In the last two weeks, both Aston Martin and Ferrari have reported their respective Q2 2020 results (McLaren does not report until the end of August so we will come back to them later). Normally in these types of articles I spend quite a bit of time going through the financial results and highlighting key numbers. This time I thought I would try something a bit different, instead of focusing on the numbers, which were in line with what I expected (Aston is still a train wreck and Ferrari turned in a very solid quarter given the circumstances), I would instead take a look at what the two executive teams said in their presentations and the question and answer sessions that followed. I have sat though more quarterly earnings calls than I care to remember, I always find it interesting what CEO’s say and even more so, what they don’t.
Aston Martin
As Aston Martin reported first, we will start with them. This was Lawrence Stroll’s first earnings call since assuming the position of Executive Chairman. If you had no background on Aston’s most recent series of challenges, based on Stroll’s opening remarks, you would probably take away that this was a company in good shape with a bright well defined future (Aston Martin 1st Half Earnings Call Transcript). While management teams normally do try to put the best possible face on situations, I did expect a bit of balance to give it an aura of credibility. In this case it came across as a bit delusional given the depth of the mess Aston Martin is in today.
In terms of specific comments that were (or were not) made:
To say Stroll, Moers, and their teams have their work cut out for them is the understatement of the century. The current line up is a major challenge, the new complete lack of transparency on the DBX order book is highly concerning, and the Valkyrie program is still badly behind schedule. It’s going to take roughly another year of destocking before Aston can fully move to a model of building to demand.
Ferrari
The Ferrari Q2 2020 Earnings Report was a completely different tone and atmosphere from Aston Martin. Louis Camilleri comes off as both understated and completely in control. The earning’s call webcast, including the Q&A session, is posted: Ferrari Q2 2020 Earnings Call. My net takeaway from the call was that this was a company completely on top of both their business and the current situation.
In terms of specific comments that I found quite interesting:
Overall, Ferrari has, and continues to be, very well managed. The confidence of the management team in their business and its direction comes across clearly. The few challenges they are facing are more long term and strategic in nature than necessarily Covid-19 generated. In fact, the few current issues Ferrari does have, a waitlist that is too long and a manufacturing backlog, other companies would kill for.
Summary
Aston Martin and Ferrari might as well be in two completely different universes. Ferrari is a highly successful company doing a great job navigating in a challenging environment. The only area of concern I can see is related to mix dependency and portfolio fragmentation. Neither of these are Covid-19 related and are questions of long-term strategy. Aston Martin is trying very hard to project confidence and clarity of direction under new management while standing in the middle of a massive turd of a situation. While the confidence and vision maybe inspiring with the future bright, the present is still one big odious mess.
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August 2020
Aston Martin seem to be in a much deeper hole than I thought. Repeatedly let down by Reichman’s design, yet they’ve bet the farm on yet another of his disasters – The DBX. Whilst not absolutely terrible, it’s not what it should be either. You’d buy the Bentley instead.
Ferrari seems to be much more level. In a far better position to weather the coming Coronavirus storm of fewer buyers for luxury items. It’s not that they’ve lost product that’s the problem but all the buyers who’ll be tightening their belts too.
The other area to look at is those buyers who effectively “rent” their cars. Never with the intention of owning outright, just keeping ahead of the payments enough to have enjoyed the car. With Ferrari lead times going further out the used value, and therefore the depreciation, will still enable those people to continue this rental model. For the Aston no such luck. Dealer stock is still too high, and it seems there’s not enough deposits being placed upon the DBX and other future models like the Valhalla. Two year wait at Ferrari and Aston probably won’t let you wait more than two seconds before taking your money!
Stroll still doesn’t fill me with any confidence. And Tobias Moers just doesn’t seem like the right guy to take over Aston when he’s failed to deliver a major project like the Mercedes AMG One. Neither seem willing to do what is necessary to save Aston Martin – Sack Marek Reichman.
Lack of news on DBX side is bit concerning, but not exactly surprising. People who wanted to order the car blind already were mentioned in Q1 numbers, and during this whole “coronacrisis” I’m pretty sure the number could have only decreased. But I think it is still only “a bit” concerning, true test for DBX will be in Q3/Q4, where first cars will start hitting streets, dealers will have demo cars to show potential customers, let them test drive it etc. It’s not supercar people will buy only with their heart, I think there might be some people who might be interested but just won’t order it without checking it themselves.
But all in all, I’m not really sure if it is going to be success Aston is needing. The car isn’t particularly good looking, and (at least for me) doesn’t have this “wow factor”. Plus it is late to the party. If anybody wasn’t satisfied with their Range Rover or Cayenne probably has already switched to Bentayga or Urus. When Bentley debuted it had 12 cylinders and I think one of the best interiors. When Urus debuted it beat other SUVs on performance. And the comes the Aston, with car that doesn’t seem to be breath-taking in any aspect, it is just a good car. And if you want to buy just a good car, why pay around 50% more for Aston when you can buy Range Rover or Cayenne?
[…] Aston is still a train wreck and Ferrari turned in a very solid quarter given the circumstances (Aston Martin & Ferrari’s Q2 2020 Results). Unlike both Aston and Ferrari, which as public companies host presentations and a Q&A session […]