Catching Up with Aston Martin, Ferrari, & McLaren

It’s been a bit over a year since I did a general update on Aston Martin, Ferrari, and McLaren.  During this past year all three have undergone enormous changes.  Two of the three had near death experiences and all three have new CEOs since the start of 2020.  All three are still facing major challenges both internally and with the coming transition first from ICE (Internal Combustion Engine) to Hybrid and then to Electric.   

Aston Martin

Starting with Aston Martin. Thanks to Yew Tree/Stroll’s multi million pound investment (Lawrence Stroll is now the Executive Chairman) and Mercedes Benz technology, Aston Martin has avoided an 8th bankruptcy, at least for now.  Andy Palmer, the vast majority of Palmer’s team, and just under $5 billion in shareholder value are all long gone.  What does remain is the new DBX (SUV) plus a new factory in Wales (St Athan) which was built to produce it and is running at around 40% of capacity, an epically delayed halo hypercar (the Valkyrie), a mountain of debt, and in the words of the current CEO Tobias Moers an “aged” sportscar portfolio.  A comment that I’m sure was welcomed by all the Aston Martin dealerships globally as its sure to drive sales…………..

 

Speaking of sales, I got an email this week from an Aston Martin dealership in the US.  They are offering 3 years free servicing with the purchase of a DBX.  I checked the dealer’s website, and they currently have nine new DBX’s listed for sale and one used DBX.  Based on past experience, if they are showing 9 DBXs for sale, they probably have twice as many in stock.  3 years free service isn’t something you offer on a new model that’s flying off the showroom floors. In the Q 1 2021 earnings call, Aston indicated that they would no longer be reporting retail sales.  Eliminating this key piece of information gives Aston the ability to immediately revert back to bad old habits and start stuffing dealerships with cars if they are trying to manage earnings and hit certain targets to prop up the share price.  I am surprised the financial analysts who follow Aston haven’t raised this as a major credibility issue given the history.  It’s the financial equivalent of putting a recovering alcoholic in charge of guarding the wine cellar.  It might be ok but there’s a big risk it doesn’t end well.

 

Unpacking the DBX saga a bit more, there are a few things that are hard to square.  The new manufacturing facility in St Athan opened in December 2019 with 600 employees hired over the course of 2020.  In March 2021, Aston made 1/3rd of the work force (200 employees) redundant which is not surprising as the factory is running at less than half capacity.  In addition, the depth and breadth of options on the DBX is being cut back with most carbon fibre being eliminated. These are not the actions you normally see taken to support a massive success and the changes in options go directly against Moer’s statement on driving ASPs.  In addition, Aston Martin had taken £18.8m in grants from the Welsh Government for job creation, skills training and research and development.  When the grant was given, full employment at St Athan’s was expected to reach 750.  Needless to say, the Welsh Government has to be less than happy with the current situation. 

 

Moving onto the Valkyrie. If Aston Martin finally delivers a customer Valkyrie before the end of the year, it will have taken Aston longer to develop this car than it took Henry VIII to go through 4 wives or the Allies to defeat Germany in WW2.  Both Moers & Stroll are on record as having promised the first deliveries will happen before the end of 2021, though Aston Martin also said the same for deliveries last year.  From what I have gathered from a few different sources, that is likely to happen.  These sources also indicated that given the massive problems Aston has had trying to get the electronics to work in the road cars, it’s now the track cars that are being prioritized as they will be built without the sophisticated electronics & hybrid system.  Apparently, Aston has had major challenges getting the Valkyrie road car mules to run for more than 20 minutes at a time with the longest run being around 45 minutes so far.  On a more positive note, I have heard that the Valkyrie is by far the quickest car (road or track) a few of the drivers have ever experienced.  How many owners will be able to drive the track cars anywhere near the limit without the sophisticated electronics systems will be interesting to see.

