Aston Martin, a cash burning company

Aston Martin does not have any plans to start making profits until 2016. In a stage they claim to be of investment, the company keeps loosing money, while expanding their capacity and develops new products that hope will bring stable profitability. Aston Martin explains that they are not doing something like this; BMW is also in an investment phase, for which they had to build a whole new facility to expand their carbon fiber production, as I explained in one of my previous blogs.

Their reasoning makes some sort of sense when thy try to compare themselves to other companies, but the problem with Aston Martin is that they are not BMW; their total sales were of 4200 cars, and they are expected to go down during the next years. Furthermore, how long can Aston Martin, as one of the few high-luxury brands that is not owned by a big company, afford to keep making losses? What would happen if their plan for 2016 does not work? Would it result in the private investors selling the company to one of the big firms?

Aston Martin is still trying to find its way in the highly competitive market for luxury cars where new players keep trying to get a portion of the market share. In the past years, Aston Martin cancelled their mini city car after its competitor, the  Toyota iQ, failed. A small car like this would have probably harmed the brand as the Smart did with Mercedes. Additionally, they admitted that they were comfortable with their portfolio, so they do not plan to work on an SUV as the other luxury brands in their sectors, as I wrote on one of my previous blogs. This does not seem to be one of their best decisions since, as we studied in this course, it is easier to make profit with larger vehicles as SUVs. The only reason to explain this would be that with all these brands entering the market, developing one of these multi-billion SUVs could result in more losses if the model results in a failure.

With a history so rich as Aston Martin, all the car lovers, especially the British, hope that their plan for 2016 works out and they stop filing losses.

 

Source: http://europe.autonews.com/article/20140512/ANE/140519984/aston-martin-expects-to-be-profitable-after-2016

3 comments to Aston Martin, a cash burning company

  • Kuangdi Zhao

    I think Astron Martin is getting uglier. If you look at their models five years ago, such as D89, DBS, and V8 vintage, and compare them with today’s models, you will be able to see that Astron Martin is giving up its original designs. I think the management is attempting to boost sales by adopting a new design style.

  • Jier Qiu

    This reminds me of a news I read about Aston Martin recalling 17k cars due to they all have counterfeit material produced by a chinese sub-supplier. This includes most of its sports cars from 2008 to 2014. This might also contribute to its financial situation.

  • Louis Ike

    I am curious to see if the executives in the company look towards outside sources for financing, and if so under what obligations. It is hard to tell from public statements if Aston Martin really is just going through with some large capital expenditures that will foster future profit growth, or if Aston Martin is simply losing money and doing some investing. Perhaps we will see a management overhaul or a potential buyout in the future.

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