ASTON MARTIN’S ANDY PALMER: Restoring profits with an SUV?

Aston Martin has unveiled the DBX SUV, a vehicle it believes will be crucial to its survival after lower-than-expected demand for its core sports cars pushed it to losses in the second and third quarters of 2019. CEO Andy Palmer, 56, has had to increase the company’s debt to cover the DBX’s final development ahead of deliveries in mid-2020. Palmer told Automotive News Europe Correspondent Nick Gibbs that he is confident the SUV will bring new customers to the company and pave the way for the promised rollout of a midengine sports car and the Lagonda luxury electric brand. Here are edited excerpts from their conversation.
Q: How important is the DBX?
A: Every car we launch is important because of the way the business runs. But in terms of changing the company so that we address each of the luxury clusters, this is really important. So far we have replaced the core GT and sports cars — our historical ground. This is the first model that expands the portfolio.
How many can you sell in a full year?
About 4,000 a year, with a peak of 5,000.
What does that mean for Aston Martin’s 2020 sales?
I can’t give forward-looking data, but we are about 6,000 to 6,500 units [in 2019]. We will not have a full year of DBX, but we’ve more sport cars coming. The Vantage roadster arrives next year, and the midengine car [the Vanquish, comes in 2021]. The DBX will represent the largest single volume.
Where will DBX customers come from?
Today more than 70 percent of Aston Martin customers have an SUV in the garage, so the hard work is already done. We just need to convert those people from their daily driver into an Aston Martin SUV. They are coming out of Porsche Cayennes and Range Rovers. What we are looking to do is cream off the top of that premium SUV sector.
The Cayenne has been an important benchmark in the development of the car. Our cars don’t compete directly, but they (Porsche) are a very credible source when it comes to ride and handling, and build quality.

The public reveal of the DBX was held in Beijing and Los Angeles. Why those two places?
China and the U.S. are the car’s biggest markets. But also, it’s a signal that we are a very traditional British car company trying to be more global in our approach. The DBX has, in particular, been very much designed with Chinese and American customers in mind.
Aston’s first hybrids will be versions of the Valkyrie and V-6 Valhalla supercars. How quickly will the SUV get a hybrid variant?
We are not yet disclosing our cadence of hybrid rollouts, but by the middle of the 2020s all of our cars will have a hybrid offering.
Will they be plug-in or full hybrids?
We are looking at both. I’m not a big fan of the plug-in hybrid because you are adding weight and complexity. My preferred delivery is a self-charging hybrid. The only reason for thinking otherwise is the definition of regulations and getting the CO2 credit. And in some places that might push us to add a plug.
Some analysts, notably Max Warburton of Bernstein, are skeptical about your rollout of the Lagonda luxury electric brand by 2023. Is that still the plan?
We still work from that basis. Max’s commentary is that it’s a lot to do, and I would be first to acknowledge that. But we have also achieved a lot.
When we announced the Second Century plan, there were plenty of people speculating about whether we had the capability to do everything we said. But I think we have already exceeded some of those people’s expectations. The most difficult car we did was the DB11, because it was essentially a new factory, new electrical architecture, new engine, new platform. Nothing that we will do will be as difficult as that. Moving into the SUV format with the DBX has also challenged us, but we have delivered everything on time so far.
You have reduced your vehicle sales guidance to 6,500 from 7,000 for 2019. Why?
Our sports cars are growing both in volume and in market share, but the Vantage market is difficult. It borders on premium, and that market is more in line with automotive TIV (total industry volume).
The Vantage starts at about $163,000, which drags down your average selling price. Is it a market you need to be in?
What the Vantage allows us to do is to climb a ladder into luxury. None of the other luxury automakers provide that step, so you go from a high-end Porsche into the luxury arena. Vantage provides a platform to do that inside the brand.
It’s also a platform on which we build our specials and our race cars, so we have credibility when we do stuff like Le Mans.
You recently talked about actions to improve efficiencies and reduce costs. What actions have you taken?
The DBX is being developed much more efficiently than we anticipated, and that impacts capital expenditure. When we drew the development costs curves, we followed those we experienced with the DB11. But what we found is that we have been able to operate much more efficiently than in the past in terms of manpower spend or changes to tooling in the design.
The increase in virtual testing is a huge benefit. We operate in a lean environment where everyone is looking at places where it’s possible to eke out improvements. That has allowed us to reduce our forecast on capital expenditures by quite an extraordinary amount. In February, we gave a guidance of £320 million to £340 million ($412 million to $445 million). However, in July we revised it to £300 million ($392 million).
Since the company went public in October 2018, the value of Aston Martin’s shares has fallen about 80 percent. Was the IPO a mistake?
There’s no point in looking backward. The share price is obviously a disappointment, and I have to acknowledge my role in that. But we have to get on and improve it. I think the importance of the DBX, and whether we can deliver it efficiently, will also affect the share price.

Source: autonewscom