In terms of the track Valkyries, Aston has outsourced the development & production of the car to Mulitmatic (Multimatic also is building the latest Ford GT) with instructions to get it done as quickly (and if the rumors about Stroll’s instructions are true, as cheaply) as possible.  Multimatic will also likely be doing the final development and most of the production on the road Valkyries with final assembly planned at Aston Martin’s Gaydon facility.  Continual failed crash tests by Multimatic have not helped speed development along, and its believed they are struggling.  Last I heard, neither Valkyrie variant had passed crash tests yet.  In addition, Aston has only bought 30-40 of the Valkyrie’s Cosworth V12s to date so the actual number of cars that can be produced right now is fairly limited.  Needless to say, the relationship between Aston Martin & Red Bull (way back in the middle of the last decade, the Valkyrie was originally conceived as a joint project with Red Bull’s Adrian Newey as the chief designer) has turned bitter and toxic.  Red Bull has not been involved at all since the end of last year.  How this is going to end is anyone’s guess but I’m sure there will be plenty of finger pointing.  Neither Stoll nor Moers have any “ownership” of the project and seem to view it as an unwelcome stepchild that they just can’t wait to get out of the house.  Just to make it even more interesting, apparently there is no love lost between Moers and Multimatic.  This might have something to do with Moers’ experience in his prior job on the almost equally delayed Mercedes AMG One, which Multimatic was also working on.

The recent lawsuit Aston Martin filed against the Swiss company Nebula, is quite interesting.  Nebula had helped to finance the development of the Valkyrie and sign-up customers in return for future royalties.  Aston is claiming Nebula withheld customer deposits on the Valkyrie and is writing down £15 million against 2021 earnings as a result.  This would be roughly equivalent to the deposits on 30 Valkyries.  Nebula is claiming that it has done nothing wrong.  Needless to say, this has the potential to get very messy and drag out over an extended period.  What is clear is Aston Martin wants out of the royalty agreement.  From a purely business perspective, Aston is taking the risk that the cost of litigation and potential settlement will cost less in the long run than the royalty payments.

It is also possible Moers could be warming up shareholders for a much bigger hit, given there is potentially more ugly news to surface with the Nebula dispute. That figure could easily be in the £50 million plus range, given that more deposit holders have also been refunded recently.  In addition, you have the Valhalla depositors who have been requesting refunds as that project has gone badly off the rails.  Based on Moers recent statements, if the Valhalla ever does see the light of day, it will be a far cry from what was originally presented.  All this will likely put increasing strain on the Stroll – Mercedes relationship.

Going back to Tobias Moers and Lawrence Stroll, it doesn’t seem like it is all smiles in paradise anymore.  After lots of bold and bombastic claims in 2020 about creating a great luxury brand, the “British Ferrari”, Stroll has kept a much lower profile in 2021.  In Stroll’s most recent comments to the Times of London, he mainly focused on making Aston a proper luxury brand, aligning supply with demand, and expounding on the tie up with Mercedes Benz: “A company of this size needs a big brother — to think they don’t is wrong,” Stroll said.  It’s a fascinating statement given his two closest and more successful competitors, Ferrari & McLaren, are both completely independent.  Reading between the lines, it appears that Mercedes are now calling the shots at Aston Martin whether Stroll likes it or not.  This is not that surprising as Aston Martin can’t really survive without Mercedes support and Stroll’s Racing Point/Aston Martin F1 Team is also heavily dependent on Mercedes for technology.  Basically, Mercedes has Stroll over a barrel as any profitable exit for Stoll is going to be heavily dependent on Mercedes support. 

 

Tobias Moers, who came from Mercedes, appears to be more of a Viceroy, than trying to settle in as an indigenous CEO.  Moers has not moved his family to the UK, and he is still commuting from Germany.  In the last earning call, he seemed tired and uninterested in sparing with the financial analysts.  The nicest thing Moers has said about Aston’s current lineup is they are “OK” but he has also called the current portfolio “aged”.  Moers has granted very few interviews and has done little to become the public face of the company.  All of which are indicators he is not planning to stay.  What he has done is streamline the manufacturing side of the business and kill off the V6 engine project, leaving Aston totally dependent on Mercedes for its powertrains going forward.  Stroll’s vision of becoming the British ‘Ferrari’ is clearly not shared by Moers and I don’t recall him ever referencing it.  My guess is Moers will stay through the end of the year, declare that he has stabilized the business, then go back to Mercedes.  For Mercedes this is a win win, they will have a true inside view on if they should acquire Aston Martin and if they decide not to, they can walk away without having put £1 into the business.

