Investors will be hoping for a miracle given the state of the share price
Thursday 12 May 2022 Author: Danni Hewson

In the weeks before Aston Martin’s (AML) stock market listing four years ago Andy Palmer, who was CEO at the time, told investors the company didn’t make cars, it made dreams.

Well, the dream has become something of nightmare with the value of shares down 93% since their peak in October 2018.

The company’s latest set of results did little to calm jitters. Pre-tax losses in the first quarter nearly tripled compared to the same period the year before. Deliveries fell by 14% and net debt soared by a third to a £957 million, which is a little more than the current market valuation of the company.

The man behind the car maker’s 2020 bailout is convinced the company can be transformed into ‘the world’s most desirable ultra-luxury British performance brand’. However, executive chairman Lawrence Stroll has a lot of skin in the game and it’s clear from the last set of financials that his turnaround plan hasn’t exactly gone to plan.



To be fair, the last couple of years have delivered the kind of market environment no-one could have predicted. Supply chains have been shaken and stirred and key components have been in short supply.

His decision to bring in two Ferrari (RACE:BIT) veterans to spearhead a ‘new phase of growth’ could be viewed as either a stroke of genius or a considered gamble.

When you compare the two brands it’s easy to see why Stroll would look to emulate the Italian company.

Since floating in 2015, Ferrari’s market value has jumped from €9 billion to €36 billion while the British rival has only found reverse gear.



A Ferrari driver could just as easily fall for Bond’s motor – exclusive, sporty and very expensive. Both businesses are chasing the same electric dreams and now operate in very similar ways after Stroll’s previous management team delivered both cost savings and a pipeline of new models.

MARKET STILL TO BE CONVINCED

The market only gave a lukewarm welcome to the new team in Aston Martin’s driving seat. Former Ferrari boss Amedeo Felisa understands cars and delivering consistent quality must be the hallmark of Aston Martin’s next chapter under his new leadership. However, the expert is in his 70s. Felisa has come out of retirement to work his magic, but his age suggests he’s not exactly in it for the long haul.

The way the changing of the guard happened set tongues wagging. Ousted Aston Martin CEO Tobias Moers had only just begun pushing through his transformation plans, ones which had the backing of the company’s executive chairman. Yet mere months later the business is now apparently ready for its next phase. Is there something worse with the business than people are letting on?

In the plus column the brand remains one of the strongest names in the automobile industry. Aston Martin is also back on the F1 grid after a 50-year absence, pitting its performance credentials against the very best motor fans can dream of, and a potential partnership with Audi is intriguing.

Pricing for Aston Martin’s traditional road models has been stronger after dealing with issues of over-supply. But problems delivering the much-heralded limited-edition Valkyrie have cost the business dear both in monetary terms and in consumer confidence.

Pandemic job cuts have created gaps in manufacturing and there is ongoing criticism that for such a high-end brand it fails to sufficiently update its popular models in the same way its rivals have perfected.

THE FUTURE IS ELECTRIC

The race could yet be won if Aston Martin can deliver a heart stopping electric vehicle. Sports cars are about performance; they’re about the drive and enthusiasts will tell you no-one has quite delivered the ultimate electric ride just yet.

Both Felisa and returning teammate Roberto Fedeli as Aston Martin’s new chief technical officer could make the difference at their new employer but they’ll need to work quickly.

Aston Martin’s chairman recently pledged the business would only sell hybrid or electric options from 2026 and delivering that is going to take a unified team and a whole load of cash.

Details on how it will deliver that promise are fairly sketchy, but Aston Martin says it is on track for delivery of its first plug-in hybrid by the beginning of 2024 and its first fully electric option in 2025 – right around the time Ferrari is scheduled to unveil its own all-electric model.

That’s where the dream really starts to unravel. The rising cost of living might not be such an issue to an Aston Martin customer, but anticipated price hikes might slow demand and narrow margins.

But it’s the cost of servicing all that debt that’s the real worry, particularly when you consider how far in the red the company is. It’s not exactly the kind of a calling card you want if you need to refinance.

While Aston Martin’s engine partnership with Mercedes should help keep development costs down, the shift to electric vehicles is an expensive game that all motor companies are caught up in. Aston Martin seems like it’s finally heading in the right direction, but as the song goes, the road is long.

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