Bentley boss foresees steady, strong profits as brand reset takes hold

Bentley’s 2021 global sales reached a new all-time high of 14,659 vehicles, helping profits soar. The 103-year-old brand followed that with a healthy first quarter in which its average revenue per car rose to 212,000 euros from 184,000 euros during the same period last year. Bentley CEO Adrian Hallmark told Automotive News Europe Correspondent Nick Gibbs why his strategy of being hyper vigilant on production costs while keeping the range as up-to-date as possible should ensure long-term profit stability even during market dips.

You had a successful 2021 in terms of sales and profit. Was it a one off?

Looking backward, yes. Looking forward, I hope not. If you look at the best players in our sector, these bumper years are bigger and come more often. We have made profits since the launch of the Continental GT [in 2018], but they have been nowhere near what the best competition in the sector have achieved. We had a good year, but we need to move from regular mediocre profits and occasional disasters to regular strong profits and occasional mediocre ones. That's the norm in the luxury sector. We expect to fall, but not fall into huge losses. That's what the whole restructuring and brand reset have been about in the last couple of years.

You were given some fair winds in 2021. What will ensure that these profits continue?

Several things. First, we have completely restructured the company. We have taken nearly a quarter of the build hours out of our vehicles and there is another 10 percent that is about to come out. Therefore, the manufacturing cost is down massively -- more than a quarter compared with less than three years ago. Because of the derivative strategy, the average price per vehicle has risen 10 to 15 percent. So, if you get 10 to 15 percent more top line and 25 percent less cost, the company is way more productive financially. During COVID we also took out 30 percent of indirect colleagues, which was terrible. Secondly, we benefit from having fresh products with a high level of technology. In the next two years, even before we get to launching electric vehicles, you will see a real cascade of derivatives and special editions. Not just keeping the products alive, but at the peak of their performance. Not just launch it, leave it for five years and facelift it. We have to be far more energetic and competitive every year with every model right on through the life cycle.

How have you saved money in production?

It's really stark. We built more than 15,000 cars and we did that with the same number of people as we built 11,000 cars the year before. We have also done a big materials-cost program but without cheapening the products. For example, we were utilizing about 45 percent of the most expensive leather hides on earth. We improved that to 60 percent utilization through changes in the way that we inspect hides, but also in the way we cluster the parts that go into the car. That makes a difference when each hide costs about 200 pounds ($245) and each car has about 10 to 15 hides. Another great example is that we now spend 1.3 million pounds a year less on protective gloves that we did three years ago. People were just using them and chucking them [now they are using them multiple times]. It was one of the hundreds of ideas that came from the colleagues on the shop floor.

What employee numbers are you at now?

About 4,250 to 4,300 down from close to 5,500 two years ago. That includes the entire workforce and some contractors. We are down to about 105 to 110 contractors. We are at close to 1,000 two years ago.

Will you always be that lean?

I would equate it to a mortgage. There's no problem having a 2 million pound mortgage for a house worth 4 million pounds. The problem is having a 2 million pound mortgage when the house is worth 500,000 pounds. Headcount itself is not the ultimate measure. The productivity of the business is key. We are looking to add more than 100 engineers in areas such as electric powertrains, connected cars and autonomous driving. So, we are looking to grow again. The key now is to grow more efficiently because the worst-case scenario is that we recruit back the same number of people we had doing the same things as before. That would be a disaster.

What does your first EV in 2025 have to do? Will it need to have best-in-class range? Will it have to reach 0 to 100 kph in 1 second?

From an acceleration point of view there are diminishing returns, which sounds bizarre. With electric cars, you can have what you want. The problem is, it's uncomfortable. The thrill of 2.4 seconds to 60 mph (about 97 kph) is great about 10 times. Then it just becomes nauseous. The lower power rate of acceleration is actually more usable and is still rapid beyond description. So, for us, it wouldn't be the brutality of acceleration that defines us. Secondly, in terms of absolute range, we are never going to be the best. What we need is adequate. We tend to build big cars not super-aerodynamic small cars. However, you will still see a step change in aerodynamics compared with our cars of today. No question. For me, it's not about the ultimate range or the ultimate acceleration. It's about having the right range, fast charging and the holistic experience that comes from the breathtaking design expected from Bentley, space and comfort beyond what we currently offer, and then digital capability that takes what we already do to another dimension. Much like how our manufacturing process has been radically changed, the same will be true for the digital experience in the car. You will still get craftsmanship. You will still get novelties like the rotating dashboard. You get comfort, but on a completely new level, including well-being based on medical facts rather than just air coming through the seats.

