is going to be increasingly the engine for growth for purveyors of luxury goods and services, with Asia-pacific growing from 28pc to 34pc of the HNWI market over the past decade.
China promises to be a strong growth platform as we execute our Second Century Plan, our mid-term plan for sustainable growth involving seven new models over the seven years of the plans.
Without their patronage and their growing appetite for new technologies, a company such as Aston Martin would not be able to relaunch the Lagonda brand, which will return to the market in three years as the world’s first 100pc battery electric luxury car brand. The Lagonda relaunch will, in turn, create jobs in manufacturing, among suppliers and dealers as we tap into the resilient and growing market of wealthy customers.
Some of those customers will be ordering new cars on the Monterey Peninsula, where the Concours d’elegance celebrates both vintage and cutting-edge new models. For those with the means to buy the cars displayed on the famous 18th fairway of the Pebble Beach links, exclusivity is a price worth paying for.
For companies making the cars that they want to buy, exclusivity will drive future profitability. In the automotive world, being a purveyor of luxury goods is a good place to be.
‘Companies are now targeting 14,000 women with fortunes of $30m plus’