Was Aston Martin’s expansion into lower reaches of the luxury automotive food chain a good idea? The development of the AM V8 Vantage was at best a dangerous move. Why risk devaluing a storied brand? Looking at top line figures, it seems as if Aston’s “entry level” model is a solid success. Aston Martin’s sales have increased to levels the company hasn’t experienced since . . . ever. Thanks in part to the AM V8, Aston Martin turned a profit in the two years prior to its removal from the FoMoCo family. But looking one level deeper, the British automotive brand’s move down market triggered several less-than-savory consequences. They may be returning to bespoke, fragrant leather coops, but the prodigal chickens are back, and they’re bad.
When a luxury brand faces introduces a substantially cheaper offering, it “pulls forward” potential sales. Aston’s cheaper alternative to a previously ultra-exclusive automotive product gave people who very much wanted to buy into the brand a chance to do it a lot sooner. This sounds exciting to the marketing folks, both in terms of total revenue generated and brand prominence. But the fact that AM intenders were fulfilling their yearning for a luxury product at a much lower price got lost in the buzz.
In other words, in a related, unintended, but hardly unpredictable consequence of lowering the barrier to entry, Aston’s V8 sales reduced the pool of potential customers. Did the AM V8 attract buyers who would otherwise never have thought of an AM? Unlikely. But by putting more people into a cheaper AM, the company ran the very real risk of those customers failing to upgrade to a more expensive model later on. The chances are high that the Vantage V8 fully scratched their owners’ AM itch. Oops.
You can see the same thing happening over at Porsche. Although the Boxster/Cayman twins are cheaper, less powerful and less prestigious than the 911, they’re damn fine automobiles in their own right. If you really love your Boxster or Cayman, why not save yourself some money and stand pat? Which is exactly what has happened.
The 911 is a vastly more profitable car for Porsche. Hence Stuttgart fought nail and claw against this happy-Boxster owner dynamic. It took, what, 13 years before the Germans offered a limited slip differential in their mid-engined marvel? And yet, they caved anyway, offering the usual minor upgrades on their lower-priced model, giving Boxster/Cayman owners an excellent reason not to make the jump to hyper-price.
Note: the Boxster and Cayman did not cannibalize 911 sales directly. I highly doubt many Porsche owners traded down from a 911 to a Boxster. If you look just at the sales numbers, there was no initial negative effect from the Boxster. Armchair analysts tend to forget that Porsche was on the ropes when the Boxster was launched, and customer loyalty meant that 911 sales were relatively robust and stable. However, when the economy boomed in the ’90s and early 2000s, the 911 sales bump was way under expectations, exactly because of the Boxster.
Let’s have a look at Aston Martin’s numbers. [Click here for AM sales chart]
In 2006, the take-off of DB9 and Vanquish sales (seen in 2004 and 2005) reversed abruptly. When the V8 Vantage came to market, the 2005 levels of the high margin cars effectively halved. [I apologize for having only the European numbers in the graph, since I do not have access to global sales ones.]
It’s a familiar story. Jaguar XJ sales effectively halved with the arrival of the S-Type and never recovered. S-Type sales dropped by 40% with the introduction of the X-Type. Other premium brands have perhaps not experienced as pronounced an effect, simply because the much cheaper offering sold in much higher numbers (declines of 30-50 percent For the Bentley Arnage and Lamborghini Murcielago upon the arrivals of Conti GT/Flying Spur and Gallardo). Are these brands really better off for opening the gates wider?
For Aston, the answer seems pretty obvious. If nothing else, Aston residuals have started dropping rapidly. Most of this is due to the current economic crisis, but pre-AM V8 Vantage, the fall would not have been nearly so dramatic. When a seller gets rid of a two-year-old V8 Vantage for $60K, this drives down residuals for the DB9s and Vanquishes as well.
The new Aston Martin Rapide aims to add some luster to a brand tarnished by its own short-sighted model management. Oddly, both Porsche and Lamborghini are following the exact same trajectory at the same time. In all three cases, the brands are ignoring Ben Franklin’s sage advice: it takes many good deeds to build a good reputation, and only one bad one to lose it.
More than that, just as you can’t unring a bell, you can’t drag a brand back upmarket—at least not without waiting a long time for the dissonant echoes to fade.
As someone with almost no hope of ever owning an Aston, gazing at $70k 2007 V8 Vantages online is very tantalizing. Plotting ruinous but doable financial moves to get one are considered briefly, then rejected with a sigh..