Ferrari

While the machine keeps on powering ahead, it hasn’t been all smooth sailing for Ferrari in the past year.  Ferrari navigated the Covid disruptions incredibly well, however they did lose their highly regarded CEO, Louis Camilleri, who retired suddenly in early December after catching Covid-19. Post Louis Camilleri’s departure, Ferrari seems to have taken a more aggressive stance on moving into EVs.  John Elkann, the interim CEO post Camilleri, moved quite quickly on pushing forward an EV (electric vehicle) agenda (John Elkann is head of the Agnelli family, Chairman & CEO of Exor, the holding company for the Agnelli family’s main investments). Ferrari is one of Exor’s largest holdings and a key source of Agnelli’s wealth & income). When the question came up on the Q4 2020 call, Elkann was very explicit that in the coming decade that there would not be a fully electric Ferrari.  Hybrids yes, but fully electric no.  In the Q1 2021 earnings call, Elkann announced that Ferrari would be launching its first fully electric car in 2025.  That’s quite a change in strategy in just 6 months.  This does raise the question if Camilleri’s departure might have been partially driven by a disagreement on EV strategy.  Now with Camilleri out of the way, Elkann is pushing the EV agenda forward hard.

This theory is supported by the recent appointment of Benedetto Vigna as the new Ferrari CEO effective September 1.  Vigna is seen as a highly unexpected choice as he has no experience in either the automotive sector or luxury goods.  Vigna has spent the vast majority of his career in electronics and is currently the head of the sensors group at semiconductor firm STMicroelectronics.  Vigna will have the massive, high risk task of leading Ferrari through the hybrid and EV transition.

McLaren

After all the drama around McLaren’s near-death experience last spring, the past twelve months have been relatively quiet.  The two most recent models, the 765LT and the V6 hybrid Artura, have been well received.  McLaren seems to have taken a go slow and make sure it’s perfect approach on the Artura which should help put to rest the noise around reliability.  Despite mixed press reviews on the 765LT, owners speak very highly of the cars, and they are trading hands at well over sticker.  There have been a few management changes, a new CMO for the McLaren Automotive is now in place, and Tony Joseph, the President of McLaren North America, recently departed.  I have met Tony on several occasions and he will be missed. Tony did an excellent job building the McLaren NA business and network up from basically nothing to what it is today.

The lawsuit with McLaren’s bond holders on if McLaren’s historic F1 cars had been pledged as collateral has been resolved.  As a result, the sale and lease back of the Woking Headquarters was able to go ahead.  The HQ sale plus the sale of a minority position in the Race Team have put McLaren back on sounder financial footing.

In summary, all three supercar manufacturers have their challenges.  For Ferrari these are not outside what one would expect for a highly successful company in a challenging environment about to go through a major technology transition.  McLaren is stable right now but can’t afford any more missteps.  The first couple of years post the Artura launch will be critical.  What happens to Aston Martin is anyone’s guess.  Its last several years would definitely make for a compelling mini-series.  It’s doubtful the DBX will be the savior it was originally touted as, and the Valkyrie has been a massive PR mess for years now with potential to get even worse.  How Stroll eventually extricates himself (and his wallet) from this will be interesting to watch. 

Thoughts and comments? Please see the comments section below.

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June 2021

 

Recent Posts

21 Thoughts on Catching Up with Aston Martin, Ferrari, & McLaren
    John
    9 Jul 2021
    9:36am

    Just watched a clip on the Aston Martin Instagram feed of the Valkyrie at Goodwood Festival of Speed. I kept thinking of the question Jeremy Clarkson put to Tiff Needell about the McLaren F1: “Is it skittish?”

    https://www.youtube.com/watch?v=ZXN5VBLCOZw

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    Benjamin
    30 Jun 2021
    1:31pm

    Are Ferrari and McLaren truly independent? I may be wrong but I was under the impression the McLaren V8 isn’t even built by McLaren and Ferrari use a lot of Fiat parts, they just hide it well as to not disrupt the mainstream perception of Ferrari being completely pure. Purely from an objective standpoint I believe you’re being too harsh on Aston Martin. They clearly had major financial issues last year and as most businesses are, they’re trying to get up and running again. I’m waiting until January 2022 before I start criticising them, if they are in the same position in 6 months as they are now then I will openly admit you were right and I was wrong. Currently however, I do not agree with you and I believe things will change once the Valkyrie gets on the road

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    Robin Kanagasabay
    30 Jun 2021
    9:17pm

    Excellent and thought provoking as always!