Does it need to be a statement design or more practical?

We will never build a Volkswagen Caddy. That's probably not what you meant by practical, but our cars have to be inspirational. The design language definitely has to shift. We are moving into a completely new phase. And what we won't do is try and make them look like electric cars. Beauty is beauty. We will make sure that we build the most appealing cars we can.

Will the EV due in 2025 be a coupe, an SUV or something in between?

It will be incremental to our current range. Whatever it is, it is fully designed.

At that point each subsequent car will be electric. Will each replace a model in the current range?

Yes, pretty much. There will be some innovation, for sure. We are going to move with the times a little bit, but the segments have been pretty consistent for about 30 years. We have an old adage: “If you have to describe what it is, it's failed already in terms of design.” So, is it an SUV not an SUV? Is it a sedan, a coupe? The minute you put doubt in  customers’ minds they won't buy the cars. They want to know they are buying something that everybody understands and aspires toward. If they have to justify or explain it, forget it. We will be making our design much more progressive, but we are not going bizarre.

How much autonomy are you planning? Are customers asking for the car to have self-driving capabilities?

It's changing. It's not changing as quickly as the move to BEVs [battery-electric vehicles], but it is changing. As more competitors offer more features, a growing number of our customers will see the benefits of having more autonomous capability. In the second half of this decade, whether that's 2027 or 2028 is irrelevant, we will be Level 4 autonomous [meaning the car can drive itself under set conditions and unlike Level 3 the driver will not be asked to take over]. Before then we will be quite cautious. We know the majority of our customers and prospects are looking for a BEV in the next five years, but most of them are not looking to be driven. They all want to buy a Bentley to drive it. Our chauffeur mix is 4 or 5 percent. Even in China, which 20 years ago was more than 90 percent chauffeur-orientated. But, as soon as they experience Level 4 driving in controlled conditions, seeing that it can take the boredom and stress out of a long journey, they will want it. Don't forget, however, that the autonomous car consumes energy at a rapid rate. So, I think we will be on Mars before we achieve traveling for six hours, sleeping throughout and waking up at your destination.

Will the electric car due in 2025 be autonomous-ready?

Absolutely. We will make sure that the hardware capability is there. A bit like some competitors have done, we will have some of the technology inside but use it just as a form of data gathering to train the algorithm and to train our understanding of the way the cars work. Depending on where the lidars are mounted, you get completely different data. It’s very important that we get the lidar set clear and ensure we have solid data that can be used in multiple vehicles in the future and be efficient and safe.

So, the EV will have one or more lidar units?

We have been evaluating one or two. It's still not fully decided. It doesn't make a lot of difference at this stage. As long as we decide in the next 12 to 18 months.

You must be flattered that your competition levels are rising with both Lotus and Jaguar looking to compete. What do you say to these new entrants?

Good luck. But seriously, if you look at the Range Rover the base price of the last three product generations has gone up 15 to 20 percent per generation and so has the volume. The last-generation Range Rover didn't overlap at all with the Bentayga’ pricing. Now there's 80 percent overlap. Should we increase our prices? Maybe. If they are successful and people are looking at 150,000 pound Range Rovers, they will also look at a 150,000 pound Bentayga and decide. Knowing what I do about our quality and functional performance, I think we are in good shape. The fact that the market is moving in that direction lead me to say: “Bring it on.” This will actually bring more attention to Bentley. We have got to respond competitively, but this is just a natural evolution for us.

Does that mean your global sales of 15,000 last year are the minimum?

