Does the Aston Martin share price rely on the success of the DBX?
With £391 million of net debt, Aston Martin shares have understandably plummeted of late. Will the new DBX luxury SUV be the saviour of this iconic car brand?
Iconic British supercar manufacturer Aston Martin Lagonda quietly celebrated the production of its first DBX model, the new luxury SUV produced exclusively in Wales. The company is pinning its hopes squarely on the success of the DBX as it attempts to negotiate the troubled waters of the post-lockdown period.
The company recently announced job losses for over 500 staff, with many at its headquarters and English factory in Gaydon, Warwickshire, affected.
Losses of £119 million in Q1 of 2020 have set alarm bells well and truly ringing, as a dramatic decline in global demand has left Aston Martin reeling.
Debt-laden Aston Martin still in trouble after a board restructure
The company’s finance chief Mark Wilson left the business during the lockdown, while the manufacturer received a lifeline from Canadian billionaire Lawrence Stroll. The owner of Formula 1 racing team Racing Point has taken a sizeable 16.7% stake in Aston Martin, becoming executive chairman in the process and replacing Penny Hughes.
Three additional board directors stepped down following the company’s annual meeting in June. However, CEO Andy Palmer is still at the helm, having been given the backing of the company’s leading shareholders, including its Kuwait-based investment funds and the Italian Investindustrial private equity firm.
The arrival of Lawrence Stroll could be a transformational move for the Aston Martin brand, with the manufacturer being lined up to return to the F1 grid as a rebrand of the Racing Point team. Stroll’s Yew Tree Consortium stumped up £260 million of fresh capital as part of a new £536 million fundraising round by Aston Martin. Stroll believes F1 could be the best way to rebuild the 'Aston Martin brand globally' and having a 'successful works team' in F1 to 'engage with its customer base'
Aston Martin is pinning its hopes on its St Athan facility
Despite laying off more than 500 employees in the next few months, Aston Martin is retaining and even expanding its workforce at its St Athan production facility in Wales.
The St Athan plant will be the hub of at least 50% of the company’s future output, as it doubles down on the luxury SUV, attempting to produce 4,000 DBX models a year at a cost of £158,000 per vehicle. With over 2,000 advanced orders for the 4-litre, twin-turbocharged model – and counting – hope abounds that the DBX can be Aston Martin’s saviour.
How to trade the Aston Martin share price
Despite the positivity surrounding Aston Martin’s likely increased exposure on the F1 stage and the potential success of the DBX, analysts insist that the balance sheet issues will not go away overnight. Quest analysts claim that the company is 'burning cash', while the Bank of America describes the company’s outlook as ‘bleak’.
It’s hardly surprising when you consider that the Aston Martin share price is trading at around a sixth (50.60p) of its value this time last year (319p).
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