    Do you have any thoughts as to whether the change to full EV may allow Rimac to become a major player in this sector (with or without a Porsche/ Bugatti tie up)? They seem as far ahead of other supercar manufacturers as Tesla were in mainstream cars and of course VW already have the id.R

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    Simon B.
    1 Jul 2021
    12:55pm

    Those Valkyrie rumors are really quite shocking if true. Top Gear has claimed to be invited to a first drive event in August and the lead Valkyrie engineer Nick Burns made an instagram post all the way back in April saying that his work was done. Based on this many people were speculating that the deliveries could be starting in September. However, if they can’t even make the car work longer than 45 minutes and they still haven’t passed crash regulations, then I don’t see how that’s gonna happen. If indeed the track only AMR Pro Valkyrie variant is to be produced first – and in the recent release AM claimed to target “Q4 2021” for that – that would push the road going Valkyrie to 2022.

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      Charles
      13 Jul 2021
      10:20pm

      Tobias Moers said during Goodwood the car will start production in 2 weeks time

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    Benjamin
    1 Jul 2021
    12:45pm

    I found the point about McLaren and Ferrari being completely independent interesting. I was under the impression McLaren engines were built by Ricardo and every Ferrari for essentially the past 50 years have been made and released under Fiat ownership. I’ve heard from a few people there are quite a few Fiat bits in a prancing horse, they just hide it well as to not upset the apple cart. I think Aston Martin need to be given more time with regards to F1, to expect drastic changes in this short of a time frame is just unrealistic. I’d also like to wait until the end of the year before scrutinising the Valkyrie programme anymore. If, in January, we are still in this position I will concede you were correct although currently I believe you are incorrect. I do think it is a crying shame the V6 has been discontinued but if things were as Moers says and it was simply just a concept then I understand the decision.

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    Gareth
    30 Jun 2021
    4:32pm

    Insightful// Thank you for sharing! It’s baffling to me how Aston thought they could afford to build a new platform for the DBX and still believe it would be the financial saviour of the company.
    Moers is right. The interiors on all Astons are a terrible mess, nothing says quality … these cars are being bought on brand alone. That’ll die out one day.
    McLaren need to slow waaaay down. They’re going to need time to recover from a new model a day and filling dealerships with unsellable cars. I so hope they succeed, as their products are stunning for such a young constructer.
    Ferarri. The only Ferrari I find desirable since the Testarossa is the FF.

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    Justin McKenna
    30 Jun 2021
    8:08pm

    Can’t believe it’s over a year since that article and how different the world looks now through the prism of these three manufacturers. Very interesting thank you – unlike the lineups of the three car makers. I don’t believe any of them have become more interesting (to me anyway) over the last year. Maybe the Arthur and the nee Can’t call it a Dino hybrid will in fact be interesting but given how the most interesting car Ferrari has now is the Roma (to me anyway) I’m not betting on it.

    I don’t know what Aston are doing as I kind of lost interest but all three makers now have their most interesting cars (to me) in their back catalogue.

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    Russell
    1 Jul 2021
    5:27pm

    I always enjoy all your articles for their insights. I tend to agree with most of your comments and when I don’t it’s generally thought provoking. Sadly with electrification I think all the supercar manufacturers are in for a difficult time, with their low volumes over which to spread the technology changes. It’s hard to see them all staying independent. McLaren’s products are the most exciting to me and I find it amazing how they’ve come from a near standing start to challenging and often exceeding the established players like Ferrari and Lamborghini. McLaren clearly need to sort out their overall strategy, rather than being the over-eager puppies they have been so far. In trying to please everyone all the time they have caused issues with over-supply and residual values, which always comes back to hurt future demand. I think Ferrari are getting close to doing the same at the moment and their stock market valuation is frankly daft. Aston has a chance but they certainly have their work cut out and I’m not sure the current CEO is the right man for the job……I guess time will tell.