If Aston wasn’t harmed by the DB7, it won’t be harmed by the V8. A quote from Astonmartins.com:
“By the end of production, the DB7 had become the most successful Aston Martin ever with a little over 7000 examples completed. Without the success of the 7, Aston Martin would never have survived into the 21st century. At that time (December 2003), more than one in every three Aston Martins ever produced was a DB7.”
http://www.astonmartins.com/db7/index.html
And actually, in my mind, the V8 is the most desirable of the lot. Even if I had the money, that would be the one I choose. What’s wrong with making a desirable product?
The V12 Vanquish is to the best of my knowledge long since on its way out, so make what you will of that.
I, possibly for one, am tired of reading all these comments people make saying things like “oh I’ll never ever be able to afford one of those”. There is no doubt in my mind, dwford, that you’d like to one day own an Aston. But if you keep telling yourself it’ll never happen, your negative thoughts will continue to make themselves a part of reality, and it really will never happen. I suggest you cease thinking that way.
I’m not sure that the launch of a 100k sports coupe can be considered a devaluation of the brand in this case.
The argument is usually made when a previously upmarket brand goes mass-market, like Tiffany silver jewelry or the C-class. I wonder if the pool of people who can afford the Vantage truly constitutes a mass-market when compared to the pricier DB9.
Also, looking at that sales chart, it may be that the falloff in “expensive” car sales could just be a result of the DB9 – released in 2004 – not being new anymore. I’d have to see some non-speculative arguments to understand if this is correlation, or causation.
Did the AM V8 attract customers who would otherwise never have thought of an AM? Unlikely
I’m not so sure I agree with this. The Vantage was high-911 money, while the DB9 was mid-Ferrari money. It stands to reason that someone who would buy an optioned out 911S 4 or SL55 would cross shop the A-M but wouldn’t look at a DB9 (or F430, or Gallardo…).
There are three rules for offering a lower priced car:
1) It must be very high quality, and appropriately represent the brand.
2) It must be visually distinctive from the brand’s more expensive offerings.
3) While the lower priced offering has to be good, it cannot be better than the brands more expensive offerings.
The X-Type violated rule 1 and 2 (it looked like an XJ). The cheap Aston Martins and Lamborghinis violate rule 2. The Boxster/Cayman violates rule 3 (it used to violate rule 2, but that has been corrected).
I’m not particularly fond of them, but I don’t think the cheap Bentleys violate any of the rules.
People always cite the strong sales of the Bangle 7 vs. the S as an example of Bangle’s true genius. It isn’t. It’s an example of rule 2. The ugly 7 looked nothing like the 3 or 5; if you bought it people could tell from miles away that you bought the most expensive BMW. On the other hand, the previous generation S looked exactly like the previous generation C; nobody wants to buy the most expensive Mercedes sedan and look like they bought the cheapest.
When asking if TTAC was too negative, well, here’s a good example of too negative.
Aston’s real problem is that DB9 and Vanquish are aged models and not competitive in their class.
As for the V8 Vantage cannibalizing sales of the more expensive models, not likely. But here comes the V12 Vantage…
Don’t forget that everywhere but in the United States, the AMV8 is a direct price competitor to the Porsche 911 3.6.
The downmarket effect is more pronounced in the UK and Europe.
“Aston’s real problem is that DB9 and Vanquish are aged models and not competitive in their class.”
The Vanquish has aged, the DB9 has not. If a car is as beautiful as the DB9 is, they could make it for twenty years without it going out of style…
Aston is just lucky this isn’t being made anymore:
http://www.miata.net/products/hot/images/aston.jpg
http://www.miata.net/products/hot/frosty03.html
“The Vanquish has aged, the DB9 has not. If a car is as beautiful as the DB9 is, they could make it for twenty years without it going out of style…”
It’s that type of thinking that kept Aston in the dark ages for so long. With a continued flood of new models from Ferrari, Lambo, etc.. Aston can’t afford to stand still in a competitive market.
@no_slushbox
I will always be upset those acheingly beautiful miata coupes never made it over here.
Seth L:
That isn’t one of the ultra rare JDM only Miata coupes, it’s just a regular 2nd generation Miata with a front bumper cover made by a German company that went out of business.
