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October 12, 2021 12:00 AM

Despite chip crisis, Rolls-Royce sails toward record year

CEO Müller-Ötvös says brand has increased revenue per unit by emphasizing personalization

KC Crain
Luca Ciferri
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    Rolls-Royce CEO Torsten Müller-Ötvös

    "The average age of a Rolls-Royce owner is about 43 years old. Mini is the closest in the BMW Group at about 47," CEO Torsten Müller-Ötvös said.

    Rolls-Royce CEO Torsten Müller-Ötvös says that since September 2020 orders and production have been "flying." The BMW Group subsidiary has been unaffected by the semiconductor shortage because it parent has given the low-volume British brand's high-margin models priority when it comes to chips. As a result, Rolls-Royce is on pace to top its global sales record of 5,152 units set in 2019. Müller-Ötvös says Rolls-Royce has increased revenue per unit by emphasizing personalization. In addition, this year the company added a bespoke program called Coachbuild that will offer limited-edition models priced at several million euros every other year. Another way Rolls-Royce is maintaining its strong balance sheet is by declining to expand the brand into non-automotive areas such as offering perfumes or lending it name to six-stars hotel. The aim is to protect Rolls-Royce's exclusivity and prevent any distraction from its goal of making 'the best cars on earth.' Müller-Ötvös, who has lead Rolls-Royce for more than a decade, discussed these topics and more with Automotive News Group Publisher KC Crain and Automotive News Europe Associate Publisher and Editor Luca Ciferri at the IAA Mobility show in Munich last month.

    Rolls-Royce was on track to have a strong year prior to the chip crisis. How are things now?

    That hasn't affected us. We have not lost production of a single car. We are part of the BMW Group and we get 100 percent of the chips we need. As you can imagine, contribution per car on a Rolls-Royce is far higher than any other BMW Group brand.

    Meet the boss

    Name: Torsten Müller-Ötvös
    Title: Rolls-Royce CEO
    Age: 61
    Main challenge: Driving Rolls-Royce to new unit sales and margin records and not getting drawn into non-automotive business endeavors that could diminish its goal of producing the "best cars on earth."

    The pandemic has caused a huge rise in demand for luxury goods including cars. Wait times for new vehicles are getting longer and as a result used car prices have increased by double-digit percentages. Is Rolls-Royce also benefiting from this?

    Yes. For us, the conditions are perfect. I've never experienced such a good market during my nearly 12 years in this job. It's not just one or two markets. All markets worldwide are booming. The United States in particular is doing tremendously well. It is in a tight race with China to be our No. 1 market. Asia is fantastic. Europe is strong. The UK is booming. It's really good.

    How much of this acceleration is due to the new Ghost?

    We launched the new Ghost at the end of last year, and the first deliveries to customers happened at the beginning of this year. The order book for the Ghost is super long, as every single car is sold out. Dealers don't have enough. This is also true for our other models. We are completely sold out.

    What is the average wait time?

    For us half a year is normal. Now you wait close to one year.

    How have your used car prices changed?

    They are up by 20 percent to 50 percent depending on the model and market. Prices are reaching their peak point. Customers who don't want to wait, as they seek instant gratification, are turning to our Provenance Rolls-Royce [the company's certified used car program]. This is a great business condition for a luxury brand president.

    Is it true that Rolls-Royce has the youngest average age of owners within the BMW Group, and this is mainly due to Asia?

    No, that's true globally. Overall, the average age of a Rolls-Royce owner is about 43 years old. Mini is the closest in the BMW Group at about 47. This is really incredible. The reason for that is ultra-high net worth individuals are getting younger and younger each year. We foresaw this trend 10 years ago after talking with private banks about those individuals. That forecast proved right.

    What was the average age of owners when you took over as Rolls-Royce CEO in April 2010?

    It was 56. Since then, it had decreased every year. To put this into perspective, to have an average of 43 means that for every 60-year-old buyer we get we need somebody who is 20. We have met many of them. They are often young people with great business ideas who have made a lot of money and buy a Rolls-Royce.

    With so many younger buyers, will you add a less expensive model to lower the entry point into the brand?

    As long as I'm in this position, that will not happen. There is no reason to go into lower segments. We start now at 250,000 euros [excluding sales tax]. That is perfect for us. Also, our customers would hate us if we went downmarket. That's the last thing they want to see. That's why you don't hear me talking about sales numbers or making projections on where we might be in a couple of years. I never do that. Have you ever heard how many Birkin bags that Hermes sells? Probably not. That's exactly how you need to operate in the luxury segment. We are in a rare biosphere. Nobody needs us to go from A to B. Nobody!