It’s a bit like head count. I wouldn't define success by just sales volume or the number of people employed. The trick for us is to build sustainable growth and sustainable cash to be able to reinvest in sustainable products. I look at Ferrari’s business model with some degree of envy and respect. Look at the profits they make through the volume that they have achieved. It's phenomenal. Volume is not the ultimate measure. It's quality of business and quality of customer engagement and loyalty to the brand that allows you to reinvest in the future. And that's what we are looking to do.

How do you feel about Bentley’s price position now?

We have a really good position. The weakness with it is that all four cars are within about 30,000 to 40,000 euros of each other.

In which direction do you expand your pricing?

We are not going to go to the same level as Rolls-Royce. We are not that elite. And at the same time, we are not going to swing over toward Ferrari and start building sports cars. We build are luxury cars that are used every day. The durability, quality and desirability of them is the sweet spot. So, if you look at the price stack, it's not that we want to charge more or less for the cars we have, but only existing in this thin atmospheric band of pricing is risky. We are diverse in terms of product breadth and offering different body styles, but we are not diverse when it comes to price. We could get a little bit down and a little bit up. We were there with the Mulsanne at more than 250,000 euros, but we withdrew it because the market wasn't sustainable for that kind of car with its values. We want to go up.

Does that mean the EV is not the next Mulsanne, as has been reported?

Definitely not. But in terms of price point, one of the EVs will be more in that Mulsanne range than anything that we have today. It has to be. We will have something between it as well. We are not just going to have four nameplates all in that thin price ban.

Are you going upward on the EV’s price because electric cars are more expensive.?

The 12-cylinder engine is about 10 times the price of the average premium car engine, and the average battery is less than our 12-cylinder engine. I can't wait for batteries, they’re cheap in relative terms. So, no, it's not. But even with hybrids, when you have a Euro 7-compliant engine with a battery and e-motors, the cost difference between that and a full-electric powertrain becomes marginal. Because our costs are so high compared with regular car companies, shifting to BEV is much less of an economic challenge for us than it is for them. Not only from a brand fit point of view, but also from the cost of the economic viability of those products. That is why we are excited about it.

The 12-cylinder engine is a rare beast. How do you replace the Bentley-ness of a multi cylinder engine in the BEV era?

When we look at the BEVs, it’s pick your horsepower. If we are 659 hp now with GT Speed, we will be double that with a BEV.

Aren't you edging into that nausea-inducing level of acceleration at that point?

You can tune the acceleration to whatever you want. You don't  have to have 0-60 mph in 1.5 seconds, you can adjust that to 2.7 seconds, for example, with the ability to switch it to 1.5 seconds. Most people enjoy the 30 to 70 mph (50 to 113 kph) acceleration, or in Germany the 30 to 150 mph (50 to 240 kph) acceleration, not the 0 to 60. Effortless overtaking performance from a huge amount of torque on demand. And we will be able to create even more with some of the technologies that we will lead, which are currently being discussed. We are looking for the W-12 of batteries, too. We are not just going to plug in a load of triple AAA batteries and see how it goes. We are willing and able to innovate in battery technology within the VW Group and be the lead for some of the new technology partners for the group or outside of it.

Porsche had said that the cell is the new combustion chamber. Do you agree with that?

Totally. We only have 12 combustion chambers in the biggest engine instead of 1,500 or 2,000 in the battery as well as the ability to optimize different parts of the battery at different times to give you range and performance. This is nascent technology. We are at the beginning of it and it's going to be more tuneable from the whole brand point of view. Not all cells will be equal when it comes to how they are applied into vehicles. There will still be brand differentiation.

It’s been just over a year since was Bentley transferred from Porsche’s control to Audi. How is life under Audi?

It's fantastic. We had a great relationship with Porsche, but we also had a great relationship with Audi because we relied upon them for support on the Bentayga, which uses their architecture. It's not as if we just met them. But I think the biggest benefit was this whole architecture lead thing. Audi is leading the premium and luxury battery electric vehicle architecture, not just the battery cell, but the whole vehicle and all systems. Most of the products that we will do in the future come from that architecture. So, instead of having three based on the Porsche architecture and one on Audi it's going revert it the other way within the next five to seven years. It makes sense for us to be closer to Audi from a technology point of view.