Here is the JDM only 2nd generation coupe:
http://www.diseno-art.com/encyclopedia/vehicles/road/cars/mazda_mx-5_coupe.html
“It’s that type of thinking that kept Aston in the dark ages for so long. With a continued flood of new models from Ferrari, Lambo, etc.. Aston can’t afford to stand still in a competitive market.”
Astons has always been the crème de la crème of cars. It’s haute couture for the ultrarich, or for those who would rather have a hole in their head than be seen in something so common as a Porsche, or something so vulgar as a Ferrari. The only brand that is in the same neigbourhood, though further down the street, is Maserati. The point is, Aston has always been above things like staying out of the dark ages, as long as they make beautiful cars and be able of maintaining their high standard. David Brown didn’t earn a penny as owner, as the standard he wanted to achieve was higher than the market could afford. Aston has always been a money loser. And Aston has always been resurrected, just because there really isn’t anything else that can replace it. If money is no object, Aston Martin is for those that have a need to stand out with their refined taste. Nothing speaks class more than an Aston.
Which reminds me of an anecdote. There was a bumpersticker with the label “My other car is an Aston Martin”, sent out to Range Rover owners. Because, according to a survey, Range Rover was the most common second car to Aston owners. I think it’s cute…
Wow its true, 2 year old $60K Vantages do exist. In another couple of years at that rate I could actually afford one! Yay Carpocalypse!
One thing that Aston Martin’s (corporate A-M) future owners have going is that Aston Martin STILL has an R&D contract with Ford…thus a new buyer would not have to build a massive infrastructure…they could just write a check for Ford’s services, define their own goals and then focus on the business, marketing and sales side.
Of course, there are downsides to this arrangement too.
Sure, the lower priced options may cannibalize some sales, but the market is competitive, if they don’t someone else will.
Given the dynamics of the Great Recession, Aston would probably be in much worse shape (long gone) if it hadn’t introduced the V8. It’s AM’s only hope of survival, IMO. As Jack said, the V8 only put Aston in the 911 class, which seems to be the sweet spot of the market.
The move to the V8 Vantage was a recognition of a changing luxury sports market. While AM is a strong brand other players such as VW (with the R8) are making aggressive moves into this market. AM needed a product that would compete but without the R&D budget that Ferrari has.
Just like the Boxster led the Porsche revival, the V8 Vantage has a good chance of saving the Aston brand.
I think the most important aspect of the Vantage is that it’s really, really good to drive. Especially the post-facelift model with more horsepower and a bigger engine. Aston really needed that. The DB9 is not an especially exciting car to drive, considering the price and competition from other GTs and serious sports cars.
We can argue about Aston’s positioning in the market all we want, but most importantly their cars need a rep for being enjoyable.
At least they aren’t making SUVs to stay profitable.
meefer:
If only that were true. . .
https://www.thetruthaboutcars.com/autoblog-wins-english-understatement-award/
@Title: No.
Until now, the average upper middle class guy couldn’t aspire to own a new Aston. Now, if the same guy plays his cards right, and doesn’t go crazy with his house, he can save up enough money to buy this car. Sure it might not be a practical, but what sports car purchase is.
Here in the suburbs of Detroit, I never saw a DB7. 911 Turbos could be seen quite frequently. I have seen two DB9s driving around here. I have seen many more V8 Vantages, just because people can afford them. There is a detailer close to where I work, that I see a different one at about once every 1-2 weeks. You could not have those numbers with a DB9. To make a good profit, you need volume. You can’t call Ferrari any less prestigious than Aston Martin, and they do just fine with their lower level cars.
The niche players have to work by different rules. Their manufacturing and R and D resources are proscribed. Maxing them out is key but they cannot go over their limits. Making a model that skirts unobtanium is pointless if you have no sugar daddy to give you more when the cupboard is bare. Extending the brand, cheaply, has huge benefits that, for a standalone, is mandatory, not an option.
A-M HAD to do something like the V8 Vantage, just to survive. End of story.
Now… the real story is what’s to follow. After the sheer brilliance of the last few years, the Lagonda looks like a dog and that hideous thingy with the side strakes glued onto a DB9 reveals that the design language has … changed. What actually gets to a production line will be interesting, especially given the turmoil in the owner’s suite.
I also live in Metro Detroit, and have only seen 1 Aston Martin on the road. But Aston’s problem isn’t a downmarket car. It’s problem is that we are at the begining of the Second Great Depression. There is a very small market for $100000+ cars. Which is getting smaller by the second. And there are better products available. With better reputations. The dwindling amount of people that can afford these are choosing to spend their money elsewhere.
