Achieving Ferrari-level margins is not easy.
Aston Martin needs to do one of two things to become a profitable automaker once again: raise more cash or secure a business partner.
Despite the successful launch and sales of the Aston Martin DBX SUV, the legendary UK-based automaker is still struggling financially even though it managed to raise $776 million last summer thanks to an investment from Saudi Arabia's Public Investment Fund.
But that investment was used, in part, to pay off debt. However, the company's net debt increased from 809 million pounds ($962 million) to 833 million ($990 million) from September 2021 to September 2022. These figures clearly indicate more financial help is a must.
"Aston Martin Lagonda (AML) still screens as a candidate for future recapitalization by the time the business achieves a viable operating structure, possibly 2024," according to the chief automotive equity analyst at Jeffries, per Automotive News Europe. "Investors must either be prepared to recapitalize the business again once operations reach viable metrics or believe that an OEM will step in and provide the scale AML is missing."
In short, Aston Martin is falling behind rivals like Bentley and Ferrari in terms of profit margins. It's not that AML lacks partners. It just doesn't have the right ones for the times. Geely currently has a 7.6% stake in the company, but it does not have the technology AML needs to compete against its competitors. Mercedes-Benz continues to supply AML with engines and some electronic architecture, but that's still not enough.
Its share in AML dropped to 9.7% at the end of September. "Porsche, Bentley, Lamborghini, Rolls-Royce - they are not standalone. They all need some scale provided by the parent," the analyst explained.
Now Executive Chairman, Stroll has reduced the supply of cars, leading to higher transaction prices, increasing from 157,000 GBP to 195,000 GBP ($232,175) in the space of a year. But now Aston Martin is facing the same supply chain issues as the rest of the motoring industry due to increased orders that can't be transformed into sales, which would result in a drastic increase in Aston's bank balance.
AML simply can't afford to wait until the supply chain normalizes. Finding more cash or making a deal with a stable partner are its only options right now.