Aston Martin Posted Encouraging 2023 Results but Lags in Electrification

Encouraging 2023 Results & Guidance

Aston Martin Lagonda (AML.uk) reported upbeat top and bottom lines for 2023 on Wednesday. Pre-tax losses narrowed to £239.8 million (around USD 303 mln), while gross margins widened by 650 basis points, to 39.1%. Revenues rose 18%, in excess of £1.5 billion. ^[1]

The robust results were largely a result of strong sales and higher prices. The British luxury sport cars maker handed over 6,620 vehicles last year, marking a 3% increase, while average asking price (ASP) grew around 15% to £231 million.

Executives are optimistic about the future due to "continued strong demand", expecting to deliver "significant strategic and financial progress" in 2024. They anticiapte sales volumes to increase by "high single-digit" percentage, achievement of the 40% gross margin target and material improvement in free cash flow.

First BEV Push Back

Aston Martin launched its first ever SUV in 2020 to soar up sales and help it exit the financial doldrums. Deliveries of the most powerful version, the 707, rose 25% last year and the firm spoke of "transformational demand". Its entry in this highly desirable segment has largely fulfilled these goals, but the company now needs to focus on electric vehicles to carry forward.

There may have been a slowdown in demand for electric cars last year due to an adverse external environment and a backtrack to hybrids, but the shift to electromobility seems unstoppable. Hybrids are a good solution for sports cars, as car enthusiasts still crave the sound and feel of internal combustion engines. The European Union has already banned sales of internal combustion engines (ICE) cars from 2035 though, so there is no room for complacency. ^[2]

The firm sold 87 units of its limited-production Valkyrie hybrid hypercar last year, which is priced in the millions. Its true entry into hybrids will be the six-figures Valhalla supercar, on course for production within this year. However, the launch of its first pure battery electric vehicle is now pushed back by a year, to 2026.

Electromobility Lag

Although Aston Martin is making progress in electrification, it lags behind key rivals. Hybrid sales of Ferrari (RACE.it) surpassed those of petrol cars for the first time in the third quarter and accounted for 44% of total shipments for the whole of 2023 ^[3]. The legendary Italian manufacturer plans to reverse the ratio by 2026, with 40% ICE and 60% hybrid and full electric, while its first pure BEV is expected within 2025, before of Aston Martin.

German giant Porsche of the Volkswagen Group meanwhile is lightyears ahead, as it has been selling hybrids since 2010. The all-electric Taycan has been on the market since 2020 and deliveries grew 17% y/y in 2023, reaching 40,629 units. ^[4]

Even Chinese manufacturers, typically known for cheaper cars, are eying the electric supercar market. BYD (BYDC.hk), which outsold Tesla last year (hybrid and BEVs), unveiled a pure electric supercar. Under the YANGWANG brand, the U9 reaches a top speed of 309.19 km/h and packs 1,300 of horsepower. The U9 is priced at around USD 233,000 (1.68 Million RMB) and deliveries are expected to begin this summer. ^[5]

Conclusion

Aston Martin Lagonda had a tough ride in the stock market, since it began trading publicly in 2018. Its stock (AML.uk) managed to post profits last year, but is under pressure so far in 2024. The progress in financials and vehicle sales is welcome and so is the push towards electrification.

However, Aston Martin needs to try harder and the pushback in the timing of its first all-electric vehicle is worrying. The recent dent in demand for electric cars may make hybrid more appealing, especially in the high-end supercar segment, but rivals are moving forward and the British manufacturer will have to get this right.