Look around Bloomfield Hills, and that area. You will see them quite frequently. (The Vantages anyway) The inventory at Aston Martin of Troy seems to be different every time I drive by, so somebody is buying these cars in the area.
Sure the next couple of years will be tough for manufactures of premium cars. They are not necessary.
“The Vanquish has aged, the DB9 has not. If a car is as beautiful as the DB9 is, they could make it for twenty years without it going out of style…”
Beauty is the worst thing to build a brand on.
– Beauty ages.
– Beauty only holds so much appeal; people buying $100k+ cars want beauty + performance + gadgets + reliability. AM’s have lagged in everything BUT beauty.
– Beauty is changing. AM has been running the exact same Callum design language since 1994. It is beautiful and striking design language, but it is getting tired. Jaguar cars are basically the same thing for a hell of a lot less money. Masarati is making a comeback with some fantastic looking cars (with Ferrari heritage no less). Porsche continues to hone and polish the 911 (does any disagree that from a driving/reliability/safety perspective that the 911 isn’t the car to beat in the $100+ daily driver class?).
Aston suffers from that very British problem; historic hubris. I don’t quite know what it is, but English cars tend to be bold, but when you scratch the surface, you find them to be incompetent. The low reliability of the Range Rover (go anywhere, but bring spares!). The lack of competitive performance of the V8 Vantage given what the technical specs should have delivered. Everything about Bristol Motor Cars. English automotive brands have a way of trudging along, trading on brand equity that was forged long ago and is now lost. It took VW to revitalize Bentley (and they are now just vulgar). The only success out of the English automotive universe comes from BMW’s ownership of Mini and the utterly delightful Rolls Royce.
What the hell is it about English brands anyhow?
These things are all over south Florida, dime a dozen. I can’t tell a high end one from a low end one though. I am sure when the leases are up, the current owners will be on the the next hot thing.
Ever think that the Porsche 911 sales suffer from it’s unfortunate name? Doesn’t seem as cool to drive around in something called a 9-11 as it once did.
Wow, I never thought about it that way.
I always thought cheaper models wouldn’t cannabalize your own sales, but eat at the pie of your competitors.
i.e. Introducing the X-type would reduce 3-series sales, reducing revenue for BMW and their cash cow so they have less money for R&D. Not X-type would destroy S-type sales.
Makes sense either way. You should’ve sent this article to Rolls Royce. :)
As a guy who’s shacked up with a Vantage owner, and who has done plenty of wheel time and shotgun time in a Vantage, I gotta tell you: the Vantage does not cheapen the brand.
The car looks and feels something special, something apart from the run-of-the-mill. There’s nothing de-contented or down-scaled about it. It’s more accessible, yes. But the car is still an Aston in every way. A car that beautiful, and that beautifully finished (outside and inside), cannot possibly cheapen the brand.
People notice the car instantly, and spot it as something special. It attracts huge attention, and lots of people asking about it.
well taken in that context, you can also argue that Rolls Royce is doing the same in terms of the 200EX. the coupe and drophead would not affect the Phantom. but once a mini phantom comes out, i think a lot of people will go for that especially with the maybach 52 selling so little.
but on another note, Rolls Royce never had so much to offer, and would they be throwing away their so called exclusivity especially that the 200Ex is resting on a much cheaper 7 series?
I fully stand behind the points but it might be useful that I give some additional clarifications, which could not quite make it into the original, 800 word format, not at least in a way that would make it interesting, or would have generated debate.
For the record, I believe AM did a very good job with the AM V8. Short of the Vanquish, which retailed for twice the price, it is the best Aston, by far eclipsing the DB9. It will never be an everyday proposition on par with a 911 in terms of the service network, reliability, etc. (although Porsche reliability is far from where it used to be or should be) – Aston simply never had or will have the ressources to match a much larger scale manufacturer like Porsche. Around 500 Cayman prototypes were used for testing every last element in the package, driving untold miles to make sure the package stays together over time, etc. And Cayman was only a modification of an existing model, rather than something totally new. That would be ~10% of AMs total annual sales.
The AM V8 has many things going for it. It has a very nice looking interior, something Astons of the past (pre DB9) were definitely deficient in. It has a wonderful engine noise. It is reasonably competent in driving dynamics, handling, etc. even if it would not worry a 997 – not until the latest Prodrive fettled incarnation anyway. It is most definitely not a downmarket cut price offering.
