Aston Martin is falling behind peers in its bid to approach the margins achieved by rivals such as Bentley and Ferrari, analyst firm Jefferies said.
LONDON -- Aston Martin will need to raise more cash or find an automaker to partner with before it can become viable business again, a leading financial analyst said.
The unprofitable automaker raised 654 million pounds ($776 million) in September via a rights issue that brought in Saudi Arabia’s Public Investment Fund as a major investor. The funding drive, the automaker’s second since listing in 2018, was partly to pay off existing debt.
Despite this, the UK automaker’s net debt increased to 833 million pounds as of the end of September from 809 million the year before, company figures show.
“Aston Martin Lagonda still screens as a candidate for future recapitalization by the time the business achieves a viable operating structure, possibly 2024,” Philippe Houchois, chief automotive equity analyst at Jefferies, said in an investor note.
Houchois believes that Aston Martin is “falling behind peers" on industrial scale as it battles to reverse a run of unprofitable quarters and approach the margins achieved by rivals such as Bentley and Ferrari.
“Investors must either be prepared to recapitalize the business again once operations reach viable metrics or believe that an OEM will step in and provide the scale AML is missing,” Houchois wrote.
The analyst said that China's Geely Auto, which has built up a 7.6 percent in Aston Martin on the open market, would not be able to provide technology Aston Martin needs. “We do not see how Geely fits that profile,” he wrote.
Aston Martin is almost unique among luxury automakers in operating on its own, with only engine supply and electronic architecture provided by minority shareholder Mercedes-Benz.
“Porsche, Bentley, Lamborghini, Rolls-Royce – they are not standalone. They all need some scale provided by the parent,” Houchois told Automotive News Europe.
Mercedes first formed a partnership with Aston Martin in 2013 and in 2020 expanded that with an agreement to boost its equity stake from 2.6 percent to a maximum of 20 percent over a period of three years in return for Aston gaining access to new Mercedes technologies.
However, Mercedes’s stake was reduced to 9.7 percent after September’s share issue.
Despite a long history of unprofitability, Aston Martin has survived due to the willingness of investors to buy into the iconic brand.
“There is value in the brand itself,” Houchois said.
Current majority owner Lawrence Stroll bailed the company out in 2020 and rewrote the company’s business plan.
”One thing Lawrence Stroll has done right is restricted supply and transaction prices are improving,” Houchois said.
The company’s average selling price jumped to 195,000 pounds ($232,175) through September from 157,000 pounds in the same period last year, company figures show.
Vehicle sales, however, have been hit by supply problems this year, widening the company's third-quarter operating loss to 58.5 million pounds from 30.2 million a year earlier.
