Aston Martin Surges as Demand for $223,000 SUV Brightens Outlook

Aston Martin Lagonda Global Holdings Plc climbed the most in four months after the British carmaker issued an upbeat outlook for the coming year, driven by demand for its debut SUV.

The company plans to produce 6,000 vehicles this year, up from just 3,394 in 2020, with the 158,000-pound ($223,000) DBX model accounting for much of that output. Aston Martin’s quarterly revenue and adjusted earnings beat estimates, sending the shares up as much as 13% in London.

Aston Martin Surges as Demand for $223,000 SUV Brightens Outlook

Aston Martin spent last year restructuring itself after a rescue by Canadian billionaire Lawrence Stroll. The 61-year-old fashion mogul has injected much-needed cash and forged closer ties with Daimler AG’s Mercedes-Benz to ensure the company survives tumultuous times for the auto industry.

After not having turned a profit since it went public in 2018, Stroll has set targets for Aston to earn 500 million pounds ($706 million) on 2 billion pounds of revenue by 2025. Stroll also has returned the company to Formula 1 racing.

Aston Martin Surges as Demand for $223,000 SUV Brightens Outlook

Aston recorded a 70.1 million-pound adjusted loss before interest, taxes, depreciation, and amortization for last year, though earnings on that basis were positive in the fourth quarter. Revenue in the last three months of the year rose 3.4% to 341.8 million pounds.

SUV Expansion

Aston plans to expand its portfolio of SUVs over the next two years, Chief Executive Officer Tobias Moers said in an interview. The company will begin to see the fruits of its partnership with Mercedes-Benz in the third quarter, the former head of AMG said.

In October, Aston reached an agreement for Mercedes to supply hybrid and electric powertrains to the U.K. company, building on an engine tie-up that started in 2013. In exchange, Aston will issue new shares to Mercedes, which will boost its stake from 2.6% to as much as 20% over three years.

The carmaker is counting on sales of the DBX to pace its recovery. Deliveries of the model began last year in the midst of the Covid-19 pandemic and ensuing lockdowns. The carmaker also will begin shipping its Valkyrie hypercar in the second half of 2021 as planned.

Aston Martin Surges as Demand for $223,000 SUV Brightens Outlook

Aston plans to refresh its entire portfolio of cars and introduce electric and plug-in hybrids, Moers said. The DBX, which accounted for almost two-thirds of production in the fourth quarter, has orders booked through the summer and is seeing strong demand in China.

In a significant change in strategy, the carmaker will introduce electric variants for all its launches from 2024, according to an investor presentation. Aston doesn’t plan on investing in battery production, which Moers said is a “far too intense” capital expenditure for the company to make.

What Bloomberg Intelligence Says

Aston Martin 4Q results show the first signs of a turnaround -- aided by the new DBX SUV -- forging a positive 2021 outlook, with an updated Project Horizon strategic plan focusing on electrifying the brand from 2024 via Mercedes. An ambition to be 90%-plus electrified by 2030 mirrors Porsche, and is significantly ahead of Ferrari.

-- Michael Dean, BI automotive analyst

Click here to read the report.

After its earnings report, Aston launched an offering of 70 million pound-equivalent senior secured notes due 2025. The debt, which will be denominated in U.S. dollars and is an add-on to the bond the company issued in November, will be used for general corporate purposes including working capital requirements.

The company’s $1.09 billion bond due 2025 was quoted at 109 dollars on Wednesday, according to BMRK data.

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