Aston Martin is on track to have four straight quarters of profit for the first time in a decade largely because of strong demand for its new DB11 supercar. The momentum is expected to continue as the British brand launches a revised version of its best-seller, the entry Vantage, later this year followed by its first SUV in 2019. The cloud on the horizon is the UK's pending split from the EU. Aston Martin CEO Andy Palmer discussed these topics and more with Automotive News Europe Associate Publisher and Editor Luca Ciferri and Correspondent Nick Gibbs at last month's Frankfurt auto show.
You had a great opportunity on your recent trip to Japan with UK Prime Minister Theresa May to voice your concerns over Brexit. What feedback were you getting?
Our message to her was that the No. 1 concern is the non-tariff barrier. I can hypothesize how I can cope with a tariff. The thing that really hurts is the non-tariff barrier. The car is stuck in a port in Germany or France because the administrator doesn't rush to sign through the paperwork. That has a much bigger impact on the bottom line than dealing with a 10 percent tariff. We need import-export to be as frictionless as possible.
Will Brexit force you to boost your local content?
That's my second-biggest preoccupation. If we're part of the EU and we're exporting then we're at 95 percent local content. If you're exporting exclusively from the UK, then we're somewhere between 30 and 40 percent. We're a long way from 60 percent, therefore your origin-of-source under current regulations becomes an issue. Suddenly you've got to start re-shoring big lumps of metal back to the UK, but I can't see a scenario where we bring engine production back. The cost of capital for equipment on an engine is huge.
Aston Martin vehicle sales were 3,687 last year. What will they be this year and when will you break the firm's 2007 record of 7,200?
We should be at 5,000 cars this year, but that's not the real story. In 2007, EBITDA was 92 million pounds. Last year we were at 101 million pounds. So, the underlying efficiency of the company is more than double what it was in 2007. This year our guidance is 175 million pounds of EBITDA based on 5,000 cars. We shouldn't be getting excited about this. This should be normal.
In reality, 7,000 is the production capacity on two shifts in Gaydon. We can see a clear line of sight to reaching that in 2019, when we will have a full year of the Vantage and the Vanquish replacement.
What if you added a third shift?
You can stretch it to 10,000 on three shifts, but it's quite inefficient to do a three-shift system.
Why is having three shifts inefficient?
Because of shift premiums and the planning maintenance, when you have to stand down the plant. Usually, the extra money you put in and the extra production you get out are not linear. You can do it, but it's better to build a new factory.