What has been the reality versus your expectations of the relationship with Audi?

My biggest fear was not the technology, but that we would have to resell the strategy that we just agreed over two years and got signed off. I thought this would result in six- to nine-month slowdown, but I couldn't have been more wrong. They have embraced what we have achieved in the turnaround. They have embraced what Bentley could be fully again. No question. We are full steam ahead.

The EV coming in 2025 will use Audi’s PPE architecture platform. Will your EV and the Audi Landjet arrive at roughly the same time?

The Audi flagship and the Bentley flagship are going to come roughly around the same time, probably within a year to 18 months of each other

With Audi first?

Well, watch this space.

Is it still called PPE?

It’s PPE but sometimes we change it to SSP, but I wouldn't worry about the name. It will probably change again. Artemis was the project to put all these cars together and then create the platform. There is a team within Audi that is running this. So, the core technology is developed by core Audi engineers.

How involved has Bentley been in the creation of the architecture?

The platform gives us the battery technology itself, the drive units, the autonomous capability, the connected car capability, the body systems and some innovations in those. All that is being worked in parallel. All of our attributes are baked in at the beginning. We are right in the middle of that process, which is demanding because we have to do pre-development work that we never did with previous programs. PPE allows different heights and sizes so you can have everything from SUVs to low-slung cars to midsize and full-size ones.

When you start building the PPE-based first cars, what comes from Germany and what do you build on site in the UK?

Like today, probably we will buy non-painted bodies from Germany, then prep them and paint them and build the cars. Today, we buy axles and gearboxes from European suppliers. That will be the same. But instead of building our own engines as we do today, we will assemble battery packs on site. So, the added value in Crewe would increase because you build every car battery pack. At the moment, we only build the 12-cylinder engines from scratch.

The UK is planning a couple of gigafactories. Would Bentley, as a member of the VW Group, be able to go to one of those and source batteries? Or will you be part of a wider Audi-led purchasing scheme?

The first step for us is to secure the future technologies that we need to develop the Bentley BEVs for the next eight years to fully transition to electric. The blessing is that we are able to shape that future technology more than we ever have in the last 20 years in the group. So, we have got a secure battery supply for the middle of this decade. If during the course of the next three to five years we find better technologies, be it solid-state batteries or better performing cells from other suppliers, we will absolutely consider them. Our commitment is to find as many synergies as we can within the group to make sure that we have security of supply. We are constantly looking at innovation, and we are seen as an opportunity to innovate safely with some of the higher cost early technology opportunities out there because our products can withstand that extreme unit cost more so than the regular volume car.

Will the first batteries for the 2025 car come from Northvolt?

No. There are two different battery technologies in the group. The unified cell for the volume cars, and a high-performance cell being led by Audi.

Which of VW Group’s battery partners is helping develop that?

There is no one partner with the monopoly. We have the cell design, the mix and the way it's going to be manufactured and we have options as to who we go with for that cell. That still needs to be determined.

How will your trim shop adapt to an electric car?

Maybe it will expand. As will wood and other materials and 3D printing and laser etching. We are also going to radically change substrates as well. We use metal now. It used to be solid wood, but it was too heavy. So, we have gone to lightweight castings, but we are looking at new technologies that will also be able to carry lighting or other technologies in them that will be interacting with the veneers and the finishes themselves. These are actually the bits that are the most delightful for our customers. So, it's not trivial, but it's not the heavy engineered axle and drive units.

How do to get the balance right between Bentley tactility and the trend for big screens and all the software within it?

We hate additive screens with a passion. The most breathtaking materials I have ever seen in Bentleys are the most harmonious, understated but exquisite in their detail. The challenge to the team has been: How do we do that in the digital world together with the materials and the craftsmanship? How do we create the most inspirational digital experience that, when it's off, still looks as inspirational as the 1950s Flying Spur with fully matched mirror veneers around the car? We have some really cool solutions. The rotating dash [in the current Flying Spur] was just practice.