It does however present the problem I mentioned in the main article – it captures many potential customers, who would otherwise wait for another couple of years to afford the DB9. And those customers on the whole tend not to upgrade later on.
In terms of the rules no_slushbox laid out (which I think are a very good way of conceptualising the problem) AM V8 definitely violated rules no.2 and 3. It looks very similar to the DB9 – which is good because it is beautiful and brings across a level of calss that is otherwise largely absent from that price range. And objectively speaking it’s a much better finished and more rounded product than the DB9, even if it’s nowhere as accomplished as a Vanquish (which remember was much more expensive than the DB9). What you do not see in the summary view presented in the graph is that the DB9 wasn’t old when the V8 came out – it was on the market for just 1.5 years before the V8 hit.
Another way to look at it is how much better could the DB9 have gotten, had the whole development effort necessary for the V8 been expended on it, and how many more sales that would have brought about. At the much higher DB9 margins.
I hope the article did not come across as negative – AM does and did many things right. However the underlying principle of depleting the pool of potential customers stands. Now you either find ways of replenishing the pool at a much faster rate, or the customers for your higher priced models will evaporate.
Actually I think the various limited editions, such as the V12 Vantage, the One-77, potential further cooperations with Zagato etc. might very well be more profitable avenues to explore for Aston Martin.
And back to the original article on the Lagonda relaunch, whch prompted this piece, while we might not like the looks of the Lagonda all that much, it is very unlikely to directly compete with AM, or lower the tone, so it’s a good move, even if we all agree that the designers need to go back to polish it further :P
Some more examples of the same principle: Audi and MB both found out, much to their displeasure that the launces of the A3 and A-Class respectively had some very unintended, and unfortunate side effects. Namely, instead of attracting a younger demographic to the brands, what happened was that in most cases those models attracted the oldest customers. The explanation? Many older customers, who just wanted the catchet of the brand but had no real need for a full sized, more profitable MB / Audi product went for the cheaper offering instead. SUre, you had the situation where an MB / Audi driving husband would purchase one of those entry models for their wife or kids – but not nearly in the numbers envisaged by the makers. The problem specifically for MB was that the FWD A and B-class offerings share practically no common parts with any other models in the range, which makes them a break-even proposition at best (if you count development costs), while at the same time stealing some sales away from the more expensive and profitable models, increasing ubiquity and cheapening the brands. Your take?
Are these brands really better off for opening the gates wider?
I don’t think so. I think Bentley has substantially cheapened it’s image with the Continental GT. It is now in doctor, dentist, lawyer range which means you see a lot of them. That is not good for a brand like this. Sadly, it also pushes it into the realm where it can be bastardized by a host of aftermarket modifiers. Even looking at the Dupont Directory, you can find bloody awful looking Bentley’s groaning under the weight of tacky add-ons and pimptastic wheels. I doubt this would have happened if they had stayed upmarket.
I am of the opinion that there are two kinds of people that buy uber-cars. People who want to be seen to be rich (or assumed to be) and people who want something super-luxurious or super-performing. Never the twain should meet.
If I were very wealthy, for example, I’d get someone to build be a Daytona replica or an Ultima Can Am. NOT because I want to be noticed but because I want something unique.
In my best Lutz voice:
Rich people don’t care about depreciation.
They do, however, care about exclusivity.
-ted
Kristjan Ambroz wrote:
The explanation? Many older customers, who just wanted the catchet of the brand but had no real need for a full sized, more profitable MB / Audi product went for the cheaper offering instead.
Is this a hunch or do you have access to supporting data? I ask because, while I can believe this about the little Benzes, it totally contradicts my experience with A3 owners. They seem very much the sort of customers of whom Alfred Sloan would approve … namely young purchasers, who can move up through your model (or brand) hierarchy as their circumstances improve.
NickR wrote:
… Bentley has substantially cheapened it’s image with the Continental GT. It is now in doctor, dentist, lawyer range …
Yes, how sad that people who actually work for a living might be able to afford a Bentley. And how unfair to their traditional clientele of athletes, rap artists, drug dealers and trust fund babies.
Sorry for the sarcasm, but it accurately reflects my feelings about this whole subject. Because the dynamics of the ultra-luxury business are so totally unique, I don’t believe they have anything to teach us about the mainstream–or even mainstream luxury–market. Hence I think we waste altogether too much time pondering them.
Maybe the next time I post I’ll check the date on the previous post first :-)