Aston Martin shares in reverse as annual losses balloon

Andy Palmer. (AFP)
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Updated 28 February 2020

Aston Martin shares in reverse as annual losses balloon

LONDON: Shares in Aston Martin Lagonda tanked on Thursday after James Bond’s favorite carmaker said net losses nearly doubled last year on weak global demand — and warned over the potential impact of coronavirus.

Losses after tax accelerated to £113.2 million ($147 million, €135 million) in 2019, Aston Martin said in a results statement. That compared with a loss of £62.7 million in 2018.

The flagging automaker said it sold 5,862 cars last year, down 9 percent on 2018, adding that chief financial officer Mark Wilson was leaving the group.

“2019 was an extremely challenging period for the company,” said Chief Executive Andy Palmer, who last month unveiled a £500-million cash injection that will see Aston Martin become a Formula One racing team.

“While retail sales grew, we were unable to generate the revenue and profits we had originally planned,” Palmer added on Thursday.

Revenues fell to £997 million from almost £1.1 billion.

It warned also over the possible impact of the new coronavirus or COVID-19 outbreak in key market China — which was its star performer in 2019.

“COVID-19 has the potential to impact both the supply chain and customer demand in China and other markets,” the company said.

“China was the company’s fastest growing market in 2019 and represented nine percent of total wholesales.”

Aston indicated it had seen only modest disruption from some component manufacturers in China, but none of its “tier 1 suppliers” manufactured there.

“Despite some disruption to supply of some components from China, there has been no impact on production. Supply is secured until at least end March,” it added.

The results sent Aston’s share price sliding 10.7 percent to 349 pence in midday trading on the London stock market.

“Full year results from Aston Martin are as ugly as you can get,” said Russ Mould, investment director at AJ Bell.

“Sales have gone into reverse and profit has evaporated. Worst of all is the scale of its borrowings. Its net debt position of £876 million is nearly as much as the entire year’s revenue.”

Aston on Thursday expressed hope for the future after last month clinching a cash injection from Canadian billionaire Lawrence Stroll to help it get back on track.

“2020 is the year in which the business will be reset in order that it can start to operate as a true luxury car brand,” the carmaker said in the earnings statement.

“This process is absolutely necessary for the long-term performance and value of the company.”

Under the deal, the Racing Point Formula One team — whose drivers include Lawrence Stroll’s son Lance Stroll — will be rebranded Aston Martin from 2021.

Stroll senior agreed to partly fund the financial lifeline for Aston Martin, whose stellar progress ahead of its 2018 stock market debut crashed spectacularly on weak global demand linked to China’s slowdown and Brexit.

“Arguably the scale of its planned £500 million fundraise isn’t large enough,” added analyst Mould.

“This may be all the company thinks it is capable of raising in the near-term, but there seems a big risk it will have to go cap in hand to shareholders again in the not too distant future.”


GM energizes Chinese electric micro car market

The Wuling Hong Guang MINI EV, below. (Supplied)
Updated 19 min 40 sec ago

GM energizes Chinese electric micro car market

  • Trend toward a new segment of EVs in the country following changes to government subsidies

BEIJING: When 32-year-old photographer Jaco Xu needed a run-around car for work in the eastern city of Hangzhou, the price tag on the latest micro EV from GM’s China joint venture overcame his qualms about electric vehicles.

Xu paid 38,800 yuan ($5,735) for his tiny two-door Wuling Hong Guang MINI EV, while the basic model retails for just 28,800 yuan ($4,200), making it China’s cheapest EV.
“It feels pretty good. The price is so low and the appearance is simple and beautiful,” said Xu. “Why would I hesitate at that price?“
Launched in July, the Wuling MINI is heading a trend toward a new segment of EVs in China following changes to government subsidies — smaller vehicles with less range between charges, but a super-cheap price tag.
Despite basic features — no safety air bags, optional air-conditioning and a driving range of less than 200 km (125 miles) due to a smaller battery — buyers have been enthusiastic.
SGMW, GM’s venture with partners SAIC Motor Corp. and Guangxi Automobile Group, sold about 15,000 of the vehicles in August, making it China’s top-selling EV for the month, surpassing Tesla’s popular Model 3.
The venture plans to expand manufacturing capabilities of the new model, turning out cars at its plant in Liuzhou as well as its existing facilities in Qingdao, said Zhou Xing, SGMW’s branding and marketing director.
“We positioned this model as a ‘people’s commuting tool’,” he said, speaking ahead of the Beijing auto show that starts on Saturday. “Customers can drive their cars to work every day.”
The target market includes people like Xu who are looking for a city run-around as a second car, rural buyers who want a vehicle to move goods and young first-time buyers who are motivated by price.

HIGHLIGHTS

● GM JV micro car is China’s best-selling EV in August.

● Wuling MINI EV targets new EV buyers, sells from $4,200.

● Leads trend to smaller cars, batteries after subsidy cuts.

Total sales of new energy vehicles — including electric, plug-in hybrid and hydrogen fuel-cell vehicles — are expected to reach 1.1 million vehicles in China this year, about 5 percent of total auto sales. The micro car represents a shift in what typifies a mainstream electric vehicle, as policymakers push for increased EV production and sales have been bolstered by restrictions on petrol-fueled cars.
In response to government requirements to win generous EV subsidies, automakers over the past decade have developed higher energy-density battery systems to allow cars to drive for longer with a single charge.
Tesla’s Model 3, which has a range of more than 400 km, has been the market leader in China for most of 2020, retailing for about $43,000, about 10 times the cost of the Wuling MINI.
However, China cut subsidies heavily in 2019 and is now asking for higher EV power efficiency to save energy. Automakers, in turn, are planning more smaller EVs with a moderate driving range aimed at customers who can charge cars easily, industry executives said.
The economics are skinny. Wuling MINI will not get EV subsidies due to its short range. For SGMW, the cheap price tag means it makes very little money at best, according to insiders.
EVs, however, generate green credits for SGMW that can be used to offset negative credits of other companies like SGM, its sister venture which is expanding a lineup of bigger SUVs under Buick, Chevrolet and Cadillac marques.
“Selling micro EVs in China makes more sense this year,” said a product planning official at a GM rival. “Subsidies have become a less important factor of pricing as government has already cut a lot, while green credits are expected to become more expensive,” the official said.
Bidding to reverse a sales decline due to a slower economy and stiff competition, GM expects EVs to make up more than 40 percent of its new launches in China over the next five years.
The Detroit automaker is revamping plants in Shanghai, Wuhan and Liuzhou under its two Chinese JVs to enable production lines making gasoline cars to turn out EVs, public documents detailing its constructions plans show.
For now, the Wuling MINI is the cheapest EV, but it faces competition from the cheapest models from rivals BYD and BAIC BluePark.
Great Wall Motor and Toyota’s China partner GAC are also planning more electric models with a range below 400 km, company officials said this month.
And startup Kaiyun Motors is trying to radically lower the price of its new electric pickup truck Pixel to about 20,000 yuan for urban delivery services, although these EVs will be sold without batteries, allowing consumers to swap them.