The big boom in ultraluxury

Aston Martin’s Andy Palmer: “Richer people are getting richer and there are more of them.” Photo credit: AUTOMOTIVE NEWS ILLUSTRATION

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LONDON — Ultraluxury car companies project an image of perfection, but their cash flow used to be as unreliable as the cars they built.

Aston Martin went bankrupt seven times in its first 100 years. Lamborghini went through multiple owners before ending up at Volkswagen. Bentley almost disappeared under a lackluster Rolls-Royce ownership.

That’s no longer the case. The iconic European marques are in a better state now than probably they’ve ever been. The big reason? “Richer people are getting richer and there are more of them,” Andy Palmer, CEO of Aston Martin, told Automotive News. “And the area which is growing quickest and represents their biggest spend is luxury and ultraluxury cars.”

The sales growth is staggering. In 2002, the combined global car sales of Aston Martin, Bentley, McLaren, Rolls-Royce, Ferrari and Lamborghini was 6,475, according to JATO Dynamics. Last year, that figure was 29,554. The 2002 figures lack data from China, which had yet to make its mark on ultraluxury sales.

In 2017, McLaren, Ferrari and Lamborghini boasted record sales. Aston Martin, McLaren, Bentley and Ferrari posted profits for the year, with Ferrari claiming industry-leading margins of 30.1 percent. BMW doesn’t break out Rolls-Royce in its financials, but the company boasts it is “highly” profitable. Lamborghini is still an unknown.

As the customer base expands, so does the effort going into wooing buyers. Palmer, previously head of global planning at Nissan, discovered that Aston had no planning department when he joined in 2014. So he applied marketing science learned at Nissan to fully understand who his customers were. It resulted in a pronounced change in the cars Aston built, with much greater differentiation among models.

This management experience is key, Christoph Stuermer, global lead analyst at PWC Autofacts, believes: “Production background is really important. You understand what your Six Sigma engineer tells you, and you understand why you need him there in the first place,” he said, referring to the quality improvement methodology.

Palmer, an engineer-turned-marketing guru who hails from Stratford-upon-Avon, became Carlos Ghosn’s right-hand man in his 23 years at Nissan. But at Aston he has adopted the methods of an old rival.

“What you see essentially is the Toyota management system, with kanbans,” he said, referring to the color-coded cards used by workers to order more parts. “I don’t care about volumes a day. I care about getting cars off the end of the line without reworking.”

Palmer signed off on the first 1,000 new DB11s, his first car, and will sign off on the first 458 of the new Vantage entry sports car. “There’s no more profound way of sending the message to the work force that quality is the most important thing,” he said.

The ultraluxury brands of today have diversified their product lineups. Bentley gambled some of its exclusivity by launching the GT Continental coupe in 2003 for the price of a top-spec Mercedes S class. It was a roaring success. Last year the Bentayga SUV, launched in 2016, accounted for nearly half of the brand’s 10,552 sales.

McLaren might be unique in refusing to develop an SUV, but it still keeps up a frenetic pace of launches — in 2016 it announced 15 new cars or derivatives by 2022.

“The fresher you keep the product, the more you can keep your price up,” CEO Mike Flewitt said.

Aston Martin has the broadest ambitions. It launches an SUV next year, followed by a midengine supercar to compete with Ferrari and a range of all-electric Lagonda-branded cars to rival Rolls-Royce.

China is boosting sales, but it accounted for just 10 percent of the global total for the six brands last year — 2,961 vehicles, according to JATO.

Indeed, there’s still plenty of growth in the established markets. North America, for example, was the biggest market for Lamborghini, Rolls-Royce and McLaren in 2017.

But growth won’t continue forever.

Said Palmer: “There is a volume limit to every brand if they want to remain rare and exclusive.”

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