Transforming Aston Martin.

Picture this. You are an uber-net-worth with a fully accoutred, 100m super-yacht. Despite this, you, your family and guests are feeling a bit uninspired and let’s face it, bored.

You are looking for the next experience.

Don’t despair! Next year you’ll be able to peel off a cool $4 million for a 3-person submarine rated to a depth of around 1,600 feet.

Dubbed Project Neptune, this recently unveiled sub is the product of a joint venture between Aston Martin and luxury submersibles manufacturer, Triton.

Attribution: Project Neptune (Aston Martin/Triton Submarines, LLC).

Not really what you’d expect a sub to look like. But it does look familiar, doesn’t it? Hint: The world is not enough.

Aston Martin’s symbiosis with the 007 franchise started ~50 years ago when the racing car manufacturer’s model DB5 was paired with Sean Connery's James Bond in “Goldfinger”. This has continued with successive models and 007 adventures, most recently with the awesome DB11 showcased in “Spectre”.

The ongoing and often implicit co-branding with the 007 franchise remains a masterstroke in entertainment marketing and strategic positioning.

However, does the addition of a 007-inspired submersible signal a strategic shift away from car manufacturing?

I wanted to explore this, so I started with what the company currently says about itself and then compared that to its recent actions.

Aston Martin under current CEO Dr Andy Palmer states that: “Aston Martin is an exclusive luxury sports car company with a unique British heritage.” That’s clear. So why personal subs?

Well, why not? In addition to handcrafted cars (of which only 80,000 have been built in the last 100 years), Aston Martin is joint venturing/collaborating with other specialists to build exclusive AM37 powerboats, luxury condos in Miami and now personal subs, all of which look like they belong on a 007 movie set.

Although none of these are exclusive luxury cars with a British heritage, they will carry the Aston Martin brand and will therefore take on the shared 007/Aston Martin DNA. The implication being uncompromising precision, performance, style and beauty which will appeal to the same customer category.

So, it seems that Aston Martin is still a highly differentiated car manufacturer operating in the luxury/performance category of the automotive industry. However, by lending its name to suitable collaborations and joint ventures it is creating a horizontal suite of luxury lifestyle products and experiences that reach further into the luxury customer wallet, but without all the usual risks of repositioning and going it alone in specialist verticals. 

It is too early to say which aspects of Aston Martin’s dual strategy transformation are fundamental versus experimental, but the company deserves credit for its third consecutive quarter of profit. This reflects an improved financial profile on the back of refinancing and the rather stocked, DB11.

Aston Martin's half year performance to 30 June 2017 included a near doubling of revenues to £410.4m, along with a pre-tax profit of £21.1m which represents a £100m turnaround from the £82.3m loss booked in the same period of 2016. The most recent earnings guidance issued on 25 August 2017 calls for underlying earnings of £175m, on revenues of £830m, amounting to a record year if delivered.

Still, a continuing solid performance is crucial for Aston Martin, particularly in light of its Second Century transformation plan. The plan calls for one new model to be released every 9 months through to 2020, including a move to hybrid/electric vehicles in 2019. 

Aston Martin's fabulous cars and collaborative products/experiences seem to come straight out of Q's lab and are sure to create many more memorable moments in life (for some) and in art (for others).

Recent profit improvement and extraordinary co-branding is one thing, but can this be converted into above industry-average returns over the long term? Perhaps, but it will require Aston Martin to navigate the spectre of changing populist, technological, financial and other hazards with the precision, performance and style of 007 himself. 

So much for my promising career in finance.

Mike

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