Business

Aston Martin battles tough year in hope SUV will revive sales growth

Bloomberg

Aston Martin Lagonda’s Chief Executive Officer Andy Palmer said the company’s first sport utility vehicle, or SUV, arriving later this year will be crucial for the British luxury-car maker, which is trying to revive sales growth and rebuild investor trust.

The DBX is expected to add about 4,000 units to annual deliveries after its launch in late 2019, Palmer told reporters in Tokyo. The automaker cut its overall sales target for this year by 11 percent last month to a minimum of 6,300 cars.

The DBX will be the biggest step yet in Palmer’s campaign to win over buyers and regain investor confidence in the Gaydon, England-based carmaker. Waning demand in the U.K. and Europe have left Aston Martin’s stock valued at a quarter of its initial public offering price just 10 months ago — the worst-performing new listing on London’s main market in more than two years.

“The key, of course, is DBX,” Palmer told reporters at the brand’s dealership in central Tokyo. “When you see DBX, when you hear DBX and when you drive DBX, it should shout Aston Martin at you.”

Palmer didn’t rule out raising more funding should Aston Martin need to replenish its declining cash pool. The company generated about £900,000 (¥116 million) of cash from operations in the first half, the lowest since it started to disclose earnings, according to data compiled by Bloomberg. “In a public market in the U.K., probably the investors would prefer that you had more cash,” Palmer said. “If we felt that we needed more money, then we would step to an instrument which we understood, which will be to go to the debt markets and raise more debt.”

The DBX will compete with the Porsche Cayenne and Macan, the Bentley Bentayga, and the Lamborghini Urus. Adding an SUV is a tactic that’s worked for Bentley, which has doubled production numbers with the Bentayga, and for Porsche, whose $50,000 (¥5.3 million) Macan is the firm’s best-selling vehicle.

While Palmer said the stock market reaction doesn’t change Aston Martin’s plan of introducing seven new models in seven years from 2016, analysts are downbeat. They lowered the average one-year target price for the stock by 43 percent in the past three months, with Credit Suisse’s Daniel Schwarz recently slashing his estimate by more than two-thirds.

Meanwhile, hedge funds have taken record short positions in both Aston Martin’s debt and equity, the Financial Times reported, citing data from IHS Markit. The cost of borrowing the company’s sterling-denominated bonds has risen to the highest of any U.K. corporate debt, according to the report.

“Short-sellers are taking the opportunity of 2019 being an increasingly difficult year — wholesale not quite enough, difficult market in the U.K. and Europe,” Palmer said. “And because Brexit moved — used to be end of March and now it’s end of October — it’s not reasonable to assume that somehow the market is going to come back.”