As Aston Martin plan to list shares in London, the automaker's CEO Andy Palmer believes the company will be more profitable than Ferrari.
Ferrari has consistently been the world's most profitable car company in recent years, with an EBIT margin of 24 percent in the first half. Aston Martin meanwhile has only just emerged from a long period of unprofitability.
Berenberg, a bank, described Aston's business model as "flawed" compared to Ferrari's. "Aston Martin lags significantly behind Ferrari on nearly every quality metric, particularly on critical measures like capital intensity [capital investment per car], cash generation and contribution margin," it said in a note.
So how does Palmer believe he can predict consistent EBIT margins of more than 20 percent in the medium term?
Firstly, the company has set a limit on how long models run for. In strategy dubbed 7x7x7, Aston will launch seven models over seven years, each with a seven-year life cycle. Those models are as follows: the already-launched DB11, Vantage and DBS Superleggera sports cars.
Next year comes the DBX SUV, followed by the mid-engine supercar and then the two electric Lagonda models: first an SUV in 2021 and a year later a sedan. At that point, the cycle goes back to the beginning.
In the past, Aston models lived too long. That meant cars needed to be pushed towards the end of their life, which prompted discounting by dealers. "Those are behaviors that mean you lose money," Palmer said.