    How much do your customers typically spend to personalize their cars?

    On average it's about 70,000 to 80,000 euros. When it comes to the bespoke commissioning of ideas, we see cars easily doubling their initial price. That is quite substantial because it's not driven marketing. The customer's imagination is our limit not the other way around. So, the aim is to fulfill every customer's dream as long as it is safe and technically viable. We are selling several Phantoms at prices that exceed 1 million euros.

    Potentially taking those prices one step further is the re-establishment of your so-called Coachbuild department for special projects such as the Boat Tail. Could you share its starting price?

    We haven't revealed the price, but there has been some speculation that it could be the most expensive car on earth. We will make just three units. Each will be very different from the other. We handpicked the three customers from Luminaries [a select group of Rolls-Royce's top clients worldwide]. This is a four-year journey, therefore we as an automaker and our customer want to know with whom you are in bed with for such a long project.

    How much involvement will these customers have?
     
    You need to invest time. You are with us from the first sketch because the end product stems from the customer's ideas. The three customers already knew each other before we started. They had the idea to bring back the Boat Tail design because one of them owns an old Phantom Boat Tail. That was how this all started. The idea for a picnic area also came from one of the customers. And we made it happen. This is marvelous because it's an experience that money can't buy. It's by invitation only.

    How will the Coachbuild program evolve?

    We will do something every other year. The numbers will be very limited, ranging from a one-off to a maximum of four to make sure they are rare.

    Although you don't like to discuss sales figures, will Rolls-Royce once again exceed 5,000 units this year?

    It's fair to say that you will see a number over 5,000. I'm pretty sure that we are going to set a new record year. [The current high is 5,152 in 2019]. Obviously, last year our sales dropped substantially because we had to shut down the plant for quite a while and then we operated on one shift only. We ramped up to two shifts in September 2020. Since then, we have been flying. And it's not only us. Banks will tell you how much money currently is available for consumption because it was saved when people could not travel. This helps the luxury goods industry as demand is also booming for boats, jets, watches and jewelry.

    Can you meet this rising demand with just two shifts a day?

    We have an 11th shift every other Saturday. On weekdays the plant operates from 6 a.m. until 11:00 p.m.

    Are people also spending more to personalize their cars than they did before the pandemic?

    Definitely. Customers are investing even more money now because they are coming with even more flamboyant ideas. There has been a significant increase. One example is customized colors.

    Does this mean that your profit margin per unit will also exceed what you achieved in 2019?

    Contribution per unit is far higher than it was in 2019.

    With all this positive momentum, will Rolls-Royce branch out into other business areas by offering a branded perfume or lending its name to six-star hotels?

    No, our business is Rolls-Royce cars. I don't want us to offer aftershave or get involved in hotels. That's not right for us because it would dilute the brand. We don't need to boost our brand awareness because it is already at a very high level. Every kid in the world knows what it stands for: the best. Secondly, I don't want to distract the very small Rolls-Royce organization from really concentrating on doing what we do: build the best cars in the world. Third, we are in complete control of our design, engineering, manufacturing and aftersales. If we are involved in a hotel project and the quality of the hotel goes down, we have no control over that. Ultimately, we want to prevent any bad experience because even one can immediately spread globally and tarnish your brand. I won't allow that to happen.

    Related Article
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    Rolls-Royce will launch EV shift with Spectre coupe
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    INTERVIEW OF THE MONTH: Sign up for our monthly newsletter delivering exclusive interviews with executives from leading automakers.

    How many Rolls-Royces does your typically customer have?

    About six.

    To reach that average there must be some customers with very large collections of Rolls-Royces, right?

    I have seen garages with more than 100 Rolls-Royces. They are housed in specially built complexes just to make sure they are properly serviced, parked and polished. I'm a car afficionado, and when I see these garages, I feel like a kid in a candy shop. It is fantastic.

    Do you know how many of the Rolls-Royce models built since the company's founding in 1904 are still around?

    It is roughly 80 percent. This showcases the quality that has gone into every Rolls-Royce as well as the way each has been maintained. Many cars are handed down to the next generation, particularly when they are highly customized with features such as the family crest. These cars don't end up in used car market.

    By the end of 2023, Rolls-Royce will begin deliveries of its first full-electric car, the Spectre coupe. Are you planning to do something to make the recharging experience more premium?

    This not a big issue for them. Their car collections already include one or more electric car, so they have charging points at their houses and offices. Secondly, the average Rolls-Royce owner only uses the car for short to medium-distance trips. The end up driving about 5,000 km a year. For longer trips, they take their private jets.

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