    It would be good to see another of your reviews of the market and supercar prices. With Covid and chip supplies affecting the new car market, it seems to have played out in interesting ways in the second hand market. Particularly with many people having more disposable cash and too much time on their hands, rather than the normal dynamic where some people look to sell their cars to raise funds for one reason or another and not enough time to drive and enjoy their cars. Is it a bubble waiting to burst as things get back to normal?

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    John
    3 Jul 2021
    7:12pm

    There’s a video on Car Scoops of the Valkyrie being tested. With the amount of debris the rear diffusers throw up it must be sponsored by Dyson and Autoglass!

    (For those outside the UK, Autoglass is a big windscreen / shield replacement company. There’s going to be a lot of smashed glass!)

    There’s also been an interview published by Autocar with Tobias Moers. My conclusion is that he simply doesn’t get Aston Martin. He’s been questioning the DB names of Aston! And his vision of Aston is for hard, stiff, sports cars. Not GTs. This doesn’t even make allowances for the DBX.

    Then he believes that Astons can be made purely from Mercedes parts. Even Ferrari have parts from the Fiat group and beyond, but their engines are all Ferrari. McLaren’s engines are derived from a Nissan race engine, but they’re very much a McLaren engine. Older Aston engines were based upon either Jaguar blocks, or Ford. They took the best parts, parts which really didn’t matter that much in that you had a well developed foundation, and very much built an Aston engine out of them.

    But for Tobias, a crate engine from Mercedes is good enough for Aston. Might be for the DBX where the customer is probably wanting to fill up the rear with baby buggies, but for their other cars? No.

    One of Aston’s designers has also left for Dacia. He needed to take Marek Reichman with him. Their problems really stem from Reichman designs not selling. No matter which angle you take, his designs haven’t found the market required to keep Aston afloat. Palmer’s biggest fault was thinking a Reichman design would sell enough to keep them afloat whilst betting the farm on the DBX. But he also let Reichman design the DBX. Therefore, you have the company failing because they trusted Reichman’s designs, whilst betting on the future with more Reichman design. It’s a planned failure.

    And Tobias Moers had one job to save Aston – Sack Reichman. He hasn’t, and on top of all his other problems, he’s definitely not CEO material and definitely no good for Aston.

    The difference at McLaren is stark. They knew they were in a little bit of trouble, and took steps to work their way out. No, I don’t think they should have sold off their building, but if they think being tied in to a more expensive lease agreement rather than just paying maintenance is a better option, who am I to say? But they’ve realised they needed to address issues with the cars, and get the product right. They’re not as deep in the brown stuff as Aston, they haven’t bet the farm on one model, so were always going to survive.

    Ferrari, however, seems to have been having an Italian moment! A bit of behind the scene passionate disagreements and they come out a bit stronger and a bit more focused on where they need to head in the future. Like McLaren their V6 offering is now in the public. But they’re also addressing that due to political pressures they have to accept an electric car has to be offered.

    Supercars going electric? The real problem is batteries. They’re dictating the packing strategy in automotive design right now, but if we have the breakthrough we need in this technology it will flip to designers packing their batteries to optimise on weight distribution again. Alas, we’ll have to wait a little bit longer for these new ones to be developed but when it happens, the switch to electric across all sectors could be rapid. Until then, internal combustion really is the best option.

    And finally, “Giga factories”. It’s seems it’s so rare in the west that factories employ thousands this new term has come out. Then in China they’ve got factories producing phones and computers for all the different brands under one roof employing hundreds of thousands of workers. Are those “Peta factories”?

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    Update on the Saga of Stroll’s Aston Martin | karenable
    11 Jul 2021
    12:53am

    […] days ago, I posted an article on Aston Martin, Ferrari, and McLaren (Catching Up on Aston Martin, Ferrari, & McLaren).  In the article I covered a number of the major challenges each has and is facing.  By far the […]

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